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20 QUESTIONSEvery Washington HospitalBoard Needs to be Able toAnswerDeveloped for the Washington State Hospital Association byThe Walker Company Healthcare Consulting

20 Questions Every Washington Hospital Board Needs to be Able to AnswerContentsWhat is the board’s fiduciary duty? ..................................................................................................................................................... 4What is the difference between the hospital’s mission, values and vision? ..............................................................7How does the board ensure that quality is truly job one? ................................................................................................. 11How does the board ensure that the right issues are discussed in the right way at the right time? ...... 25How does the board ensure strong and effective executive leadership? ................................................................ 32What is the board’s responsibility for planning for the future? ...................................................................................... 40How does the board hold itself accountable for continuous leadership improvement? .............................. 47What’s the board’s role in building trust and connections with its community? ............................................... 57How does the board ensure a loyal medical staff? ................................................................................................................. 61How should the board gauge the hospitals’ financial performance? ........................................................................ 75What does it mean to be an effective advocate for your hospital? ............................................................................. 82How does the board ensure successful leadership for tomorrow? ............................................................................. 87How does the board ensure the quality of its medical staff? ........................................................................................... 91How does the board ensure continuous growth in its critical leadership knowledge? .................................. 95How does the board keep conflict out of the boardroom? .............................................................................................. 98What are the most prominent health needs in your community? ............................................................................. 102What is community benefit and what’s the board’s role in ensuring it? ................................................................ 111What is the board’s responsibility for ensuring a positive workplace culture? ................................................... 114What is the board’s accountability for ensuring the right organizational structure? ...................................... 119What does health care reform mean for governing boards? ......................................................................................... 1233

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat is the board’s fiduciaryresponsibility?In any venue, fiduciary responsibilities have to do with issues of trust and confidence. In the realmof hospital governance, it is imperative that hospital governing boards understand their particularfiduciary role as it pertains to accountability, financial responsibility, confidentiality and integrity.Fiduciary: (1) of, relating to, or involving a confidence ortrust; (2) held or founded in trust or confidence.For hospital governing boards, fiduciary responsibilitiesand their related issues of accountability and trust are complex.Boards have a two-way responsibility: they must act in the bestinterests of both the hospital and the communities theirhospital serves.In these days of economic insecurity, it is particularly importantfor hospital governing boards to earn and keep the public trust.In the handling of hospital finances, the oversight of hospitalquality, patient care and safety, and the assessment of hospitalprograms and services, governing boards can and must beheld accountable to the people of the communities they serve.There can be no room for question of integrity or credibility ofboard members. Especially now, trust is an asset no board cando without.What are “Fiduciary Responsibilities?”Legally, board members must take particular care to becomethoroughly informed before making a business decision; theymust put the needs of the hospital first when takingresponsibility for its operations; and they must abide by laws,regulations and standards of hospital operations.These three main responsibilities are usually referred to as theDuty of Care, the Duty of Loyalty, and the Duty of Obedience.Each may be applied in a court of law to determine whether ornot a trustee has acted improperly. They are to be takenseriously by every person accepting a position on a hospitalboard of directors.Duty of Care. When engaging in hospital business, trusteesmust use the same level of judgment they would use in theirown personal business activities. The tenets are mostlycommon sense:Obtain necessary and adequate information beforemaking any decisions;Act in good faith;Make decisions in the best interest of the hospital; andSet aside personal interests in favor of those of thehospital.Individual state courts often further define board members’fiduciary duties, as does the U.S. Internal Revenue Service (IRS).The IRS, in recommendations for trustees, encourages puttingpolicies and procedures in place to ensure that each trustee istotally familiar with the hospital’s activities, that every activitypromotes the mission of the hospital and helps it achieve itsgoals, and that each trustee should be fully informed about theorganization’s financial status.Duty of Loyalty. The duty of loyalty bars trustees from usingtheir board positions to serve themselves or their businesses. Itrequires that when acting in their fiduciary capacity, trusteesplace the interest of the hospital before all else. It demandsthat board members be:Objective and unbiased in their thinking and decisionmaking;Free from external control and without ulterior motives;Free of any conflict of interest when discussing issues andmaking decisions; andAble to observe total confidentiality when dealing withhospital matters.4

20 Questions Every Washington Hospital Board Needs to be Able to AnswerThe Board’s Fiduciary Responsibility: Putting the Community’s Trust into ActionTo identify potential conflicts of interest, trustees and staffshould annually disclose, in writing, any known financialinterest with any business entity that transacts business withthe hospital or its subsidiary businesses.The IRS recommends creating written procedures fordetermining whether a relationship, financial interest orbusiness affiliation results in a conflict of interest, and outlininga course of action in the event that a conflict of interest isidentified.Duty of Obedience. The duty of obedience requires boardmembers to be faithful to the hospital’s mission, and to followall state and national laws, corporate bylaws, rules andregulations when representing the interests of the hospital.Board members, in carrying out their duty of obedience, willprotect the limited resources of the hospital to ensure optimalservices and benefit to the community. They will ensure legalcompliance with all applicable laws and regulations.The IRS recommends several board actions to promote goodgovernance practices related to the board’s duty of obedience:Develop both a code of ethics and whistleblower policies;Adopt and monitor specific fundraising policies;Carefully outline and determine compensation practices;andDevelop and strictly adhere to document retentionpolicies.Two Roadblocks to Fiduciary EffectivenessStrong boards are independent-minded, curious, and able tofocus on what matters most. Their members are willing tochallenge status-quo thinking and stretch themselvesintellectually. Weak boards are complacent and submissive.Their members do not ensure that all sides of issues areconsidered, or that “conventional wisdom” is challenged. Suchweak boards are not likely to successfully carry out theirfiduciary responsibilities.There are two true roadblocks to any board’s ability to maintainfiduciary effectiveness. These are 1) a tendency toward “rubberstamping;” and 2) a tendency toward micromanagement. Bothare most likely to occur when a majority of members lackinterest, drive or the ability to speak from the shadow of one ormore overbearing board members.Carrying Out the Board’s Fiduciary DutiesThe Duty of Care is fulfilled by...Consistent attendance at board and committee meetingsAttentive and introspective preparation for board meetingsObtaining and reviewing relevant data and informationbefore voting to ensure evidence-based decisionsExercising independent judgmentPeriodic examination of the performance of the executivesand trustees who lead the organizationMeaningful review of the organization’s finances andpoliciesThe Duty of Loyalty is carried out by...Full disclosure of potential conflicts of interestCompliance with the organization’s conflict of interestpolicyAvoidance of the use of corporate opportunities forpersonal gain or benefitMaintaining confidentiality when requiredThe Duty of Obedience is carried out by...Strict adherence to the by-laws of the board and themission of the hospitalCompliance with all regulatory and reporting requirementsUnderstanding of all documents governing the board andits operation (by-laws, articles of incorporation, board andcommittee job descriptions, charters, etc.)Ensuring that decisions further the organization’s missionand comply with the scope of its governing documentsRubber Stamping. Members of rubber-stamping boards fail toask pertinent questions or engage in deliberative dialogue onsolutions to challenges, and do not work successfully togetherto arrive at independent-minded decisions. They acceptrecommendations with little questioning or debate, and fail toexplore alternatives and scenarios that may reveal theweaknesses of arguments or positions.Rubber-stamping boards are often a result of overly dominantindividuals and weak board chair leadership. A strong boardchair will ensure that every board member is meaningfullyengaged in constructive thinking and deliberation on theimportant issues that come before the board.5

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat is the difference betweenthe hospital’s mission, values andvision?Too often hospital leaders develop mission, values and vision statements, and then don’t makemeaningful strategic use of these critical statements. Successful governing boards know thatthese statements, when properly developed and used, are the primary driver for everygovernance discussion and decision.The board must ensure that the hospital hasmeaningful, unique, market-specific and compellingmission, values and vision statements that inspire andlead employees, physicians, trustees, volunteers and others tothe highest levels of achievement.The board must ensure that the entire hospital family, from topto bottom, sees its role and value in achieving the hospital’smission and vision. Every single person plays a vital role, andeach person should hold him or herself accountable forunderstanding that role and playing their part in theattainment of the mission and vision. That culture ofcommitment is created and inspired by the board.The board must ensure that these statements are unique,meaningful, powerful and compelling, and that they helpsolidify organizational thinking when confronted with amultitude of potential pathways to the future.Once solid mission, vision and values statements have beenagreed upon by the board, these statements should be theforefront of board decision making, and at the top of trustees’minds as they develop strategic plans, recruit physicians, planfor programs and services, determine community needs, andadvocate for legislative and regulatory change that will benefitthe community.Finally, the board plays a unique role in motivating andinspiring hospital leadership to excel as strategic changeleaders, individuals who can coalesce their colleagues in astrategic movement unified by purpose, committed toexcellence, and rewarded for outstanding performance.Mission, Values and Vision - The Gears thatDrive Organizational SuccessThe board of trustees is ultimately responsible in every way forthe hospital’s long-term success in meeting the health careneeds of the people it serves. It’s incumbent upon the boardto ensure a tight strategic fit and linkage between thehospital’s mission, vision and values.These three statements are the foundation of a solid strategicplan. The board of trustees, more than any other group ofleaders, is responsible as the “keepers” of these critical successfactors.The MissionThe mission is the core purpose of the hospital. It should be aunique description that clearly defines the hospital’sdistinctiveness and differentiation.Great mission statements are short, memorable, highly focusedand enduring. They are able to capture in a few words theuniqueness of the organization and what it strives toaccomplish. In addition, they clearly, boldly and vividly definethe hospital’s distinctive uniqueness - what sets it apart fromother hospitals, and makes it a valuable asset to patients andthe community.Great mission statements use words and phrases that arecompelling and passionate, and that inspire dedication andcommitment. They are the foundation of everything thehospital does, and they inspire the hospital's vision and thestrategies and objectives that underpin it. Great missionstatements are used at board meetings to help frame criticaldiscussions and stimulate deliberative dialogue and decision-7

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding the Foundation for Success: Developing Powerful and Purposeful Mission, Values and Visionmaking. They are a focal point for ensuring that everyemployee, physician, board member, volunteer or othermember of the hospital family understands his or her uniquerole in helping the hospital to carry out its most importantwork.Keeping the Mission Alive. Simply having a great missionstatement doesn't guarantee that it will be consistently carriedout with passion and with purpose. In order to keep themission alive it should be printed at the top of every boardmeeting agenda. Having the mission front and center on theagenda will help to ensure that it’s thought about and referredto during the course of governance dialogue and decisionmaking.The board should take time during its board meetings for"mission moments," opportunities to reflect on some of theways in which the hospital is carrying out its most importantwork. These mission moments can serve as an inspiringreminder of the importance of the hospital to patients, familiesand the community, and the importance of the governingboard’s work in ensuring constancy of purpose in achieving themissionThe board of trustees faces many situations in which it has verydifficult decisions to make. When making these difficultdecisions, one important question should always be asked:"how will this action, activity or decision further our ability toachieve our mission?"Finally, at the end of every meeting take a moment to reflecton this question: "has the work we've done today on behalf ofthe hospital and the people we serve advanced our ability toachieve our mission?"How Does Your Mission Measure Up?Consider the following questions to determine how your hospital’smission measures up to “great mission” criteria: Is your mission dynamic, memorable, compelling, passionateand meaningful to everyone in the hospital family? Does it resonate with patients, consumers, payers, andcommunity leaders? Does your mission clearly differentiate the hospital from allothers in the market? Does it describe your competitivedifference and distinctiveness? Does everyone in your organization know what the mission is?Can they relate the essence of it to patients, consumers andothers? But more importantly, do they "live the vision"through the way they act and serve?Based on your answers, should your mission be changed to betterreflect your hospital’s true core purpose and value?The VisionThe vision is a vivid description of what the hospital seeks tobecome in the future. It considers future challenges,possibilities and choices, and serves as a “high bar” fororganizational success. Like the mission, creating a vision withpassion and purpose takes time, innovative thinking, and anability to think into the future.The vision should be inspiring, unique and visual; it should bewritten in a way that creates a mental image of the hospital at afuture point in time. It should be enduring, and able to standthe test of time. It should be hopeful, empowering andmeasurable, providing purpose and focus in a dynamic, rapidlychangingenvironment. And while it should be a “stretch,” andbe very challenging to achieve, it should also be realistic andattainable with hard, focused work by everyone in theorganization.The vision should inspire enthusiasm and commitment in everycorner of the organization, articulating what the hospital’s hardwork and investment is seeking to achieve, and prepareleadership thinking and resources to meet future challenges. Itshould be powerful and empowering. Finally, the vision shouldencompass the “big goals” that drive strategies, objectives andaction plans.The Dynamics of Creating a Vision. The key components of avibrant vision are straightforward. They consist of the now -where the hospital is today; the future - an assessment ofwhere the environment is headed; the focus - the responsesthe hospital intends to undertake to be successful in thatfuture; and the future reality - where the hospital anticipates itwill be when it’s successful in achieving its prioritized strategicinitiatives.Elements of a Value-Based Vision. Many believe that a visionshould be a simple, short and concise statement. That viewoften leads to a very general goal that doesn’t truly describethe future the hospital seeks to achieve.Instead, a successful, high-value, strategically usable vision isone that describes what the hospital seeks to become in thefuture in several critical organizational success areas. Forexample, what is the hospital’s vision for improvement in thecommunity’s health? What does the board want to be able tosay about the level of quality and patient safety in five years?How will the hospital adopt and implement new informationtechnology, such as electronic health records, onlineappointments and e-prescribing in five years? What is thehospital’s vision in the area of finance, patient and customerloyalty and satisfaction, and overall corporate culture?8

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding the Foundation for Success: Developing Powerful and Purposeful Mission, Values and VisionHow Does Your Vision Measure Up?Think about the hospital’s vision. How does it measure up? Have you defined the areas in which your future success ismost critical? Is your vision a powerful statement of the hospital’s future inthe areas most important to its success? Does your vision connect with the mission and values? Is your vision realistic, while at the same time an organizational“performance stretch?” Is your vision relatable to every area and every person in theorganization? Does your hospital measure progress in achieving the vision?In order to successfully achieve the mission, what otherorganizations will the hospital seek partnerships with, and whatwill those partnerships look like? What new services will thehospital develop and excel in as a center of excellence? Whatchanges in governance and leadership will be in place in five or10 years, and how will those changes benefit the organization?These are the types of questions that should be asked by theboard in the process of developing a value-focused strategicvision. They establish an agenda for strategic change that mustbe supported by clearly-defined strategies and measurableobjectives.An Ideal Vision. An ideal vision is challenging, but at the sametime realistic and attainable with diligence, commitment, andintelligent leadership. It’s powerful, hopeful and empowering,and it inspires enthusiasm for the future and a commitment toachieving the hospital’s mission.An ideal vision provides purpose and focus during challengingand uncertain times. It takes into account the hospital’s currentand emerging challenges and opportunities, provides purposeand focus, and describes a future that has successfully dealtwith them. In addition, it drives creative strategic thinking, andprovides leadership with an "end point" that serves as thefoundation for the hospital’s strategies and objectives.ValuesValues are the principles and beliefs that drive organizationalbehavior at every level throughout the entire organization. Thevalues are inspirational guideposts, the ethical compass thatinspires people to live their professional lives in a certain way,and relate to patients, families, visitors, competitors, and othersby exhibiting certain organizational and personal qualities andcharacteristics.Values are not simply a collection of high-sounding words on awall in the hospital lobby. They are the “rules of the road,” theaspects of personal and professional behavior that signify whatthe hospital is and what it believes. They should becommunicated and demonstrated through action – every day,in every way.Good Values Create Better Organizations. Good values cancreate better organizations if they are more than just platitudes.Truly meaningful values are the unchangeable, bedrock coreprinciples and ethics that guide the actions and belief structureof the organization. They serve as “cultural cornerstones,” ablueprint for organizational, employee, and medical staffbehavior. They are the fundamental beliefs and truisms thatguide organizational behavior and decision making. They setthe organization apart from its competitors, and establish itsunique organizational culture.In addition, values limit operational freedom and constrainbehavior in order to ensure compliance with all laws andregulations, and set a high ethical bar. Finally, they demandconstant vigilance to keep them at the forefront oforganizational behavior and expectations.Putting the Hospital’s Values to Work. Having values isimportant, but embedding them into the hospital’s culture iscritical, and the board can help make that happen. Thehospital’s values should be integrated into every employeerelatedprocess – hiring, performance evaluation, criteria forpromotion and awards, and dismissal. They should continuallyremind everyone in the hospital family that the values form thebasis for every decision the organization makes, particularly themost difficult ones.They should be promoted at every opportunity, and becomeinfused in the organization’s behavior. One way to highlightand instill the values is to tell stories about how employees,How Do Your Values Measure Up?Do a quick values check. How do your hospital’s values measureup? How distinctive are your values? Do your values make a positive difference in the way peopleact, serve and relate to one another? Do your values support the mission, vision and strategies? Does your hospital use the values when evaluating employeeperformance? Does your hospital showcase examples of living the values? Does your hospital enforce its values, even when it’suncomfortable?9

