Board members may lack the requisite skill sets to lead a complex organization.Board members may shy away from making hard decisions because of the threat of liability or, conversely, not realize the liability risk for failing to act.
This represents a two-fold failure: first, to develop and adopt consistent governance best practices; and second, to conduct the research needed to support and implement best governance practices. We urge a renewed commitment to developing best practices and to supporting the research basis to improve healthcare governance.
In the Dec. 4, 2006, Bulletin of the National Center for Healthcare Leadership (a supplement to Modern Healthcare), one of the authors, Peter Jacobsen (and a colleague, L. Edward Bryant, Jr.) set forth Ten Best Practices for Measuring the Effectiveness of Nonprofit Healthcare Boards. A good first step would be for boards to consider adopting and monitoring these practices. Some of them include:Adopting a compliance mentality.Continuing governance education.Use of high-level dashboard reports.Appropriate agenda practice.Eliminating and/or managing apparent and real conflicts of interest.
Getting governance right is important for many reasons. First, effective governance can lead to better economic performance and fewer concerns about patient safety. Second, effective governance is necessary to avoid some of the management debacles healthcare has seen over the past few years, such as systematic fraud and abuse at HCA and Tenet Healthcare Corp.; the bankruptcy of Allegheny Health, Education and Research Foundation; and, among other findings, the allegedly illegal arrangements with part-time cardiologists in return for referrals at the University of Medicine and Dentistry of New Jersey.
Third, the adoption, assessment and monitoring of best practices are essential to avoid further governmental intrusion into the delivery of healthcare. In the absence of voluntary action by the private healthcare sector, either governmental regulation or judicial rulings will likely impose stringent requirements. Furthermore, the consequences of not complying with fundamental governance standards can inflict considerable damage to organizational image and reputation, not to mention economic hardship through fines and penalties.
Finally, demands for information transparency in the emerging consumer-directed healthcare approach can expose poorly run organizations to public criticism from insurers and consumers. Equally important, the information demands to achieve consumer-driven healthcares goals raise important legal considerations for timely and accurate data that providers and insurers will need to consider. The increased expectations for quality, service and the value of the care anticipated compared with the quality and cost of care actually received will define which systems thrive and which do not.
Despite a boards legal and organizational mandate to ensure the organizations viability, there appears to be great uncertainty as to how governing boards must fulfill these responsibilities. Much of this uncertainty stems from the complexity and scope of the boards fiduciary responsibilities. In an earlier era, when board membership was a reward for community achievement and the environment was not competitive, adherence to strict governance practices was not crucial. All of that has changed. Board members are required to become familiar with their fiduciary duties and to act accordingly. In particular, boards must develop policies to:Respond to an increasingly market-driven competitive environment. Adhere to their duties as fiduciaries of the institution.And, if not-for-profit, meet their obligations to the community.
Yet for whatever reason, boards are widely viewed as unprepared to meet the leadership challenges of a new healthcare environment. Many boards seem complacent and unwilling to move beyond governance practices more suited to an era of stable funding, philanthropic support and less competition. Board members and administrators could benefit greatly from implementing a set of best practices in discharging their responsibilities.
As a starting point, boards should follow these principles: Boards must commit to adopting and implementing best governance practices. All board members support the fundamental fiduciary duties of care and loyalty with signed annual statements. All board members commit time and attention to becoming educated regarding their obligations as trustees and to confront the organization whenever necessary to uphold these obligations. All board members commit to oversee institutional compliance with applicable governmental regulations.
And these practices: Annual and ongoing monitoring of best practices. Annual and ongoing education on roles, responsibilities and developments in healthcare delivery and regulation. Development of a board work plan that addresses the duty of care and loyalty with specific examples related to the needs of the organization, including a compliance plan. Annual self and external evaluation of performance against the work plan. Identification of gaps and/or knowledge in performance along with corrective action plans.
Recognition of the need for the development of and sustained attention to best governance practices will become expected behavior in the industry. That attention must be coupled with research into governance practices that will identify and standardize performance expectations to ensure the viability of the delivery system without increasing the regulatory burden. Until that time, prudent principles and practices should be a part of every healthcare governing boards activities.