5 Simple Steps to Manage Your Risks as a Medical Practice Owner
Do you ever lose sleep worrying about what you don’t know you don’t know? Do you find yourself wondering what might happen if a claim came through the door that you had never anticipated in your wildest dreams? If you’re a medical practice owner seeking answers to what possible risks might exist and worrying about the unknown, you are not alone. Business today, both in and outside of the healthcare industry, is full of challenges and uncertainties, making it imperative for practice owners to take proactive measures to manage risks effectively.
The truth is managing risks in a medical practice can be a daunting task, especially when you are preoccupied with providing quality care to your patients. However, the good news is you don’t have to navigate this alone. In this article, we will introduce you to a comprehensive yet simple five-step risk management method. By the time you have finished reading, you’ll be equipped with the knowledge and tools needed to take the steps you need to safeguard your practice’s future and ensure its continued growth and success.
What is Risk?
Firstly, let’s look at what risk actually is. Risk is, quite simply, the exposure to danger, harm and/ or loss. It is the probable threat of damage to profit and property and the potential loss of reputation and goodwill.
To successfully navigate the challenges that risk presents to business, it is essential for medical practice owners to adopt a proactive approach to risk management. By implementing a strategic risk management framework of ‘avoid,’ ‘mitigate,’ ‘transfer,’ and ‘accept,’ you can ensure the security of your practice’s future and make informed decisions that align with your goals.
You should also know that nothing happens in business without taking risks. At You Legal, we want medical practice owners to take a proactive approach to risk management, as we know it’s the best way to ensure that medical businesses have the best opportunity to thrive.
Step 1 – Understand Your Risks as a Director
As the owner of a medical practice, it is crucial to understand your role and responsibilities as a director. Your practice’s legal structure, whether it is a company – which would look like “Your Medical Practice Pty Ltd” or involves trading under a trust, comes with additional responsibilities. While smaller company directors are often heavily involved in management, larger practices may have a Practice Manager, whereby that person’s Employment Contract and creating a Delegation of Authority Policy can help to manage some risks that occur with a growing practice.
It is essential you are well-versed in your director duties under the Corporations Act 2001. These duties are fiduciary in nature and include acting in good faith, exercising due care and diligence and avoiding conflicts of interest. You are also obliged to avoid trading insolvent. You are also bound by regulations like Work Health and Safety (WHS) laws and ASIC requirements.
Remember, your responsibilities as a director are owed to the company as a whole entity, not just to specific individuals or stakeholders. This includes promoting the organisation’s interest above your own personal interests.
Directors can protect themselves by actively participating, making decisions that prioritise the organisation's best interests, diligently carrying out their duties and responsibilities and maintaining transparency, all of which serve to mitigate potential risks. Additionally, directors can transfer risk by ensuring the organisation has appropriate Directors’ and officers’ insurance and keeping updated on industry issues through industry bodies like the Australian Medical Association.
Step 2 – Understand Your Staff Are a Risk
No business can run without people, but it is crucial to recognise that your staff members can be a significant source of both support and potential risk. As a practice owner, you bear the substantial responsibility, so far as reasonably practical, of ensuring the health and safety of your workplace.
As an employer, you are vicariously liable for the acts and omissions of your employees. This means that their actions, whether positive or negative, reflect on your practice, and if they are injured, you are responsible. Your staff can inadvertently harm your practice in various ways. They might leave and decide to establish a competing practice nearby, potentially drawing away patients, or their negative remarks or unprofessional conduct can tarnish your practice’s reputation in the community.
At the same time, it is important to recognise individual employees also bear responsibility under WHS laws. They are not only expected to take care of their own well-being but also to refrain from any actions that could affect the health and safety of their colleagues.
To mitigate potential risks with your staff, you may consider implementing written agreements, which can take the form of Employment Agreements or service agreements. These agreements clarify roles, responsibilities and expectations, helping to avoid potential conflicts and disputes. Moreover, establishing well-defined policies and procedures is key. Notably, a Delegation of Authority Policy ensures clarity on what areas of responsibility certain staff members have, serving as a means of transferring responsibility and accountability to employees. Utilising disclaimers and consent forms and investing in suitable insurance coverage can further transfer risks associated with team member actions, adding an extra layer of protection.
Step 3 – Understand Potential Risks
Risks can come in various forms, ranging from natural disasters and pandemics to legal issues, technology failures and regulatory changes. Even environmental concerns, such as climate change and chemical spills, can pose significant threats. Additionally, the stability of property, equipment, security and the broader economic and financial landscape are all potential sources of risk.
To effectively manage these ever-present risks, you may consider investing in appropriate insurance and ensuring all agreements are meticulously documented. This not only helps to avoid misunderstandings but also allows for the transfer of responsibilities and liabilities to the parties involved. Alongside this, it is recommended practices establish a regular review process of identifying and managing risks and staying current with industry best practices through continuing education.
Step 4 – Understand Indirect Risks
It is essential to not only focus on immediate threats but also to be aware of indirect risks that can affect your medical practice. Indirect risks may encompass a range of situations, from supplier-related uncertainties, such as vaccine and supply shortages, to the personal situations of your patients that can alter their healthcare priorities. More broadly, the general location of your practice can be indirectly impacted, leading to issues like restricted access for your patients.
To successfully navigate these challenges, it is important to remain as agile as possible, enabling you to adapt swiftly to changing circumstances. Furthermore, fostering strong communication and relationships within your practice and with external stakeholders can help not only avoid potential issues but also mitigate the impact of indirect risks.
Step 5 – Leverage an Expert
Finally, it is essential to recognise the invaluable advantage of leveraging an expert. Bringing in an expert to assist your risk-management measures brings your practice with fresh ideas, a repository of best practices and a heightened sense of accountability.
Need help?
The You Legal team has extensive experience in providing advice and insights into the best practices for your medical practice. To confidentially discuss any matters, contact our team here, and we will put you in touch with the best professional for your needs.
Interested in commissioning a Risk Audit for your Medical Practice? Our Practice Risk Audit is tailored to your specific business needs, whether you’re a small business with 1 to 10 Full-Time Equivalent (FTE) employees or a larger organisation. You can find our Fast Track solution here.