Hospital board members need to boost knowledge of value-based care

The move away from fee-for-service, while slow, has kick-started many hospitals’ efforts to work on population health and alternative payment models. But even as support for these types of projects grows among hospital management, another key stakeholder needs to get on board.

The board.

“You’re not talking about doing something different, you’re talking about becoming something different,” said Jamie Orlikoff, president of consulting firm Orlikoff & Associates, of the shift toward value-based care. “And as a result, your traditional business will suffer.”

The nascent shift to value-based reimbursement has been a key incentive to rethink strategy, with most CEOs indicating total or significant commitment to population health in a Power Panel survey Modern Healthcare conducted in 2017.

That’s despite these initiatives not being profit drivers, often cutting down on the acute-care business that generates most of hospitals’ revenue—leading to difficult conversations with board members who see their roles as sharply focused on profit margins.

“This takes a tremendous amount of—not just education—but boards really engaging on this,” said Orlikoff, who has served on a number of hospital boards. He currently serves on the board of St. Charles Health System in Bend, Ore., a post he’s had for the past two years.

Board members, who help dictate a hospital’s future, often don’t have healthcare backgrounds. Most hospital boards tend to recruit members whose expertise centers around business experience and community leadership—and while large, sprawling health systems sometimes have the reach to recruit more niche knowledge, smaller hospitals can face challenges ensuring board members have backgrounds relevant to healthcare’s complexities.

“I see that as a large part of management’s responsibility: to provide education on these kind of complex issues,” said Ruth Colby, CEO of Silver Cross Hospital in New Lenox, Ill.

A board’s makeup changes every few years, and boards are currently undergoing a slow shift in how they recruit members, with a growing emphasis on what governance experts call “competency-based recruitment.”

That involves recruiting trustees with skills that members believe will help to provide better insight and advice on organizational strategy and decisions, said Amanda Berra, a senior research partner at the Advisory Board. In healthcare, that might include recruiting members with expertise in workforce management, technology deployments, retail and hospitality, or risk management and actuarial experience.

“There has been a slowly percolating movement away from the old-school way of putting people on boards,” Berra said. That “old-school” mentality often meant members nominating others in their circles. Now, boards are paying more attention to core competencies and diversity, she said.

Last year, 42% of hospitals and health systems reported that their selection committees used an approved set of competencies to select board members, according to the American Hospital Association’s most recent National Heath Care Governance Survey Report. That’s up from 35% in the AHA’s 2014 survey.

However, health systems were much more likely to indicate using competencies for member selection at 64%, compared with subsidiary boards (46%) or free-standing hospital boards (28%).

It’s challenging for healthcare organizations to find experts in complex topics like population health and value-based care to serve on their boards, and it’s no easier for small and midsize hospitals and health systems, which tend to appoint more community representatives.

Recruitment for those experts is an industrywide challenge, with many hospitals of all sizes and locations struggling, said Pam Knecht, CEO of consulting firm Accord. “Every sophisticated board I know of is trying to add people who can bring population health and value-based payment expertise to their discussions,” Knecht said.

That overall uptick in boards honing in on core competencies dovetails with an expansion of the board’s responsibilities.

Two decades ago, boards primarily focused on checking the hospital’s margin and revenue, said Beth Daley Ullem, governance expert at the Institute for Healthcare Improvement.

Now, she said boards are also overseeing quality of care, including not only inpatient safety but systems of care that extend beyond the hospital and improve health equity. There’s been “an expanding scope of responsibility for boards,” Ullem said. “It’s become quite complex governing all those dimensions of quality.”

Perhaps as a result, more health systems compensated board members last year: 25%, up from just 8% in 2014, according to the AHA’s survey.

However, the majority—87%—of hospitals and health systems still don’t compensate board members. That trend has remained constant over the past few years; 88% of hospitals and health systems indicated they didn’t compensate board members in the AHA’s 2011 and 2014 surveys.

Board members with business, technology and workforce expertise can provide a strong backbone for difficult decisionmaking—but without a strong foundation in healthcare as well, board members may be left confused about how their backgrounds intersect with the hospital business. While most hospitals offer new board members a comprehensive orientation, including meetings with the CEO and tours of the facility, organizations have been hesitant to require ongoing education for members.

Only 29% of hospitals and health systems said they required continuing education for board members last year, according to the AHA’s survey.

Hospitals might feel uncomfortable mandating education, Orlikoff said, in part because board members tend to be busy and mostly volunteers. But that lack of up-to-date education poses specific challenges when weighing the pros and cons of programs that can confuse even seasoned industry leaders.

“Experts cannot agree on what they mean, let alone board members,” Orlikoff said of population health and value-based pay. He said St. Charles Health, the system where he serves on the board, has a mandatory continuing governance education program for board members.

Hospitals shouldn’t tell “the big lie”—that being a board member is just going to meetings.

“Really good boards will say, ‘Here’s how much time it takes to be a board member; here’s how many hours a year it’s going to take you to be a board member,’ ” he added. “That includes preparing for meetings, attending meetings, following up after meetings and continuing education.”

Discussions about population health and value-based care can be difficult to get off the ground not only because of the need for background knowledge, but also because of a central concern—profit.

