Board Structure of a Healthcare Institution
Since the passage of the Affordable Care Act (ACA), the healthcare industry has been undergoing more major changes than almost any other industry. The changes that ACA brought with it have caused healthcare systems to make major changes in how they provide and bill for services. As a result, hospitals in many areas have found the best way to provide care is to consolidate with other hospitals or clinical entities.
As healthcare systems merge and consolidate, their governance structures must change with them. This poses a strong challenge in that the healthcare industry is changing faster than healthcare systems can change or modify their foundational structures. As a result, many healthcare systems are struggling to play catch-up to reorganize their foundations.
According to The Governance Institute, there are seven essential pillars of good governance. Healthcare industries undergoing extensive changes should keep these pillars in mind as they reorganize their board and management systems:
- Board Recruitment
- Board Structure
- Board Culture
- Education and Development
- Evaluation and Performance
- Continuous Governance Improvement
- Leadership Succession Planning
Hospital Board Structures
Single hospitals have the most straightforward board structures. Much like other corporations, there is a board of directors, which is sometimes called a board of trustees. The board takes responsibility for strategic planning, risk management and oversight. Boards nearly always have committees that perform the detailed work.
Single hospitals are run by a CEO who takes responsibility for managing the daily activities of the hospital.
Hospitals connected through larger systems usually have multiple boards. This is where forming an optimal working structure gets complicated. Systems range from a few regional hospitals to multistate systems or megasystems. There are many challenges involved in combining systems because of the existing multiple layers of governance and the layers of governance that larger systems require. The main challenge is how to cover all aspects of governance for multiple facilities without duplicating efforts.
While there is no one-size-fits-all board structure for hospitals within large systems, leaders should consider the following issues as they reconfigure their board and management structures:
- Size of system
- Location and geographic spread of facilities
- Level of diversity in patient population
- Culture across system
- How to use size as an advantage for market share and capital investment
- Attaining uniformity of care
- Reducing waste
The only “right structure” is the one that meets the needs of the patients, community, stakeholders and shareholders, if there are any. Regardless of the type of structure needed, BoardEffect is a board portal platform that works for all boards.
Different Types of Boards
Every board of directors looks and functions differently. Something that unites them is that they all have fiduciary responsibilities. Regardless of how hospitals delegate duties and responsibilities, all board members have a responsibility to make decisions as an ordinary, prudent person would and to place the interests of the hospital or healthcare organization above their own. Board trustees are responsible for the hospital’s success, fiscal health and any legal actions.
Another factor in the structure of healthcare boards is whether the hospitals in the healthcare organization operate as for-profit or non-profit entities.
Boards of for-profit hospitals operate similarly to other for-profit corporations. They operate according to the hospital’s mission and bylaws. For-profit boards have responsibility for planning and oversight, while the CEO and senior management have responsibility for the daily activities of the hospital. They’re also required to comply with all laws and security regulations. Boards of for-profit hospitals are also highly responsible to their shareholders.
Boards of nonprofit hospitals also take their lead from the organization’s mission and bylaws. What makes them different from for-profit hospital boards is that nonprofit boards are ultimately responsible to the public they serve. Nonprofit boards also have responsibility for planning and oversight. They hire and evaluate a CEO to manage the hospital’s daily activities. Hospitals with religious affiliations may also appoint a religious leader who has authority over their board and the senior management team.
Most hospital boards incorporate one or more advisory boards into their governance structures. Single hospitals may rely on an advisory board for counsel on matters where the board lacks expertise. Healthcare organizations with multiple hospitals and clinics may appoint several advisory boards that serve in connection with various other boards. Larger healthcare organizations may also have one or more community boards, so they can have input and feedback from the needs of the community.
All boards of healthcare organizations must clearly understand the difference in the roles between governance and management. Boards of trustees prepare for short- and long-term plans and growth. Managers implement the board’s decisions.
In carrying out their duties, healthcare boards of trustees have six main areas of responsibility, including:
- Hiring and retaining the most qualified CEO
- Short- and long-term planning based on the organization’s mission
- Ensure patient care is of high quality
- Overseeing credentials for medical staff
- Overseeing the financial health and well-being of the organization
- Board self-evaluations for the purpose of education and development
Role of Committees in Healthcare Governance Structures
Committees are an important component of all healthcare governance structures. The bulk of board work is usually done in committees, task forces or advisory councils. Common faults of board structures are that there are too many committees and that the committees are not functioning optimally. Committee work should not be operational, which falls under managerial duties. Standing committees have regular and ongoing duties. Ad hoc committees should dissolve once they’ve met their identified objectives.
The most common standing committees for healthcare systems include:
- Finance committee
- Safety and quality committee
- Executive and nominating committee
- Executive compensation committee
- Nominating and governance committee
- Strategic planning committee
- Audit and compliance committee
Stand-alone hospitals and hospitals that have local boards may also have a community benefit committee to represent the needs of the community.
Final Thoughts on the Structure of Healthcare Boards
The Affordable Healthcare Act was just the beginning of change within the healthcare industry. As citizens experience the changes that the Act has brought, challenges with healthcare plans are coming to light. Additional issues such as changes in Medicaid and Medicare, and concerns over health parity, will also be factors in the near future that affect how healthcare systems structure their boards and governance.