View this article in printer-friendly PDF format

Congratulations! The local hospital has invited you to join its board of trustees, and you’ve accepted. Now, just one question remains: How do you prepare for your first board meeting?

Regardless of the size of the organization, board membership puts you in a key leadership position within a multi-million-dollar business. You may regard your appointment as a rewarding new challenge or a daunting, and possibly scary, new role—but no matter how you approach it, it carries enormous responsibilities.

Gone are the days when well-meaning and well-connected individuals could join the hospital board and merely donate their time for the good of the cause. In the post-Enron era, board members are expected to understand and practice the principles of corporate governance and to play a central role in sustaining and growing the organization.

In the new business climate, all corporations are under public and legal pressure to practice the highest level of business ethics while striving to perform at their peak potential. This is especially true in the health care sector, where fierce competition and shrinking reimbursements have made the role of the governing board even more critical.

Why good governance is important

• Your hospital is a community asset that needs to be protected. The local community expects and assumes that “its” hospital will continue to grow, evolve, and provide care for the local population. While day-to-day operations and management leadership are absolutely critical in reaching this goal, the role of governance in ensuring that there is a fundamental base for planning, vision, and decision making is vital to the long-term vitality of the hospital.
• Your hospital is an essential cog in the local economy. Your organization is probably one of the largest employers in the community, and its presence and the quality of care it delivers has a direct impact on jobs and the quality of life.
• Your hospital must be able to meet local demand. Like any other business, customers have choices. Both patients and employers will shop elsewhere for better prices, access, and quality of care if your organization does not deliver.
• Your hospital operates in a regulatory and legal arena. Part of your responsibility as a board member is to help ensure that the hospital is operating within the bounds of its legal and regulatory requirements.

Your 10 major responsibilities as a board member

While you may be called upon to participate in a number of board-related activities, there are 10 primary responsibilities that form the core of “board life” in the hospital organization. Success in discharging these responsibilities requires an understanding of the difference between governance and management.

John Carver, a leading policy governance theorist, refers to governance as the act of creating the “means” for getting something accomplished. In a hospital setting, the board creates the “means” by developing policy, engaging in planning, and playing an oversight role in asset management and quality assurance. In contrast, management is the “ends,” acting as the board’s agent for day-to-day oversight and implementation. Board policies are designed to build mechanisms for monitoring, evaluating, and improving performance. Management policies relate to how things get done.

As you start your governance journey, here’s a checklist of some universal responsibilities for hospital board members.

Responsibility 1:
Define and enforce the organization’s mission, vision, and values.

As a member of the board, you will play a critical role in defining the hospital’s reason for existence (mission), what it should strive to become (vision), and the core concepts and beliefs that will govern it along the way (values). Whether the organization is secular or faith-based, the board has a critical role in making sure that both mission and vision are being respected and achieved. Mission and vision also drive the fundamental values of the organization—the principles and concepts by which the hospital delivers care and meets the needs of the communities it serves. The diagram below summarizes the relationship between mission, vision, values, and the board’s planning responsibilities.

Responsibility 2:
Choose, hire, and evaluate the CEO.

Another of your key responsibilities is to ensure that the essential human capital resources are in place to operate and deliver services. Using a military analogy, if the board represents the Joint Chiefs of Staff, then the CEO is the field general—the “agent” of the board and the individual through whom most of the organization’s implementation activities flow—and your role in selecting, hiring, and overseeing this individual is vital to achieving the hospital’s mission and vision.

Responsibility 3:
Create and implement high-level policies.

The board plays a major role in policy development and refinement. One of the ways the board protects the assets of the hospital is by developing “board-level” policies. For example, board-level policies set reasonable limits on expenditures, govern the ability of individual employees to enter into contracts and make obligations on behalf of the hospital, and determine how the quality of care is assured and monitored. Board policies differ from management and operational policies, which relate more to how work is accomplished on a daily basis.

The board should stay focused on policies that ensure that assets are protected, that care delivery is of the highest quality, and that the parameters of authority delegated to others in the organization (e.g., the management and the medical staff) are sufficiently broad enough to allow for creativity but narrow enough so that the board can exercise the appropriate amount of governance. Balance is the goal; too much oversight can be as bad as too little.

Responsibility 4:
Provide financial oversight.

