Health system boards see DEI as a new business imperative

Before they could fully embrace a shift to population- and value-based care, ThedaCare’s leaders knew they had to have a feel for their community’s needs.

“If you don’t understand the population, you’ve lost the game,” ThedaCare CEO Dr. Imran Andrabi said.

Not only did that mean learning about and confronting healthcare disparities among a diverse patient population that includes deep-rooted farming communities and recent immigrants, it also required an unwavering commitment to improving diversity, equity and inclusion among its board members.

“Diversity is a core competency from a board governance perspective,” Andrabi said.

An increasing number of hospitals and health systems are coming to the same realization.

As the COVID-19 pandemic ripped through the nation, it unearthed vast fissures in healthcare access, quality and outcomes within and between communities.

“You can no longer ignore the fact that racism truly has an impact on our health,” said Antoinette Hardy-Waller, CEO of The Leverage Network, a not-for-profit organization committed to the promotion and advancement of African-Americans to governance and board roles in healthcare. She also serves on the board of CommonSpirit Health.

And as the healthcare delivery system continues its slow march toward value-based care and population health management, improving health equity is quickly becoming a business imperative for boards as they try to ensure their health systems can survive the transition from volume to value. It will be harder for them to adapt if they don’t create a new governance construct, one that more accurately resembles the nation’s changing demographics.

“The talent around the table is critical,” said Lynn Crump-Caine, who serves on the board of directors for Illinois and Wisconsin-based Advocate Aurora Health.

Historically, underrepresented racial and ethnic minorities make up about 40% of the U.S. population and the Census Bureau predicts the country will be majority-minority by mid-century—though evolving and complex racial and ethnic identities complicate the picture. Still, they account for just over 10% of hospital and health system board members, according to the Governance Institute. Those figures haven’t changed much in recent years, aside from a modest uptick in the number of women on boards.

That’s despite years of discussions about the social determinants of health, health equity and the need to transition from volume- to value-based care and population health management.

“None of that has really moved the dial on increasing and improving diversity at the board or C-suite levels,” Hardy-Waller said.

Providers claim they want more people from underrepresented communities on their boards. But they’re often unwilling to replace current members or loosen strict criteria that limit the ability of new people to join, such as requiring board members to live within a few miles of the facility, according to experts. Hospitals and health systems will have to rethink how they recruit and retain board members from underrepresented backgrounds if it’s a priority. They can’t keep doing things the same way, experts said.

Under a value-based payment system that rewards the ability to manage population health, providers won’t meet their quality targets if they can’t ensure access to high-quality care for all the people in their community.

“No hospital will succeed in the future if they don’t know how to achieve better outcomes at a lower price,” said Deloitte’s Dr. Kulleni Gebreyes, who leads the firm’s U.S. healthcare consulting arm and Health Equity Institute.

Experts argue that boards must become more diverse to tackle healthcare inequities, pointing to an ever-growing body of research showing that more diversity improves organizational performance. According to a 2019 report from McKinsey & Co., companies with executives in the top quartile for ethnic and cultural diversity were 36% more likely to outperform those in the bottom quartile. Likewise, firms in the top quartile for gender diversity were 25% more likely to outperform those in the bottom quartile.

A more diverse board can also help hospitals and health systems differentiate themselves in the short term, as hospitals aren’t just competing with each other anymore. They’re facing stiff competition from new providers, tech startups, and behemoths like Amazon, Google, and Walmart, delivering consumer-friendly experiences, often at lower costs.

“If you stand still and continue to practice the way you have, you’re going to lose ground,” Gebreyes said.

Advancing health equity and, in turn, diversity, equity and inclusion, needs to be central to an overall strategy, according to experts. “It can’t be a nice-to-have or a side project,” Gebreyes added.

It’s an idea that Michigan’s Spectrum Health has taken to heart, as the system has increasingly focused on health equity during in-depth, strategic planning conversations between its board and executive team. But it’s not just about doing the right thing. It’s also a business decision.

“Health equity is key to realizing our mission,” Spectrum Health CEO Tina Freese Decker said.

