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1997 RISK MANAGEMENT HONOR ROLL: HOSPITAL'S AILING RISK MANAGEMENT PROGRAM HEALED

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When Jeannie Sedwick arrived at Wake County Hospital Systems Inc. nearly 21 years ago as an administrative assistant, the medical center's risk management program was in need of intensive care.

It was less than bare-bones.

"There was a risk manager here, but he was more of a safety officer," Ms. Sedwick recalled. "The insurance part of the program was under the chief financial officer," with a broker taking care of most of the buying duties, she said.

Eventually, even the "risk manager" was gone, taking an administrative position in another part of the hospital.

It wasn't until 1985 that things began to change at the facility, commonly known as Wake Medical Center in Raleigh, N.C. New leadership arrived after the retirement of the hospital's president and brought with it a new emphasis on controlling and funding losses.

"We decided in 1985 to create a risk management department with somebody in charge of loss control and the insurance portfolio," recalled Douglas B. Vinsel, Wake Medical Center's executive vp who came on board at that time.

And when it came time to enlist someone to create the hospital's first comprehensive risk management program, Ms. Sedwick got the nod.

"At that time, it was as much her personal attributes as her background or skills" that got her the job, Mr. Vinsel said. "She impressed me as thorough and hard-working."

Her title as risk manager was new in 1985, but Ms. Sedwick was not a complete greenhorn to loss control after her years as an administrative assistant in nursing administration. In that position, she began developing loss control programs for the medical center and working closely with the hospital's defense counsel. She also worked with the facility's reporting process that tracked incidents that could lead to claims.

"She had done components of risk management with the incident-reporting system and claims review related to nursing activities," Mr. Vinsel noted.

In her new post, it didn't take her long to realize there would be some new and unusual challenges.

"It started off with one person," she said. "I would beg, borrow and steal support help from everybody I could."

But with the challenges came some unique comforts.

"My first office in risk management turned out to be in a renovated nursing wing, and I was in a patient room. It was the only office I ever had with a window. But the window came with my own oxygen and my own sitz bath."

From that clean and well-lit place, Ms. Sedwick set out to bring risk management to the medical center.

Eleven years later, in a different office just down the hall from the medical center's main entrance, she can reflect on the success of building a risk management program for the non-profit hospital system. She has looked out for the needs of the system, made up of a 750-bed, six-location acute care teaching facility, 44 outpatient clinics and a rehabilitation hospital. Last year, the system generated revenues of $261 million.

With that success came a new title in 1995-director of risk management-and she now has a staff of three. Her current office, however, has no window, oxygen tank or sitz bath.

Ms. Sedwick's achievements have earned her a place on the 1997 Business Insurance Risk Manager of the Year Honor Roll, and the recognition by her peers is tying a neat end to her career at Wake Medical Center. She begins a new job this month as managing director for property/casualty at AHA Insurance Resource Inc., a Chicago-based subsidiary of the American Hospital Assn. that provides financial and insurance products to the health care market.

Ms. Sedwick's 21 years at the hospital have left her with an impressive resume of accomplishments. Some of her achievements include:

Restructuring the hospital's workers compensation coverage from an insured program to a self-insured plan. The high retention saves thousands of premium dollars annually.

Re-engineering the facility's incident reporting system so that staff can more efficiently evaluate reports that provide an early warning of potential claims.

Spearheading production of a video program aimed at reducing falls by patients. The number of falls and claims has decreased significantly since the videos were completed (see related story).

Development of a loss control program called Support Services Rounds. Non-clinical departments are reviewed annually and nursing departments twice a year to determine whether these areas are meeting federal and state regulations. Problem areas that could leave the facility open to liability are identified.

Building a close relationship between risk management and in-house counsel in order to better defend claims that reach the courtroom and to prevent those that have the potential for getting there (see related story).

Increasing the use of outside sources, such as brokers, insurance company loss control personnel and professional organizations to improve loss control (see related story).

"She has put together a risk management program that would rival any I know of in North Carolina," Mr. Vinsel said. He speaks with some authority, having handled the risk management responsibilities at York Hospital in York, Pa., for five years in the 1970s.

Back in 1985, it was workers comp insurance that Ms. Sedwick targeted early as an area where improvements could lead to savings.

"When I came into the program, we assessed our insurance coverages, and one of the things that we identified with a new broker I selected was that we needed a self-insurance program for our workers compensation."

A program was in place soon after. "We reduced our cost significantly that first year that we were self-insured. . . .That was probably the most exciting thing we did initially."

The facility's workers comp program features a self-insured retention of $250,000 with $5 million in excess coverage written by Frontier Insurance Co. Taking on the retention dropped the cost of coverage by 49.3% the first year.

Ms. Sedwick buys coverage for workers comp exposures, but she doesn't manage the program. That responsibility belongs to the medical center's human resources department and a third-party administrator.

Two employee health nurses tend to some work-related injuries, and the hospital sends injured workers to its emergency room when possible. "We were able to cut our expenses by utilizing our own services," Ms. Sedwick noted.

The $250,000 retention is high enough that excess coverage has never been tapped, Ms. Sedwick said.

A more recent reworking of one of the hospital's insurance programs involved marketing liability coverages, a move that saved thousands of premium dollars while increasing limits.

But even though the savings were significant, Ms. Sedwick acknowledged that ending a long relationship with The St. Paul Cos. Inc. was painful. Although St. Paul still writes property insurance for the hospital, it was replaced by American Continental Insurance Co., a unit of MMI Cos. Group, on the facility's liability risks. That insurer offered a better cost and expanded services.

"Relationships are so important in this business," Ms. Sedwick remarked. "To change that relationship of 20 years was difficult. But you have to look at what's best for the organization."