As the industry continues the slow slog away from fee-for-service, it means that hospitals beginning the shift to value-based care today will see a dip in revenue. Boards need to proactively understand this, so they don’t hit the brakes prematurely, Orlikoff said.

“If a board doesn’t understand what you’re transitioning to, and they don’t understand what you’re going to give up to get there—in the best of circumstances, you’re going to take big hits—they’re not going to be able to support the strategy,” he added.

Most boards have begun these conversations, said Kathryn Peisert, managing editor at the Governance Institute. Since 2013, she said, most boards have been adding goals related to population health and value-based care to their strategic and financial plans, according to the organization’s biennial survey of hospitals and healthcare systems.

“There’s a huge concern about how fast to move to value-based payment,” Peisert said. “There’s a lot of smaller to midsized organizations that are taking the wait-and-see approach.”

The board at Silver Cross has been discussing population health and value-based care since at least 2010, when the Affordable Care Act was passed, according to Colby, and the hospital participated in one of the first bundled-payment programs offered by the Center for Medicare & Medicaid Innovation. The hospital is now part of the Innovation Center’s Bundled Payments for Care Improvement Advanced Model, which kicked off last year.

Colby said she approached the board with roughly a dozen possible episode-of-care bundles they could participate in for BPCI Advanced, along with an analysis of each one. That meant discussing: “What if we don’t perform well on this particular bundle? What if we don’t meet the quality metrics? What is that going to cost the organization?” she said. “We outlined all the risks that could occur, and how we were going to mitigate those risks.”

From there, Silver Cross administrators gave the board their recommendations of which bundles could work for the hospital.

The board ultimately signed off on participating in 10 bundles, including for congestive heart failure and urinary tract infections.

Silver Cross’ board reviews quality and cost for these sorts of programs through its quality and cost-effectiveness committee, Colby said.

As of this year, just 23% of hospital and health system boards indicated they have a dedicated population health or community health improvement committee, according to the Governance Institute’s most recent survey, cited by Peisert. But given how topics like population health and value-based care are interwoven with standard committees like finance and quality, they might not be a necessary addition, Knecht said.

“Most of the more sophisticated boards are asking themselves: Should we change our committee structure to ensure sufficient focus on population health and value-based payment?” she said. “I don’t think there’s a great answer yet about the best board committee structure, but I would argue this topic is so strategic that it ought to be at the full board level.”

There’s no dearth of resources to provide board members with general healthcare education—webinars and conferences, to name a couple—but hospital management must go a step further to ensure members have adequate expertise to weigh in on an organization’s specific programs and strategies.

One place to start, governance experts say, is to focus board meetings more closely around the hospital’s needs.

“It’s extremely common to pick board conversations by topic,” said the Advisory Board’s Berra, noting boards will often peg a subject like population health to a specific board meeting, select a speaker to give an overview and then host a discussion of the subject afterward. “But you can do all that, and then walk out and nothing has really changed.”

It’s important for the board to have that foundation in a topic, she said—but board meetings could be used more wisely.

For education on a subject, board portals could prove helpful. That way, members can access general educational information on a topic like population health as needed, without it taking up significant time during monthly meetings. Online portals, increasingly considered a governance best practice, are already used by 55% of hospital and health system boards, according to the AHA’s latest survey.

A robust portal—stocked with news stories, podcasts, webinars and glossaries of noteworthy healthcare terms, topics and policy changes—“allows new board members to learn at their own pace,” Knecht said. “It’s providing tools that allow board members to quickly get up-to-speed on whatever they need to know at the time of day, or night, that makes the most sense for them,” she added.

Joe Sluka, CEO of St. Charles Health System, also said he emails members with operational updates every two weeks, so that they can make better use of board meetings. “We don’t spend time talking about the operations of the organization at the board meeting,” Sluka said. “We spend most of that time on strategic and generative issues.”

Leaders like Sluka say meetings can be used to delve deeper into a topic at hand.

Rather than having a passive presentation, governance experts advise hospitals to encourage a pre-meeting reading, bring in an expert speaker and then dedicate the rest of the meeting to actively discussing the topic’s impact on the organization—not just the topic at large.

“The education must be framed relative to the strategic focus of the organization,” Orlikoff said.

That includes getting into specifics. Rather than having a single meeting to discuss population health generally, Berra suggested hosting one meeting to discuss some of the most significant unaddressed health disparities in the hospital’s community, followed by another meeting to evaluate possible approaches to those specific concerns.

The board members “don’t need to be experts” in all the ins-and-outs of a particular area of healthcare, noted Michael Peregrine, a lawyer with McDermott Will & Emery who represents hospitals in matters related to corporate governance. “But they need to have enough familiarity with the issue to vote one way or another or to ask questions,” he said.

One way to ensure they get that information? Ask, Berra said.

Ahead of board meetings, she suggested hospital management alert board members about specific information they’ll be evaluating and giving their feedback on—and give board members the opportunity to request information or data they feel they’ll need to participate constructively, she said.

“If they understand what they’re supposed to be doing, then they can tell you” what they need to know, Berra said. “The real issue is that within each topic there’s a multitude of angles, and we have an opportunity to be much more clear with the board about what exactly it is that we want them to do,” she added.