Source: https://www.governanceinstitute.com/page/EBriefings_V15N6
Timestamp: 2019-04-24 16:06:22+00:00

Document:
Welcome to The Governance Institute’s E-Briefings!
This newsletter is designed to inform you about new research and expert opinions in the area of hospital and health system governance, as well as to update you on services and events at The Governance Institute.
New developments in data analytics, technology, and artificial intelligence are driving innovation in healthcare. Providers of all types and sizes are increasingly recognizing the imperative of innovation. This article highlights steps that board members can take to foster successful innovation in their organizations.
Develop and maintain a vision of the ideal healthcare system to guide innovation-related resource allocation decisions.
Help address social determinants of health in the community?
Look at how proposed innovations would affect the patient’s experience of care through a patient’s eyes.
New developments in data analytics, technology, and artificial intelligence are driving innovation in healthcare. Providers of all types and sizes are increasingly recognizing the imperative of innovation. Opportunities for significant improvements in the patient experience and health outcomes abound, and the possibility of enormous disruptive potential is upon us.
With so many choices, resource allocation decisions are more challenging than ever in an era of disruptive innovation. And champions of various innovations can often make a compelling case for their projects. In healthcare, we are all susceptible to shiny object syndrome, which occurs when a new idea captures our imagination and distracts us from the big picture. We then risk going off on expensive tangents that don’t necessarily improve healthcare value.
The ideal healthcare system will reward high-value care. It will be a well-care system rather than a sick-care system. It will pay for all services that providers consider essential to achieving the desired health outcomes. These, of course, are the concepts underlying value-based payment. Continued innovation in value-based payment models is needed because early experimentation has not resulted in definitive winners. Complete interoperability across the continuum of care is a prerequisite for a high-value health system.
The ideal healthcare system will be personalized on a mass scale. It will recognize that price transparency,1 along with clear and easy-to-understand financial communication,2 is integral to engagement. It will be genomics-based, meaning precision medicine will become the standard of care. Patients will no longer experience care that’s all downside—i.e., treatment that causes side effects but has little or no chance of benefiting a patient, given his or her genetic profile.
The ideal healthcare system will value engagement with patients and communities. It will address social determinants of health, so it will be integrated with a wide array of community resources and will emphasize accessibility to a variety of care providers and services. Prevention and treatment of behavioral health and substance abuse issues will be on a par with those for other medical conditions. End-of-life discussions will be more socialized and acceptable than they are now.
If a proposed innovation does not meet one or more of these criteria, chances are it’s just another shiny object.
Technological innovations have already transformed the patient’s experience of care in many ways—not always for the better, from the patient’s perspective. For example, it’s common knowledge that patients feel their physicians spend more time engaged with the computer during office visits than they spend with patients. The lack of eye contact contributes to patients’ sense that physicians are not listening to them. The advantages of an electronic health record are not always obvious or relevant to patients. But board members and other healthcare leaders know there’s no going back to paper records. We wouldn’t want to even if we could. It would be a huge step backward for patients and for the healthcare system.
Now that electronic health records are widely deployed in acute care and other settings, we are figuring out how to compensate for their negative impact on the physician office visit experience. I’m confident that we will figure it out. But the point is this: when implementing a disruptive technology, it’s better to do it right than to do it over. In other words, we must keep patient experience front and center when adopting new technology.
At first glance, it may be hard to see how innovations that bring us closer to an ideal healthcare system could do anything but improve the patient’s experience of care. Yet we shouldn’t underestimate the potential for negative impacts associated with transformational change. For example, wearables that continuously monitor health metrics and facilitate intervention, while a giant leap forward in many ways, may be experienced by patients as intrusive. Precision medicine may be welcomed by patients who learn they will benefit from certain care and distrusted by those who hear the difficult news that they will not. In addition, it’s important to keep in mind that American consumers often equate procedures and medical interventions with health improvement. Overutilization is not just a supply-side phenomenon. Down the road, consumers may question whether value-based payment—by whatever name they eventually come to know it—is incentivizing providers to withhold what consumers consider to be necessary care.