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding the Foundation for Success: Developing Powerful and Purposeful Mission, Values and Visionphysicians, volunteers, trustees and others exemplify thehospital’s values in their work. Finally, demonstrating thevalues should be celebrated at employee meetings, boardmeetings, community meetings and other venues.Making Your Mission, Vision and Values MoreThan Words on PaperTo ensure success in living their values and achieving theirmission and vision, governing boards can take several simplesteps.First, ensure that the mission, values and vision are prominentelements of decision making at all board meetings. Theyshould be prominently displayed with every board meetingagenda. And when considering any decision, boards shoulddiscuss how the decision will contribute to fulfilling themission, values and vision.When considering policy and strategy decisions, boards shouldput them to the mission, values and vision alignment test. Dothey fit? Can their rationale be explained? Is an investment inthem an investment in furthering mission, values and visionsuccess?In addition, boards should regularly examine their strategicprogress by reviewing the indicators that tell them whetherthey’re on the right strategic course, and continually probe thevalue of their initiatives in helping them achieve their missionand vision. They should also ensure that a well-defined boardapprovedsystem is in place to measure progress towardachieving the mission, vision and strategies, and take timelycorrective action when necessary.What Do We Know Today that We Didn’t Know Then? Onevital question that should be regularly asked by the board oftrustees is this: “What do we know today that we didn't knowwhen we developed our vision for the future? And if we hadknown then what we know now, would our assumptionschange? Would our strategies change? What would we bedoing differently?”It's important that the mission, values and vision be reviewedon a planned, predictable basis, such as at the board's annualretreat. These should not be static statements. Instead, theyevolve as the environment evolves. Assumptions should bechallenged, and developing realities should be factored intothe hospital’s thinking about what it is and where it's headed.The only way to ensure that that occurs is through a continualflow of new information, new ideas, and new knowledge thatdrives new assumptions.Seek Leadership Involvement, Particularly From the MedicalStaff. Defining the hospital’s mission, values and vision is notthe exclusive job of the board. It’s one of the primaryresponsibilities of the board, but to do it right requiresinvolvement and buy-in across the organization.The medical staff is one of the principal groups whose inputand involvement is critical. Talk of mission, values and vision isoften met with disinterest or rejection by physicians, who maynot see value in the process. Involvement in mission, valuesand vision thinking and planning by medical staff leaders is acritical factor in success. In addition, the board should alwaysdepend on well thought-out options and alternatives frommanagement to help shape the mission, values and visioncourse.10

20 Questions Every Washington Hospital Board Needs to be Able to AnswerHow does the board ensure thatquality is truly job one?Boards of trustees are responsible for ensuring the quality and patient safety of their organization,and must take strong, organized action to establish and nurture an organizational culture thatcontinually seeks to improve quality and patient safety at every turn.While there has recently been a much-heightenedawareness about quality and patient safety inhealth care, errors still occur in hospitals every day.These errors are not always large and egregious; they mayinstead be small or unnoticed acts of commission or omission.Regardless of the nature or scope of the problem, medicalerrors have great consequences on an organization’s quality ofcare, patient satisfaction, medical staff and employee morale,and future reimbursement.The Problem: Inadequate SystemsThe health care system is fragmented, with patients seeingseveral different providers for any number of health issues.Each provider has only limited access to patient information,and care is often poorly coordinated amongst the providers.This has resulted in no clear lines of accountability, andoftentimes poor communication between all levels of careproviders.Understanding the nature of this fragmented system, boardsmust ask: “What can our hospital do to remove these systembarriers?” According to the Institute of Medicine, there aremany behavior choices that health care organizations makethat can lead to patient injury or death, including:Not adhering to protocols/requirements;Inadequate investment in systems;Inadequate staffing;Lack of, or poor provider qualifications;Communication inefficiencies and ineffectiveness; andFailure to learn and change.Boards must commit to changing these behavior issues bysetting the tone or “culture” for the hospital, including settingpatient safety guidelines and priorities and dedicating theresources necessary to provide appropriate, effective, safe care.Quality and Patient Safetyare Job OneToo often boards of trustees assumethat quality and safety problems arenot an issue in their hospital unlessthey hear otherwise. Instead, boardsshould ask specific questions toidentify the hospital’s currentperformance and pinpoint areaswith the greatest need forimprovement. Questions boardsshould be asking include:How good is our quality? Howsafe is our hospital? How do weknow?What is our “culture” of qualityand safety? Does everyone inthe hospital family understand and embrace it?How can we improve?What should we be measuring?What does the public expect from us?“Board seats inAmerican hospitalshave traditionallybeen relativelyhonorific positions...itis time for hospitalboards of directors –along with executivesand physicians – torise from slumber andview safety as anurgent matter”-Donald M. Berwick,Chief Executive, Institutefor Health CareImprovementHow ready are we to publicly disclose our quality andsafety performance?Boards of trustees should be concerned about patient safetyfor moral, ethical, legal and financial reasons. Board members11

20 Questions Every Washington Hospital Board Needs to be Able to AnswerGovernance Accountabilities in the Quest for Qualitymust understand that they are liable for the care provided atthe hospital; that medical errors significantly impact health carecosts; and that patient safety is a key component of “staying ontop” in a highly competitive environment.Board Liability. It is ultimately the board’s responsibility toensure that the hospital is taking clear, appropriate measures toprovide the safest health care in the most efficient andeffective manner. As a result, trustees need to be aware of andproactive in addressing patient safety in their hospital, and seekcontinuing education about current trends and implications.Boards should regularly review key quality indicators, and takecorrective action when necessary.While it may be resource-intensive to implement and regularlymonitor and measure quality improvement and safetyprotocols, consider the following:Medical liability costs rise as the number and scope oflawsuits increase;Fear of liability may cause providers to stop deliveringservices altogether;Doctors that don’t stop delivering services may practice“defensive medicine,” ordering extra tests and proceduresout of fear of liability; andThe cost of lost business, employee morale and a negativereputation from one or two serious patient safety breachescan be very damaging.Cost. The cost of medical errors to the health care system andindividual organizations is significant. Half of the cost ofmedical errors come from direct health care expenses, such asincreased hospitalization; the other half includes such indirectexpenses as lost productivity and disability. More specifically,medication errors are estimated to account for a significantportion of preventable medical errors. According to theNational Committee for Quality Assurance’s 2004 State ofHealth Care Quality, more than $9 billion in lost productivityand $2 billion in hospital costs could be averted through moreconsistent use of proven best practices.In addition, studies demonstrate that more people die annuallyfrom medication errors than motor vehicle accidents, breastcancer or AIDS – three causes that receive far more publicattention. Adverse drug effects cause approximately 777,000deaths per year and can cost hospitals between $1.56 - $5.6million annually, depending on the size of the institution.Competition. High quality providers are magnets for patientself-referral, physician referrals and managed care contracts,Questions Trustees Should be Asking AboutQuality and Patient Safety1 What quality and patient safety measures should we becollecting and closely monitoring?2 What are the top five safety issues at our facility?3 What is our organization’s plan for safety improvements?4 What should I hold the executive team responsible for this yearto improve our patients’ safety?5 Is it easy and safe to report errors at our hospital? What is theprocess?6 How much do medical errors cost our hospital annually?7 What steps have we specifically taken to address the IOM’s SixAims?8 If we were paid today on the basis of quality, not procedures,how would we do?says Russell C. Coile in “Quality Pays: A Case for ImprovingClinical Care and Reducing Medical Errors.” And althoughquality has traditionally been a matter of perception on thepart of patients, many organizations routinely publish reportson the top-rated hospitals for quality. Hospitals that do not putprotocols in place to reduce medical errors risk losingconsumer confidence and market share.Quality Leaders and Standard-SettersMedia scrutiny is increasingly shaping the public’s opinionsabout health care quality and patient safety. As the presscontinues to report anecdotal examples of poor health carequality and safety slip-ups, public skepticism and concern willcontinue to mount. People’s opinions will be shaped by thestories they read and hear, but more importantly, by the “wordof mouth” outcomes of those stories.Hospitals and lawmakers are increasingly looking to nationalleaders such as the Institute of Medicine (IOM) and NationalQuality Forum (NQF) for quality measurements andbenchmarks and suggested action steps. The JointCommission patient safety standards are aligned with theserecommendations, and underscore the importance oforganizational leadership in building a culture of safety.Institute of Medicine. In 1996 the Institute of Medicinelaunched its effort focused on assessing and improving thenation’s quality of care. The first phase included research anddocumentation of the nation’s overall quality problem,resulting in the now well-known report, To Err is Human. The12

20 Questions Every Washington Hospital Board Needs to be Able to AnswerGovernance Accountabilities in the Quest for Qualitystudy brought national attention to the seriousness andfrequency of health care errors, reporting that:IOM: Simple Rules for the 21st CenturyHealth Care SystemThe Institute of Medicine’s 2001 Crossing the Quality Chasm reportincluded specific recommendations for ways health careorganizations can improve quality, including the ten rules for caredelivery redesign outlined below.Current Approach: Care is based primarily on visits Professional autonomy drives variability Professionals control care Information is a record Decision-making is based on training and experience Do no harm is an individual responsibility Secrecy is necessary The system reacts to needs Cost reduction is sought Preference is given to professional roles over the systemNew Rules: Care is based on continuous healing relationships Care is customized according to patient needs and values The patient is the source of control Knowledge is shared and information flows freely Decision-making is evidence-based Safety is a system property Transparency is necessary Needs are anticipated Waste is continuously decreased Cooperation among clinicians is a prioritySource: Crossing the Quality Chasm: A New health System for the21st Century. Institute of Medicine. 2001. www.iom.edu.44,000—98,000 Americans die each year due to medicalerrors;Medical errors are the 8th leading cause of death in theU.S.;The annual cost of medical errors is as much as $29 billion;The majority of problems are systematic;Many Americans are injured by the health care that issupposed to help them;Less than five percent of these injuries are due toindividual errors; andErrors can be reduced, but not eliminated.To Err is Human was followed by a second phase of researchand the publication of Crossing the Quality Chasm, a reportdescribing broader quality issues and defining the “six aims” ofcare, stating that care should be:Safe, avoiding injuries to patients from the care that isintended to help them;Effective, providing services based on scientific knowledgeto all who could benefit, and refrain from providingservices to those not likely to benefit;Patient-centered, providing care that is respectful of andresponsive to individual patient preferences, needs valuesand ensuring that patient values guide all clinicaldecisions;Timely, reducing waits and sometimes harmful delays forboth those who receive and those who give care;Efficient, avoiding waste, including waste of equipment,supplies, ideas and energy; andEquitable, providing care that does not vary in qualitybecause of personal characteristics such as gender,ethnicity, geographic location, and socio-economic status.Crossing the Quality Chasm included specific ideas of ways tomake health care safer, including: 1) health care organizations’purpose should be to continually reduce the burden of illness,injury and disability; 2) purchasers and health careorganizations should work togetherto redesign health care processes;and 3) purchasers should examinecurrent payment methods andremove barriers that impede qualityimprovement.The recommendations made in thisdocument, and continuing researchand recommendations by the IOM,have become the new standard forhealth care safety. It is critical thattrustees understand the keycomponents of this research anddevelop strategies to address theseissues in their hospitals.The IOM Definitionof Quality: “Thedegree to whichhealth services forindividuals andpopulations increasethe likelihood ofdesired healthoutcomes and areconsistent withcurrent professionalknowledge.”13

20 Questions Every Washington Hospital Board Needs to be Able to AnswerGovernance Accountabilities in the Quest for Qualitythe best care, and perhaps punish for poorly provided care.According to a story in The New York Times, the experiment is“an effort by Medicare to address a fundamental concern aboutthe current payment system.” Currently hospitalreimbursement is the same regardless of patient outcomes, asituation that is unlikely to continue in the future.National Quality Forum. The National Quality Forum (NQF) isa not-for-profit membership organization created to developand implement a national strategy for health care qualitymeasurement and reporting. It was developed through acombination of public and private leaders committed tobringing about national change in health care quality onpatient outcomes, workforce productivity, and health carecosts.In response to the IOM report, the NQF identified 27 “neverevents,” or events that should never happen in a hospital andthat can always be prevented. Examples of “neverevents” include:Operating on the wrong body part or thewrong patient;Performing the wrong procedure;Leaving foreign objects in a patient;Contamination, misuse or malfunction ofproducts and devices;Wrong discharge of an infant;Patient disappearance or suicide;Death or disability due to a medication error;Death or disability associated with a fall, burn or use ofrestraints;Care ordered by someone impersonating a doctor ornurse; andAbduction or assault.The NQF works to promote a common approach to measuringhealth care quality, and is known as the “gold standard” for themeasurement of health care quality. In 2006 the NQF endorsedmore than 300 measures, indicators, events and practices formeasuring and improving health care quality across thespectrum of care.The Institute for Healthcare Improvement. The Institute forHealthcare Improvement (IHI) was established in 1991 to leadthe improvement of health care across the world. The IHIestimates that nearly 15 million instances of medical harmoccur in the U.S. alone every year – a rate of over 40,000instances per day. The IHI is striving to achieve health care forall patients with:People appreciatehonesty and beingtold what ishappening to themor what mighthappen to them.The more peopleknow about theircondition, the morefavorably they viewtheir doctor.No needless deaths;No needless pain or suffering;No helplessness in those served or serving;No unwanted waiting; andNo waste.In an effort to accomplish these aims, the IHI launched its“100,000 Lives Campaign”, with the goal of reducing 100,000preventable deaths in the U.S. Over 3,000 hospitalsparticipated in the campaign, and in 18 months an estimated122,000 lives were saved. The combination of t hecampaign’s success and the desire to addressmedical errors that may harm patients in additionto preventing avoidable deaths led to the IHI’srecent launch of its “Five Million Lives Campaign.”The new campaign expands the focus of the100,000 Lives Campaign, with the goal ofdramatically accelerating efforts to reduce nonfatalharm, while continuing to fight needlessdeaths. The Five Million Lives goal is to protectpatients from five million incidents of medical harmover a two-year period, from December 2006 –December 2008.To achieve the goals of the Five Million LivesCampaign, the IHI is enlisting at least 4,000 U.S.hospitals in a renewed national commitment to improvepatient safety faster than ever before. The campaignchallenges American hospitals to adopt 12 changes in care thatsave lives and reduce patient injuries:Six interventions are from the original 100,000 LivesCampaign that target preventable patient deaths, such asadverse drug events, surgical site infections and ventilatorassociatedpneumonia; andSix new interventions were added, with the goal ofreducing unnecessary patient harm, such as reducingsurgical complications and preventing pressure ulcers.One of these six interventions asks for hospitals to “getboards on board…by defining and spreading the bestknownleveraged processes for hospital boards of15

20 Questions Every Washington Hospital Board Needs to be Able to AnswerGovernance Accountabilities in the Quest for Qualitydirectors, so that they can become far more effective inaccelerating organizational progress toward safe care.”Hospitals and Physicians Can’t Do It AloneQuality improvement requires an understanding andacceptance of mutual responsibilities between all keystakeholders, including employers, clinicians and staff, andpatients. Implementing quality and patient safetyimprovements is an opportunity for board members to beleaders in the community, coalescing all the key stakeholderstogether around a common purpose.Employer Involvement. Employers have the opportunity to bechampions for patient safety, promoting the need for safetyreform and providing leadership in action toward thedefinition, measurement and improvement of quality andpatient safety.Clinician and Staff Involvement. Accountability for qualityand safety should be incorporated into every employee’s jobdescription. Regardless if employees have direct contact with apatient, every employee has a role in patient safety, fromkeeping the facility clean, to arranging the room in the safestmanner possible, to ensuring the patient is checked in andregistered correctly. Employees should be educated about thequality and safety expectations they are required to meet, aswell as how to report safety concerns and errors. Theseconcepts should be ingrained in the workplace culture, andeffectiveness and success in meeting specific goals should berecognized and rewarded.To ensure accountability, employees should work in teams thatshare responsibility and check one another to ensure protocolsare followed. Individuals and groups should be recognized fordisclosing errors, near misses and safety concerns, rather thanpunished.Key elements of employee and medical staff commitment tosafety include:Accountability: medical staff and other employee jobdescriptions should incorporate accountability for safety;Education/Knowledge: educate employees on theimportance of safety, surveillance and expectations forreporting safety concerns and errors, beginning with theirorientation as new hires;Evaluation: employee evaluations should take intoaccount contributions to safety;Disclosure: reward employees and physicians fordisclosing errors, near-misses and safety concerns; andTeamwork: employees and physicians should work inteams so each member knows his or her responsibilitiesand those of teammates, and members of the team lookout for one another, noticing errors before they causeinjury.Patient Involvement. Patients play a critical role in quality andpatient safety as well. Without patient honesty and clearcommunication, health care providers may misunderstand apatient’s needs, desires or abilities. That patient’s role in patientsafety includes:Changing Public Perceptions AboutQuality of CareRecent public and private efforts to promote awareness of medicalerrors and improve quality of care is impacting the general public. A2006 study conducted by the Kaiser Family Foundation and the U.S.Agency for Healthcare Research and Quality found that: 36% of Americans have seen information comparing the qualityof care provided by health plans, doctors and hospitals; 20%have used the information to make decisions about their care 55% of Americans understand the term “medical error,” up from31% in 2002 When given a common definition for “medical error,” 43% ofAmericans believe that preventable medical errors occur “veryoften” or “somewhat often” Many Americans are taking their care into their own hands: 70% report checking the medication given by theirpharmacist against the doctor’s prescription 54% bring a list of all their medications to a doctor’sappointment 45% bring a friend or relative to doctor appointments tohelp as questionsSource: New Survey Captures Public’s Views of Medical Errors and Quality ofCare. Kaiser Family Foundation. September 27, 2006. www.kff.org.Informing doctors about medication they are taking;Asking for written information about possible medicationside effects;Choosing hospitals with experience treating theircondition;Learning about their condition;16

