The recent economic crisis, coupled with weekly headlines about one company after another demonstrating poor corporate governance choices, led investors and corporate watchdogs to blame boards of directors for lessthan- expected company performance. These stakeholders argue that directors were asleep at the wheel and not paying close enough attention to their oversight responsibilities. In response, regulators are regulating and directors are looking for additional ways to demonstrate their accountability and stay out of the crossfire.
How does this scenario relate to hospital trustees, especially nonprofit hospital trustees? The common thread is governance and how the board manages its operations. Hospital trustees should not forget that included in their key responsibilities, along with performance oversight, approving longterm strategy, reviewing the CEO succession plan and overseeing risk and compensation, is determining how the board should function. Effective hospital governance is becoming increasingly important and is evident in the increased scrutiny surrounding such issues as quality processes and patient safety. In addition to uncertainty regarding the economy, health care leaders also must be concerned about the challenges and effects of health care reform. How does the hospital trustee respond?
Public company directors have a notso- secret weapon that helps them stay focused on their fiduciary obligations — the corporate secretary or chief governance officer. This individual is an officer of the company and is generally charged with advising directors and management on governance best practices, tracking compliance and disclosure obligations, record-keeping and documenting decisions. While hospital trustees elect officers, including the secretary, the function of this role varies widely. It may be time for trustees to reevaluate the benefits of naming to the hospital’s executive staff a chief governance officer whose primary role is to support the governing board.
Trustees are professionals who are dedicated to the hospital’s mission, but not usually medical professionals. Trustees bring valuable expertise to management and serve as a sounding board for the CEO. They want to incorporate best practices into their decision- making processes, but struggle with myriad health care laws, insurance reimbursements, Centers for Medicare & Medicaid Services regulations, and understanding complex organizations and sophisticated medical practices. When you add to this mix the fact that hospital trustees usually have full-time jobs and work on a volunteer basis, the anxiety level rises. The CGO can help trustees more confidently work through the maze and help to build strong boards.
Doctors, nurses, hospital staff and administrative employees walk on a path of continuous improvement every day. They are concerned with healing patients, improving patient safety, discovering research breakthroughs and educating others. Trustees, like outside directors of public companies, have become more sophisticated and ask tougher questions, but are concerned about meeting heightened expectations. They grapple with the privilege of serving their local hospital, the wonder of everyday medical miracles and understanding multifaceted health care facilities, government regulations and governance issues. The CGO can help the board to stay on its own path of continuous improvement and provide continuity and efficiencies for board operations.
Questions for Discussion
1. Who is now responsible for supporting the governance function at our hospital?
2. Are staff who support the board dedicated to the governance function or do they also have other key job responsibilities?
3. What support skills does our board need?
4. How does our board stay abreast of governance best practices?
5. When did our board last evaluate its governance practices? Is it time to revisit the processes we use to ensure informed decision-making?
The primary responsibility for hospital governance must remain with the board of trustees. Strong boards take their fiduciary responsibilities seriously. Trustees join the board because they care about the hospital and want to make a difference. But, it is easy to lose focus. By assuming administrative responsibilities and facilitating the board’s governance processes, the CGO helps trustees stay focused on substantive matters and assists in holding the board accountable to stakeholders.
Deciding on the best board governance system for a hospital is a difficult task because no two hospitals have the same structure. It is important that the system used, and the role of the CGO, be molded to fit the unique qualities and culture of each individual hospital. The following description of core responsibilities can be used as a framework to build the right governance system for your hospital.
A good governance system helps trustees to stay strong and adds value in a number of ways. The CGO supports the board and its committees and helps the hospital CEO, senior management and trustees to work together better and serve stakeholders.
Many crises can be prevented and others significantly mitigated if boards and leaders ensure that a well-designed crisis- management plan is in effect. Even after crises occur, a plan that is executed effectively can position a hospital to minimize damage and lay a foundation to regain and maintain the public trust, a responsibility at the heart of effective stewardship and governance.
Bill Ide (email@example.com) is chairman of the Conference Board governance center advisory board and serves as independent counsel to boards as part of the McKenna Long & Aldridge Governance Center. Summer H. Martin (firstname.lastname@example.org) is a partner at McKenna Long & Aldridge LLP, Atlanta. Mary Totten (email@example.com) is content director for AHA’s Center for Healthcare Governance, Chicago.