The health system’s board recently approved a new health equity committee to help its board and executive team address the mounting social challenges exposed by the pandemic—it’s the first new committee the system has created in a decade. And it wouldn’t have been possible without an array of voices at the table.

More health systems are calling on people from outside their communities to serve on their boards as they move away from the traditional, community-based governance model that has guided them since the 18th century.

That model served providers well until recently, including ThedaCare, a Wisconsin health system with seven hospitals and nearly three dozen other facilities. But the transition to population- and value-based care required a different approach. “Four years ago, we were in the mindset that everyone has to come from the community, but that evolved over the last few years,” Andrabi said.

ThedaCare brought in four new members in 2020, including the former board chair of a rural community hospital and a geriatric neurologist who founded a neuroinformatics and data analytics company. She also happens to be an Asian woman. The health system has attracted national talent thanks to its commitment to population health, which gives board candidates a greater sense of purpose than traditional healthcare concerns like profitability.

Other providers hope to do the same, as healthcare grows increasingly complex and boards seek more specialized expertise that often isn’t available in many communities. It’s also useful for boards to have one or two members who aren’t bound by the community’s social, economic and political relationships because they’re better able to speak freely and tackle difficult issues that could have political implications at the local level.

The pandemic has accelerated the trend. Hospitals and health systems have struggled to meet the needs of their communities, watched fee-for-service revenue disappear and been forced to rapidly overhaul their operations by embracing telehealth and other new ways of doing business. Boards are increasingly looking for help with cybersecurity, digital health and change management. But traditional competencies like finance, strategic planning, quality and safety still lead the way.

In the past decade, hospitals and health systems have increasingly focused on prioritizing specific competencies and skill sets rather than community representation alone.

A board’s ability to govern can suffer if all its members are from the community because many areas lack people with expertise in critical areas like cybersecurity or value-based care. But hospitals and health systems can’t rely on outside experts alone because they might not understand local healthcare issues and be less invested in the community.

That’s why ThedaCare provides its board members with comprehensive education about the needs of its community: to help them identify and close gaps. It’s led to an even greater focus on the social determinants of health. In 2018, ThedaCare committed to a system-wide expansion of its Reach Out and Read program, which encourages families to read and learn together. During each check-up, children in the program receive a book that is age-, language- and culturally appropriate. And the health system’s pediatricians and family physicians use Well Child visits to monitor kids’ development to make sure they’re on track and have conversations with parents about how to incorporate reading into their lives. It’s part of ThedaCare’s long-term investment in population health.

“It’s not just the sustainability of the healthcare infrastructure. It’s also the sustainability of the community overall,” Andrabi said. “If those farms go away, then the community’s health is impacted in a very significant way.”

Experts said the most effective boards are mostly made up of community members, with a few outside experts sprinkled in to provide needed expertise and perspective. “It’s a delicate balancing act,” Accord Limited CEO Pam Knecht said.

But boards have shrunk in recent years, as many experts believe that boards with dozens of members are often too large to govern effectively. According to the Governance Institute, the median board size is 11, which falls within their recommendation that most providers should have 10 to 15 members on their board, depending on the organization’s size. That size allows them to be nimble enough to make decisions, maintain the right mix of backgrounds and perspectives, and fill out board committees.

Yet it also puts more pressure on healthcare leaders to reevaluate their board’s composition.

“You have to be more thoughtful about who you’re putting on the board and why,” said James Orlikoff, president of Orlikoff & Associates and an American College of Healthcare Executives faculty member.

But that doesn’t mean everyone on the board needs to be an expert in every subject. By ensuring that every member has a firm grasp on critical issues, boards can take full advantage of each director’s expertise. They can also hire outside consultants or form new subcommittees to bolster their board’s decision-making.

Orlikoff cautioned that boards run the risk of falling back into old habits if they appoint people based on race, ethnicity or gender alone. “That’s a very slippery slope because it takes you right back into this notion of representational governance,” he said. Instead, boards should ask their members to bring all their knowledge and experience to the table rather than telling them to represent a specific group.