To address these issues, board members should seek ways of looking at proposed innovations through a patient’s eyes. Healthcare organizations typically fall far short of other service and consumer product organizations in having structures and processes designed to gather consumer input and feedback on a regular basis. Board members who have expertise in this area have opportunities to make important contributions to organizational listening skills.
Innovation in healthcare is bound to present challenges that we haven’t even identified yet. But with a patients-first and value-based perspective, board members will be well equipped to guide their organizations through the coming era of transformational innovation.
The Governance Institute thanks Joseph J. Fifer, FHFMA, CPA, President and CEO, Healthcare Financial Management Association, for contributing this article. He can be reached at jfifer@hfma.org.
1 See HFMA, “Improving Price Transparency”; Joseph Fifer, “Price Transparency: What Board Members Need to Know,” BoardRoom Press, The Governance Institute, June 2015.
2 See HFMA, “Patient Financial Communications”; Joseph Fifer, “The Role of Financial Communication in Building Community Trust: What Board Members Need to Know,” BoardRoom Press, The Governance Institute, December 2015.
3HFMA, Avoiding Surprises in Your Medical Bills: A Guide for Consumers, 2018; HFMA, Understanding Healthcare Prices: A Consumer Guide, 2015.
This article addresses the duty of “due care” in practice, with special attention paid to the CEO’s role and the relationship between the community hospital/health system board and the identified “medical staff” in all of its forms. It provides direction to boards as they face an increasingly complex array of organizational designs, business relationships, and decisions made within the context of systems, processes, and leadership constructs of today’s hospitals and health systems.
Ensure they understand the requirements of a “fiduciary” as they apply. Boards of licensed hospitals and health systems are not “advisory.” They are deemed to be “fiduciaries” and in charge of the management and performance of the organization.
Always exercise “due care,” including for matters relating to the function of the formal medical staff and its role as “agent advisor” to the board. The executive structure of the formal medical staff must have a direct reporting relationship to the board. Executive management facilitates the ongoing functionality of the relationship but does not control or direct the relationship.
Fully understand the nature of employed physicians’ relationship with the medical staff, the organization, and the board, including aspects relating to physician employment agreements. While physicians employed by the hospital or health system may be members of the formal medical staff, this body is not responsible for the performance of physicians as employees. The employer remains “primary” as it relates to the actions of physicians as employees.
Governing boards of community hospitals in the U.S. have a duty of “due care” as it relates to the organization’s operations and performance. This duty derives from the description of the responsibilities of a “fiduciary” and means that a director must exercise appropriate diligence—doing what a reasonable person would do in the same situation with the same information—in making decisions for the organization when overseeing its management.1 The duties and responsibilities of the board as a fiduciary body extend to the CEO and all members of the medical staff, whether operating as independent members of the hospital medical staff, employees, or contract providers of professional services within the health system.
The majority in Avera Marshall concluded that the Avera medical staff was capable of suing and being sued independently and further decided that the hospital’s medical staff bylaws formed a binding contractual relationship between the two. This decision thus increased the medical staff’s status as being something more than merely a department of the hospital and a creature of the hospital’s board.
For review, the existence of a licensed hospital derives from its incorporation in the state within which it operates. The articles of incorporation and/or corporate bylaws provide for the purpose of its existence. Upon incorporation, and for the full life of its existence, it possesses a board of directors (sometimes referred to as a board of trustees). The board derives its authority from state law (the state in which the hospital is incorporated) and the corporation’s resultant articles of incorporation (and related bylaws), which together align the mission, responsibilities, and accountabilities of the hospital with state statute and state licensing requirements.
The board may not abdicate or delegate its final decision-making authority and it retains supremacy in all decisions, actions, responsibilities, and accountabilities as they relate to operations and performance of the institution that it governs. Governing boards are not “advisory” but are rather controlling in nature.