20 Questions Every Washington Hospital Board Needs to be Able to AnswerGovernance Accountabilities in the Quest for QualityBeing a personal advocate or finding an advocate;Ensuring prescriptions are legible; andDemanding an understandable, written dischargetreatment plan.The Board Role. Too often quality is on the board agenda as adiscrete item, such as finance. Boards must recognize thatquality and patient safety is the backbone for everything theboard does. Meeting agendas should include regular review ofreports on quality and patient safety. The board should setperformance goals for quality and safety improvement, andhold managers accountable for achieving those goals. Qualityand safety expectations should be a major factor in boarddiscussions about services, facilities, medical staff developmentand workforce development.A Call to Responsibility: Improving Quality andPatient Safety at Your OrganizationWhile no board or individual trustee sets out to govern lowperformance, boards can be “unsafe” or perform “governancemalpractice” simply through lack of knowledge orunderstanding about key issues, not talking about quality andpatient safety measures and their implications, lack ofinvolvement, or focusing in the wrong areas. A “culture ofsafety” should be ingrained in the hospital, beginning with theboard. The board is responsible for setting the tone for thehospital, providing the tools necessary for employees to carryout the quality and patient safety vision, and encouraging asafe environment by regularly measuring and monitoringquality measures.Creating a Culture of Safety. The term “culture of safety” isused often, but the definition can be ambiguous. Boards mustdefine what a culture of safety means to their hospital,including the following critical components:Commitment of Leadership: Active involvement by thehospital’s governing body, clinical and non-clinicalleadership, with continual improvement in patient safetyand medical error reduction as an explicit hospital priority;Open Communication: Patient involvement in decisionsabout their care, informing patients of the consequencesof the care they receive, and ensuring language thatsupports the patient safety effort;Reporting: Create an environment of trust to addressaccountability in a fair and just manner so blame is notautomatically placed when an error occurs; encourageemployees to view patient safety as an integral part oftheir jobs, and to internally report errors, “near misses” andother opportunities to improve safety;Informed Action: Understanding of systems thinking andhuman factors is critical to the effective evaluation ofgathered data; data and information about errors and“near misses” collected and analyzed internally on anongoing basis; regular evaluations of care processesconducted to seek opportunities for improving patientsafety; andTeamwork: Continual training in both team skills and jobspecific competencies, encouraging caregivers toconsistently work in a collaborative manner in which eachindividual has a responsibility to identify and/or act toprevent potential medical errors.Steps the Board Should Undertake. Boards are responsible forensuring that high quality care is consistently and effectivelydelivered to patients, and providing leadership that results ineffective systems, measurement and improvement. In fulfillingthis responsibility, boards should take action to ensure thathealth care quality is a paramount priority in every decision andaction made on behalf of the hospital. The National QualityForum issued a “Call to Responsibility” for hospital governingboards, outlining four key principles with actionable policiesand practices that boards should follow to fulfill their role inquality improvement:How Engaged Are You?The “Boards on Board” governance “how-to” guide from the Institutefor Healthcare Improvement (IHI) suggests that boards typically fallinto one of four categories in their quality accountabilities. The IHIconsidered board engagement in improving quality and safety,effectiveness, and understanding of quality principles. The fourboard categories they identify are:1. Actively engaged and capable; already leading a highperformanceorganization and wondering how they can dotheir board work even better;2. Actively engaged; often showing that commitment through ahigh-profile event, but needing a much stronger foundation forcontinual work on improvement;3. Not fully engaged, but having strong, latent capabilities andtalent on the board; looking to light a fire with the full board,but not sure how to proceed; and4. Neither engaged nor capable; feeling quality is just fine;viewing quality of care as not the board’s proper business, butrather that of the medical and executive leadership.Source: 5 Million Lives Campaign. Getting Started Kit: GovernanceLeadership “Boards on Board” How –to Guide. Cambridge, MA: Institute forHealthcare Improvement; 2008. www.ihi.org.17

20 Questions Every Washington Hospital Board Needs to be Able to AnswerGovernance Accountabilities in the Quest for QualityHospital governing boards play a vital role in monitoringand improving hospital care to ensure that it is safe,beneficial, patient-centered, timely, efficient and equitable.To fulfill their role in ensuring quality, hospital governingboards should:Ensure that health care quality is a paramount priorityand a primary focus of board activitiesProminently place patient safety and quality issues onboard agendasProactively oversee and evaluate patient safety andhealth care outcomes and the creation of a culture ofsafety by engaging in patient safety and qualityimprovement projects, establishing governancepractices that support performance measurement andquality improvement, and holding managementaccountable for performanceEnsure that a system of performance measurementand quality improvement is in placeRecognize physicians’ roles, and the role of themedical staff within the hospital, and the roles ofnursing executives and other clinical leaders inachieving qualityAssure that the hospital leadership adopts humanresources policies and physician staff bylaws thatarticulate specific expectations for qualityimprovementEnsure that the hospital management is capable ofand focused on the analysis and improvement oforganizational design that supports patient safety andquality of careAlign budget development and financial resourceswith quality and patient safety goalsActively support management’s negotiation ofpayment contracts that do not penalize theorganization for its investment in quality and safetyTo enable effective evaluation of their own role inenhancing quality, hospital governing board should:Advocate for diverse board composition with specificexpertise in quality and patient safetyReview board performance (individually andcollectively) in improving hospital careHospital governing boards should develop a “qualityliteracy” regarding patient safety, clinical care, and healthcare outcomes. This literacy should:Include education in the infrastructure of patientsafety, healthcare quality and performancemeasurementRecognize the role of the board in representingconsumers and the community it servesBe comparable and akin to the knowledge andunderstanding of the organization’s financial healthand well-being vis-à-vis the Sarbanes-Oxley ActUtilize existing organizations and their resources toprovide courses, training and information (the JointCommission, Quality Improvement Organizations,etc.)Hospital governing boards should oversee and beaccountable for their institution’s participation andperformance in national quality measurement efforts andsubsequent quality improvement activities:Ensure that participation in national qualityimprovement activities focus on nationally agreeduponprioritiesParticipate in one or more existing efforts, such as theHospital Quality Alliance, Joint Commission NationalPatient Safety Goals, NQF-endorsed national voluntaryconsensus standards, the Leapfrog Group, and othersConsistently review performance data fromparticipation in national quality improvement effortsCalculate the determination of cost implications ofadverse events and poor performanceEvaluate performance based on the context of the sixNQF aims: safe, beneficial, patient-centered, timely,efficient and equitableHold management accountable and require full andcomplete explanations when safety and qualityperformance levels differ from national benchmarks orfall below expectationsFacilitate the adoption of incentive programs forexecutives based on quality improvementsQuality Fraud. Infusing the board agenda with a focus onquality invites another perspective on the board’s responsibility18

20 Questions Every Washington Hospital Board Needs to be Able to AnswerGovernance Accountabilities in the Quest for Qualityfor quality and patient safety: the one of compliance, andavoidance of “quality fraud”. “Quality fraud” is a term not oftenunderstood, but it is one that every board should pay closeattention to.Both the Office of Inspector General (OIG) and the Departmentof Justice (DOJ) have increased their attention to quality andpatient safety. Quality is increasingly being linked toreimbursement, and these government agencies want toensure that patients receive the quality of care that they arepaying for.Payment for poor quality is viewed as a false claim, and failureto accurately report quality data may be considered potentialfraud. Further, both the OIG and the DOJ place theresponsibility for quality of care squarely on the shoulders ofthe board.Prosecution for quality fraud may be determined by thefollowing factors:1. Has there been a systemic failure by management and theboard to address quality issues?2. Has the organization made false reports about quality orfailed to make mandated reports?3. Has the organization profited from ignoring poor quality orignoring providers of poor quality?4. Have patients been harmed by poor quality or given falseinformation about quality?A Fiduciary Duty. In September 2007, the OIG and theAmerican Health Lawyers Association (AHLA) co-sponsoredCorporate Responsibility and Health Care Quality: A Resourcefor Health Care Boards of Directors. The purpose of thepublication is to equip boards with the rationale and toolsnecessary to understand and execute their obligations forquality and patient safety. Based on discussions of fiduciaryduty of care and duty of obedience to mission, the documentadvises that duty of care is generally accounted for when theboard acts:In good faith;With the care of an ordinarily prudent person in likecircumstances; andIn a manner reasonably believed to be in the best interestsof the organization.The OIG and the attorneys further advise that courts haverecently interpreted the duty of care to include a level of duediligence that includes “reasonable inquiry” by the board intothe organization’s operations and performance. Morespecifically, the document advises that the OIG expects boardsto exercise general supervision and oversight of quality andpatient safety, including:Being aware of quality issues, challenges andopportunities;Paying close attention to the development of qualitymeasures and reporting requirements (including periodiceducation from executive staff); andReceiving executive updates regarding quality initiativesand associated legal issues.OIG/AHLA Quality Oversight Recommendations. Boards can’tjust be passive recipients of quality and safety information;trustees must be actively engaged in oversight. The OIG/AHLApublication includes a series of recommended questions andexplanations for boards to use in understanding and governingquality. The OIG and the DOJ will increasingly examinegovernance to ensure that boards of trustees understandquality and patient safety issues, and that they effectivelymonitor performance to ensure that the care provided by theirorganization exhibits the highest quality and efficiency.In the pursuit of “reasonable inquiry”, the OIG and AHLArecommend that boards ask and have solid answers to severalquestions:1. What are the goals of the organization’s qualityimprovement program? What metrics and benchmarksare used to measure progress towards each of theseperformance goals? How is each goal specifically linked tomanagement accountability?2. How does the organization measure and improve thequality of patient/resident care? Who are the keymanagement and clinical leaders responsible for thesequality and safety programs?3. How are the organization’s quality assessment andimprovement processes integrated into overall corporatepolicies and operations? Are clinical quality standardssupported by operational policies? How doesmanagement implement and enforce these policies?What internal controls exist to monitor and report onquality metrics?4. Does the board have a formal orientation and continuingeducational process that helps members appreciateexternal quality and patient safety requirements? Does the19

20 Questions Every Washington Hospital Board Needs to be Able to AnswerGovernance Accountabilities in the Quest for Qualityboard include members with expertise in patient safetyand quality improvement issues?5. What information is essential to the board’s ability tounderstand and evaluate the organization’s qualityassessment and performance improvement programs?Once these performance metrics and benchmarks areestablished, how frequently does the board receive reportsabout the quality improvement efforts?6. How are the organization’s quality assessment andimprovement processes coordinated with its corporatecompliance program? How are quality of care and patientsafety issues addressed in the organization’s riskassessment and corrective action plans?7. What processes are in place to promote the reporting ofquality concerns and medical errors, and to protect thosewho ask questions and report problems? What guidelinesexist for reporting quality and patient safety concerns tothe board?8. Are human and other resources adequate to supportpatient safety and clinical quality? How are proposedchanges in resource allocation evaluated from theperspective of clinical quality and patient care? Aresystems in place to provide adequate resources to accountfor difference in patient acuity and care needs?9. Do the organization’s competency assessment andtraining, credentialing, and peer review processesadequately recognize the necessary focus on clinicalquality and patient safety issues?10. How are “adverse patient events” and other medical errorsidentified, analyzed, reported, and incorporated into theorganization’s performance improvement activities? Howdo management and the board address qualitydeficiencies without unnecessarily increasing theorganization’s liability exposure?Board Information: The Key to Quality Knowledge. The boardshould have materials and information that will enhance theirquality discussions and support their governance efforts. Thesematerials should include such things as:A comprehensive quality dashboard that includes keyindicators of clinical quality, patient safety and satisfaction,employee and staff satisfaction, turnover and vacancies;Executive reports of medical staff quality meetings;Reports of grievances, adverse events and potentialliabilities;Progress reports on corrective action plans;Information about quality improvement and patient safetyplans;Understanding of publically reported hospital data andinformation; andInformation about healthcare quality trends.Background materials should include articles about quality,governance practices in relation to quality, emerging industrytrends, legal and regulatory requirements regarding quality,and quality processes and practices from other industries thatmight be applied in the hospital setting.Building Physician Partnerships for Quality and PatientSafety. The medical staff is responsible for delivering the bestpossible quality to patients in the safest manner, workingcollaboratively with the board to identify clinical issues thatprevent quality and patient safety improvement. Despite thisshared quality goal, an eroded sense of shared vision can occurdue to competing agendas, economic stress, regulatorypressures and leadership problems.But working with the medical staff and medical executive teamis essential in ensuring a patient safety plan is successful. Formany boards this may be uncharted territory: in the past theboard focused on building positive stakeholder relationships,philanthropy and setting the hospital’s strategic direction,while the medical staff was responsible for quality of care.Physicians don’t want to be micromanaged by the board, andtrustees don’t want to overstep their bounds. But the quality ofcare provided at the facility is ultimately the board’sresponsibility, and increasing involvement will help the boardbetter understand the issues and recognize the resources andtechnology necessary to achieve greater patient safety.Some trustees may be uncertain about voicing their opinionsaround members of the medical staff. A recent article inQuality Management in Health Care reported that trustees wholack medical expertise tend to be hesitant to challengemembers of the medical staff, or to second-guess how themedical staff disciplines providers for violating procedures. Butto successfully improve quality of care, the board and medicalstaff must work as a team. That requires the medical staff totranslate complex medical issues into “plain English” thattrustees can understand, and requires trustees to ask questionsand stand up for what they believe is right.The contrasting cultures of physician independence andautonomy and board shared-decision making may be difficultto overcome, but can be achieved through board-medical staff20

20 Questions Every Washington Hospital Board Needs to be Able to AnswerGovernance Accountabilities in the Quest for QualityKey Questions for Trustees When Implementing aQuality and Patient Safety ProgramThe board’s responsibility in patient safety is simply to monitorperformance and demand accountability. Governing bodies shouldhold themselves accountable for patient safety just as they areaccountable for financial performance. According to the AmericanHospital Association, boards should begin by: Asking to see regular reports on patient safety from the facilityor organizational managers; Requiring root-cause analysis of all errors that lead to injury; Setting performance goals for safety improvement; and Holding managers accountable for achievable patient safetyimprovement goals.communication, relationship-building and mutual respect. Theboard sets the tone for the hospital by creating a culture that isacceptable to both the board and physicians, creating a“practice friendly environment” through strategicunderstanding of the issues, ensuring adequate staffing, qualityemployees, efficient and effective processes, and providingadequate resources.Board/medical staff relationships can also be enhancedthrough additional efforts, such as retreats and workshops, one-on-one meetings or focus groups that allow both groups tounderstand one another’s viewpoints. Conducting a medicalstaff needs assessment can also help the board to understandphysician needs, and physician involvement in strategicplanning allows mutual understanding of long-term issues anda shared long-term vision.If boards struggle to get physicians onboard with a quality andpatient safety plan, explaining how implementing the plan willprovide their patients with better care will build physiciansupport. Make sure providers know that the changes will resultin fewer errors and less harm to their patients, itemizing thespecific desired outcomes as a result of the changes. Andclearly explain to the medical staff that they will play an integralrole in the decision-making and implementation process, andthat they will be instrumental in developing and implementingthe patient safety plan. The reward will come for thephysicians when they see that the care provided at theorganization has improved and that their patients are receivingthe very best care possible.Maximizing Employees’ Quality Improvement Commitment.The workforce is responsible for riveting its attention onimproving quality and safety within the scope of their jobs, andemployees are an integral part of the quality and patient safetyimprovement team. According to an article in Hospitals &Health Networks, to ensure that employees understand theircritical role and maximize employees’ quality improvementcommitment, boards should:Demonstrate patient safety as a top leadership priority;Actively promote a non-punitive environment for sharinginformation and lessons learned;Routinely assess risk to positive patient outcomes;Leading the Quality and Patient Safety Movement:Steps for BoardsThe American Hospital Association’s Quality Center recommends thatboards undertake the following seven steps as they begin their questfor improving quality and patient safety:1 Understand the issues. Attend educational retreats andnational conferences, read relevant literature, and recruittrustees with backgrounds in the science of quality (such asengineering, aerospace or manufacturing).2 Together with other senior leaders, learn about methods tomonitor quality. Seize the opportunity to bring the board,medical staff and administration together to learn from expertsand one another. Attend national meetings as a group and/orbring in guest speakers. Success is dependent on the entireleadership team rallying behind the cause.3 Don’t be intimidated by technical jargon. The board should befocused on ensuring peer review is conducted rigorously,understanding metrics related to outcomes, and askingcommon-sense questions, not overlooking the details ofphysicians work. Boards should focus on big-picture questions,such as “how do our results compare with our competitors?”4 Challenge your CEO. Link senior staff compensation to qualityoutcomes data.5 Join national and regional collaboratives. Participate inopportunities to share knowledge with and learn from otherorganizations, such as the IHI’s 5 Million Lives Campaign.6 Collaborate with physicians. Hold the medical staffaccountable for their delegated quality assurance functions, andkeep quality in the forefront of all recruitment and credentialingdecisions.7 Believe in quality. Recognize that board leadership can resultin profound improvements in quality and patient safety; don’tbecome passive or defer too much to the medical staff andadministration.Source: Lister, Eric D. Leading the Drive for Quality: Is Your Board Ready:Trustee Magazine. November/December 2006.21

