This Health Law News article is Part III in a series discussing the new governance study, “Governance in Large Nonprofit Health Systems: Current Profile and Emerging Patterns.” Part 1 – Executive Summary was published in Hall Render’s Health Law News on August 8, 2012, and Part II – Public and Private Scrutiny of Hospital and Health System Governance was published on August 28, 2012. The remaining articles in this series will cover key findings and their potential significance for hospital and health system boards, exceptional governance features of the participating systems and key recommendations.
In Hall Render’s August 8, 2012 Health Law News article, Rex Killian, President of Killian & Associates (“K&A”) and Of Counsel to Hall Render, provided an Executive Summary of a new major study that had just been completed by Lawrence Prybil and his research team, including Killian, of the board structures, processes and culture of the boards of large, nonprofit health systems in the United States. In the August 28, 2012 article, Killian addressed the public and private scrutiny of hospital and health system governance and how the study was designed to answer key questions of CEOs and board members of hospitals and health systems and provide practical advice as to how boards can improve their effectiveness and efficiency. Hall Render was a sponsor of the study. The full Report is available here.
In this Part III, K&A and Hall Render will address the nine contemporary benchmarks of effective governance that were developed and used to assess and score the governance structures, processes and cultures of the 14 large health system boards that participated in the study.
While several public and private organizations and groups have previously developed sets of “best” or “recommended” governance practices for hospitals and health systems, the research team elected to develop a short, concise and contemporary set of benchmarks that could be applied uniformly and measured. The team reviewed previous governance studies and current literature in both the public and nonprofit corporate sectors and consulted with several experts in the field. The team developed nine benchmarks and related indicators and reviewed them with current and former executives in health systems that were not part of the study population. The benchmarks that were adopted were concluded to be pertinent to effective governance, well-established and measurable.
The objective of the research team was to:
- Develop a composite and short set of benchmarks and indicators of effective governance that would address board structure (board organization and composition), board practices and processes (board focus, accountability, relationships, evaluation, succession planning and meetings) and board culture; and
- Develop a methodology to measure and score a board’s performance whereby boards could evaluate and compare their practices against the benchmarks and peer groups.
As was the case with the 14 boards participating in the study, the information obtained through the use of the benchmarks and scoring highlighted several key findings [Section III of Report] and areas in need of improvement and provided the foundation for the recommendations [Section IV of Report].
The nine benchmarks and 32 indicators are set forth in Table 31 of the Report (pp. 47-50), and the scores of the 14 systems are displayed in Tables 32 & 33 (pp. 51-52). In evaluating the boards against the benchmarks, comparable information was obtained through a review of corporate and governance documents and interviews with CEOs and board members. It was a systematic and structured evaluation, not a “check-the-box” or self-assessment evaluation.
The benchmarks were organized around three key measures of board performance: board structure, board processes and board culture. While the Report offers more detailed description of the benchmarks, the following is a summary of the nine benchmarks and related indicators:
Board Structure – Two benchmarks and related indicators on board structure address board size, board member terms and term limits, board committees and board composition (including board member competencies, board member independence and board member diversity).
Board Processes – Five benchmarks and related indicators on board processes address the board’s responsibility and accountability, board chair and CEO relationship, board and CEO evaluations, board and board leadership succession planning, the board’s oversight responsibility for patient care quality and safety, the board’s responsibility for community benefit and population health and the way the board sets the meeting agenda and conducts its meetings.
Board Culture – Two benchmarks and related indicators on board culture address several features that, if present, indicate the existence of a healthy, effective board culture. As observed in many of the corporate scandals, a passive culture results in ineffective governance and validates the principle that “culture eats strategy for lunch.”
By applying these benchmarks and related indicators in a thorough and disciplined board evaluation process, hospital and health system boards will be able to identify and address areas in need of improvement, demonstrate compliance with public and private regulatory bodies and improve the overall effectiveness of the board and organization.
In upcoming articles, K&A and Hall Render will discuss (a) key findings of the study and their potential significance to hospital and health system boards, (b) some of the “exceptional” board features of the participating systems and (c) recommendations for the board’s consideration.
If you have questions regarding the study, please contact:
- Rex Killian, K&A, at 314-504-2213 or rkillian@killianadvisory.com;
- Lawrence Prybil, PhD, LFACHE, Professor and Associate Dean of Public Health, University of Kentucky, at 859-218-2239 or Lpr224@uky.edu;
- Jeffrey Carmichael, Hall Render, at 317-977-1443 or jcarmichael@hallrender.com; or
- Your regular Hall Render attorney.