Rather confusingly, the Supreme Court ordered the case remanded to the lower court for further proceedings “consistent with this opinion.” When the case returned to the lower court, that court considered the matter further and concluded that the board did indeed possess ultimate authority over the hospital’s medical staff. Further, the court held that the medical staff and its member physicians served only in an advisory capacity to the board and had no power to veto any board decisions. Thus, in a roundabout way, this litigation confirmed the supremacy of not-for-profit boards over their medical staffs.
As is the case with other professional advisors to the board, directors are not required to possess the knowledge of medicine, nursing, or that of other licensed healthcare professions to carry out its appointed duties. Instead, it must rely upon the advisory function of its affiliated medical staff just as it does with other professionals in advisory roles such as legal and tax advisors. As noted above, a governing board is required to take “due care” in managing the often-delicate relationship between the board itself and the formal medical staff.
The advisory functions and responsibilities of the medical staff are most always provided for in the written medical staff bylaws of a licensed hospital. These bylaws delineate the responsibilities of the formal medical staff as they relate to the board and typically describe the specific activities and actions required of the medical staff as it discharges its responsibilities on behalf of the board.
The medical staff exists as a constituent part of the hospital/system. It has no purpose or standing as a legal entity nor has it the capacity to bargain with the hospital boards.
It is advisory with its scope of activity and responsibilities in this regard, which is delineated in the medical staff bylaws.
It recommends actions to the board often through a medical executive committee (MEC), a formal, functioning subcommittee of the medical staff.
It is typically the case that authorities regarding changes or amendments to the medical staff bylaws remain unilaterally with the board, as the medical staff is a product of the bylaws of the organization and does not exist independently.
While the medical staff is functionally “self-governing,” it operates in accordance with bylaws approved by the hospital board. The medical staff’s role is one of support to the responsibilities and accountabilities of the board and accordingly exists as an agent of the board.
With this in mind, it is important to remember that the medical staff, due to the special nature of its collective base of knowledge and experience, is relied upon by the board to carry out its purpose and function as designated, which requires it to have a direct line of report to the board.
There is no legal bright-line test of “due care”; cases involving issues of due care are decided by a judge or jury based upon the evidence produced at trial and each factual pattern is different.
In summary, the board ultimately controls all aspects of the mission and operation of the organization and is responsible and accountable for its performance by both law and regulation. Management and the medical staff exist as instruments of the board to effectively carry out its assigned responsibilities and authorities.
Boards should expect that the health systems they govern will employ physicians at accelerating rates. Employed physicians are typically contract employees of health systems meaning their employment is governed by a written employment agreement between the organization and employed physicians. Employed physicians are typically members of the formal medical staff of the hospital(s) controlled by the health system.
While employed physicians are subject to all requirements of the governing bylaws of the formal hospital medical staff, the hospital medical staff is not primarily responsible for the behaviors and performance of employed physicians, as specified in their employment agreements.
Board members of health systems do hold a responsibility of due care as it relates to the physicians employed within the health system. Governing boards are responsible to know and understand how physicians employed by the organization are accountable to the organization under the terms and conditions of their employment agreements, and are responsible to know and understand the means, methods, structures, and individuals responsible for the performance of the physicians employed by the organization. The proper exercising of “due care” as a board member, in this regard, extends beyond the knowledge that employment agreements, and related compensation plans, meet legal, regulatory, and fair market tests. Likewise, the health system, the governing board, and by extension, senior leadership, are responsible and accountable for the medical care delivered by physicians within their employ. Employed physicians operate as “agents” of the health system.
As cited, management exists to carry out the healthcare organization’s mission, vision, strategic plan, clinical services plan, and operating and capital budgets as approved and directed by the governing board.
The functions of hospital management are generally the acquisition, organization, deployment, management, and evaluation of human resources, capital assets, financial assets, and related and required third-party arrangements needed to achieve the vision, mission, and plans of the hospital as directed and overseen by the board, which operate as the ultimate authority of the organization. Hospital management operates within and through governance and an organizational structure provided at the approval of the board (see Exhibit 1). This structure identifies, organizes, and links together the programs, services, and functions provided to care for patients.