20 Questions Every Washington Hospital Board Needs to be Able to AnswerGovernance Accountabilities in the Quest for QualityDetermine ways employees can learn from one anotherand share information;Involve staff in analyzing causes and solutions to errorsand near misses;Reward and recognize safety-driven decisions andreporting;Foster effective teamwork, regardless of authority, throughteam training and simulation;Implement care delivery processes that avoid reliance onmemory;Implement care delivery processes that avoid reliance onvigilance; andEngage patients and caregivers in the design of caredelivery processes.Ensuring High Quality and Patient Safety. The board can helpensure high quality and patient safety by first ensuring thatappropriate resources are dedicated for quality and patientsafety initiatives. Boards must remember that quality isembedded in everything the hospital does, and askthemselves: “what is an appropriate amount of money to investto achieve our quality and patient safety aims?”Once sufficient resources are allocated, the board andhospital’s commitment to quality and safety must be widelycommunicated to employees, physicians and the public. Thatcommitment should be followed-up with regular reports anddiscussion about quality measurements, comparison of thehospital’s measurements to benchmarks, and investigation androot-cause analysis of poor performance or events.Organizational quality and safety initiatives should also bereviewed regularly to look for improved processes or bestpractices the hospital can implement. Finally, to ensure longtermcommitment to these initiatives, new board membersmust be recruited who are dedicated to the quality and patientsafety efforts.Strategies for Leadership in Quality and Patient Safety. Eachboard can individually take actions that advance the hospital’sprogress toward its quality and patient safety goals. Accordingto a recent article in Trustee magazine, specific steps boardscan take include:Asking how patient safety is addressed in the hospital;Discussing how the hospital ensures that everyoneunderstands their role in quality and patient safety;Familiarizing board members with Joint Commissionrequirements and additional patient safety materials;Speaking publicly about the unacceptability of the currentstate of patient safety;Implementing a proactive patient safety approach;Developing a culture of trust, rather than blame;Setting an expectation for interdisciplinary error and nearmissinvestigations;Including quality improvement and patient safety inorientation and education;Ensuring patients/families are notified as soon as possibleif an error occurs;Supporting investment in quality and safety;Openly engaging employees in patient safety planning,probing for perceptions of risk areas;Continuously articulating the business case for safetyimprovement;Personally promoting patient safety;Ensuring that resources are appropriate for safetyimprovement;Conducting self-assessments;Cultivating media and staff understanding of the issues;Ensuring systems are in place for assess individualaccountability and competence;Sharing personal and institutional patient safety learning;Participating in conferences, coalitions and other efforts toimprove patient safety; andEngaging in initiatives to drive enhancements inregulations, licensing and accreditation agencies thatsupport safety improvement.Putting patient safety on every board agenda;Participating in external safety education programs andconferences;22

20 Questions Every Washington Hospital Board Needs to be Able to AnswerGovernance Accountabilities in the Quest for QualityThe Goal: “Quality Literacy”A critical tool for advancing quality is continuing governanceeducation and knowledge building. The goal is to build theboard’s “quality literacy.”Quality education planning should include new trusteeorientation. Does your orientation emphasize quality? Does itinclude help in understanding quality reports and dashboards,information about quality trends, a summary of legal andregulatory quality mandates, an explanation of quality termsand acronyms, and a review of your hospital’s quality program,initiatives, challenges and issues? Have you consideredassigning new trustees to the Quality Committee to providethem with a deeper understanding of the hospital’s qualitycommitment and efforts?More Best PracticesThere are more practices that will further the board’s qualitygovernance and leadership:Goal Achievement and Compensation. Tying executive goalsand performance to compensation is critical practice.Achieving certain quality goals should be a part of not only theCEO’s performance evaluation each year, but of everyemployee’s performance evaluation. Ensure that achievementis rewarded by linking a meaningful percentage ofcompensation to quality goal achievement. The entireorganization should be focused on quality progress, and goalsshould cascade through all levels of the organization.Budget. Ensure that quality improvement plans and goals areincorporated into the budget. Identify the resources needed tohelp guarantee success well enough in advance so they maybe incorporated into the hospital’s annual budget process.And if budgets need to be reduced, ask what impact those cutsmay have on quality.Quality Diversity. Evaluate the diversity of your board. Do youhave members with quality expertise? That expertise might beclinical and it might be an individual with quality performanceimprovement experience from an outside industry.Board Self-Assessment. Does your annual board selfassessmentinclude an evaluation of board and individualquality expertise and practice? Have you considered thosefindings as you develop quality and patient safety educationfor the board?Sources and Additional Information1. Rowland, Christopher. Hospital Trustees Shift Their Focus to Medical Safety. Boston Globe. March 5, 2007.2. Abelson, Reed. Bonus Pay by Medicare Lifts Quality. The New York Times. January 25, 2007.3. New Survey Captures Public’s Views of Medical Errors and Quality of Care. Kaiser Family Foundation. September 27, 2006. www.kff.org.4. Mycek, Shari. Patient Safety: It Starts with The Board. Trustee Magazine. May 2001.5. To Err is Human, Building a Safer Health System. Institute of Medicine. www.iom.edu.6. Causes of Medical Mistakes. www.wrongdiagnosis.com/mistakes/causes.7. Harvard School of Public Health/Kaiser Family Foundation. Medical Errors: Practicing Physician and Public Views. The New England Journal ofMedicine. December 12, 2002.8. Sarudi, Dagmara. A Commitment to Safety: A Toolkit for JCAHO’s new Patient Safety Standards. Hospitals & Health Networks.9. Runy, Lee Ann. Quest for Quality: Lessons Learned, Challenges Met. Hospitals & Health Networks. November 2002.10. Wilson, Nancy J. Creatures of Culture. Hospitals & Health Networks. May 2001.11. Sarudi, Dagmara. A Commitment to Safety: A Toolkit for JCAHO’s new Patient Safety Standards. Hospitals & Health Networks.12. Hospital Governing Boards and Quality of Care: A Call to Responsibility. National Quality Forum. December 2, 2004.13. Lister, Eric D. Leading the Drive for Quality: Is Your Board Ready: Trustee Magazine. November/December 2006.14. A Commitment to Safety: A Toolkit for JCAHO’s New Patient Safety Standards. www.jointcommission.org.15. Agency for Healthcare Research and Quality, www.ahrq.gov.16. American Hospital Association, www.aha.org.23

20 Questions Every Washington Hospital Board Needs to be Able to AnswerGovernance Accountabilities in the Quest for Quality17. American Society of Health-System Pharmacists, www.ashp.org.18. Institute for Healthcare Improvement, www.ihi.org.19. Institute for Safe Medication Practices, www.ismp.org.20. Institute of Medicine, www.iom.edu.21. The Joint Commission, www.jointcommission.org.22. National Patient Safety Foundation, www.npsf.org.23. National Quality Forum Principles. National Quality Forum, www.qualityforum.org.24. First Consulting Group, www.fcg.com.25. Quality Interagency Coordination Task Force, www.quic.gov.26. 5 Million Lives Campaign. Getting Started Kit: Governance Leadership “Boards on Board” How –to Guide. Cambridge, MA: Institute forHealthcare Improvement; 2008. www.ihi.org.27. Arianne N. Callender, Douglas A. Hastings, Michael C. Hemsley, Lewis Morris, Michael W. Peregrine. Corporate Responsibility and Health CareQuality: A Resource for Health Care Boards of Directors. United States Department of Health and Human Services Office of Inspector Generaland American Health Lawyers Association. September 2007. http://www.oig.hhs.gov/fraud/docs/complianceguidance/CorporateResponsibilityFinal%209-4-07.pdf)28. OIG Report on Board Oversight and Quality of Care: What it Means for Health Care Boards of Directors. Foley & Lardner LLP. October 16, 2007.http://www.foley.com/publications/pub_detail.aspx?pubid=451529. Alice G. Gosfield, J.D., James L. Reinertsen, M.D. Avoiding Quality Fraud. Trustee. September 2008. http://www.trusteemag.com/trusteemag_app/jsp/articledisplay.jsp?dcrpath=TRUSTEEMAG/Article/data/09SEP2008/0809TRU_CoverStory&domain=TRUSTEEMAG30. Joanna H. Jiang, Carlin Lockee, Karma Bass, Irene Fraser, Robert Kiely. Board Engagement in Quality: Findings of a Survey of Hospital and SystemLeaders. Journal of Healthcare Management. March-April, 2008. http://www.entrepreneur.com/tradejournals/article/177719968.html31. Jim Roberts, M.D., Steve Durbin. The Board’s Role in Quality and Safety, 7 Key Governance Questions. July 9, 2007. Providence Health & Services.32. Hospital Governing Boards and Quality of Care: A Call to Responsibility. National Quality Forum. December 2, 2004. http://www.qualityforum.org/pdf/reports/call_to_responsibility.pdf24

20 Questions Every Washington Hospital Board Needs to be Able to AnswerThe truth is, the time a governing board spends togetherin its meetings can make or break its effectiveness. Greatboard meetings are sure to mean success for thehospital. After all, everyone arrives having done theirhomework, they know the issues they’ll be discussing andvoting upon, they’re committed to treating one another in acivil manner, and they deliberate calmly. If the discussionshould ever get boisterous, their chair will skillfully bring themback to order, refocus the discussion, and call for a vote. Whenthe gavel signaling adjournment falls, board members clap oneother on the back and congratulate themselves on anotherproductive meeting. Wow!It may sound like a dream, but it’s a fact that your governingboard meetings can move just as smoothly and productively.Best Practice Number One: The meeting startsbefore the meeting!Board members should arrive prepared, receiving their boardpacket – including the agenda, previous meeting minutes, andseveral board reports – at least a week ahead of the actualmeeting. And, as committed as each board member is to his/her position, every single person has read and studied theentire packet, has prepared ideas to propose during discussionperiods, and is in their seat on time.How does the board ensure thatthe right issues are discussed inthe right way at the right time?Hospital leaders must navigate through a complex health care environment that continues tocome under increasing examination and debate. The effects of the economic recession,implementation of the IRS’ Form 990 changes, the increasing call for transparency, and scrutiny ofhealth care costs and quality mean that boards today, more than ever, must focus their time andattention on the most critical issues confronting their organizations. Board meetings shouldbegin with prepared participants, follows a meticulously-planned agenda, includes respectful,friendly exchanges of ideas and calm deliberations, is conducted by a procedure-savvy chair, isblessed with decisive votes and ends on time. If this is not quite a description of your board’smeetings, read on…Too often, board members arrive five minutes early (or late!)and try to speed-read their packet information beforediscussions begin. That makes it nearly impossible for them tobe equipped with the background information they need todiscuss agenda items intelligently, and their lack of detailedknowledge can cloud any vote they may cast during themeeting’s progress.Takeaway tips: Read and study your board agenda several daysprior to your meeting. If you have questions, call the boardchair for clarification. Clarify your thinking on each scheduledagenda item and arrive prepared for discussion anddeliberation. And always be sure to arrive on time.Best Practice Number Two: A great agenda setsthe stage.Sketchy agendas, or agendas with catchall phrases such as“New Business,” “Old Business,” or “Other Business” do no oneany favors. A well-planned agenda can keep a meetingfocused and, believe it or not, on time. It can keep discussionsfrom derailing and keep your members on task.Here’s what a clear agenda contains:Time, date and location of the meeting.25

20 Questions Every Washington Hospital Board Needs to be Able to AnswerMeetings People Remember and Critical Conversations the Board Should Have NowItems being considered, with brief descriptions as to“discussion only” or “action (voting) item.”A suggested time for each item’s discussion (in minutes).Items of greatest importance placed at the beginning ofthe meeting; items of lesser importance near the end.Use of a consent agenda is also a time-saver and keepsmeetings on track. A consent agenda is an “agenda within anagenda,” containing items that rarely need discussion. Onmost consent agendas you’ll find approval of minutes, approvalof agenda, the chief executive’s report and various committeereports. On occasion, a consent agenda might include legaldocuments such as leases or contracts that have already beenagreed upon, but need formal approval. A consent agendagathers all of these “low or no discussion” items into a group,and a vote is taken at the meeting’s outset either giving“consent” to unilaterally approve the entire group, or to pullone or two items out for clarification and discussion (it isassumed that all board members have read the items includedin the consent agenda prior to the meeting).Takeaway tips: Pay close attention to your agenda. Note theitems that will be discussed and the time allotted fordiscussion. Come to the meeting with your ideas and thoughtsprepared. Expect to spend more time on items of greatestimportance, and little time on minutiae. Expect to approve theconsent agenda, or be ready to ask that one or more items beremoved from it for clarification.Best Practice Number Three: Treat others asyou want to be treated.The cardinal rule of boardroom etiquette is: Treat your fellowboard members as you want to be treated. Learn to agree –and disagree – courteously. Speak in calm voices. Don’tinterrupt, and don’t try to dominate the discussion. Do speakup, stating your opinions and ideas concisely. Be willing tolisten to others’ opinions, and perhaps even change your mindif you hear a reasonable new alternative to a tough issue. If youfeel yourself getting hot under the collar, remember yourmission to serve the hospital and the community.Boardroom etiquette and courtesy are often “taught” in boardorientation. Adults may not feel they need to be taught, butthey do need to be reminded! Many boards these daysconduct ongoing member performance evaluations, and someboard members have been asked to resign because of bullyingways.A tremendous aid to keeping the meeting discussions anddeliberations civil is for each board member to have a workingknowledge of parliamentary procedure, again, often taught inboard orientation. After all, rules of order are the basis of civillaw.Takeaway tips: Treat others as you want to be treated. Respectothers’ right to speak, and listen to their ideas. Expect others todo the same for you. Be calm. Be collaborative. Keep yourtemper. If you disagree with someone discuss the idea, don’tbelittle the person. And learn the basics of parliamentaryprocedure. It can help keep your meeting friendly and focused.Best Practice Number Four: Elect an organizedand focused leader.A skillful board chair can bring efficiency and order to the mostchaotic of situations. Perhaps emergency action is needed ona particular issue: the skillful board chair concisely states thechallenge, the background to the issue at hand, and signals thebeginning of deliberation. Perhaps one board member isdominating a discussion. A skillful board chair reminds thegroup of the importance of all voices being heard, and callsupon others for their opinions. Perhaps a board memberremains constantly mute, never offering ideas or opinions. Theskillful board chair can draw them out, urge their participation,and ask their assistance. Perhaps a discussion is veering offcourse. The skillful board chair brings it back into focus andkeeps tab on the timing of the discussion.Some boards may find they spend more time discussing pastaccomplishments or the “good old days” more than they dopressing, difficult issues. The skillful board chair may remindthem of health care planning forecaster Ian Morrison’s words,“If you don’t think systematically about the future, you run therisk of not participating in it.”Takeaway tips: Elect and appreciate a skillful board chair.Expect to participate equitably in meetings, or receive a phonecall from the chair asking you to either tone it down or step itup. Expect the chair to keep discussions on focus and on time.And expect the board chair to help the board remain a forward-looking organization.Best Practice Number Five: Know yourdeliberative and decision-making processesand how they work.Deliberation is one of the key roles of a governing board; it’swhere decisions are formed before decisive votes are taken.26