While the management team manages daily financial operations, the board is responsible for:

• Oversight and understanding of financial conditions
• Target and “alarm” condition setting
• Prudent investment of funds
• Wise allocation of resources
• Capital and operational budget oversight and approval

As a new board member, your analytical skills, general business experience, and knowledge and understanding of hospital revenue and expense structure will be important.

Responsibility 5:
Ensure the quality of care.

The board is not expected to play the role of health care professional, but it is responsible for making sure that clinical quality and patient safety standards are met or exceeded. This requires knowledge of the structure and function of the hospital’s quality care programming efforts, as well as a good grounding in the areas that are typically monitored and measured.

The board is responsible for knowing whether or not quality standards are being met and taking action if they are not. The two major mechanisms that the board uses as its “ends” are the medical staff (which operates with delegated authority as specified by the hospital’s bylaws) and the key clinical care committees, such as the infection control committee and the pharmaceutical and therapeutics committee.

Responsibility 6:
Develop and oversee the strategic planning process.

Providing strategic direction and participating completely in the planning process are additional board responsibilities. Through the strategic planning process, the board can fulfill related responsibilities—for example, mission and vision setting and protecting and growing the assets.

Working with senior management, physicians, and other stakeholders, the board is responsible for developing a long-range business plan to guide the hospital’s or health system’s business activities. Some of the key areas for board involvement include:

• Providing oversight of short-term and long-term planning
• Ensuring that the planning process is a cooperative venture among the various parties involved (i.e., the board, senior administration, medical staff, and other staff)
• Focusing on high-quality and high-impact strategies, and resisting the urge to follow glitzy fads
• Approving the plan, understanding its underlying assumptions, and monitoring results

Responsibility 7:
Understand and ensure compliance with applicable laws.

Board members are not expected to be health care attorneys, but they are responsible for understanding certain legal issues and seeing that the board gets good legal advice. Effective boards have a broad understanding of the legal areas that apply to the hospital, including:

• Private inurement and private benefit
• Medicare fraud and abuse
• Stark law
• ERISA
• HIPAA
• Antitrust laws
• Sarbanes-Oxley
• Open meeting requirements for public hospitals
• State laws governing nonprofits

Responsibility 8:
Serve as a public liaison.

As the saying goes, most health care is a local business, which makes your role as a liaison between the hospital and the community another important area of responsibility. It does not mean that you should try solving individual complaints that are brought to your attention, but you should be prepared to direct people to the resources within the organization that can resolve a problem. Here are some of the areas where the board might expect your assistance in this role.

• Serve as a community representative
• Promote the hospital
• Take the “pulse beat” of the community
• Understand and be sensitive to local values and perceptions
• Clarify community concerns (without trying to solve them on your own)
• Bring matters of importance to the board’s attention
• Maintain your public liaison role at the governance level, not the management level
• Represent the hospital in interactions with municipal and county governments, when necessary

Responsibility 9:
Evaluate the board’s performance, as well as your own.

High-performing boards know where they excel and where they need improvement. Periodically, you will be expected to participate in a formal process of ongoing review of the board’s performance as well as your own performance as a board member. More importantly, you will have the responsibility to help formulate goals and take the steps necessary to make governance a continuous-improvement process.

Responsibility 10:
Establish and support a program of active philanthropy.

Today, many boards are taking steps to ensure the long-term financial future of their organizations by building a solid foundation for community philanthropy. If your board is already taking this step, you may be asked to help with an annual giving or capital campaign. Your knowledge of the hospital’s mission and vision are extremely important for you to be effective in this role.

In addition to attending and participating in hospital board meetings, you may be asked to serve on board committees or to play a role as a community liaison.

Final thoughts and takeaways

Organizations that spend the time to hone their governance skills tend to focus more intently on mission, vision, and corporate responsibilities, while those that undervalue the role of governance seldom acquire the cohesiveness of a high-performing enterprise.

As you join the board, it’s important for you to maintain your enthusiasm and drive for organizational excellence. You have been selected to help the organization perform at the highest level of its capabilities. Your hospital is a business, and to perform well, it must be well-governed. That translates into your commitment to acquire and develop new skills and to participate to the fullest extent possible.

Never underestimate the importance of your role as a trustee or director. Your hospital is counting on you.

David Hoffman, Ph.D., is a partner in the Wipfli Health Care Practice and a frequent speaker on this topic. He can be reached at 608.270.2968 or dhoffman@wipfli.com.