As we begin considering the ever-closer life marker of retirement, it seems appropriate to return to a topic that has drawn growing attention since we began our careers in hospital administration about 40 years ago. That topic is hospital governing boards and their importance. A lot has changed related to governance in those 40 years. Here are a few of the most important changes.
Board size: Forty years ago hospital boards were generally quite a bit larger than boards are today. It was not uncommon to have a board of 25 or even 35 members. Today, community nonprofit boards are frequently in the 12- to 16-member range. Fundraising versus knowledge: Forty years ago board members were often selected based on their personal wealth and potential to donate to and/or raise funds for the hospital in the community. Board members came from wealthy, old-money families or from top executive ranks of banks, insurance companies, law firms, business and industry. Today, board members are most likely selected because their knowledge fills a gap in expertise—not that they would provide the service directly, but because they understand and can speak the language of banking, real estate or law.
More educated: Certainly board members 40 years ago were well-educated, but there was only a smattering of education available that would help them be better trustees. Now there is much emphasis on board members' continuing education. The state associations, the American Hospital Association and many top-flight national organizations all do more and better board education. Further, the evolution of webcasts and videos means education is available frequently and much less expensively in online archives, so it can be accessed at the time and place convenient to the board member. Beyond that, the growth in the number of writers-consultants-speakers means there are more people really studying and explaining how boards work.
Less conflicts of interest: In the past, there may have been a passing nod to the avoidance of conflict of interest, but in practice it was not uncommon for the hospital to do banking with, buy insurance from and seek legal advice from a board member in those professions. Sometimes the service was free, but generally there was a corresponding fee. Today, many more boards observe a strict conflict of interest policy.
Presumption of good intent: Forty years ago hospital boards operated with a presumption that they were doing good for the community. Legal decisions and good business practices advancing over the decades now mean that hospital boards understand better than ever their responsibilities for fiscal and clinical quality. As a result, there is much better documentation of board decisions and the processes used to reach them.
Quality is the top priority: Related to the point above, boards now know that their responsibility for the quality of medical care in the hospital is paramount. Forty years ago—indeed, even 10 years ago—boards put much more emphasis on how the hospital was performing financially. The monthly and quarterly financial statements were frequently subject to deep scrutiny, whereas today some boards put the financial report on the consent agenda as long as there is nothing financially alarming occurring.
Better educated, better supported CEOs: In the past, there were many chief executives in hospitals who came from accounting or nursing or some other business entirely and did admirable work with little or no formal education in health services management. Today, that less-academic route is fairly rare. In fact, in our state and across the country there are more emerging—or, perhaps, re-emerging—physicians running hospitals. And many of these physician-hospital executives also have an M.B.A. or M.H.A. degree. That means the executive and the executive team are able to provide much greater depth of information to boards contemplating the hospital's future or making a major decision than would have been the case generations before.
If someone had asked us 40 years ago, would we have predicted these changes? Sure, there were things we could see that were not what they could have been, for example, conflicts of interest among board members. But would we have foreseen strict, formal policies being in place in 2010? Probably not.
Have these changes been beneficial? Absolutely. Boards, in general, are much more prepared and thorough in conducting their business.
Governance in the Future
What other changes in health care governance are plausible and what challenges will those changes bring?
Consolidation: The number of hospital systems and the size of those systems will likely grow significantly. With that, the weight of decisions that boards will be asked to make will be bigger and of greater consequence—and not just for one hospital or community. The time required to prepare for and make decisions will increase for the trustees of these consolidated enterprises.
Pay for board members: It seems likely that the question of pay for board members of nonprofit hospitals and systems will come around again. In years past, that discussion always ended with board members saying they are serving their community and do not want pay. Perhaps not the next time around.
Alternative sources of information: Organizations will increasingly depend on good, objective information from outside the organization, not inside, according to Peter Drucker. Boards may simultaneously become both more and less dependent on their CEOs as the primary sources of information. They will become more dependent because the trustees will not have the personal knowledge and contacts in multiple communities, yet less dependent because trustees will seek outside information beyond the CEO's sources. Correspondingly, board members from outside the community may become more common, contributing both knowledge and objectivity.
Dual planning horizons: The short-term planning horizon has shrunk to the 18-month range or less. Remember when it was difficult imagining a plan that was less than 10 years in focus? Now, it may be the responsible thing to do to have two plans: one for 18 months and one for 30 years. As much as they can, boards will imagine the possible tidal changes going out three decades and what alternative futures those changes bring.
Assuming we have community hospital and health system boards of trustees 40 years from now, how will our successors describe governance progress in 2050?