A vast majority of large not-for-profit health systems have adopted or plan to adopt relevant portions of the Sarbanes-Oxley Act, according to a survey of 101 system chief executive officers by the Governance Institute. The survey showed that 86.5% of respondents have adopted relevant portions of Sarbanes-Oxley and 11.5% planned to do so. And the move to adopt provisions of the act -- Congress' response to corporate accounting scandals -- is one of the reasons why large health systems are becoming more like centralized, for-profit corporations, according to a white paper on the survey. Other reasons for centralization include the use of stronger compensation practices, widespread divestiture or closure of underperforming assets or services, and increased setting of financial performance targets for subsidiaries, according to the paper, called "Pursuing Systemness: The Evolution of Large Health Systems."
The management of large health systems, for the most part, already closely resembles modern corporations, said one of the authors, Edward Kazemek, chairman and CEO of Accord Ltd., a governance consulting firm. But governance practices are still in the process of shifting to the for-profit model, Kazemek said. Both trends are pushing large health systems to become more centralized while the decentralized, holding company model for systems isn't sustainable long-term, he said. -- by Paul Barr