MHA-FP5014 – Assessment 2: Addressing Risk Financing Issues in the Health Care Center

MHA-FP5014 – Assessment 2: Addressing Risk Financing Issues in the Health Care Center

MHA-FP5014 – Assessment 2: Addressing Risk Financing Issues in the Health Care Center

Sample Solution:

The risk management process is one of the essential tools implemented by an organization to minimize financial losses and operational errors. Risk management is a process of identifying, analyzing, and mitigating threats to a firm’s earnings. In the healthcare sector, risk management is employed to safeguard the organization’s market share, assets, accreditations well as the patient’s safety (Sturgess, 2015). Management at Stanford medical Centre has reported several cases ranging from financial fraud, patients’ identity theft, and data theft. The most affected area is the insurance and claims management that has seen the medical center lose a lot of cash due to unexpected malware in the system. In such a situation, it is important to draw our attention to critical indicators of performance risk to enable us to develop strategies in dealing with uncertainty. The key indicator of risk performance is the rate of revenue generation. The continued decline in revenue reported has been attributed to an increased loophole allowing fraudulent activities and Medicare fraud from employees (Scandizzo, 2013).

Strategies Used to Identify Risk Financing Issues

            Identifying risk financing issues requires a collective support from various stakeholders in the organization. One of the strategies employed is brainstorming. In this strategy the company will select employees with special leadership skills amongst them internal auditors, Enterprise Risk Management staff and IT experts, to fully identify the major loopholes within the company that give rise to Medicare fraud. Having people brainstorm is quite beneficial since an individual may come up with a risk financing issue that none of the others had an idea of. The other strategy is the SWOT analysis. The Strengths and weaknesses constitute internal factors within the company, whereas opportunities and threats constitute variables without the company, that management has little control over their impact (Matins, Garrido, Cassia, &Luiz, 2011). The fact that our attention is drawn mostly to the strengths and opportunities as key competencies for the company, it times to focus on threats and weaknesses as areas prone to risk. Dealing with Medicare fraud will require a keen analysis on possible threats such as stolen patient’s data which could lead to embezzlement of funds through insurance claims. When more focus is turned to the threats and weakness it becomes much easier to identify risk financing issues.

Recommendations for Risk Financing Options

In dealing with the current patient data threat, Stanford can implement the risk transfer, risk retention, risk avoidance, and risk mitigation options. The first recommendation that should be addressed is risk transfer, which involves the transfer of risk to a third party. By transfer of risk, Stanford may purchase an insurance premium in exchange for protection from losses relating to risk financing (Scandizzo, 2013). Most are times when management is uncertain of the risk, therefore, seeking professional financial services to hedge against risk is a good option. The second recommendation is risk retention, whereby an organization decides to accept the risk and deal with the losses internally instead of purchasing insurance policies. This approach can be best implemented through funded retention, which involves a plan by the medical center to set aside funds in advance to cover for the losses.

Besides, the management undertakes analysis on potential risks that could occur to set aside a substantial amount that would allow full recovery. Funded retention is often practiced when the risk associated with loss is minimal compared to the funds spent in purchasing an insurance policy. The other important recommendation is risk mitigation that involves the design and implementation of techniques to lower the probability of experiencing risk financing losses (Barton, Shenkir, & Walker, 2001). The medical center should install a secure IT system that tracks all the billing transactions and ensure it’s the genuine insurance holder and not an imposter. Additionally, the management should introduce an adequate system to manage financial data and providing secure backup data storage whenever essential data is comprised. Most importantly, employees should be computer trained in readiness to spot any malware software embedded in the system that could interfere with the company’s financial assets,

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Legal and Ethical Financial Risk Obligations

The Accountable Care Organizations represent a combination of various health stakeholders such as physicians, doctors, nurses, surgeons to form an umbrella hospital that provides coordinate healthcare services to patients (Sturgess, 2015). The concept that involves the linkage of various stakeholders is prone to many risks, and thus the need to initiate certain obligations is critical in ACO’s success. The ACO groups have been mandated to implement an upside risk model, which ensures that necessary technological updates and data analytics are implemented to minimize errors and improve revenue (Inglehart, 2011). ACO’s have also been obliged to have a shared savings system to ensure they meet the quality target in serving Medicare patients. Subsequently, the group should reach a certain threshold of medical practitioners to serve 5000 Medicare patients before being fully accredited to operate as an ACO. In conclusion, the obligations have made ACO’s more diligent in services because the financial risk is shifted to the health provider and the insurance companies. It is their responsibility to improve patient’s outcomes through investment in data analytics to achieve maximize revenue and minimize losses.


Inglehart, J. K. (2011). The ACO regulations- Some answers, more questions. New England Journal of Medicine, 364(17), e35

Barton, T. L, Shenkir, W. G., & Walker, P. L (2001). Managing Risk: An Enterprise wide Approach. Financial Executive.

Matins, C., Garrido, M., Cassia, A. R., Fereira, M., &Luiz, R. (2011). Risk Identification Techniques Knowledge and Application, Brazilian Construction.

P. (2015). Risk Management and Risk Financing. Doi: 10.12774/eod_tg.may2016.sturgess1

Scandizzo, P. L. (2013). Securitizing Area Insurance: A Risk Management Approach. Journal of Financial Risk Management, 02(03), 55-60. Doi:10.4236/jfrm.2013.230009

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