In marketing its liability program during renewals that were completed last fall, the medical center was "challenging the insurance industry to be creative. And we had some people step up to the plate and do a nice job."

St. Paul has "been a fine organization and served us well over the years," Ms. Sedwick said of the insurer. "But we were being challenged to examine our insurance budget and to maximize the dollars we were spending for the services we were going to get."

In signing on with American Continental, the medical center was able to slash its premium costs for liability coverage while increasing limits. Because the hospital is in a hotly competitive industry with other area medical facilities, Ms. Sedwick chose not to release specific costs and limits of the coverage.

Primary general liability coverage and hospital professional liability insurance written above a self-insured retention were among the coverages moved to American Continental and together accounted for a 15% decrease in premiums.

Along with increased limits and lower premium costs, the insurer included some additional goodies. It increased the number of visits by a loss control expert above the number provided by the previous insurer and offers "extensive access to educational programs" aimed at reducing losses, Ms. Sedwick said.

"They do focused workshops," she said of MMI, noting that earlier this year she attended a day-and-a-half seminar on how to reduce medication errors by working with pharmacists, hospital staff and physicians. Other workshops have centered on emerging liabilities in managed care and outpatient services.

MMI provides the hospital with its RiskKey loss control and claims reporting software. The system allows the medical center through its incident reporting system to enter information on incidents that could result in claims. If claims are filed, the information is moved easily to another part of the system without having to be re-entered.

Ms. Sedwick relies on the incident reporting system to give the hospital early warnings about potential claims. She recently re-engineered the process to make it easier to process thousands of reports from different hospital departments.

"It's a system where we use reports completed by the staff to let us know when an error or a problem has occurred," Ms. Sedwick explained, like a patient falling or an improper amount of medication being administered. "It may be a property loss if we've lost someone's dentures or broken their glasses. Or maybe the patient or family is just complaining about specific parts of their care."

Reports are reviewed daily, and at the end of each month, an analysis determines whether some incidents could lead to liability for the hospital. "We identify where the incident occurred, what type of incident it was and what the severity was."

Incidents that could lead to a claim are investigated by hospital staff, and the insurer is notified. "If it's something we decide we want to handle in-house, we go ahead and initiate conversations with the patient's family to do whatever it takes to make the situation right."

The system was in place when Ms. Sedwick arrived at the hospital 21 years ago, and over the years she began to see that the system could be made more efficient.

Reports were being filed only at "crisis time," she said. "It wasn't really focusing on the loss prevention aspect and the broad brush that we were looking for to pick up every kind of liability exposure. As I developed the program, that brush got broader and broader, and we began to get more and more incident reporting."

But as the volume of the reports increased to about 4,000 per year, the amount of information was putting a strain on resources to process it. "It became clear that maybe incident reporting could be reduced without losing the purpose of the reports," Ms. Sedwick noted.

To accomplish that, it was decided that only reports of incidents that directly affected patients would be filed to risk management.

Other incidents-for example a medication error that was caught before the medicine reached the patient-were directed to departments that could work on eliminating such occurrences.

As a result, the number of reports has dropped to about 3,000 per year, giving staffers more time to concentrate just on problems that impact patients.

Even with the re-engineering, as her broker points out, that's still a lot of work for Ms. Sedwick and her three staffers (one position is vacant.) And processing the incident reports is just one part of the risk management department workload.

"She's a fantastic organizer," said Gary W. Buchanan, senior vp at Willis Corroon & Associates Inc. in Chapel Hill, N.C. "An ordinary person would have just thrown their hands up" at the challenge of streamlining the incident reporting system while juggling other risk management duties, he added.

Among those other duties is an effort called Support Service Rounds that Ms. Sedwick began several years ago to make sure departments comply with various state and federal regulations that apply to the hospital.

"We have requirements from different regulatory bodies and agencies, and in making sure that we follow those requirements, it's necessary to do surveys," she explained. "As we began to look at all the different areas that needed to be assessed annually, we decided it made a lot of sense to form a team" that would perform the assessments on a regular basis.

Non-patient areas are surveyed once a year to assess, among other things, the quality of facility and employee safety, infection control practices, whether educational requirements are being met and adherence to Occupational Health & Safety Administration regulations. Patient areas are surveyed twice each year to make sure regulatory compliance is met.

Department managers receive the results of the assessments and have 30 days to let risk management know how problems identified by the survey have been corrected. Some jobs, such as those that involve minor engineering work, have a 60-day limit for completion because corrections take longer.

"Risk management became the central point to gather that information" and provide feedback to the hospital's safety committee on compliance with state and federal regulations, Ms. Sedwick said.

Such sharing of information and the team approach are core elements of Ms. Sedwick's risk management philosophy.

"Risk management is not just a department in a hospital," she said. "It's an understanding throughout the organization from the top of the organizational structure to the bottom."

To foster that understanding, Ms. Sedwick has emphasized educating employees about risk management and their role in helping control losses.

The education starts when an employee comes to work at the facility. During orientation, "we are given an hour to tell them about risk management, why it's important, why we want them to be a part of the program and what the benefits will be," she pointed out. "That's our first shot at making sure people know what this program's about."

On a monthly basis, nurses new to the facility and those who want a risk management update on issues such as claims and legal issues are brought together for a meeting.

New nurses are given information on how to prepare incident reports and how the information is used to defend lawsuits.

"And we talk about the different cases we've had and whether we've learned from them. We talk about what kind of insurance coverage the hospital has and whether they need to think about having their own personal liability insurance."

"The concept here has been to involve all employees in the risk management program," Ms. Sedwick said. "It doesn't get done by itself. We're only the facilitators, the catalyst to bring people together to solve the problems. We can't do it ourselves. We can help set direction, coordinate and plan."