Raising the Bar for Board Performance
Snapshot
For boards to lead their organizations to value-based care, they will need highly skilled, energized and diverse members. However, a new governance survey finds that they have some work to do in diversity, competencies and turnover.
In the years since the Affordable Care Act was signed into law, hospital boards and leaders have scrutinized, shored up and even redefined their organizations to participate in a transformed health care delivery system. At the same time, some boards have looked inward to ensure that they have the right mix of voices and competencies at the table to lead this transformation. But a new national governance survey finds that boards may not be acting fast enough, and what’s more, there may obvious, though fixable, roadblocks in the way.
Since 2005, the American Hospital Association’s Center for Healthcare Governance has conducted three national surveys, gathering information from hospital CEOs and board chairs on the state of governance. The surveys included questions on board composition and the community, orientation and education, quality oversight, executive performance evaluation and other areas. While many questions remained the same over the years to capture trends, the 2014 survey included new questions on readiness to govern the transforming health care delivery system.
Virtually all of the board chairs reported some degree of knowledge among their trustees about the “transformational changes occurring in health care.” The vast majority also reported that their boards were engaged in candid strategic discussions about what health care transformation means for their organizations and in developing a new organizational vision and strategy for transformational change. However, just one in five trustees rated themselves as nearing the completion of that transformation.
“[Trustees] understand that the world is changing,” says John Combes, M.D., president and chief operating officer of the AHA’s Center for Healthcare Governance. “They have a good grasp of it. They’re not quite sure what to do yet.”
The Center’s survey findings also reveal evidence of stumbling blocks that could inhibit the agile and complex decision-making that will be vital in the years ahead. Boards continue to struggle with recruiting diverse trustee voices and using competencies to recruit and assess members. They also fall short in promoting regular turnover among board members to preserve independence and the ability to respond to an evolving environment.
To gain a better understanding of these weak spots and to learn how proactive boards are preparing themselves for the transformational changes ahead, Trustee spoke with governance experts and board members from a range of hospitals and systems.
Diversifying Voices
A closer look at the composition of today’s boards reveals that as of 2014, nearly half of boards lack any minority trustees, according to the governance survey, and just 12 percent of trustees were non-Caucasian, only a slight improvement from 10 percent in the 2011 survey. The percentage of women on boards, at 28 percent, remains unchanged, as does the percentage of physicians, at 20 percent. The percentage of nurses decreased by 1 percent to 5 percent. Meanwhile, there is a 2 percent increase in trustees 51 and older.
Hospital boards are only shortchanging themselves, particularly as their governance roles and related decisions extend into population health and other areas far beyond the walls of the hospital, says Fred Hobby, former president and CEO at the Institute for Diversity in Health Management, an AHA affiliate.
Boards can’t fully understand quality-related challenges without having a sense of the underlying dynamics, Hobby says. Case in point: If a military base is nearby, he asks, wouldn’t it help to have the perspective of a high-profile veteran? As board prospects are vetted, they might want to consider how someone who happens to have a disability might enrich discussions related to access issues, he says.
“Are patients after discharge unable to purchase their medicines and subsequently being readmitted within 30 days?” Hobby asks. “You want people on the board who understand the cultures, the language challenges, the socioeconomic challenges of the patients being served.”
While diversity in sexual orientation wasn’t specifically addressed in the governance survey, health care organizations need to understand and serve patients with diverse sexual orientations. Jack Lynch, CEO at Main Line Health, Philadelphia, and a board member of the Institute for Diversity, says that although he didn’t specifically seek a board member from the lesbian, gay, bisexual and transgender community, he was happy to realize that a recently recruited female community leader also happened to be married to another woman, because “we serve a population and we employ people who happen to have that sexual orientation,” he says. “I think it’s helpful to have insight into that thinking, and to be sensitive to that population when we are making decisions.”
