Every year at this time MODERN HEALTHCARE salutes outstanding trustees. But what about the "perfect" board?
Unlike picking an individual trustee, finding the correct mix of elements that constitute an outstanding board can prove elusive. Certainly, the issue is far more complicated than it was a decade ago. Mergers, managed care and the probing eyes of regulators mean running a hospital is no longer a straightforward, or even peaceable, business.
Within the past few years it has become commonplace for a board's delicate dealmaking to be shot down by an attorney general's threat of litigation. Many have seen their hospitals' files carted away by federal agents. During the recent financial upheaval at Allegheny Health, Education and Research Foundation, the cost and appearance of the homes owned by some of the trustees were the focus of a lengthy article in a Pittsburgh newspaper.
Still, governance experts agree that there are some perfect-or rather, near-perfect-hospital and system boards. They are a minority, to be sure: certainly less than 10%, according to Charles Ewell, chairman of the Governance Institute in La Jolla, Calif. Conversely, Ewell believes another 10% are "absolutely terrible," leaving 80% as competent but undistinguished.
For basic guidelines on strong governance that could be used in crafting the perfect board, see the box on this page.
Making magic. So what's the stuff of that magical minority, the board that, according to governance consultant and San Diego State University public health professor Dennis Pointer, "brings a tear to your eye"?
While there are a number of generally accepted guidelines that could be used in crafting the perfect board, Barry Bader, a governance consultant in Bethesda, Md., says "the perfect board has visionary leaders, persons of exceptional confidence, who bring both diligence and objectivity to their work, which is based on a strong foundation and commitment to the mission and core values of the organization."
Easier said than done, says James Orlikoff, president of Orlikoff and Associates, a governance consulting firm in Chicago. "You always want to recruit your trustees to fit your strategy and balance it with other interests," he says. "But there are district hospital boards, stand-alone hospital boards and multihospital system boards, and each has a different strategy."
The right size. However, there are some general ground rules. Although opinions differ slightly as to a board's perfect size, most agree it should be between 10 and 20 trustees. (The average suggested number was 14.) "Below 13 members, there aren't enough people around to get the work done. With more than 20, the board becomes so large that it cannot work as a cohesive or deliberate leadership team," Pointer says.
Whatever the number, Orlikoff believes the board should have an odd number of trustees to better avoid tie votes.
What type of people make up the perfect board is a matter of debate, although one ex officio post for a hospital executive and one physician-from either the medical staff or connected medical group-is considered a given.
"One of the big pitfalls boards encounter is recruiting their members from the same social, business and religious circles," Bader observes. "They're not necessarily tapping into the reservoir of new talent or new thinking that may be available in a community." He adds that college or university presidents and representatives from public health are underutilized sources.
Ewell believes the experience of some trustees should be tailored to the situations a board is likely to face: "If it's facing special issues, such as finance, maybe it should have more finance people, or an architect if it's in a building phase," he says.
Orlikoff agrees, but notes that one of the tricks is "getting people to forget the model they came from. You want people with excellent financial expertise, but not bringing their banking experience to full bear. Instead, they should learn all of the healthcare financing mechanisms, then apply them."
Orlikoff would also like to see more trustees from outside the community, particularly on rural boards where fear of backlash may prevent making difficult financial and strategic decisions. "The community model of governance is such a mind-set, it's a default," he says. "There should be two members who are outsiders-so outside that they can see when the emperor isn't wearing clothes."
Saying goodbye. Experts agree that the ideal board should be subject to limits of two or three terms totaling eight or nine years, with each term followed by an evaluation of the member, usually undertaken by the board's executive committee. After serving multiple terms, a year should pass before a trustee could be reappointed. "That allows the removal of deadwood and keeps the membership fresh," Ewell says.
But Pointer, who just completed maximum tenure on a seat on the board of Daniel Freeman Hospitals in Inglewood, just outside Los Angeles, noted that "it's never a pleasant experience leaving."
In the case of a trustee not performing up to snuff, after close scrutiny, he or she should be asked to leave, experts agreed.
"It is very difficult to ask a volunteer member to leave before their term or tenure has expired, but it has to be done," Bader says. "There is a culture of performance and accountability on a good healthcare board."
And the ability to move on to new issues, no matter what.
"Imperfect boards in the Fifth Circle of Hell discuss the same issues over and over again, partly because they continue to be brought up by a block of members," Orlikoff says. "On a perfect board, members who do this would be sanctioned. They should speak with one voice, but agree without being disagreeable."
"Their attitude should be challenging without being destructive. They're not a pushover (to the executive staff), but they're not an adversary either," Ewell says.
Continuing education is the key to this, although Pointer observes that the average 15 to 18 hours of education a trustee obtains each year is inadequate. "That's two (work) days, and given the amount of change taking place in the industry, that's not enough, but I'm hesitant to put a number on it."
Ewell thinks about 30 hours a year is necessary. That decision should be left up to individual trustees but with some advice from the board's executive committee, the board chairman or the chief executive officer, according to Pointer and Ewell.