20 Questions Every Washington Hospital Board Needs to be Able to AnswerMeetings People Remember and Critical Conversations the Board Should Have NowExcellent deliberation always begins with a written definition ofthe challenge before the group, stated in neutral words withkey points highlighted. The issue or challenge should tiedirectly back to the hospital’s strategic plan and will be ofimportance to the hospital and/or the community. The chairdetails what the deliberation should accomplish, re-stating theobjectives. He/she keeps the discussion on target, makingcertain every person shares opinions and is heard from.Solutions are proposed and alternatives are suggested, leadingto a vote being taken or scheduled for the next meeting.There are several models of decision-making, and boardmembers must understand how their particular board utilizeseach method. In the consensus model agreement is reachedafter all alternatives are on the table, and the group arrives atone opinion. In some instances, the “majority rule” model isemployed, where a simple majority decides the issue. In otherinstances, the board calls for a decision to be made by a supermajority,at least 51 percent of participants carrying the motion.Other forms of majority rule are a 2/3 requirement, and onoccasion, 3/4. Sometimes, the full board simply approvesdecisions reached by the executive committee, although“rubber-stamping” of all such opinions is not a good practice.Takeaway tips: Know how the deliberative process works, andbe prepared to participate. Help make certain that all membersare heard from. Know which decision-making models apply invarious situations within your board. Do not abstain fromvoting unless a conflict of interest applies.Best Practice Number Six: The first five minutesafter the meeting count, too.Many boards pack up and leave the moment adjournment isannounced. If you knew your board meetings could becomemore energized and effective if you gave just five moreminutes of your time, would you offer them?Boards that conduct the most efficient and effective meetingsdon’t always do so from the outset. They fine-tune theirmeeting work through the use of individual board meetingevaluations. These evaluations are designed to be completedin five minutes or less, and include yes/no answers with roomfor suggestions. Simple questions might include: Did themeeting follow the agenda? Was the agenda focused onfuture issues? Did we start and end on time? Were allmembers participating in an active manner? Did the boardchair lead the meeting skillfully? Comments could also besought regarding the helpfulness of board packet materials,meeting direction and focus, issues as they relate to thestrategic plan, fairness of deliberations, and a sense of whethereach member left the meeting knowing what he/she neededto do next.Takeaway tips: Prepare a short meeting evaluation for everyboard member to anonymously complete prior to leaving. Theboard chair and the CEO will utilize information from theevaluations to fine-tune the board’s meeting process.Many of the reminders presented here are common sensesolutions and known by most, but practiced by few. Byimplementing the six best practices of efficient boardmeetings, your board can achieve meetings that are highlyproductive, energetic, inspiring and enhance learning. Yourmeetings will be memorable – for the RIGHT reasons.Overview: Six Best Practices for BuildingBetter Meetings1 The meeting starts before the meeting!2 A great agenda sets the stage.3 Treat others as you want to be treated.4 Elect an organized and focused leader.5 Know your deliberative and decision-making processesand how they work.6 The first five minutes after the meeting count, too.Critical ConversationsQuality and Patient Safety - It’s Job One, So How Well Do YouDo It? The expectation of informed, engaged and activeparticipation in quality oversight and leadership should be thefoundation for every board meeting agenda. Attaching ameasure to the amount of board meeting time spent onquality is one way to stimulate boards to carry out their qualityaccountability and raise their level of quality and patient safetyknowledge, engagement and effectiveness. Being consciousof the amount of governance time spent on quality will raise itsprominence on the list of board priorities. Quality should be atthe forefront in board discussions and decisions on just aboutany subject on the agenda.Executive Compensation: Can You Defend It? Wall Streetfinancial executives aren’t the only ones finding theircompensation the subject of news headlines. Increasingly, theglare of publicity is turning on hospital executives as well.The recent changes to the IRS’ Form 990 are designed toprovide greater transparency into executive compensation.27

20 Questions Every Washington Hospital Board Needs to be Able to AnswerMeetings People Remember and Critical Conversations the Board Should Have NowAccording to a 2009 work plan for the IRS’ ExemptOrganizations Division, the division will thoroughly reviewForm 990 filings for information regarding executivecompensation and benefits, and evaluate board practicesduring examinations. 2Boards should take action to make sure they carry out a soundand defensible compensation process, including: 5Establishing a comprehensive, written process forevaluating executive compensation;Ensuring that no conflict of interest exists for trusteesevaluating and approving executive compensation;Comparing the executive’s compensation and benefits tothat of other similarly situated executives usingindependent data, surveys and compensation consultants;Evaluating and accounting for executive performanceagainst pre-established goals; andDocumenting the board’s processes, considerations anddecisions.To ensure that executive compensation reviews are rock-solid,hospital boards of trustees should engage in a criticalconversation that answers these questions:Is the CEO’s full compensation and benefits packagedocumented in a written employment contract?Does the board have and adhere to a conflict of interestpolicy? Is that policy applied to compensation and benefitreviews and decisions?Does the board have a compensation committee? If so, isthere a policy specifying criteria for committee selection?Do those criteria include freedom from conflicts ofinterest?Does the hospital have a written policy establishing criteriafor hiring a compensation consultant, and requiring theconsultant to be free of conflicts of interest?Have compensation evaluations included comparison withcompensation and benefits offered by similarorganizations?Could nonqualified deferred compensation and/orretirement plans offered by the organization beconsidered “excessive?”Have executive benefits been recently reviewed? Are CEOtravel and other benefits governed by a written policy andmonitored by the board?Is the CEO’s compensation tied to achievement ofdocumented performance measures?Community Benefit - How Do You Measure Up? The lack of aquantifiable measure for community benefit has become asource of debate. At the center of the debate is whether thecommunity benefit provided by hospitals is commensuratewith the tax-exempt benefits they receive. According toSteven T. Miller, Commissioner for Tax Exempt andGovernment Entities of the IRS, the goal of the recent Form 990revision, and specifically the creation of Schedule H, is to createtransparency for hospital practices that in turn will provide for amore-informed review and decision-making process regardingthe community benefit standard. 1As allegations of excessive compensation and inequitablelevels of charity care and community benefit draw scrutiny andattention, trustees need to engage in a critical conversationthat seeks answers to these questions: 2,3Does the hospital’s mission clearly affirm the hospital’scommitment to serving the community’s health careneeds?Has a community needs assessment been recentlyconducted? Can the organization’s strategic initiatives beclearly tied to the highest priority needs identified in theassessment?Does the hospital have a written charity care policy? Iseligibility clearly defined? How do patients learn about itsavailability?Have the policy and eligibility been reviewed in responseto increasing community needs resulting from economicpressures?Has the hospital clearly and comprehensively defined theamount and types of community benefit it provides?Is the hospital separating bad debt, Medicare andMedicaid shortfalls from charity care and communitybenefit activities?Does the hospital have a written bad debt policy? Has theboard recently reviewed it, and is the board aware of howit’s applied in the current recession?Will the hospital’s level of community benefit stand up topublic scrutiny?How comprehensive is the hospital’s community benefitreport? Does it capture all facets of the benefits providedby the hospital? Does it effectively tell the hospital’s fullcommunity benefit story to the community?28

20 Questions Every Washington Hospital Board Needs to be Able to AnswerMeetings People Remember and Critical Conversations the Board Should Have NowThe Board’s Role in Difficult Economic Times. The impact ofthe economic recession will be the subject of many criticalboard conversations for some time. The financial effects onhospitals are now well-evident, and trustees must demonstratestrong leadership to navigate through the economicchallenges of rising interest rates, a shortage of capital, creditrating downgrades, lost investment income, increasingnumbers of uninsured and underinsured, budget cuts togovernment programs, declining admissions and electiveprocedures, and decreased charitable giving.Engaged participation in board meetings and a detailedunderstanding of financial issues has never been moreimportant for trustees. Board conversations should include:Constant oversight of the hospital’s financialperformance. Trustees must think openly and broadly,and work together with senior leaders and medical staffleaders to find new solutions for pressing financial issues.Regular review of progress on strategic plan initiatives.The board should evaluate if strategic initiatives are beingimpacted by the financial downturn, and if they should beadjusted or reprioritized to account for changingcircumstances. Trustees should take into considerationthe implications of making adjustments, and the risks ofnot taking action.Discussion of subsidized and uncompensated care needsin the community. The board must understand howhealth care needs are trending, if the organization has theresources to continue to meet changing needs, and whatplans are in place to support those resources if the trendcontinues for the foreseeable future.Continued evaluation of charitable giving levels. Hasthe board developed and implemented a detailed andstrategic fundraising plan? Are strategies being trackedand plans adjusted accordingly? Are new and innovativeopportunities being developed? Do trustees modelsupport by personally giving to the hospital? Are donorrelationships being nurtured? Is hospital news shared, andare there opportunities for donors to interact with seniorleaders and the board? 2,3Hospital and Medical Staff - Partners in Care. To succeed intoday’s changing health care environment, hospitals and theirmedical staffs must be closely aligned and work collaboratively.The delivery of care is shifting from traditional structures tomodels that incorporate integrated approaches, continuums ofcare, quality outcome measures and global payments.Examples of this can be found in programs like:CMS’ payment to both hospitals and physicians for datareporting which is designed to encourage and promoteboth quality and cost effectiveness. 11CMS demonstration programs designed to evaluatehospital/physician collaboration coupled with globalpayment and permitted gainsharing, or sharing of costsavings between hospitals and physicians (examplesinclude Medical Hospital Gainsharing, Physician HospitalCollaboration Demonstration, Acute Care EpisodeDemonstration). 11Insurer development of contract structures like Blue CrossBlue Shield of Massachusetts’ “Alternative QualityContract,” a five-year contract that provides a globalpayment for total health care costs adjusted for healthstatus and inflation. The contract includes an incentivepayment for aggregate hospital and ambulatory qualityperformance based on clinical process, clinical outcomeand patient experience measures. 12Recognition by the Federal Trade Commission of “clinicalintegration” as a valid practice that does not violateantitrust regulations. 8Emergence of the complete care of a patient, from firstencounter for an acute illness to the last encounter, as thebasis of payment. The structure is designed to incentivizecoordination of care and quality outcome versus fee-forservicepayments which are typically viewed as paymentfor volume of care. 10Hospital leadership must be a positive, collaborative, resultsproducingeffort between the administration, the medical staffand the board of trustees. The medical staff must participatemeaningfully in hospital governance, and actively contribute tostrategic directions and decisions. Board members must act ascatalysts for physician participation, and ensure that decisionsbenefit both at-large community interests as well as theinterests of the physician community. Board members mustassure that discussions and analysis are mission-driven, andmeet conflict of interest standards. Finally, trustees mustconsistently monitor strategic direction, and hold bothmanagers and physicians accountable for achieving targetedoutcomes.Nurturing a trust-based board/medical staff relationship willhelp to ensure the hospital’s ability to respond most effectivelyto future issues, challenges and changing payment and caredelivery structures. Consider the following suggestions forbuilding trust between hospital leadership and the medicalstaff:29

20 Questions Every Washington Hospital Board Needs to be Able to AnswerMeetings People Remember and Critical Conversations the Board Should Have Now1. Develop a formal hospital/physician relationship.Hospitals can increase market share by systematicallyseeking physicians’ input and aggressively addressing theirconcerns.2. Pursue the joint development of ancillary services.Health care organizations and physician groups shouldseek opportunities to form mutually beneficialpartnerships to expand or reinvigorate these services.3. Involve physicians in leadership. When physicians andhospitals work in the spirit of partnership facing strategicissues, that spirit goes a long way toward ensuring mutualsuccess.4. Offer physicians choice. Individual relationships shouldbe pursued that meet the interests and comfort levels ofboth specialists and primary care physicians, rather than a“one-size-fits-all approach.”5. Stick to the basics. Establish a foundation of trust, ademonstrated economic benefit for all parties, and ashared commitment to meeting community health needs.A critical conversation about hospital/medical staff relationsalignment may include:What leadership roles do physicians hold in ourorganization?What roles could or should the organization considerphysicians for?What skills, experience or attitudes are important inphysician leadership positions?Are physicians properly prepared to take on leadershippositions?How can the hospital help physicians prepare forleadership opportunities? Should or can the hospitaldevelop a physician leadership development program? 9What opportunities for hospital/physician collaborationmay be pursued?If gainsharing programs, integrated hospital/physiciancontracts, or similar hospital/physician opportunitiespresented themselves, is the organization ready to takeadvantage of them?What is the medical staff’s perspective on these questions?Has the board heard and listened to first-hand accounts ofphysician views?Sources and Additional Information1. Meet Smarter. Outi Flynn. BoardSource Publications. 2004.2. Orlikoff, James E. and Totten, Mary K. How to Run Effective Board Meetings. Trustee Workbook. April 2001.3. The Nonprofit Board Book. Independent Community Consultants, 1985.4. Helping Boards Make Good Decisions. BoardSource. October 2005.Quality1. Arianne N. Callender, Douglas A. Hastings, Michael C. Hemsley, Lewis Morris, Michael W. Peregrine. Corporate Responsibility andHealth Care Quality: A Resource for Health Care Boards of Directors. United States Department of Health and Human ServicesOffice of Inspector General and American Health Lawyers Association. September 2007. http://www.oig.hhs.gov/fraud/docs/complianceguidance/CorporateResponsibilityFinal%209-4-07.pdf).2. Alice G. Gosfield, J.D., James L. Reinertsen, M.D. Avoiding Quality Fraud. Trustee. September 2008. http://www.trusteemag.com/trusteemag_app/jsp/articledisplay.jsp?dcrpath=TRUSTEEMAG/Article/data/09SEP2008/0809TRU_CoverStory&domain=TRUSTEEMAG.Executive Compensation1. GAO Issues Report on Compensation Policies and Practices at Nonprofit Hospital Systems. Sonnenschein Health Care Law e-alert.Sonnenschein Nath & Rosenthal LLP. July 31, 2006. www.sonnenschein.com.2. IRS Plans to Continue Looking at Not-For-Profit Governance in ’09. Modern Healthcare. December 1, 2008.30

20 Questions Every Washington Hospital Board Needs to be Able to AnswerMeetings People Remember and Critical Conversations the Board Should Have Now3. Sen. Grassley Considers Proposing Legislation That Would Require Not-for-Profit Hospitals to Spend a Minimum Amount onCharity Care, Among Other Measures. Kaiser Daily Health Policy Report, Capitol Hill Watch The Henry J. Kaiser Family Foundation.December 18, 2008. kaisernetowrk.org.4. John Carreyrou and Barbara Martinez. Grassley Targets Nonprofit Hospitals on Charity Care. Wall Street Journal. December 18,2008. Sec.online.wsj.com/article/SB122957486551517519.html?mod=article-outset-box.5. Greis, Jason. “IRS Report Provides Insight into Community Benefit and Executive Compensation.”Greis Guide Web Site. February15, 2009. http://greisguide.com.Community Benefit1. Steven T. Miller, Commissioner, Tax Exempt and Government Entities, Internal Revenue Service. Full Text of Remarks Before theOffice of the Attorney General of Texas Charitable Hospitals: Modern Trends, Obligations and Challenges. January 12, 2009.Austin, Texas.2. Barbara Martinez and John Carreyrou. Minority of Tax-Exempt Hospitals Provide Most Charity Care. The Wall Street Journal.February 13, 2009. http://online.wsj.com/article/SB123446379679978451.html.3. Jennifer R. Breuer, Esq., Gardner, Carton & Douglas LLP. Illinois Community Benefits Reporting Act: Making the Case for CharitableMission. July 2005. http://www.drinkerbiddle.com/files/Publication/2dda6b3f-763e-4002-b565-.Economic Times1. Edmond P. Freimuth. 7 Steps to Prepare Your Company for Challenging Economic Times. TEC (The Executive Connection).Tec.com.au/node/338.2. Carrie Vaughan. Philanthropy in Hard Times. Healthleaders Media, October 31, 2008, healthleadersmedia.com/print/content/2225990/topic/WS_HLM2_LED/Philanthropy-in-Hard-Times.html.3. U.S. Philanthropic Giving to Slow due to Weak Economy, Political Uncertainty, Causing Financial Stress in the Nonprofit HealthCare Field, AHP Study Warns. WASHINGTON, Sept 23, 2008 /PRNewswire-USNewswire via COMTEX/.Medical Staff Alignment1. Journal of Healthcare Management. March 2000.2. “The Board/Physician Partnership.” Trustee Magazine. November/December 1997.3. “Trustee, Physician and CEO Skills.” Healthcare Executive. July/August 2003.4. “Developing a Partnership Culture.” Healthcare Executive. May/June 2002.5. Modern Healthcare. October 1998.6. Modern Healthcare. August 1999.7. “Rebuilding Physician-Hospital Relationships.” Trustee Magazine. May 2002.8. Johnson, Bruce A., Niederman, Gerald A.. “Using Quality-Focused Networks to Align Hospital and Medical Staff Relationships.”September 23, 2008. http://www.faegre.com/showarticle.aspx?Show=8423.9. Taylor, Mark. “7 Ways Hospital Administrators Can Improve Medical Staff Relations.” March 18, 2009. http://www.beckersasc.com/news-analysis-hospital/business-and-financial/7-ways-hospital-administrators-can-improve-medical-staffrelations.html.10. Davis, Karen Ph D. “Paying for Care Episodes and Care Coordination.” The New England Journal of Medicine. March 15, 2007.11. Centers for Medicare and Medicaid Services. “Roadmap for Implementing Value Driven Health Care in the Traditional MedicareFee-For-Service Program.” http://www.cms.hhs.gov/QualityInitiativesGenInfo/downloads/VBPRoadmap_OEA_1-16-508.pdf.12. Blue Cross Blue Shield of Massachusetts. www.bcbs.com/issues/uninsured/final-hil-briefing-4-15-08.ppt.31

