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Board members carry enormous responsibility and, in some instances, personal risk. Because health care is unlike any other business, it is generally beyond the experience of most trustees. So how can they know if their hospital is on the right track?

Save a catastrophe, it generally takes years for a hospital to slide from doing well, through distress and into crisis. Those with established systems to monitor key aspects of operations and take action when targets are not met will avoid the need for a turnaround. As a starting point, the following questions, grouped into 10 areas, should be asked on a scheduled basis and generate affirmative responses.

While there are other obvious metrics — for example, days cash on hand — that can indicate immediate danger, these questions, when taken in combination, can indicate a potential crisis. The key is to have a performance target, understand its limitations, hold those responsible accountable and require actions to correct underperformance quickly.

The Board

The boardroom is the first place to look because the board ultimately is responsible for everything that happens. The board needs to be a role model, doing its job and holding management and the medical staff accountable for doing theirs. Therefore, it must be a strong, efficient body of leadership doing its own work as well as providing guidance and oversight to the organization. Even when committed people are at the helm, weak and poorly organized boards can lead an organization to bankruptcy.

  • Are there substantial trustee orientation and continuing education programs?
  • Does each trustee have a job description?
  • Are trustee self-assessments taken seriously?
  • Does the board have goals for itself and its committees?
  • Do all trustees participate in discussions so decisions are not dominated by a few members?
  • Do board members have term limits to assure an orderly and regular turnover?
  • Are potential members nominated for membership based upon needed skills?
  • Are meetings primarily spent discussing planning and quality because the board can rely on a strong committee structure for reports and recommendations concerning the prior month's performance?
  • Does the board select and meet in executive session with its compensation consultant, auditor and general counsel?
  • Does the board follow a strong conflict of interest policy?
  • Does the board have a policy manual?
  • Does the board act decisively when substandard performance results are revealed?

Management

The board's most important responsibility is to select, guide, reward and hold the CEO accountable. To do so, the board must receive timely, accurate information in order to take corrective action when needed. Boards must have faith in the CEO, but it must not be blind.

  • Are reports to the board created to meet board needs and not simply recycled management reports?
  • Do trustees receive reports and analysis at least a week prior to the board meeting?
  • Do key members of management attend board meetings and speak candidly?
  • Do trustees challenge the CEO, chief financial officer and other executives to be sure their recommendations are well-reasoned?
  • Does the CEO actively seek and incorporate the board's input into decisions?
  • Is management respected by the medical staff, employees and the community?
  • Does management make tough decisions, such as reducing staff and closing services beyond their useful life, in a timely fashion?
  • Is there a culture of accountability?
  • Does management anticipate and plan to provide adequate time for board deliberations and decisions?
  • Are department directors well-qualified and reliable?
  • Are internal and external communications timely and trusted?

Medical Staff

Physicians must be hospital partners. They are organized into a medical staff to which the board delegates much, including assuring clinical quality, the foundations of which are credentialing and peer review. Physicians are a tremendous resource and ally if properly engaged and respected. Because they also can be formidable competitors, the hospital must earn their trust and loyalty every day.

  • Is the physician credentialing and peer review process thorough and objective?
  • Do trustees review credential files and set quality goals?
  • Is the medical staff growing and does it have strong leadership?
  • Are physicians meaningfully involved in planning and decision-making?
  • Is there a strong case management function and does the medical staff enforce approved clinical pathways?
  • Is there a strong formulary?
  • Does the medical staff discipline its members when their practice patterns or behaviors are not in accordance with policy?
  • Can trustees recommend every member of the medical staff to family and friends with confidence?
  • Are physician contracts negotiated at arm's length and do they continue to make good business sense?
  • Is physician loyalty such that they do not pull away profitable business?
  • Does the hospital or board regularly conduct a medical staff satisfaction survey?

Finance

Financial results are one of the most important barometers of the hospital's health, but they must be balanced with concerns for quality, employee and physician relations, and patient satisfaction.

  • Does the board regularly review the contribution margin of each service line?
  • Does the hospital have a policy specifying the minimum insurance contract cost coverage ratio, and does the board know the claim denial rate?
  • Does the board regularly review a report of mission-critical indicators, which include: admission and readmission rates, emergency department vs. outpatient visits, profit margin, debt service coverage ratio, accounts receivable and payable, labor costs as a percentage of net revenues, full-time equivalent staff per adjusted occupied bed, average age of plant, days cash on hand, current ratio, capital expenditures and depreciation, and fiscal year return on investable assets?
  • Does the hospital use monthly cash flow projections and daily flash reports?
  • Are profitable payer volumes growing?
  • Does the hospital have additional debt capacity coupled with the credit rating to borrow additional funds?
  • Are financial reports such that the annual audit did not surprise the board?
  • Does the hospital quickly restructure or close programs which are poor performers?
  • Are hospital vendors paid on time?

