Governance is evolving in many respects and the changes are placing their mark on virtually every organization and industry. Healthcare is certainly one of those sectors where vast changes in delivery and payment are also generating strong transformations in the governance of healthcare organizations. These changes are casting a bright spotlight on board performance within the healthcare field.
According to a new briefing by McDermott, Will & Emery, here’s a look at the top 10 healthcare governance challenges and trends for 2019.
The Strength of Board Oversight
In governing, one of the healthcare board’s major responsibilities is to monitor organizational performance and exercise accountability for results, especially in the areas of mission effectiveness, financial stewardship, strategic direction, quality and patient experience. In the digital age, the scrutiny of the media relative to patient concerns, billing practices, product, and public safety, and consumer rights often reflects back on the healthcare board’s role, processes, diligence, reliance on executives, and the strength of board oversight. When organizational problems are in the spotlight, the healthcare board’s oversight responsibilities are often too under evaluation.
Diversity and Board Refreshment
Best practices for all types of boards are clear that a diverse board composition bring many benefits, including a range of perspectives, experiences and skills that bring about better decision-making. Achieving such diversity requires deliberate, strategic approaches to board recruitment and refreshment. Yet, according to the American Hospital Association’s 2019 National Healthcare Governance Survey Report, hospital and health system boards are making little progress in racial/ethnic, age, gender or professional diversity. Additionally, some 76 percent of survey respondents reported that no board member had been replaced or not been reappointed when eligible over the past three years.
Conflicts of Interest
2019 has brought several high-profile healthcare board conflicts of interest controversies to the national forefront. Most often these issues have arisen from inadequate board attention to CEOs with latent conflicts on mergers and acquisitions decisions, directors who also have vendor relationships with the organization or lack independence, and inadequate processes to identify, disclose and manage potential conflicts of interest. The need for healthcare boards to demonstrate zealous adherence to their fiduciary duty of loyalty has never been more imperative.
With the ever-growing complexity of the healthcare environment, boards are continually faced with making complicated and key decisions on new and important issues and risks. This level of complexity requires healthcare board members who are thoroughly engaged in the governance process and who can give the growing time and attention needed to have generative discussions and approach complicated decision making in a systematic and thorough manner. Yet in 2019, the level of director engagement, attentiveness and commitment has become areas of focus for regulators, courts, and governance thought leaders. Healthcare boards are considering how to minimize director distraction and maximize directors’ time for productive governance work.
There have been a number of state regulatory authorities scrutinizing healthcare organizations and challenging their status as charitable, nonprofit entities that qualify for tax-exempt status. The challenges have been based on a range of assertions, including access to care issues, “mission drift” concerns and scrutiny of nonprofit organizations’ funding of for-profit subsidiaries. At the federal level, Senator Chuck Grassley (R-IA) in his role as Chair of the Senate Finance Committee has indicated he will also be scrutinizing hospitals and health systems’ tax exempt status in 2019.
The Intersection of Governance and Quality of Care
Oversight of quality and safety is one of healthcare boards’ key responsibilities. As the healthcare system grows and transforms to a continuum of care, the quality oversight function has similarly grown and become a more complicated responsibility. This requires strong governance that monitors the quality of care on multiple levels. An insufficient governance infrastructure can cause systemic quality issues that contribute to the frequency and number of quality of care incidents as well as medical staff concerns with hospital and health system executives and boards.
Time for a Compliance Review
Healthcare board Compliance Committees are reevaluating the scope and effectiveness of their programs following the Department of Justice’s release of two new guidance documents. The first focuses on compliance program effectiveness and the factors that are typically used in evaluating compliance programs. The second document looks at how cooperation credit in False Claims Act cases can be earned.
Disruption Increases in Frequency and Variety
The types of disruptions in the healthcare field are varied and they are also increasing. According to an article by Michael W. Peregrine and Kenneth Kaufman, healthcare boards’ oversight of growing disruptive factors should include: expecting management to identify disruption threats and develop responsive strategies; considering making changes to board processes and structures to better facilitate response plans; and ensuring that relevant business disruption-related information is brought to the board’s ongoing attention.
Legal Challenges to Board Infrastructure
The Lutheran Care Network made headlines when the New York state’s attorney challenged their corporate structure and intra-system business arrangement. The outcome of this case could determine the future rights of healthcare system’s parent companies to exert governance and financial control over the subsidiaries for which they serve as sole members.
Mergers & Acquisitions and Governance
With the proliferation of mergers and acquisitions between nonprofit healthcare organizations still on the rise, many healthcare organizations are reconsidering their post-merger governance structures and relative authorities among entities. Among the governance questions under evaluation are the authority of “legacy” enforcement bodies, the transition from initial board composition to final board size and composition, director qualifications, parameters for committee membership and leadership, and designated authorities and responsibilities of subsidiary board entities.
Board Management Software Solutions Indicated to Tackle Modern Governance Issues
Many of the challenges that today’s healthcare organizations are facing can be facilitated by implementing digital solutions for board governance, such as a board management system by BoardEffect. Diversity, board refreshment, conflict of interest management, efficient board meetings and productive use of director time, compliance oversight and secure management of confidential information and data are among the current board challenges where a quality board management software provides ready-made solutions that enable board performance and effectiveness.