20 Questions Every Washington Hospital Board Needs to be Able to AnswerHow does the board ensurestrong and effective executiveleadership?Hospital CEOs and their boards must build and sustain vibrant, trust-based relationships in order tosuccessfully navigate the opportunities and challenges in today’s complex and fast-paced healthcare world. That trust requires leadership excellence in a number of key areas, including clear andconsistent communication, adherence to well-defined roles and responsibilities, and clear CEOperformance expectations and accountabilities that are appropriately rewarded using responsiblecompensation assessment policies and procedures.The board/CEO relationship should be a trustingpartnership, where both trustees and the CEO worktogether, united as a team to achieve the greatest levelof organizational success. The relationship can be enhancedthrough a clear understanding of one another’s needs andexpectations, clear and consistent communication, sharedgoals and objectives, dialogue-rich and purposeful meetings,and a constant sharing of timely and critical information. Thoseare the ingredients of a successful partnership and relationship.Good chemistry between the board and its CEO is absolutelyvital to organizational success. Mutual respect, candor andabsolute trust distinguish the very best board/CEOrelationships. Trust, however, is the most critical componentfor boards and CEOs. Communication and effectiveness arethe results of trustful relations.Building TrustTrust plays a vital role in the ability of the CEO and trustees tocommunicate openly and honestly. Without trust, individualsmay be hesitant to participate in discussions, raise issues, orshare their viewpoints.In order to build mutual trust, the board and the CEO must relyon one another for support, consultation and advice, andcomplement one another’s strengths and responsibilities.The CEO must build a positive rapport and a close professionalrelationship with all board members. He or she mustunderstand clearly what motivates each trustee to be involvedwith the organization, and be deeply knowledgeable about theinterests and needs of each individual trustee.The CEO must also be aware of any gaps in trustees’understanding of current issues and trends, ensure that regularboard education responds to trustees’ needs, and encouragetrustees to learn and ask questions in an open, safeenvironment. CEO attentiveness to individual trustees’ needsdemonstrates interest and support, and helps build a positive,trustful environment for dialogue and decision-making to takeplace.When the board/CEO relationship is good the board hassupreme confidence in the CEO’s ability to lead theorganization, and in the board’s ability to provideencouragement, support and outside perspectives to helpenable that leadership. When its good, the board and CEO areable to work together in a collaborative fashion to design clear,focused approaches to challenges and issues, because theyaddress the right issues in the right way at the right time. Bothenjoy a sense of command of the organization and a sense offulfillment and satisfaction in the roles they play inorganizational success.On the flipside, when the relationship lapses and ends up inthe “relationship ICU,” persistent questions about focus, intentand appropriateness permeate board discussions and inhibiteffective board decision making. Much second-guessing takesplace, oftentimes behind the scenes or in the parking lot.Coalitions and factions begin to form and important decisionsare tabled due to uncertainty or a lack of trust. And adownward spiral of trust and confidence results.32

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Bonds: Pathways to Better Board/CEO RelationshipsThe Board-Savvy CEO and the CEO-Savvy BoardThe Board-Savvy CEOIn the BoardSource book, “The Board-Savvy CEO”, the authors identify four characteristics of a board-savvy CEO: A positive, constructive attitude and well-developed emotional intelligence to work with the board. Board-savvy CEOs nurture their board as aprecious asset, and they welcome and demand strong board leadership. Board-savvy CEOs are experts in high-impact governance. That means they not only devote significant time and attention to working with theirboards, they also develop significant knowledge and expertise in the area of board leadership. They understand what it means to be a highimpactboard, and how board culture, and structure and processes play into producing high-impact governance. The ability to play an active role in helping the board develop its capacity to produce high-impact governance. Board-savvy CEOs takeaccountability, along with their board, for continuous governance and leadership improvement. Good is not good enough for these boardsavvyCEOs. Board-savvy CEOs pay very close attention to keeping their working relationship with the board fine-tuned and healthy. They recognize thehighly diverse needs, emotions, governing styles and personalities present in their board, and work to ensure that board members worktogether collegially and with a sense of purpose. They communicate effectively with their boards to keep a healthy, trust-based relationship.And they encourage their board to undertake a thorough, rigorous annual board self-assessment in order to understand board needs and buildbridges to better governance. We’ll b e talking about governance best practices in board self-assessment during next month’s program.The CEO-Savvy BoardIt’s equally as important for the board to be CEO-savvy as it is for the CEO to be board-savvy. The CEO-savvy board: Is always “on the same page” with the CEO. Board members are careful not to become involved in hospital operations, roam the halls like amanager, discuss management issues with physicians and staff, or give any kind of direction to employees. They never engage in “behind-theback”discussions, which only lead to an atmosphere of mistrust between the CEO and the board. Focuses on strategy and policy, not minutia. In addition, they deal only in evidence, not in anecdote. Sets clear performance expectations with the CEO and provide candid feedback on a regular basis. They want the CEO to understand where heor she is in the eyes of the board, and increase the CEO’s sense of security and command. Understands the critical importance of confidentiality. They never share confidential hospital information with people outside the board, andunderstand that this is a critical piece of their fiduciary responsibility. Values governance participation and productivity. They recognize that what happens during the critical time that board members meet setsthe stage for everything the CEO does following the meeting. They use their meeting time productively and efficiently, and focus on ensuringthat steps to be taken following the meeting are clear and concise, and understood by all.Creating Success: Mutual NeedsEstablishing a successful relationship takes work on the part ofthe board and the CEO. There are a number of ingredientsinherent in a good Board/CEO relationship, including:Communication is clear, crisp, concise and accurate, andcandor is the order of the day;Both the board and the CEO are “on the same page,” anddisplay a mutual understanding of issues from their ownunique perspectives;Roles, responsibilities and accountabilities are clear andwell-expressed;The board has a clear understanding of its policy andstrategic “place” in the leadership continuum, and egos arenot allowed to suppress the important work at hand; andA strong sense of synergy results from a mutualunderstanding of what both the CEO and the board bringto play in tackling the complex challenges that face theorganization.Board Needs. The board needs to have an understanding ofemerging issues that will drive organizational need andorganizational success in the future. In addition, boardmembers need to understand the nature of the barriers tosuccess from the CEO’s perspective, and understand preciselyhow they can be the best leadership asset to the CEO and thehospital in dealing with these issues and barriers. Crisp, clearand concise overviews assist the board in keeping theirthinking at a high level, and avoid the tendency to “wander”into operational areas that are inappropriate.CEO Needs. The CEO needs to understand the information andperspectives the board requires in order to lead with purpose33

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Bonds: Pathways to Better Board/CEO Relationshipsand vision. He or she needs to have a board with curiosity, anda culture of candor and commitment. This requires energeticparticipation, creative thinking and a willingness to challengethe status quo.If the board/CEO relationship is not operating at a productive,high-level, there is always the looming potential for leadershipto descend into a destructive spiral of mistrust,miscommunication and misunderstanding.Purpose WanderingBoard members sometimes, knowingly or unknowingly, beginto wander into the CEO’s domain, and the results of thatmeandering can be problematic. To avoid “purposewandering,” roles and responsibilities should be clearlyexpressed in writing. This helps define the fine line betweenstrategic leadership and operational leadership. Too often rolesand responsibilities are unclear and unfocused. A formal,written set of roles and responsibilities will help prevent boththe board and the CEO from inappropriately trying to assumethe other’s responsibilitiesFor example, while the board is responsible for the high-levelstrategic focus and direction of the organization, the CEO andhis or her administrative team is responsible for the day-to-dayoperations and details of designing action plans implementingthe strategic plan. One is the “what”, the other is the “how”.On a global basis, the board is responsible for the selection andevaluation of the CEO, high-level strategic planning, thedevelopment of policies and procedures and approvingdecisions with strategic implication - such as budgets, facilityand equipment decisions and personnel policies. Thesespecific policies or procedures are often recommended to theboard by the administrative team, who rely on the board toreview the information and discuss the pros and cons of eachdecision before coming to a consensus.In contrast to the board’s high-level focus on long-termplanning and approval of budgets and policies, the CEO isresponsible for ensuring the day-to-day operations fulfill theboard’s long-term plan for the organization. The CEO providesregular updates to the board about the organization’s successin achieving its goals; informs the board about current andemerging challenges facing the organization; and presentsbudgets, capital purchases, personnel decisions, fees andbilling and collection policies, and potential new policies orprocedures to the board for review and approval.When trustees and the CEO focus on fulfilling their respectiveroles, the result is an organization that is able to leverage thebest resources of both of these important leadership assets.A good idea for delineating responsibilities is to develop amatrix of responsibilities in a broad range of areas, such ashiring, budgeting, personnel policies, compliance, advocacy,community relations, quality, credentialing and more. Thegroup or individual’s specific responsibility may then be clearlydefined, and gray areas can be avoided. The matrix shouldbriefly define whether the individual or group develops, directs,reviews, provides input, and/or approves work in each area.The Board Meeting: The Center ofCommunication Success or FailureThe board meeting is the center of communication andrelationship success or failure. Unfortunately, board meetingsare often not as effective as they should be due to poorlyplanned agendas, time wasted on routine reports and toomuch emphasis on operational issues and details, therebyfrustrating the CEO.Board meetings often focus on mundane details that have littleimpact on the long-term strategic direction of the organization,when instead they should focus on the vision, values,governance policies and strategic leadership issues critical tofuture success. It’s essential that all board members be fullyinformedabout important issues, and that agendas be gearedtoward the strategic future of the organization. If boards onlyensured this one single leadership focus, board and CEOrelations in hospitals across America would improvedramatically.Ensuring Effective Meetings. Effective, high-performanceboards spend most of their time on important strategic andpolicy issues. They engage in rich discussion and dialogue,assess outcomes, and participate in ongoing education. Theyfocus on the issues that are most critical to the organization,and where they can have the greatest impact.One way to ensure that meetings are focused on where thehospital is headed, rather than where it has been, is to designthe agenda around the “25/75” rule. According to manygovernance experts, no more than twenty-five percent ofmeeting time should be spent discussing past issues, and onretrospective reporting and analysis. At least seventy-fivepercent of board time should be dedicated to issues in whichthe board has the greatest impact: planning, setting policy,making critical decisions, and setting future direction.34

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Bonds: Pathways to Better Board/CEO RelationshipsThe CEO plays a major role in this area. He or she shouldensure that trustees receive materials to review well in advanceof board meetings to avoid grumbling abut a lack of time tobecome familiar with the issues. In addition, the CEO shouldwork closely with the board chair to ensure that meetings areorchestrated to maximize meaningful dialogue and a focus onthe future.How Did We Do? The first five minutes after the board meetingcount, too. Many boards pack up and leave the momentadjournment is announced. But what if you knew your boardmeetings could become more energized and effective if yougave just five more minutes of your time at the close of eachmeeting?Boards that conduct the most efficient and effective meetingsfine-tune their meeting work through the use of individualboard meeting evaluations. These evaluations can becompleted in five minutes or less. Simple questions mightinclude:Did we focus on the right issues?Did all members participate in an active way?Did we develop our “knowledge capital” with pinpointedboard education?Comments could also be sought regarding the helpfulness ofboard materials, meeting direction and focus, issues as theyrelate to the strategic plan, fairness of deliberations, and asense of whether each member left the meeting knowing whathe/she needs to do next. Completing these individual meetingevaluations helps the CEO to continually refine the boardagenda, and respond to board needs.Executive SessionsOne of the most productive places for candid and forthrightboard/CEO discussion to take place is in an executive session.Executive sessions are settings that allow the board to handleconfidential matters behind closed doors without staff or“outsiders” present. They typically take place followingadjournment of the regular board meeting, but they may alsotake place before or during the meeting.Appropriate topics for an executive session may includepersonnel matters, investigations or updates on allegedimproper conduct, CEO performance assessment, aspects ofstrategic planning, legal negotiations and financial discussionswith an auditor.In addition, there are times when the board simply needs tohave an opportunity to openly and confidentially shareopinions among board members on a particular topic. In orderto be effective and not misused with a “shadow-agenda,”executive sessions should address only pre-determined issuesand not delve into discussion and decision-making that couldmore appropriately be conducted in the regular boardmeeting. The executive session is not an excuse to avoiddifficult topics and conversations, or inappropriately hide boarddeliberations behind closed doors.Good Reasons for Executive Sessions. Holding regularexecutive sessions can go a long way toward building a strongsense of connection and communication between the boardand the CEO. The executive session enables both to engage inthe kind of dialogue that is oftentimes difficult during regularboard meeting when staff members and, in the case of publichospitals, the press and members of the community, may be inattendance.DisqualifiedPersonLegal Language Trustees Need to UnderstandA “disqualified person” in compensation matters, according to the IRS, is any executive who can exercise “substantial influence”over the organization. Examples of persons with substantial influence include persons making substantial contributions to theorganization, those who draw compensation based on revenues from activities under the CEO’s control, persons with managerialauthority, or who serve as key advisors to a person with managerial authority, and trustees actively involved on the board at thetime an executive of substantial influence earns an “excess benefit.”Excess BenefitAn “excess benefit” is an economic benefit that exceeds the value of the disqualified person’s services. The excess benefit is thedifference between the value of what the organization receives, and the value of what’s been given to the disqualified person. Anexcess benefit transaction can occur when the disqualified person’s compensation is considered above fair market value, or isdeemed unreasonable.IntermediateSanctions“Intermediate sanctions” are financial penalties imposed by the IRS on managers of tax-exempt organizations that engage inexcess benefit transactions. You never want to see a letter from the IRS with the words “immediate sanctions” on it.35

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Bonds: Pathways to Better Board/CEO RelationshipsRules ofEngagement. Thefollowing rules arecritical to observe inorder to ensuresuccessful executivesessions:The CEO Compensation and Evaluation ProcessDefine RoleContinual ImprovementDevelop a PhilosophyExecutivesessions shouldbe short andhighly focused;Ongoing Feedbackto and From the CEOEngage the CEOThey shouldnever be usedas a method foroperating“under theradar” of theregular boardmeeting;They shouldnot be an adhoc, anecdotal free-for-all;Determine AppropriateCompensationDevelop and Conduct the EvaluationIf the CEO is not present, he or she should be providedwith a summary of the session immediately after themeeting; andSessions should be held with the CEO’s support andapproval.CEO Compensation and EvaluationOne of the most important board responsibilities is hiring,motivating, and retaining the hospital CEO. Maintaining clearperformance expectations and ensuring a regularcompensation and performance review of the CEO encouragesfrequent and open communication between the board andCEO, and helps ensure the CEO’s performance drivesachievement of the hospital’s goals.Throughout the process, it’s critical that board membersmaintain an organization-wide focus, ensuring that the CEO’scompensation is aligned with the organization’s goals, and thatno conflict of interest exists between board members and CEOcompensation decisions.The Board’s Role in Compensation Assessment. Whendetermining CEO compensation the board should take intoaccount a variety of factors, including overall organizationalEvaluate Trends and CurrentCompensationDefine EvaluationParametersperformance in meeting board expectations; the challengesand risks addressed by the CEO; a comparison of the CEOscompensation with his or her peers who lead similar sizedorganizations; the risk or volatility of the position; the CEO’stenure in the organization; and the implications of the loss ofthe CEO in the event that inadequate compensation causes theCEO to seek employment elsewhere, or become the target ofexecutive recruiters who are constantly on the lookout for highperformers to recruit for their clients.The compensation and performance evaluation isstraightforward, but it does include a number of key steps thatshould be undertaken in a logical and progressive order.The process begins with a clear definition of the role of thecompensation and performance review process in buildingleadership loyalty and commitment, and ensuring leadershipsuccess and continuity. In addition, a compensationcommittee should be established, and its purpose should beclearly defined in the document that includes the committee’smission, composition, objectives and action plans,responsibilities and time frames, and projected outcomes.The Compensation Philosophy. Once the board’s role hasbeen clearly defined, a compensation philosophy should bedeveloped, which includes the role of CEO compensation instimulating high-performance, and as a reward for achievingboard-approved priorities. The philosophy should outline the36