Combes notes that another side of the business case for diversity is to gain more insights from younger trustees, because those generations will drive major changes in how medical care is both purchased and accessed. “We have a younger generation in this country that accesses information, that accesses services very differently than we do,” he says, pointing to millennials’ propensity to text, tweet and grab online what they need quickly.
“How do you relate to that?” Combes asks. “Do you say to the younger generation, `Oh, you have to come into the office and sit for two hours before we even see you’? Do you think the people in the next generation will tolerate that?”
Sally Mills is not a millennial, but when she became a trustee at Blue Hill (Maine) Memorial Hospital in 2006, she was in her late 30s with two children — a kid by board-demographic standards.
In the years since, the board at the 25-bed critical care hospital — part of Eastern Maine Healthcare Systems — has strived to incorporate younger voices to reflect more closely the surrounding community. So, as board seats opened up, they tended to look for skill sets that required the expertise of local business leaders or community figures and other nonretirees, according to Mills, who is an attorney. Today, roughly two-thirds of trustees are younger than 60 compared with one-third when Mills joined.
In addition, the board has tweaked the chair role in a way that will allow Mills — and other trustees after her, she hopes — to move into that position. When she becomes chair later this year, she won’t be required to attend every committee meeting as previous chairs have. Instead, when she can’t or doesn’t need to attend, she’ll communicate with the committee chair afterward by phone or email. “That’s one way I’m trying to make it work — by being smart about what meetings I go to,” Mills says. “[I] try to stay on top of it without necessarily being at every meeting.”
Strengthening Competencies
More hospitals are using competencies to select new trustees, according to the governance survey, with 40 percent of board chairs reporting such criteria, compared with 37 percent in 2011. Lynch says the 24-member board at Main Line Health assesses each board candidate against a grid with nearly two dozen prospective competencies listed along one side, including diversity. “We’ve gotten away from the old [approach of] Suzie Q’s husband has money, so let’s get Suzie Q,” he says.
Including competencies in annual self-assessments helps boards to evaluate their performances and their readiness for upcoming challenges, but just 58 percent of chairs said they had completed a full-board assessment in the last three years, and only 36 percent said they had performed individual trustee assessments. Additionally, eight out of 10 hospitals said that none of their members had been replaced or failed to be re-nominated during the prior three years, due to a failure to demonstrate competencies.
In addition to using self-assessments, boards can take advantage of a significant event, such as a merger or acquisition, to revisit board structure and competencies, says Joe Wilkins, board chair at Irvine, Calif.-based St. Joseph Hoag Health, which includes seven hospitals. When the two hospital systems of St. Joseph Health and Hoag created an affiliated network in 2013, they formed a new regional board with related competencies and strategic goals. The board was kept small at seven members, with four coming from the St. Joseph Health side and three from Hoag, he says.
“We were very deliberate around ensuring that we had a small board that would be more effective and more nimble and productive in making decisions, specifically around strategic direction,” Wilkins says.
For example, one competency for the St. Joseph Hoag Health board is strategic insight, with members needed who can show skills in driving innovation. Another is mission intensity, which included specific elements such as a dedication to serving the indigent and vulnerable, while more broadly supporting a commitment to “population health and prevention while embracing the heritage of each organizational entity.”
Protecting Independence
The average length of board terms increased somewhat since the 2011 governance survey, inching up from 3.5 to 3.9 years. The 2014 survey also looked at the maximum number of consecutive terms allowed by boards and found an average of 3.3. When combined, a trustee could serve an average of nearly 13 years.
A strong board requires the ability to take a hard look at itself and individual members and be willing to shed those who don’t have the time or commitment to meet today’s steep challenges, says David Nash, M.D., dean of the Jefferson School of Population Health and a board member at Main Line Health. Nash, who consults and speaks around the country, says that it’s not unusual for him to encounter boards with members who have served at least two decades.