Hospital management serves as a facilitating link between the formal medical staff body and the board. Since the formal medical staff does not report to or through hospital management, typically the chair of the MEC and the CEO will collaborate to ensure that the board is well-served by the operations of the formal medical staff.
It has been demonstrated in legal proceedings that hospital leadership does bear some responsibility and accountability for informing the board of matters that fall within the purview of the formal medical staff that are left unattended by medical staff proceedings for any reason.
Are Quality and Safety the Responsibility of Hospital Administration?
The quality of care and safety of patients are the most important tasks of all who work in a hospital or health system. The board, medical staff, hospital administration, and all employees and affiliates play an important role.
All in positions of authority, including administrators, licensed professionals, affiliated physicians, and the medical staff, bear responsibility to raise observations and issues of concern to the authoritative bodies within the hospital, including hospital administration, the medical staff, and the board. The CEO and subordinate officers bear responsibility to raise concerns regarding the clinical practice of physicians (whether employed by the hospital or working independently) to the medical staff and hospital board.
In rare instances where an administrative officer of the hospital has foreknowledge of circumstances where a patient may be harmed by the acts of a member of the medical staff (e.g., the hospital officer has reason to believe the physician in question is impaired or intends to perform a non-emergent procedure for which that physician is not privileged to perform) the ranking hospital officer on duty has the obligation to: a) ensure that no patient is subjected to potential harm or unauthorized care; b) confirm that the leader of the medical staff is notified of the issue and action taken as soon as is practicable; c) make certain that the hospital board chair or designee is informed of the issue and action is taken as soon as is practicable, unless the leader of medical staff accepts responsibility for notice; and d) ensure that the proper and assigned hospital staff member remains involved with follow-up processes and actions of the medical staff, including actions related to the ongoing privileges of the physician.
To set these processes and requirements within the framework of “due care” for hospital administration, when hospital administration becomes aware of the possibility of a member of the medical staff exceeding his/her approved clinical privileging, a notice should be made available up the hospital administration chain of command. Senior leadership has a first duty of notice of the medical executive committee, so long as there is no need to intervene immediately to ensure patient safety and welfare. Senior hospital administrators are then responsible to ensure the medical staff leadership pursues due process according to approved medical staff bylaws, including final disposition and report, and possible involvement of the hospital board.
In conclusion, members of the governing board of a community hospital (or an affiliated health system) should assume that all that occurs with the operation of the entity is the responsibility of the board. While the courts, judges, and juries recognize that community boards cannot know all that is required to properly deliver complex medical care to patients, boards can be and are expected to exercise “due care” in the discharge of their duties. “Due care” in this regard has been extended by the courts to matters that have involved the effects of the management of the relationships between the board, the hospital medical staff, and the management of employed and contracted physicians, all as it relates to the role of the hospital (or community health system), the CEO, and the senior leadership team.
Of special importance is the functioning and direct reporting of the officers of the hospital medical staff to the governing board, especially as it relates to the scope of practice and patient care outcomes for independent and employed physicians. For employed physicians, boards should be clear regarding those areas of physician performance that will be addressed within the scope of the functions of the hospital medical staff and those to be addressed solely within the scope of the employment arrangement.
The Governance Institute thanks Daniel K. Zismer, Ph.D., Co-Founder and Managing Director, Castling Partners, LLC, and Professor Emeritus, School of Public Health, University of Minnesota, and Kevin J. Egan, J.D., Co-Founder and Managing Director, Castling Partners, LLC, for contributing this article. They can be reached at daniel.zismer@castlingpartners.com and kevin.egan@castlingpartners.com.
1 Daniel Zismer and Kevin Egan, “The Board’s Accountability for Complex Healthcare Strategies: Exercising ‘Due Care’ in the Face of Unfamiliar Organizational Strategy and Strategy in Action,” BoardRoom Press, The Governance Institute, August 2016.
2 See e.g., Mitchell County Hospital Authority v. Joiner, 189 S.E. 2d 412 (Ga. 1972) and Darling v. Charleston Community Memorial Hospital, 211 N.E. 2d 253 (Ill. 1965, cert. denied, 383 U.S. 946, 1966); see also Gilbert v. Sycamore Municipal Hospital, 156 Ill. 2d 511, 622 N.E. 2d 788 (1993).
