Like many, I have been surprised by the recent spate of high-profile media coverage given to CEOs under fire for flawed ignition switches, lapses in the security of credit card customer information, and many more.
Granted, CEOs are well-paid and many get handsome financial packages when pushed out the door. They often concede that “the buck stops here” and we usually concur. But it’s not true. The buck stops with the directors and trustees of the organizations that hire, evaluate, compensate and retain the leaders in our organizations. Boards of directors own responsibility for the performance of the organization’s leader, and they own the problems that ensue if the individual does not perform to an acceptable level. It’s true for a Fortune 100, and equally true for a community hospital, except that most directors serving on not-for-profit hospitals boards serve voluntarily.
In hospitals, CEOs have an almost impossible job. Against shrinking reimbursement, aggressive insurance plan contracts, fearful physicians, expansive regulatory constraints and increased utilization, a hospital CEO must be Solomon to survive, and even then it’s no guarantee wisdom alone will suffice for job security. Add to that the shift from volume to value, consumer demand for transparency and menacing medical inflation and, well, the prospects for job security are thin and the pressure thermostat is at an all-time high.
A hospital board must step up, not to blindly follow the lead of a CEO under pressure, but to assure the solvency and sustainability of their hospital. I spend considerable time with hospital boards. They’re unselfish with their time and genuine in their desire to serve. Some are better versed in matters of the acute sector than others, and all seem to recognize that ACOs, medical homes, bundled payments, health exchanges, value-based purchasing et al. are the new normal for their institutions. But, in my view, there are seven emergent issues about which boards need better preparedness:
- Risk for unnecessary care: The HHS Office of the Inspector General is keen to disclose and punish hospitals and physicians who needlessly prescribe, test and do surgical cases otherwise not supported by evidence-based best practices. A board not clear on the fundamentals of evidence-based practices, and the management of treatment options not in sync with best practices is not a board prepared for the future. Gaps in care resulting from non-adherence to evidence-based practice are a bigger risk to a hospital than fraudulent coding. Trustees must understand this and hold management accountable.
- Physician partnership: Physicians are not the hospital’s customers; they are its business partners in risk-sharing arrangements with payers. Physicians respect honesty and wish to be treated as adults. And when equipped with verifiable data, act responsibly. Boards must understand that the physician of tomorrow is more technologically savvy than many on the board. Physicians have multiple options to pursue for job security and they are decreasingly dependent on a hospital for capital, patients or revenues. The board must understand the distinctions between a medical staff model of the past and physician partnership model of the future.
- Health plan options: The most vexing question many boards face is the decision to maintain relationships with multiple private payers or create an exclusive relationship with one. In tandem, many hospitals may own and operate their own to round out a fully integrated system of care. An objective assessment of health plan strategic options is necessary to every hospital board’s stewardship.
- Clinical innovation: The pace of clinical innovation will quicken exponentially in coming years. Nanotechnologies, genetics and proteomics, Bayesian analytics and adaptive clinical trials, noninvasive interventions and alternative health hold promise for better outcomes. A hospital’s board must understand the range of clinical innovations that hold the greatest promise for the community’s health, and the implications for the hospital’s budget, staffing and care coordination activity. In all likelihood, clinical partnerships will be necessary to sustain state-of-the-art services.
- Employer activism: Employers have enormous untapped influence, but many do not understand the unique complexity of a hospital’s operating environment — the convergence of clinical innovation, economic constraints, regulatory context and consumer expectations. The biggest issue is an employer’s role as a direct purchaser of health care services. All too often, employers who serve on the hospital board fall short in challenging the hospital to deliver optimal value. It’s important that a hospital board encourage candid discussion with the employers represented in its ranks to objectively assess the hospital’s performance from the outside in.
- Consumerism and retail health: Technologies and online services that equip individuals to diagnose and treat themselves for uncomplicated conditions are readily available. Access to personal health records that integrate the individual’s hospital, lab, physician and health history into a personalized care path are accessible. Consumers want to control their own health. They want to know what over-the-counter therapies do and how alternative treatments might work. They want useful information about the efficacy of drugs, the accuracy of diagnostic tests, the appropriateness of surgical procedures and whether cheaper options with the same or better outcome are available and where. They embrace group visits, personalized online tools and electronic authorization for script fulfillment. They want to know how other consumers rate the services and products they use. They want to know how their doctors are paid and how much. And they want to know the total costs and their out-of-pocket portions for their drugs, hospital and clinic visits, insurance premiums and more. The power of unbridled consumerism is a vital area for growth for most hospitals, but overlooked by many boards.
- Alternative capital: Hospitals need capital to grow, and it will decreasingly come from operating margins in core acute and ambulatory services. Hospital boards must understand the full range of options in accessing capital and be more strategic in managing return on capital in deploying assets. As health care moves from bricks to sticks, hospital boards must understand the implication in their cap ex commitments, and anticipate second guessing by those disappointed when investments can’t be justified.
The hospital CEO role is lonely. To retain a competent CEO, the board must understand and respond to these seven ssues. And if they’re not being addressed regularly in the board’s meetings, it must ask its chairman why.
Paul H. Keckley, Ph.D., a health economist and leading expert on U.S. health reform, is managing director at the Navigant Center for Healthcare Research and Policy Analysis. His H&HN Daily column appears the first Monday of every month. He is a member of Health Forum's Speakers Express. For speaking opportunities, contact David Parlin.