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Success in the era of reform is dependent upon good governance. As hospitals and health systems embark on transformational change, it's critical that their boards lead the charge. The challenge, however, is that many boards today are not equipped to direct the organization of the future. That doesn't mean that boards are not acting in good faith and striving for organizational excellence. It means that the key to governing transformational change is transforming governance.

"Boards are aware that their organizations need to change," says Jamie Orlikoff, president of Orlikoff & Associates Inc., Chicago. "They have difficulty, however, realizing that it means boards need to change as well." To begin, boards must undergo a thorough self-assessment and evaluation to ensure that the board is poised to navigate the organization through uncertain times. This process should examine whether the board has all of the relevant competencies it needs going forward. It should also examine the process for recruiting and selecting new board members. "Many boards are too big and have a lot of people who don't bring the needed competencies," says David Nash, M.D., dean of the Thomas Jefferson University School of Population Health, Philadelphia.

The use of competency-based criteria in board member selection should reflect the organization's strategic direction and goals. Boards must determine what competencies will support the organization's strategy and then undergo the often difficult task of finding the individual with the relevant knowledge and capabilities. Take population health, for example. Boards need competency and education in the field of population health and population health analytics, says Nash. "It has to be someone with knowledge of population health and Big Data, but also with the political gravitas needed to be a board member," he says. "That's a small number of people, nationally."

Board accountability is more important than ever before, says Orlikoff. "The board must be willing to hold itself accountable," he says. "And individual board members need to be more thoughtful and robust in terms of individual responsibilities." Potential tools to boost accountability include individual board member evaluation pursuant to term renewal, as well board chair evaluations.

Governing in the era of reform will require greater time commitment from board members, particularly in the area of education. "Board members need more education than we've ever provided to them in the past," says Pamela Knecht, president and CEO, ACCORD LIMITED, Chicago. "There needs to be a rigorous plan for ongoing education throughout the year." Nash agrees. "Board members need to be protective of their time for continuous learning to fulfill their fiduciary responsibility." Orlikoff suggests that continuous education should be mandatory for board members. "Most boards offer education but don't require it," he says. "This creates a two-tiered level of governance and that's problematic." Allowing board members to pick and choose among educational offerings results in a knowledge gap that can hinder board efficiency and effectiveness. Mandatory education, on the other hand, helps to create a unified vision and greater organizational alignment.

8 Strategies to Transform Governance

Hospital boards must evolve to provide effective governance in the future. These strategies can help boards evaluate how their current composition and structure needs to change to reflect the transformation of the health care delivery system.

1. Identify competencies for transformational governance. Assess and fill the gaps.

2. Determine applicability of emerging governance models; expert, community-based and clinical enterprise boards.

3. Determine whether board compensation is necessary and permissible.

4. Ensure that board membership reflects communities served.

5. Evaluate performance at all levels of governance.

6. For multiple-board health care systems and individual health care organizations joining larger systems, consider a broader role for community leaders in the health care enterprise.

7. Adopt governance best practices.

8. Adopt a high-performance culture.

Board Competencies

Transforming the health care delivery system is no small task. Accordingly, boards will be challenged in new, complex ways. It's critical for boards to conduct a self-assessment that includes a review of board composition and the recruitment and selection process for new board members. Boards should look for new members with experience, skills and knowledge who will help guide the organization through transformation change.

Key steps in selecting a board member

1. Review resumes and consider multiple candidates.

2. Recruit to fill the knowledge gaps on the board. Identify candidates with new backgrounds and skills.

3. Strive for greater diversity to reflect the community served.

4. Select the individual who is the best fit for the board.

Knowledge and skills

At a minimum, boards need knowledge and skills in the following areas:

  • Health care delivery and performance
  • Business and finance, including knowledge of new payment models
  • Human resources

Advanced knowledge and skills to meet the organization's strategic objectives:

  • Mergers and acquisitions
  • Insurance and government payment programs
  • Public health and the local health care delivery system
  • IT and clinical integration
  • Risk management and regulatory compliance
  • Clinical experience, including physicians, nurses, pharmacists and other clinicians

Personal capabilities

Desirable personal capabilities for board members include:

  • Accountable
  • Achievement- oriented
  • Ability to lead change
  • Collaborative
  • Community oriented
  • Information- seeking
  • Innovative thinking
  • Complexity management
  • Organizational awareness
  • Professionalism
  • Relationship-building
  • Strategically orientated
  • Ability to develop talent
  • Team leadership skills
  • Critical thinking
  • Flexibility and adaptability
  • Courage

Sources: "Competency-based Governance: A Foundation for Board and Organizational Effectiveness," Center for Healthcare Governance, 2009; "Governance Practices in an Era of Health Care Transformation," Center for Healthcare Governance, 2012; H&HN research

Transforming Governance for Value-Based Care

Boards of the future must focus on accountability and continuous learning.

Traditional governance practices

• Routine board education at meetings and an annual retreat

• Individual board member development

• Board member recruitment for organizational and stakeholder needs

• Full board and individual board member self-evaluation

• Governance focused on strategic and fiduciary responsibilities

• Governance internally focused on its own structure and processes

• Improvement of current governance practices

• Focus on today's performance — improving cost, quality and safety

Transformational governance practices

• Continuous learning to understand health care transformation

• Competency-based full board and board leader development and succession planning

• Competency-focused full board, peer-based individual board member, board leader and board meeting evaluation

• Generative governance that helps to shape the identity, purpose and future of the organization

• Governance focused on accountability for outcomes

• Transforming governance to transform health care

• Focus on tomorrow with metrics to shape future performance; population health improvement, physician engagement, cost/community member, recovery of at-risk dollars.

Source: "Governance Practices in an Era of Health Care Transformation," Center for Healthcare Governance, 2012

The Board's Role in Transforming Health Care

The board plays a pivotal role in health system transformation. The following steps will help boards to shape their organization's strategic direction.

1. Understand and oversee continuous performance improvement.

2. Have candid discussions about what transformation means for the organization.

3. Broaden compliance and enterprise risk management.

4. Strengthen board and organizational capabilities to manage change.

5. Ensure development of patient and family engagement strategies.

6. Develop governance dashboards with "bifocal metrics" that assess today's performance and shape future outcomes.

7. Encourage collaboration among providers to build the care systems of the future.

8. Actively oversee physician alignment, engagement and leadership development strategies.

9. Use results of community health needs assessment to set strategy.

10. Assess the capabilities of executives to lead transformational change.

11. Create a compelling vision for the future.

Source: "Governance Practices in an Era of Health Care Transformation," Center for Healthcare Governance, 2012