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Hospital boards lack strategic focus

Diversification remains an issue as they slowly align with value-based models

As providers move slowly toward value-based models, board structure and governance practices are aligning to the new business paradigm. But they still have a long way to go, particularly in the areas of diversity and governance processes.

The Governance Institute, a service of the National Research Corporation, conducts a biennial survey of U.S. nonprofit acute care hospitals and health systems (including government-sponsored organizations, but not federal, state or public health hospitals) to gauge board government structure and practices. The 2013 survey was sent to 4,199 nonprofit hospitals and health systems. The Governance Institute received 633 responses. Of those responding, 541 had fiduciary boards.

The latest survey, released this fall, shows that while boards are increasingly putting importance on quality of care outcomes, they continue to spend half of their meeting time listening to reports from board committees and management rather than focusing on strategy, and that membership diversity – in terms of gender, ethnicity and professional background – remains stagnant.

“If boards stay entrenched with traditional ways of operating (i.e., spending half or more of meeting time passively listening to reports) as the industry moves on, it will become increasingly difficult for these boards and their organizations to continue to develop the vision, strategies and operational goals necessary to keep their doors open,” said Kathryn Peisert, managing editor of the Governance Institute in an email to Healthcare Finance News.

Boards need to take a hard look at how they are structured – the composition of the board and governance processes, for example – to make sure they are getting perspectives from, for instance, medical professions such as nursing, and operating in the most efficient and effective ways possible, she noted.

“Bringing in new skills and competencies to enable the board to think about things differently is becoming more important and we hope to see that trend increase in future years,” she wrote. “But I think that it ultimately comes down to boards becoming very rigorous and disciplined about how they conduct their work and how they spend their time when they do meet, to ensure that the board meeting agenda is structured in such a way that the board has time to engage in active discourse and make important decisions at every meeting.”

But making such changes is often easier said than done.

“It’s very hard to move from a reactive to a proactive approach in this environment because there is so much to react to,” said James Gauss, chairman of board services, strategy and governance, for executive search firm Witt/Kieffer.

Poor leadership and inertia will keep boards from taking the appropriate steps to become more strategy focused and diverse, Gauss said. The good news is that board members today are taking their responsibilities more seriously than they did a decade or so ago, he said, and forward-thinking board chairs are figuring out a way to be more proactive.

The key to becoming more strategy focused, Gauss said, is practicing good governance processes. If boards are spending 30 percent to 40 percent of their time listening to routine, non-strategic matters, then they need to take a hard look at their processes, Gauss said.

Among the best practices that have worked for some boards, Gauss noted, is allotting a specific, limited amount of time for listening to reports, and scheduling longer periods of time dedicated to strategy.

As for becoming more diverse, Gauss suggested that first and foremost, boards do not diversify for the sake of diversifying. “Just to be diverse for diversity’s sake may set you up to make mistakes,” he said.

If you recruit someone to your board who meets the label of diverse but isn’t the right fit and/or doesn’t have the skill set needed by your organization, you set yourself up for failure, which will lead to future difficulties in trying to further diversify the board, he said.

To avoid such failures, boards need to be diligent and take the time to do an organizational evaluation to better understand why they want or need to diversify and to ensure the organization – culturally and procedurally – is ready for diversification. “The point is, you want to bring diversity on your board that’s going to be successful.”

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