3 Medical Staff of Avera Marshall Regional Medical Center v. Avera Marshall, 857 N.W 2d 695 (2014).
4 The forceful dissent went the opposite direction, concluding that the medical staff was controlled by the corporate bylaws of the hospital and accordingly lacked the power to overturn any valid business decision made by the board. Citing cases from several other jurisdictions, the dissent argued that a hospital board and its bylaws controlled the relationship between the hospital and its medical staff. See Mahan v. Avera St. Luke’s, 621 N.W.2d 150 (SD 2001); Radiation Therapy Oncology, P.C. v. Providence Hospital, 906 So. 2d 904 (Ala. 2005); and Bartley v. Eastern Maine Medical Center, 617 2d 1020 (Me. 1992).
5 Gary Filerman, Ann Mills, and Paul Schyve, Managerial Ethics in Healthcare: A New Perspective, 2013.
Board members and hospital executives should be accountable to each other for achieving the same goals: the effective, efficient, and safe utilization of the hospital’s resources. This article discusses why it’s important for healthcare leaders to revisit the basics of role clarity for the board and hospital management and review and apply management best practices.
By Richard Corder, M.H.A., FACHE, CPXP, Partner, Wellesley Partners, Ltd.
Is there currently a cooperative and open relationship between the board and management?
Do all board members consistently show up prepared for meetings?
Is management effective at keeping the board informed so it can make smart, educated decisions for the organization?
Does management have the tools and resources to do their jobs?
Does management regularly measure, report, and act on issues of staff engagement, stress, and burnout?
Does management effectively use a sophisticated psychometric partner and tool as an integral part of the selection, onboarding, and development of its people?
Start every board meeting with a safety story.
Follow the safety story with a report out and outcomes update regarding the needs of the organization’s customers—employees and patients.
Ask management to share the strategy and plan to effectively listen to the needs of patients (in real time).
Does management have the resources and tools necessary to onboard, orient, train, and retrain all employees?
Engage management in an ongoing discussion about their efforts to standardize work throughout the hospital or health system.
Leading a hospital, regardless of size and location, is a personal and professional challenge.
Running a hospital requires that leadership remains focused on the needs of those served, responsive to the expectations of those hired, vigilant to achieving acceptable financial results, and agile enough to react quickly to an ever-changing environment.
So, in many respects, leading a hospital is not unlike leading other businesses. Yet unlike other businesses, the stakes are higher. Failure impacts the health and safety of our community—the friends and family of those closest to us. We owe the communities we serve a commitment to take this leadership responsibility seriously, stay focused on delivering the safest, most equitable, compassionate, effective care possible and never lose sight of the needs of both those delivering and receiving the care and services we provide.
Board members and hospital executives should be accountable to each other for achieving the same goals: the effective, efficient, and safe utilization of the hospital’s resources. Running a hospital is a collaborative effort with very different roles and expectations.
An organization cannot be what its leaders are not. If the lines between governance and management become cloudy, this will impact operations. Remaining disciplined about who is responsible for what activities and outcomes, and remaining vigilant to properly address breakdowns, are crucial responsibilities of the CEO and board chair.
Roles can get confused when the board loses confidence in the CEO and executive team or when board members forget their charter and try to help by focusing on their expertise—doing what comes naturally and easily (their day jobs). To avoid this, it’s important to fully understand the different roles of the board and management, as well as what to expect from each other.
We cannot continue doing what we’re doing in healthcare and expect different results. Whether measured by lives lost to avoidable harm or the human toll of burnout, the status quo is no longer an acceptable option.
The key to accelerating progress toward improved outcomes is the daily discipline required to manage a complex business and effectively manage operations.
A quick note on the need for leaders to be clinically prepared: The skills needed for running a safe workplace are not unique to healthcare. Having a clinical background or deep experience in healthcare should not be prerequisites for a leadership role. A well-developed ability to build effective teams, confront others with dignity and respect, use data effectively, adopt appropriate technologies, and engage heads and hearts throughout the organization are the attributes we should seek in our C-suites and on our hospital boards.
