Stanford Hospital Pioneers Game-Changing Health Care Risk Analysis

  • A new risk analysis method from Stanford Hospital successfully grapples with health care’s uncertainties
  • Uses concepts, systems and approaches never before applied to health care
  • Expands view to include the value of risk

STANFORD, Calif.--(BUSINESS WIRE)-- Thirty health care executives spent almost three days at Stanford last week in a special class learning VDERM—that’s value-driven enterprise risk management. Although VDERM may not be an approach new to many other industries, in the changing world of patient care, the Stanford-originated, health care-specific VDERM just might be a game-changer.

What distinguishes VDERM is its ability to focus beyond the classic goal of managing downside risk. Using proven methods for making high-quality decisions even in uncertainty, VDERM incorporates risk’s long-neglected upside—value creation. Stanford Hospital & Clinics, which drove the creation of this new health care decision-making approach, runs by it now. The hospital’s recent $3 million investment in equipment and training to support its new safe patient handling program came after a VDERM method analysis.

That analysis included immediately obvious values, such as reductions in patient falls and injuries to employees as they tried to lift patients. The expanded VDERM analysis of the safety equipment’s value, however, also determined the benefits of other, less obvious impacts. Pressure ulcers, once called bed sores, can develop if a patient remains in one position in bed for a prolonged time. Ulcers can add days to a hospital stay for patients and increase their overall risk of infection. But they are easily preventable with regular adjustment of a patient.

The value of the safe handling equipment, the VDERM analysis calculated, would improve both employee satisfaction, which influences retention, and how patients felt about their care, which influences whether they would recommend the hospital to others. The program also won outside honors: The hospital received the Veterans Administration 2010 Best Practice Award for Safe Patient Handling.

Stanford Hospital’s Chief Risk Officer Jeff Driver sparked the collaboration that propelled the new VDERM health care methodology into being. “We were using simple methods that, unfortunately, had a built-in human bias,” he said. “We were looking for the kind of improvement that GPS offers over maps and intuition.” He also wanted to push other changes that would power the highest patient care quality possible.

For decades, hospitals’ risk management officers frequently have been perceived as solely concerned with downside risk, said Kara Clark, executive director of the American Society for Healthcare Risk Management. That perception meant they were often not invited to the table when discussions began, for example, about whether to invest millions of dollars in a certain kind of equipment.

Driver wanted to recast risk management’s methods to change its broader role. “We’d like to have a risk scorecard that looks across the entire enterprise for a unified idea of risk management at Stanford Medical Center,” said Driver. “We want to connect all the dots, to link risk management to our strategic planning and development and, ultimately, to the quality of the care we offer our patients.”

He didn’t need to look far for help. The Palo Alto-based Strategic Decisions Group was founded by Stanford University Professor of Management Science and Engineering Ron Howard in 1981. Howard and SDG quickly were established as groundbreakers in the development of what became widely adopted concepts, systems and practical approaches to make risk management decisions even in uncertain conditions, when predictions could not be precise.

As productive as those concepts and systems were, however, with the exception of the pharmaceutical and biotech industries, health care institutions did not adopt the methodology. Now that thinking is a perfect approach in a health care environment whose future needs and costs are fogged by evolving health care reform and demographics.

The current absence of VDERM’s logic in how hospitals do business is dismaying, but, “in this world lots of things are obviously better for you—that doesn’t mean everybody does them,” said John Celona, a senior SDG consultant who was part of the VDERM –for-health care collaboration team. He is also co-author of the textbook “Decision Analysis for the Professional.” He understands quite well the challenge to making sense of multiplicity and unpredictability. “People are intuitively wired,” he said, “to do a good job of making decisions when there’s a lot of uncertainty or complexity. The human brain evolved to deal with lions and tigers on the Serengeti. The modern environment is very different.”

Beyond its home hospital’s halls, VDERM is already gathering buzz: When Stanford opened registration for the first Webinar training in VDERM, more than 800 health care professionals signed up, breaking all previous records for such sessions. The American Society for Healthcare Risk Management, the leading association serving the profession, quickly recognized the importance of Stanford’s new risk management process by funding educational grants for a new course—Strategic Decision Making in Healthcare Risk Management. The 30 executives at Stanford last week were the first cohort to take the course as part of a Stanford-organized, first-time-ever certificate in health care risk management.

Celona, who also teaches at the Stanford Center for Professional Development and lectures at Stanford’s School of Engineering at Stanford University, sees VDERM as a view-changer for health care. “You’re looking at the exact same thing, but your understanding of it has changed. VDERM is that change of understanding,” said Celona. “VDERM is not hardware or software, but wetware—it’s about how people think.”

The hospital’s Risk Consulting group is collaborating with SDG and the Stanford Center for Professional Development to offer the VDERM health care risk management course online at any time, at Stanford twice a year and, by arrangement, offsite. Celona is eager to see VDERM thinking spread further into health care. “We’ll roll it out in some other specific care delivery problem areas to show its value, show some successes—and then I think it will grow as fast as grass after a spring rain.”

Said SHC Senior Director of Risk Management Controls and Education Ed Hall, who championed the Safe Patient Handling Program consideration, “Done well, VDERM’s decision analysis produces a robust, transparent and defensible understanding of value in health care. It has changed what we see when we consider financial choices. When we go through that strong analytic process, we have much more confidence in what we need to do and how we need to get there.”

About Stanford Hospital & Clinics

Stanford Hospital & Clinics is known worldwide for advanced treatment of complex disorders in areas such as cardiovascular care, cancer treatment, neurosciences, surgery, and organ transplants. Consistently ranked among the top institutions in the U.S. News & World Report annual list of “America’s Best Hospitals,” Stanford Hospital & Clinics is internationally recognized for translating medical breakthroughs into the care of patients. It is part of the Stanford University Medical Center, along with the Stanford University School of Medicine and Lucile Packard Children’s Hospital at Stanford. For more information, visit


Stanford Hospital & Clinics
Liat Kobza, 650-723-1462 (Media)
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Sara Wykes, 650-721-6263 (Writer)
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