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Bonds: Pathways to Better Board/CEO Relationshipsorganization’s position regarding the level CEO compensationshould be at relative to the CEO’s peer group, and define theorganization’s philosophy on pay-for-performance. It shouldbe tailored to and support the organization’s culture, missionand strategy, and it should explain the values and goals thehospital seeks to reward.The Compensation Policy. Once the compensationphilosophy has been developed, a policy to support thephilosophy should be created. Like the philosophy, thecompensation policy should be aligned with the hospital’smission and strategic goals. It should define such areas as thepurpose of the performance and incentive compensationprogram; the process for controlling and administering thecompensation and performance review; the criteria for theidentification of incentive targets and the payment ofperformance incentives; the timeframe for the evaluationprocess; and details of the process for payment of incentivecompensation earned in the event of the CEO’s termination,death or disability.CEO Engagement. The CEO should be engaged in the processearly-on to ensure that he or she agrees with thecompensation committee’s work plan, and that there isenthusiastic CEO buy-in to the compensation philosophy. TheCEO should provide input to the compensation committee toCEO Evaluation GoalsThe list below includes typical goals that should be consideredin the course of undertaking a successful CEO evaluationprocess.1. Expectations should be clearly identified well in advance ofthe evaluation2. The evaluation should be a continuous, year-long processculminating in a formal annual performance review, withno surprises for either the board or the CEO3. The evaluation should provide meaningful feedback to theboard on the CEO’s success in achieving board-approvedobjectives4. The evaluation process should enhance board/CEOworking relationships5. The evaluation should link the attainment of organizationalobjectives with the CEO’s personal performance objectives6. Data, not subjective assessments, should be thefoundation of the evaluation and decisions aboutcompensation7. Leadership in achieving the mission, values and visionshould be a centerpiece of the evaluation8. Compensation should be driven by specific performance inspecific areasenable it to best understand his or her contribution toorganizational success. This is typically done later on in theprocess, when the CEO reports on the results of his or herpersonal objectives and success in achieving board-definedperformance objectives.The Compensation Evaluation. It’s at this point that theserious work of the compensation committee begins. Thecommittee should evaluate current trends in CEOcompensation and seek out information on comparative salary,incentive compensation and benefits for organizations ofsimilar size around the country. At the same time, thecommittee can begin to define the parameters for the CEO’sevaluation and determine the performance criteria to be used.At this point, it is critical to reengage the CEO to ensure that heor she is in agreement that these criteria are appropriate, andthat he or she agrees to be held accountable for achievingthem.What Protects Boards and Individual Trustees?There are some inherent legal risks in CEO compensationassessment that trustees need to understand. There are threekey ways for the board to protect itself and individual trusteesin deliberations and decisions about executive compensation:Executive compensation must be approved by thegoverning body, or by a compensation committee whosemembers have no conflicts of interest;The governing body or compensation committee shouldcollect and use relevant data to establish fair marketcompensation levels when approving executivecompensation; andThe basis for compensation approval must be adequatelydocumented in written or electronic records.When trustees ensure adherence to these compensationprinciples, they have what the IRS refers to as “rebuttablepresumption.” A board has rebuttable presumption on thereasonableness of executive compensation if it approves CEOcompensation based on appropriate data that helps determinecomparability or fair market value, and documents the basis forits determination at the time it makes its decision.The Compensation CommitteeThe board is solely responsible for ensuring that the CEO isappropriately and fairly compensated. According to LarryTyler, president of Tyler and Co., an executive recruitment firm,37

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Bonds: Pathways to Better Board/CEO RelationshipsThe CEO should be evaluated using pre-determined criteria and goals specified in the CEO compensation policy established by the board’scompensation committee, and agreed to in advance by the CEO. The evaluation may include a “360-degree” approach that seeks feedback onqualitative performance from the board, medical staff leaders, senior management, and the CEO him or herself. Measurement should also utilizeperformance in achieving defined objectives, including financial success, patient satisfaction, strategic performance, etc.Quantitative MeasuresPotential quantitative measures may include, but not be limited to:Typical CEO Evaluation CriteriaFinancial and operating performance, using a variety of ratios, withcomparison to peer groupsMarket share growthPhysician satisfactionEmployee satisfactionPatient satisfactionAchievement of hospital strategies/objectivesQualitative MeasuresIn addition, qualitative measures can help identify how well the CEO performs in several important areas, including:Medical staff relationsCommunicationInternal operationsProblem solvingLeadership and strategic developmentEthicsFinancial developmentCommunity relations;Board relations and developmentThe CEO’s success in accomplishing specific hospital and personalobjectives defined by the board at the beginning of the evaluationperiodFor example, in the area of medical staff relations, the CEO may be held accountable for developing medical staff cohesiveness and a strong medicalstaff working relationship with management and the board; inspiring loyalty among the medical staff to further the strategic objectives of thehospital; and communicating effectively and in a timely manner with the medical staff.In the area of community relations, he or she may be held responsible for such accountabilities as working effectively with community leaders andwith other health providers in the region; encouraging public trust and confidence among the community; and continually maintaining a highawareness of community needs and identifying ways to meet those needs.before the CEO evaluation process can begin a number ofquestions must be considered. For example, whatperformance areas should be evaluated? What individuals orgroups will have the most amount of insight into the nature ofthe CEOs performance? What steps should be followed, andwhat methodologies will be used? Who is responsible forensuring that the performance evaluation remains on track?And how will the results of the evaluation be used andcommunicated to the CEO?Compensation Committee Responsibilities. Thecompensation committee should ensure that:A current written CEO job description for the CEO that hasbeen reviewed and approved by the CEO;There is agreement by the board and CEO on theperformance measures that will be used to evaluate theCEO’s success;There is full agreement with the CEO on the basics of his orher compensation, including base pay, annual incentives,benefits, and additional executive benefits, as appropriate;The board has full knowledge of the comparability of theCEO’s compensation to that paid to CEO’s in organizationsof similar size and scope; andThere is a process for regularly reviewing thecompensation strategy to ensure its alignment with theorganization’s mission and goals, market strategy, criticalsuccess factors, changes in CEO responsibilities and thedynamics of the health care market.38

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Bonds: Pathways to Better Board/CEO RelationshipsThe compensation committee should utilize benchmarkingdata that satisfies all IRS requirements, including anexamination of compensation levels paid by similarorganizations, both taxable and exempt, for comparablepositions. It should compare the hospital to organizationssimilar in size, and utilize compensation surveys compiled byindependent firms and/or organizations.Conducting the CEO Compensation ReviewThe Hay Group’s Hospital Compensation Report, the mostcomprehensive and widely used compensation benchmarkingresource in health care, is an excellent resource for data oncomparing CEO compensation to defined peer groups. TheHay Group annually compiles hospital compensation trends bygathering compensation data for hospital CEOs and otherhealth care executives in approximately 800 health careorganizations throughout the country. In addition,compensation may also be compared to data derived fromother reliable hospital CEO salary surveys from state hospitalassociations. Inflation implications should be considered, andcurrent market trends for base pay and incentive paycompensation structures should be factored into the analysis.The degree of success of the CEO in achieving board-approvedobjectives should also be a major factor in determining CEOsalary and incentive compensation. Trends in various financialand operating indicator areas, and the organization’s financialand operating success over the previous year should beconsidered by the board of trustees when reviewing the CEO’scompensation structure and level. These operating andfinancial indicators may be compared to other hospitals in theorganization’s peer group (for example, by revenue, number ofbeds, geographic location, etc.), using resources such as theIngenix Almanac of Hospital Financial and Operating Indicators.Ensuring Performance and Alignment: The CEOEvaluationEstablishing a CEO compensation process is an important firststep, but there’s more to be done. The CEO evaluationprovides the CEO with specific direction on board expectations,and ensures a consistent focus by the CEO on the board’s mosturgent and critical priorities.In essence, the evaluation is a process for ensuring continuousleadership accountability, renewal, focus and success.Successful CEO evaluation will identify and confirm theessential functions and personal attributes necessary to CEOsuccess, and provide a valuable opportunity for well-planned,constructive two-way communication between the board andthe CEO. It will identify specific areas requiring increasedattention by the CEO, and will ensure that the CEO isappropriately rewarded for his or her performance in meetingthe board’s expectations.The board’s responsibility is to keep the leadership and theorganization focused on achieving the mission and vision. Theboard defines the leadership competencies and personalattributes required by the CEO, the organization’s mostimportant executive leader. In order to fulfill its responsibility,trustees must have a clear understanding of CEOresponsibilities and accountabilities, the unique challenges theCEO faces, the nature of the highly-competitive marketplacefor high-performance CEO talent, and the key motivators thatdrive the CEO to succeed.Communicating Results and Driving CEOPerformance ImprovementCommunication of the results of evaluation and compensationdecisions to the CEO in a timely manner is important inbuilding a climate of trust and maintaining a strongrelationship between the board and the CEO. The discussionof the CEO’s evaluation should be used as a tool to strengthenthe relationship between the CEO and the board, enhancingcommunication and identifying both strengths and potentialareas for improvement. When sharing the results, a meetingshould be held with the board and CEO to present the findingsand provide the CEO with an opportunity to give feedback.Action AgendaExamine your compensation and performance evaluationprocess and policies. Do they satisfy the IRS’s requirements forrebuttable presumption? Do they inspire CEO commitmentand loyalty? Do they energize and reward high performance?Have a candid conversation with your CEO about your board/CEO relationship. How trustful is it? How can it be improved?What are the barriers to better dialogue and streamlinedaccountabilities?Reexamine your respective roles and responsibilities. What arethe major functional leadership areas of responsibility? Whereis there a clear delineation of authority and responsibility? Arethere grey areas? If so, how can they be clarified?39

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat is the board’s responsibilityfor planning for the future?Building and maintaining focused, accountable and visionary trustee leadership is one of theprincipal challenges for hospitals in today’s turbulent health care environment. Hospital boardsface difficult choices in a time of burdensome governmental regulation, inadequatereimbursement, increasing competition and shifting community needs. Complexity, financialstrain and demands for a greater level of governance accountability require motivated,knowledgeable trustees who understand how to think and lead strategically in today’sdemanding environment.High-Level Purpose of Strategic PlanningA highly effective strategic plan is not simply a set of strategies,plans, budgets and responsibilities. Instead, it’s an everevolvingprocess of examination of the market, forces forchange, and other current information that helps the board tounderstand changing dynamics, and continually reshape orfine-tune the hospital’s strategic direction.In essence, strategic planning is an organized, systematicapproach for understanding and dealing with the hospital’sfuture possibilities and uncertainties. It takes an “outside in”view of the organization, and what is required to achieve thedefined objectives expressed in the mission and visionstatements.In order to be successful, a high-performance strategic planrelies on the viewpoints of a broad range of constituents andstakeholders. To accomplish that, the hospital’s planners mustreach out to people and organizations throughout thecommunity, and engage them in meaningful discussions abouttheir views of the hospital, community health needs, barriers tocare, issues of access and more. Typically, this is accomplishedthrough a community needs assessment, interviews, surveysand focus groups with physicians, employees, business leaders,elected officials, opinion leaders and others whose views areimportant to understand in shaping strategies for a successfulfuture.The strategic plan should also help the hospital’s leadersdetermine a meaningful, realistic, challenging and compellingvision of the future. The key for the board is to ensure that thehospital’s vision truly means something. Finally, a highperformancestrategic planning process ensures a clearunderstanding of the resources required for strategic success,and the accountabilities of everyone in the organization forperforming their part in ensuring strategic success.Three Important Truths to Understand AboutStrategic PlanningWhile it can seem to be an overwhelming and highly detailedprocess, in the final analysis there are three important truthsthat hospital boards should understand about strategicplanning.1. First, board members don’t need to know everythingthere is to know in order to make intelligent decisionsand wise choices about the future. There is anoverwhelming amount of information available at anygiven time that may be relevant to the planning process.Trustees need to have assurance that senior leadership isasking the right questions and utilizing the appropriatetools to ensure an evidence-based, outcomes-focusedprocess.2. Second, because of the rapid pace of change in healthcare, what organizations know today is very differentfrom what they’re likely to know tomorrow. That meansthat strategic planning processes, structures and systemsneed to be nimble and flexible, and that the plan must beable to be adapted to new information and new realities ofthe future that have not yet been envisioned.40

20 Questions Every Washington Hospital Board Needs to be Able to AnswerThe Board’s Role in Strategic Planning3. Third, trustees will never know everything they’d like toknow to be totally confident in every decision they make.What they need to have is the assurance that the board’s“knowledge bank” has sufficient “capital” to ensure that thedecisions they make, and the directions they outline forthe future of the hospital can withstand scrutiny.Steps in the Strategic Planning ProcessWhile the process itself can be very detailed and complex,depending upon the hospital’s size and market, there are fivekey steps in a typical strategic planning process:1. Ensure a Strong Foundation. Step one begins with thethree critical components of the hospital’s foundation: itsmission, values and vision. While the mission and valuesmay change little over time, the hospital’s vision is an everevolvinglook into the future. The board of trustees shouldensure that these three components are carefullyexamined:Is the mission as presently stated still ameaningful and memorable description of thecore purpose of the hospital?Are the values or principles underlying themission still relevant?Is the vision, or what the hospital is striving toachieve, still a challenging but realistic stretch?2. Understand the Environment. Step two involvesconducting a thorough and comprehensive scan of theenvironment, both inside the organization, in thecommunity and nationally. The board should ensure thatthe hospital’s strengths, weaknesses, opportunities andthreats have been fully explored in a way that results instrategic change. In addition, the board should ensure arobust examination of demographic trends, economictrends and forecasted community needs, and ensure thatthe vision, goals and strategies developed respond to bothexternal trends and internal issues and opportunities.3. Understand Challenges and Opportunities. Steps three isto utilize the findings from steps one and two to definethe primary challenges, barriers, and opportunitiesconfronting the hospital, and determine the factors mostcritical in future success.4. Set the Direction. Step four involves board assurance of acareful analysis of changes to existing strategies, ordevelopment of new strategies that respond toenvironmental change and that capitalize on the mostsignificant opportunities for the hospital as it movesforward.5. What’s Most Critical? Finally, step five entails carefulprioritization of strategies and objectives to ensure theirmatch with the mission and vision, using rating criteriasuch as urgency to achieve, feasibility of success, andoverall impact on community health and the hospital’scompetitive position.Strategic Plan ElementsWhen the strategic plan is completed the hospital will haveassessed its mission, conducted a thorough environmentalscan, recalibrated its vision based on emerging trends, issuesand opportunities, and will have conducted a wide and deepanalysis of strengths, weaknesses, opportunities and threats.Following that fundamental work, strategies will be developedand measurable objectives to achieve the strategies will beformulated.It’s important for board members to know that their primarystrategic planning responsibility is contained in these criticalareas. Once this work has been accomplished and the board issatisfied with the broad strategic direction of the hospital, themanagement team can go to work to develop action steps,communicate the plan throughout the organization, andensure that everything is in place to ensure a successfulstrategic implementation.What Does a Good Plan Achieve?Before the hospital begins the development of an action planfor undertaking its strategic plan, the board should ensure a fullunderstanding of what it seeks to have the plan achieve.Management teams will often, and for good reasons, becomeconsumed with financial and operational issues andchallenges. It is the primary responsibility of the board toensure that the hospital’s mission, values and vision remain atthe center of the strategic planning process. This focus willhelp ensure that the strategic plan has timely, responsible andrealistic goals that support the mission and vision.An aggressive strategic plan requires strong and effectiveleadership to meet the new opportunities and challenges thatwill develop as the plan is being carried out. The board shouldensure that its own governance leadership, as well as executive41

20 Questions Every Washington Hospital Board Needs to be Able to AnswerThe Board’s Role in Strategic PlanningPowering Strategic Success: Nine Key Governance Assets and AbilitiesThe board plays a significant role in ensuring the success of the hospital’s strategic plan. However, fulfilling that role isn’t easy. It requires a numberof governance assets and abilities that must be consistently practiced in order to ensure strong and effective leadership of the strategic planningand strategic change process.1. The board must have the ability to pioneer new thinking and new responses to emerging community needs. That requires innovative thinkersable to think outside the customary boundaries of strategic planning.2. The board must have the ability to create and nurture a culture that welcomes and embraces change as a creator of new opportunities.Change is and will be a constant in health care. It needs to be accepted and utilized as a strategic asset, not a success inhibitor.3. The board must have the ability to deal forcefully with unplanned and unexpected change. In order to do that, the board must carve outadequate time on every board meeting agenda to discuss emerging trends, issues and challenges, and determine their relevance to thestrategic plan.4. The board must realize that there is no straight path to the future. Instead, the dynamic, rapid-change maze hospitals must navigate requiresgoverning boards to be able to think creatively through strategic responses to a wide range of scenarios. Accomplishing that requires agovernance environment and infrastructure capable of fully capitalizing on board members’ knowledge, insights and experiences. Thisleadership capital is essential to the hospital’s strategic success.5. Strategic governance leaders also have the ability to define the community benefit and value created as a result of successful execution of theplan. The ability to define, measure and report benefit and value is becoming increasingly important in today’s hyper-scrutinizedenvironment.6. A focus on vision and outcomes, vs. programs and actions, is vital to strategic planning success. The board should be most concerned withthe “what,” rather than the “how” of strategic planning. That requires a consistent focus at the very highest level, leaving the details of planimplementation to those who are accountable for it.7. New information and knowledge is not useful unless it’s put to work. The board must have the ability to make rapid, timely and well-informeddecisions resulting from their commitment to continuous knowledge development.8. Strategic winners are those who develop the ability to anticipate market needs and opportunities ahead of their competitors. This governanceasset is a powerful companion to management’s day-to-day focus on strategic implementation.9. The ability to lead with purpose and consistency through unplanned and unexpected change gives senior leaders and employees confidencein the organization’s ability to adapt its strategic thinking and strategic responses when necessary.leadership, is well-positioned and highly knowledgeable assetsin the hospital’s strategic success.A good plan also has a logical, clear strategic fit of plans andresources. The board should ensure that when a commitmentto undertake strategies and achieve objectives is made,adequate resources exist to ensure their success. This requiresa careful process of prioritization.One of the key factors in the success of any strategic planningeffort is how well its focus will be embraced and supported bythe broad community – physicians, patients, consumers,businesses and payers. To accomplish this, boards of trusteesneed to be active “community connectors.” They need to bestrong advocates, educators and promoters of the hospital inthe community, and build awareness, understanding andloyalty to the hospital as the community’s most important andmost needed health care asset.Finally, a good strategic plan is measurable. The board needsto know precisely how well the hospital is progressing inachieving its stated strategies and objectives. The way toaccomplish that is through a robust set of “key performanceindicators” or “vital signs” that tell the board if potential“strategic gaps” are developing.Key Board Responsibilities and OpportunitiesGovernance leaders play a unique and very important role inthe hospital’s strategic planning process, and in its ongoingstrategic success. The role of the board is to be a leader, amotivator and a catalyst for strategic success. The board doesnot need to be involved in the details of strategic plandevelopment and implementation.It’s the strategic thinking role that is absolutely unique to theboard in the strategic planning process. Simply stated, theboard should govern and lead the strategic plan, not create ormanage it. But that simple statement too often gets lost inmisunderstanding, miscommunication, misapplication andmissed opportunities.42

