Hospital Board Governance Best Practices

Considering the current state of health care transformation, hospitals and health care services are perhaps one of the most rapidly evolving industries in the country. It’s prudent to consider hospital board governance best practices in light of general best practices that all types of corporations and industries share, as well as to consider best practices in light of recent changes in how hospitals deliver health care services.

The American Hospital Association’s Center for Health Care Governance conducted a careful review of hospital board governance best practices in 2012. Their report divides hospital board governance best practices into two insightful categories, including bold board moves and board leadership. The complexity of health care and the rapid transformation of the industry requires hospital boards to take advantage of digital software solutions to keep pace with their important duties and responsibilities.

General Hospital Board Governance Best Practices

Best practices are important for every board of directors to know and to consider, especially hospital boards. Something that adds to the complexity of some hospital boards is that they may oversee a number of hospitals, integrated health systems and philanthropic foundations. Because hospital board decisions have a major impact on the life and death of their patients, the fiduciary duties and core responsibilities of hospital boards are vital to their functioning.

Drawing from 10 years of client experience, Integrated Healthcare Strategies divides general hospital board governance best practices into fiduciary duties and six other core responsibilities.

Fiduciary duties

Fiduciary duties for hospital boards are the same as those for all boards. They include duty of care, duty of loyalty and duty of obedience.

Duty of care requires hospital boards to obtain advice from independent, outside experts when they evaluate their own performance. Duty of care also requires boards to consider industry benchmarks and the board’s goals in monitoring finances, quality of care, customer service and strategic planning.

Duty of loyalty entails ensuring that board directors place the interests of the hospital and all associated entities before their own. Board directors should take heed of conflict of interest and confidentiality policies.

Duty of obedience requires boards to align executive and manager compensation and strategies with the hospital’s mission. This duty also requires boards to ensure the organization’s compliance with all laws and regulations.

Core Responsibilities

In general, hospital board governance best practices require financial oversight, quality oversight and manager oversight. As with boards leading other types of industries, hospital boards are responsible for setting the hospital’s strategic direction, which includes adopting criteria for evaluating proposals for new programs and services related to finances, quality services and patient safety. Core responsibilities for hospital boards include assessing themselves and the organization’s bylaws and making recommendations for improvement.

One of the criteria that is important for hospital board governance committees to consider is each board director’s ability to advocate on behalf of the organization.

Bold Board Moves Needed for Hospital Board Governance Best Practices

The Center for Health Care Governance places urgency on the following hospital board practices:

• Board competencies. Identify the gaps in board competencies needed for transformational governance.
• Governance models. Explore alternatives to governance models, such as expert, community-based and clinical-expertise board models.
• Decide if board member compensation is permitted and advised.
• Community leadership. Determine how or if community leaders should be involved in the hospital’s leadership and governance.
• Trustee characteristics. Strive for diversity in age, gender, ethnicity, talents and abilities.
• Board culture. Ask bold questions, challenge the normal course of action, be willing to think outside the box, and be willing and able to make tough decisions.
• Best practices. Know and adopt hospital board governance best practices, including board education, leadership development and succession planning.
• Be accountable through annual board self-evaluations, peer review and best practices.

Board Leadership Needed for Hospital Board Governance Best Practices

The Center for Health Care Governance identified the following leadership best practices:

• Focusing on the basics. Monitor oversight, quality, safety, financial performance, evidence-based approaches to improving quality and safety.
• Participate in candid discussions about transformation. Dig deep in conversations with clinical leaders about transformation, and how they can best use assets now and in the future to meet community needs.
• Risk management. Assess and monitor risks related to transformation and enterprise risk management and factor them into hospital governance best practices and decision-making.
• Strengthen change management. Enlist the help of experts to strengthen the board and the organization and expand education on all levels.
• Make patient engagement a priority. Encourage patient and family engagement and provide opportunities for patients and their family to help make decisions about their care.
• Develop Use comprehensive data and develop processes to assess the hospital market and shape it to meet future needs.
• Work on developing collaboration with other health providers, health care organizations and the community to build a better system of care for the future.
• Oversee physician engagement. Oversee efforts to align and integrate physician engagement and develop physicians’ leadership abilities. View physicians and clinicians as partners in governance and leadership.
• Take a community focus. Conduct needs assessments in the community and set strategies that serve them well.
• Assess executive capabilities. Include the ability to lead transformational change when assessing the capabilities of the CEO and senior executives and when pursuing succession planning for future leaders.
• Create a vision. Develop an inspirational vision for the future, without fearing change.

Panelists for the Center for Healthcare Governance indicated in their report, “Governance Practices in an Era of Health Care Transformation,” that hospital governance boards need to take advantage of new tools and resources to keep pace with the transformation in hospital governance best practices, encouraging them to lead by example and demand the same practices from themselves that they expect of others.

New technology is woven into nearly every aspect of hospital operations, leadership and governance. Hospital boards would be remiss not to consider the fact that hospital governance best practices also entail exploring digital software solutions, such as board portal systems to support good corporate governance. BoardEffect offers a secure platform for hospital boards to assist them in their core responsibilities and fiduciary duties in their endeavors to manage multiple entities, communicate securely, and perform annual board and individual board director evaluations. It’s crucial for boards to take advantage of every resource and tool available to ensure good governance.