“It’s very difficult to appreciate how a member who is serving two decades or more could be classified as independent,” says Nash, a strong proponent of term limits. “They are too intertwined with management. The risk there is a narrow focus, inability or unwillingness to see the transformation, and support of the status quo.”
Lawrence Prybil is another governance expert who is concerned about the lack of trustee turnover. “To not do that ongoing assessment and make appropriate adjustments to the composition of the board is a governance failure,” says Prybil, the Norton Professor in Healthcare Leadership at the University of Kentucky College of Public Health in Lexington.
“To sit in place with the same people year after year with no fresh ideas, no fresh competencies and no amendments of the composition to reflect the rapidly changing environment is not responsible governance,” he says.
Prybil acknowledges that in some smaller communities, the talent pool might be shallower, and a particular member’s expertise might be perceived as vital. During times of great change, such as with an acquisition, it might be appropriate to extend the service of specific members, he says. Still, he recommends that boards limit term lengths, and also consider a limit on the number of terms to ensure that the board’s thinking and interactions don’t stagnate.
“We do need some continuity,” he says. “But we also need to be adapting to a changing environment.”
The board of Oregon’s Salem Health is changing member evaluations to make it easier to convey difficult but necessary feedback about performance, says Katherine Keene, a trustee at the nonprofit hospital system. Traditionally, feedback was given in a more informal way, with the chair meeting individually with members each year to get a sense of what was working and what wasn’t, and passing it along, says Keene. But trustees determined that a more rigorous, consistent method was needed, because the current approach put a lot of pressure on one individual “to distill and deliver the message,” she says.
The trustees plan to use an anonymous survey to provide more uniform feedback based on compiled data, likely starting next year, Keene says. The board’s terms are currently three years, subject to renewal. There are no limits on the number of terms.
“Our decision was that as long as we’re giving people feedback that’s rigorous, which is why we’re stepping up on that front, we don’t want to have any artificial limits on service,” she says. “If someone is still contributing and has something to offer, then we shouldn’t necessarily draw a hard line and say, `You have to stand down for a year.’ ”
The board has been tackling some significant strategic decisions in recent years, including whether Salem Health should continue as a stand-alone system, and last year, Salem Health disclosed that it was in preliminary discussions with Oregon Health & Science University.
Keene, who joined the board in 1996, is one of the longest-serving members. With the potential OHSU affiliation in the works, she says, stability matters and she’s happy to help the system move into its next phase of providing health care in the Willamette Valley. “Right now, some continuity is very important.”
Charlotte Huff is a contributing writer to Trustee.
Hartford’s Structural Assessment: Is the Board Built to Lead?
After overseeing Hartford HealthCare’s rapid expansion from two to five acute care hospitals in recent years, the board decided to evaluate its governance structure in light of the changing health care landscape.
“We wanted to have greater agility and speed and decision-making [at the board system level],” says David Hyman, a board member of the nonprofit Hartford, Conn., system that also includes two psychiatric hospitals. “And we wanted to be able to focus more on quality and safety and clinical outcomes on the local level — which we felt was better handled by a new governance structure.”
Starting last fall, a nine-member governance task force that included representatives from the five acute care hospitals and home health care, among others, held a series of meetings with an outside facilitator to hammer out the system’s future structure, Hyman says. “We didn’t go in with preconceived notions of where this was going to take us,” he says. “This was a very soul-searching process.”
Ultimately, the task force settled upon a two-tiered structure and related governance focuses. Each regional board will be responsible for quality, licensure, regulations and population health needs for the hospitals and residents in that particular community, Hyman says.
The system board focuses on broader strategy, planning and financial goals. Plus, it approves the members of the regional boards, although those boards will select and submit the nominations. “The goal is to put the responsibilities where they properly belong,” Hyman says. — C.H.
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Only slightly more than 40 percent of hospital boards spend at least half their time on strategic discussion and debate. For tips to boost time devoted to strategic discussions, read “Pumping Up Strategic Discussion”.