Over the past 3 years, Citrus Health (or "Hospital") has experienced a higher than usual amount of medical malpractice and wrongful death claims. One neurosurgeon experienced five paralysis cases during this timeframe. Now, the Hospital is faced with premium increases almost 3xs the expiring rate.

Cases of patient paralysis are suspected to be the result of a defective spine implant that the Hospital started using as the result of the COVID-19 pandemic when supply chain issues led the Hospital (without physician input) to select a new product, as the previously used spinal implant product was not available.

Physicians who had previously used the defective spine implant noticed that patients started complaining of increased pain or swelling before the useful life of the implant expired. Upon examination, it appears that the metal screws started flaking off a metal coating meant to preserve their full useful life and the metal flakes would migrate to other portions of the spine causing swelling, infection, and in some cases paralysis. The physicians reported these issues to the product manufacturer, but it took over a year for the product manufacturer to investigate the issue. The FDA finally issued a letter to the manufacturer to cease further manufacturing and distribution of the product. The manufacturer is currently facing product liability suits by patients.

Physicians stopped using the products over a year ago due to adverse patient outcomes and the delayed manufacturer response, but the new Chief Supply Officer hired at the height of the pandemic was not aware of this. When supply chain issues struck, there were a limited set of available alternatives. There are no alternative products available, and the neurosurgeons will not be able to perform surgeries at the Hospital until the previous and current supplier can get production up to meet demand, estimated to be 12-18 months.

The quoted insurance premiums for securing commercial insurance are nearly three times the expiring rates. These amounts will significantly impact the Hospital's budget and cause a deficit. The only way to avoid the deficit is to decrease the overall budget by 20% to account for the increased premiums and find other ways to mitigate risks. The insurance broker mentions that the Hospital may consider a creating a captive in the Cayman Islands to self-insure these risks.

In addition, Citrus Health is one of the last independent hospital systems left in the State of Florida. This means it is not part of a national corporate system. It is local, understands the local market, and can provide individualized care to its patients. Citrus Health is often a takeover target for national hospital corporations since it is the last independent hospital in the State. The Citrus Health Board would like to see the Hospital remain independent but is not sure the Hospital can continue to survive financially with the challenges it is facing.

During the COVID-19 pandemic, Citrus Health was able to easily adapt and change its policies to address changes in laws, regulations, temporary closures, stopping elective procedures, etc. Its smaller size allowed it to quickly implement changes necessary to adapt to ever-changing conditions. However, due to not being part of a larger national organization, Citrus Health experienced significant supply chain issues and did not spend enough money to get the attention of its traditional vendors who diverted limited resources to larger hospital systems.

New Developments

InventHealth is a national healthcare system that is interested in purchasing Citrus Health and is ready to make a significant cash investment to offset the financial deficit currently faced by Citrus Health as well as infuse additional capital to enhance operations.

The Board has historically been very conservative and unwilling to take on risk, but with newer Board members and as a result of the issues facing the Hospital, the Board is willing to explore taking on more risk, particularly if there is a potential financial upside.

2. Using the fact-pattern above, make a risk map identifying and prioritizing risks based on whether:
   2. the risk is low, medium, or high; and
   4. the likelihood of the risk occurring.
   6. See Module 8 video lecture PowerPoint, slides 25-28. [Module 8]
5. Using the mapping above, perform a risk assessment analyzing the following:
   2. What are the risks from high to low priority?
   4. What are the potential consequences of each risk?
   6. Can you place a value on the potential risk? What about a value on the potential reward (if any)? What resources could you consult?
   8. What risk treatment option do you recommend for each risk and why? (i) Avoid, (ii) Increase, (iii) Remove, (iv) Change, or (v) Share? [See reading for Module 11 and PowerPoint from Lecture].
   10. What additional information would be helpful in your analysis?