Human Resources

The hospital's employees are your most important asset, and the most expensive.

  • Does the board approve compensation and benefit plans?
  • Are staffing levels flexed with census?
  • Does the board know the employee turnover rate, their competency, and voluntary and involuntary termination percentages?
  • Are unions partners in operations and patient care?
  • Do employees receive performance reviews on time with an appropriate distribution of satisfactory and unsatisfactory ratings?
  • Do board members support a policy that all employee complaints are to be handled by human resources?
  • Are major employee relations policies approved by the board?
  • Is there a regular employee satisfaction survey?
  • Is the board appraised of employee morale and issues which may impact it?
  • Does the board know how the medical staff rates nursing and other staff support?

Quality

Patient care is why the hospital exists, but in some hospitals it is placed at the bottom of the board's agenda, which suggests it is not a priority.

  • Does the board adopt a quality program with annual goals?
  • Does the hospital meet the standards of accreditation, licensure and regulatory agencies?
  • Is the hospital's license unqualified?
  • Do readmission rates for key diagnoses meet benchmarks?
  • Does the hospital have goals governing the ED experience to include the number leaving without being seen and average wait time?
  • Does the hospital have goals regarding length of stay, case mix index, utilization of ancillaries and clinical pathways?
  • Does the hospital have a robust hospitalist program?

Marketing and Public Relations

Managing the image of the hospital and telling its story is important to earning the public's trust and business.

  • Is the hospital's reputation excellent?
  • Is there a culture of customer service that produces high patient satisfaction scores?
  • Does the hospital have a single phone number for scheduling all tests and procedures and the ability to meet physician and patient expectations in the provision of those services?
  • Is the hospital leading the market in acquisitions and implementing programs?
  • Does the hospital track such measures as "first name to mind" and regularly perform a community perception survey?
  • Is the economy in your community improving with growth in the number of employers and a corresponding decrease in the unemployment rate?
  • Are outpatient volumes and market share trending upward?
  • Is the population in your area getting younger with higher incomes?
  • Does the hospital have good media relations?

Planning

The board should be focused on the future, investing time and resources in planning and making adjustments as the market and environment change. It is imperative that the organization be proactive — not reactive — to the market.

  • Does the hospital have strategic, information technology, medical staff development, capital strategic and quality improvement plans? Were the medical staff and community appropriately involved in developing these plans?
  • Is the hospital exploring partnerships?
  • Are employees and the medical staff committed to the organization's mission and vision?
  • Does the board focus much of its activity and energy on the future?

Compliance

Health care is one of the most regulated industries in the country. Failure to comply with requirements can result in significant negative publicity, financial penalties, loss of licensure and inability to care for Medicare patients.

  • Does the hospital have a board-approved compliance program?
  • Has the hospital avoided the need to enter into an integrity agreement with the Health & Human Services Office of Inspector General?
  • Does the hospital have a working compliance hot line?
  • Is the board assured that patient information is absolutely protected?
  • Is there a strong education program for all employees and medical staff?
  • Are employed physician offices in compliance with billing requirements?

Information Technology

Information systems are an integral part of a hospital's success. In addition to basic billing and collection efforts, IT must support quality and safety and provide decision support in an accurate and timely manner.

  • Is clinical technology current?
  • Are IT systems robust and able to provide meaningful decision support?
  • Does the hospital have an electronic health record? Is the hospital well on its way to meeting meaningful use criteria?
  • Are hospital systems linked to physician offices for results reporting?
  • Are the majority of IT systems interoperable and linked?
  • If the organization is planning to become an accountable care organization, does it have the following building blocks: a clinical system that supports disease management and population health management, a dashboard to track goals and results tied to revenue and expense, and a patient registry?
  • Is there a business objective that leverages technology to improve patient safety and quality, such as computerized provider order entry?

These questions are a starting point to determine your hospital's location on the performance continuum. Those that generate a negative response require quick action to bring the organization back on track. Far too many hospitals wait too long to address problems, which makes them more difficult and costly to fix. Most physicians recommend a check-up on an annual basis, and it would be an unusual hospital that would not also benefit from a thorough, objective check-up.

Peter J. Betts, LFACHE (peter@peterjbetts.com), is president of Peter J. Betts & Associates Inc., Bradenton, Fla.