The board and management should ensure that the organization has a clear vision and smart goals that connect to the hospital or health system’s strategic plan. Having a coherent and easy-to-explain story of where the organization, department, or service wants to be a year (or three) from now is important for anyone in a leadership role. Being able to share the reason that you are engaged in collaborating with those that are doing the work, and using language and measures shared across the enterprise, is an indication that everyone is rowing together in the right direction.
There is no single more important aspect of managing a business unit than the ability to assemble the right people and effectively lead change while engaging their hearts and minds in the work.
This includes having the skills and tools to profile and plan who to hire, who to promote, and who to let go. This should include the use of a sophisticated psychometric testing tool to determine “fit”; a well-resourced and supported methodology for onboarding, orientation, training, and retraining; and a robust mechanism for capturing the experience of the caregiver.
While never losing sight of the fact that we are in the business of patient care, our business is unsustainable without the right employees, in the most appropriate roles, equipped with the necessary resources and tools to get the job done. Engaging, motivating, appreciating, and supporting the work of our caregivers (clinicians and non-clinicians, employed and contracted) is of critical importance.
The current myriad of issues that are contributing to never before seen levels of stress, burnout, and disengagement are leading the most well-intentioned and best-trained clinicians to leave the practice of medicine, deliver subpar care, or worse, harm themselves or others. Measuring and understanding levels of burnout, turnover (voluntary or otherwise), likelihood to recommend, and other elements of caregiver engagement should be prioritized and acted upon with urgency and resources.
The failure to effectively communicate is at the root of ineffective care, many malpractice claims, unresolved interpersonal relationships, and unsafe clinical practices. Learning how to confront others when necessary in a polite, kind, and professional manner should be encouraged, practiced, and, when necessary, training to do so should be made available. Collaboration—the act of two or more people with different training, knowledge, and experience working together as a team—requires a safe environment to become part of an organization’s culture.
Being responsive to the needs of those we serve has never been more important, and the world around us has changed.
Our expectations of how we interact with products and services are being crafted across myriad aspects of our lives. Whether we’re buying books, movie tickets, or airline travel, our expectations for how our preferences, needs, and feedback are accommodated by those providing these products and services are evolving.
The cumbersome and time-delayed surveying of patient experience needs to go the way of the fax machine and the pager. Our patients deserve real-time opportunities for us to capture their feedback and respond in an efficient, and timely, manner.
Current methods for collecting and disseminating data (safety, quality, and especially patient feedback) are cumbersome. Leaders need real-time data and the ability to share it across the hospital or health system, as well as smart technologies that save time and money with less human intervention.
Technological solutions to scheduling, accessing, and sharing test results free staff to do the work of caring and healing—which technology cannot replace.
Team-based programs that model the collaborative approach necessary to care for patients will be essential as we look to the future.
Technology-supported training platforms, such as virtual simulation, that reduce the need for classrooms or simulation centers and respect the needs and resources of the adult learner need to become commonplace.
The practice of medicine is “high-risk” in and of itself. Finding opportunities to standardize work and reduce risk in practice must become a norm for healthcare.
Standard operating procedures, internal service agreements, and specific behavior compacts must be co-created and adopted. Much of the culture of healthcare, based on a history of independent contractors, stand-alone practices, and siloed learning, is not conducive to excellence in hospital operations.
In closing, Dr. Paul Batalden is quoted as saying, “Every system is perfectly designed to get the results it gets.” Our healthcare system is, by any measure, designed to be unsafe, uncoordinated, and too costly.
Healthcare boards should revisit the basics of role clarity for the board and hospital management and apply some management best practices. We have the potential to impact outcomes by redesigning how we deliver our products and services.
The Governance Institute thanks Richard Corder, M.H.A., FACHE, CPXP, Partner, Wellesley Partners, Ltd., for contributing this article. He can be reached at rcorder@wellesleypartners.com.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.