20 Questions Every Washington Hospital Board Needs to be Able to AnswerThe Board’s Role in Strategic PlanningThe board is the driver and keeper of the organization’smission, values, vision, goals and strategies, but it should notdictate the plans for delivering on those expectations. When itdoes, it ceases to play a governing role, and instead plays amanagement role, blurring the lines between these two criticalelements. The board bears ultimate responsibility for thedesign of the strategic planning process and for theorganization’s success or failure. To fulfill this responsibility theboard must assume a strong and focused leadership role; itcannot afford to stand back reactively waiting to see whatdevelopments will unfold in the marketplace.The board must be able to engage in new thinking and helpexecutive management develop new directions to successfullycompete in an increasingly challenging marketplace. Boardleadership must be fast, fluid and flexible, and power anexpectation of innovative ideas, new thinking and newdirections to successfully compete in today’s turbulentenvironment.Effective board-level planning emphasizes a continual strategicdialogue into which are continually fed new information, newideas and new perspectives, and out of which emerges aconstant stream of strategic development opportunities.Why Strategic Plans FailOne reason plans may fail is because the board does not makestrategic planning a high enough priority and does not holdexecutive management appropriately accountable for planoutcomes.Achievement of the hospital’s mission and vision is the numberone job of the board. And the best way to ensure that themission and vision are achieved is to have a strong, vibrant andoutcomes-focused strategic plan. Furthermore, the best wayto ensure that the plan is meaningful and measurable is tohave in place a reward system for the CEO and other seniorleaders that are tied to the achievement of specific objectives.Another reason plans may fail is because the board of trusteesis unwilling or unable to devote the time and resourcesnecessary to develop and carry out the plan successfully.Thirdly, plans may fail for one simple but false reason, and thatreason is a belief that health care is changing too rapidly, andthe environment is so uncertain that long-range planning issimply an exercise in futility.Nothing could be further from the truth. The rapid-change anduncertain environment creates even more of a need forstrategic thinking and strategic planning. However, thatplanning cannot take place in a traditional “straight line”manner. Instead, it must rely on an ability to think and plan in“black, white and gray.” Boards and executive teams need tobe able to think through scenarios for the future, define thepotential changes that may take place in a variety ofcircumstances, and define strategic responses in advance.Governing the Right Way for Strategic SuccessHow does the board play the most positive role possible in thestrategic change process? What can the board of trustees doto help ensure a successful hospital future? And how can theboard drive strategic discipline and strategic thinkingthroughout the organization, and govern the right way forstrategic success?Think of it as a three dimensional role: Hospital boards mustfirst establish direction. The board must ensure that thehospital has a meaningful, unique, market-specific andcompelling mission and vision, statements of purpose and long-term focus that inspire employees, physicians, trustees,volunteers and others.Second, the board must ensure that the entire hospital family,from top to bottom, sees their role and value in achieving thehospital’s strategic initiatives. Every single person plays a role,and each person should hold him or herself accountable forunderstanding that role and playing their part in organizationalsuccess. That culture of commitment is created and inspiredby the board.Third, and very importantly, the board plays a unique role inmotivating and inspiring hospital leadership to excel asstrategic change leaders, individuals who can coalesce theircolleagues in a strategic movement unified by purpose,committed to excellence and rewarded for performance.Driving SWOT Deep Into the OrganizationConducting a SWOT analysis, or analysis of strengths,weaknesses, opportunities and threats, is one of the corefeatures of most hospital strategic plans. The problem withmost SWOT analyses is that they are very general in nature, andoftentimes add little to the strategic planning effort.For example, typical strengths identified in a hospital strategicplan includes such things as high quality, dedicatedemployees, strong financial position, committed physicians,etc. and while each of these may be true, they would also betrue for virtually every other hospital in America.43

20 Questions Every Washington Hospital Board Needs to be Able to AnswerThe Board’s Role in Strategic PlanningThe Strategic AssessmentThe following are some examples of the types of questions that typically emerge at the board level when a strategic assessment is properly used:1. What are the most important forces driving the hospital’s future success?2. How can the hospital improve its image and enhance consumer preferences?3. How can the hospital best capture market share from its competitors? Will the hospital’s competitors be different in the future? How?4. What hospital services have the most potential for growth, both existing services and services that could be created?5. What are the primary factors driving patient outmigration, and what can be done to retain more business for the hospital?6. What is the hospital’s role and responsibility in addressing the primary service area’s most serious health risks?7. How attractive will the primary and secondary service areas be to aggressive competitors in the future?8. How do the service area population mix and economic character affect future hospital development potential?9. What should be the hospital’s financial growth strategy, both short and long term?10. How should the hospital balance expense reductions with the need to invest in future service development needs and opportunities?11. How can the hospital continue to fund capital needs and growth strategies in the face of declining margins?12. How can the hospital ensure an adequate supply of RNs, technicians and other employees required to meet emerging needs?These are the types of critical questions that need to be explored in the strategic planning process. They’re the questions that typically result froma close examination of the data and information contained in a well-executed strategic assessment. And they are the kinds of questions thathospital leadership needs and expects to be raised by the board of trustees.There is a way to conduct a SWOT analysis that results indozens if not hundreds of individual strengths, weaknesses,opportunities and threats that can be effectively utilized in thestrategic planning process. It’s simple, straightforward, andinvolves everyone in the organization.Each hospital service line, program and/or department shoulddevelop its own individualized strategic analysis. Service andprogram leaders should work with their employees throughfocus groups, surveys and other interaction methods toengage everyone in the process of strategic thinking about thearea they know best - their own program or service.Management may provide each program or service line with atemplate to be used to guide their analysis process. Thetemplate should result in an analysis that includes statistics onutilization and personnel; assessment of the strategicsignificance of the program or service to the hospital’s future; asummary of the market for the program and service; anassessment of major trends and factors likely to influenceprogram or service success in the future; and strengths andways to maximize them, weaknesses and ways to minimizethem, opportunities and ways to capitalize upon them, andthreats and ways to eliminate them.In addition, the strategic assessment should identify primaryand secondary competitors, assess long-term financialpotential, and identify the factors that are most critical to thefuture success of the program or service. The result of all of thisis a grassroots analysis of organizational position, needs andopportunities, a sense of engagement across the organizationin strategic direction, and a long list of potential strategicinitiatives for prioritization and implementation.Vital Signs: Requirements for Evidence-BasedGovernance Decision MakingOne of the primary challenges for hospital boards is to knowwhether the strategies and objectives adopted andimplemented are achieving the desired outcomes. Being ableto engage in a continuous analysis and dialogue aboutstrategic progress and performance requires a set of keyperformance indicators that tell the board where currentstrategic gaps exist, and where potential strategic gaps may beon the horizon.With the input of the CEO and management team, the boardshould track performance and progress using a set of metrics, aperiodic review process, and an incentive system to rewardmanagement for meeting organizational objectives.Well-designed vital signs have several specific attributes: theyare few in number; strategically significant; quantifiable andtrendable, time-specific; and consistently reported and used todetermine and close strategic gaps.44

20 Questions Every Washington Hospital Board Needs to be Able to AnswerThe Board’s Role in Strategic PlanningAn accountable, strategy-focused board will review strategicperformance and progress at least quarterly, and most willreview progress indicators on a monthly basis.Developing and Using Vital Signs. Developing and using a setof hospital-specific vital signs is a straightforward process.1. The board and management team must firstdetermine what should be measured.2. Then data that indicates the degree of success inachieving an objective should be determined. Forexample, in the area of financial performance thehospital may seek to reduce its average days inaccounts receivable from 85 days to 55 days over a 24month period.3. Once the metric has been set, performance should beregularly reported in a way that shows actualperformance compared to projections, and/orcomparison with external benchmarks, such as theperformance or best practices of other similarorganizations.4. If management reports a significant gap betweenprojected performance and actual performance, itshould also be charged with recommending specificactions to be taken to close the performance gap.5. Then, on a continuing basis, the board should reexamineprogress and performance resulting from thechanges made to close the gaps.6. In many instances vital signs become outdated basedon new information or organizational changes. Ratherthan continue to rely on outdated or outmodedstrategic progress indicators, the board shouldperiodically update both its indicators and itsperformance expectations.There are a variety of areas in which strategic measures may bedeveloped to gauge the hospital’s success in achieving itsstrategic objectives. The most common and easiest to developare financial indicators. Equally important, however, areindicators in areas such as quality and patient safety,organizational efficiency, workplace culture, productivity andmission, among others.Each hospital’s strategic measures will be different. The key tosuccess is to ensure that the measures chosen are relevant tounderstanding the hospital’s progress in attaining its individualstrategies. Performance indicators need to be examined anddiscussed in the same way a balance sheet or incomeGovernance Planning Pitfalls: 8 Dangers to AvoidAs board members work to examine their strategic planningprocess and find new ways to engage the board in moremeaningful involvement, it’s important to recognize potentialgovernance planning pitfalls that are important to avoid, including:1. Assuming that the past is a reliable predictor of the future2. The inability to craft a compelling, dynamic and meaningfulvision embraced by all3. Attempting to manage plan details instead of engaging incritical strategic dialogue4. Taking narrow, board-centric approaches that do not involve abroad range of participants5. The failure to see strategic planning as a continual process ofreal time responsiveness to change, rather than an end point6. The failure to define precise targets, measure progress, andcontinually work to close strategic gaps7. The inability to drive the strategic planning process, outcomesand responsibilities deeply into the organization8. The inability to continuously turn new information intostrategic knowledge, and transform it into strategic actionstatement is discussed. No one indicator by itself can tell acomplete story. In fact, a single indicator may be misleading ifnot examined in relationship to others. Taken together, keyperformance indictors reveal much about what’s happening inan organization. This is where board insight and perspectivebecomes so pivotal to strategic success.Prioritizing StrategiesAll strategies are not created equal. Some strategies areabsolutely urgent, critical and vital to achieve within a certaintime frame, while others, while important, may not be nearly asurgent or critical to organizational success.An easy way to prioritize strategies is to give them a “weight”using different rating dimensions. For example, strategies canbe prioritized based on their doability, or how feasible astrategy is given current and anticipated resources. Strategiescould also each be given a rating based on their impact infulfilling the community health mission, the urgency ofundertaking the strategy, or the value of the strategy inensuring the hospital’s long-term strategic success.Charting a course for the hospital’s future is one of the mostimportant responsibilities of the board. However, there’s a bigdifference between mapping a course, or being a navigator,and driving the bus.45

20 Questions Every Washington Hospital Board Needs to be Able to AnswerThe Board’s Role in Strategic PlanningTo successfully lead their organizations toward the future,boards of trustees must clearly understand and successfullycarry out their unique and vital role in the strategicdevelopment and implementation process.Action AgendaBelow are some ideas for actions the board can take, movingforward, as an accountable, responsible and responsivestrategy-focused board:1. Review the current strategic plan, and evaluate its purposeand value2. Leave the initiation of a deep, wide-ranging andcomprehensive examination of organizational fitness forfuture success3. Identify the most critical challenges and forces shaping thehospital’s future, and develop a compelling and responsivevision4. Examine the governance substance and style, and adoptnew leadership processes and practices to ensure a futurestrategic planning successReviewing Your Strategic Plan:Ten-Point Success ChecklistSpend a few minutes discussing the following 10 questions about your strategic plan and strategic planning process, and give your strategicplanning efforts a grade.1. Does the plan and build on the hospital’s strengths?2. Does the plan correct or minimize the hospital’s weaknesses?3. Does the plan contain a realistic appraisal of the hospital’s markets, customers and competition?4. Can the plan be understood by everyone who has a need to relate to it?5. Does the plan appropriately balance risk and return?6. Is the timing of the plan realistic?7. Does the hospital have ready access to the resources required to achieve the plan?8. Is the organizational structure compatible with the objectives of the plan?9. Does the plan support the image the hospital wants to convey, both internally and externally?10. Does the hospital have the leadership capacity to sustain the plan over time?46

20 Questions Every Washington Hospital Board Needs to be Able to AnswerHow does the board hold itselfaccountable for continuousleadership improvement?Trustees are accountable for ensuring that continuous quality improvement processes are in placethroughout their organization. An effective board ensures that every hospital department hasquality processes, systems and structures in place. But how do trustees ensure their owncontinuous quality improvement? How do they determine when they are under-performing as aleadership team? How can boards of trustees hold themselves to the same level of accountabilityfor quality improvement to which they hold their hospitals?Governing performance self-assessment is animportant preventive measure boards can take toensure continual improvement in governing healthand wellness. And it’s one of the most reliable ways to identifyand correct trouble spots before they get out of control.A board self-assessment is an organized evaluation of boardmembers’ satisfaction with all aspects of board performance infulfilling the board’s governance responsibilities. Selfassessmentsgenerally use a combination of quantitative andqualitative measurements of board, committee and individualperformance.Successful self-assessments enable boards to identify“leadership gaps,” or areas in which the board has the greatestpotential for improvement. The board self-assessment processidentifies these gaps, and facilitates the development andimplementation of initiatives and strategies to improveleadership performance.Through an effective, well-developed board self-assessmentprocess growth opportunities can be realized, education canbe pinpointed to unique governance needs, recruitment ofnew trustees can be undertaken with increased confidence,and long-range planning can be conducted within aconsensus-based framework with everybody on the samepage.Using the Self-Assessment to ImproveGovernanceA successful board self-assessment engages the board in awide-ranging evaluation of its overall leadership performance.At the same time, it provides trustees with an opportunity torate their personal performance as vital contributing membersof the board of trustees. An excellent board self-assessmentprocess will achieve several key outcomes:Define the board’s most critical governance successfactors;Secure anonymous, broad-based and insightful trusteeinput on the critical fundamentals of successful governingleadership;Create an opportunity to address major issues and ideas ina non-threatening, collaborative manner;Clearly demonstrate where the board is both in and out ofalignment on leadership fundamentals and issues;Objectively assess the degree of common trusteeunderstanding, expectations and direction for the board;Assess the deficiencies that may impact the board’s abilityto fulfill its fiduciary responsibilities;Identify opportunities for meaningful leadershipimprovement; andHelp administration better understand and respond to theboard’s leadership education and development needs.Many hospital boards conduct a self-assessment prior to theirannual retreat, at which they have ample time to discuss theassessment results and explore ways to improve leadershipperformance.Some boards have the internal resources and knowledge tosuccessfully design and conduct the self-assessment, compile47

20 Questions Every Washington Hospital Board Needs to be Able to AnswerConducting a “Best Practices” Board Performance Assessmentand analyze the results and present the findings in a way thatfacilitates discussion and governance action planning. Othersrely on outside consultants with experience using tested andproven tools, techniques and processes.Conducting the Board Self-AssessmentThe board self-assessment may be conducted using a printedsurvey, an online survey, individual interviews, a facilitated, fullboard discussion, or some combination of these methods. Inaddition, a board may choose to utilize electronic keypads toconduct a “real-time” self-assessment at a board meeting orretreat, with results instantly available for evaluation anddiscussion.The board self-assessment should include specific, precise andwell-articulated criteria that relate to the hospital’s uniqueboard and leadership challenges. These criteria should bedeveloped by a board development committee, or a specialself-assessment task force, and should be reviewed andendorsed by the full board as leadership accountabilities theyembrace.Four main areas addressed in many self-assessments include: 1)Assessment of overall board performance in several areas ofleadership accountability; 2) Assessment of committeeperformance; 3) Identification of issues and priorities facing theboard; and 4) Assessment of individual trustee performance,including a peer evaluation.A meaningful rating scale must be developed that ensuresclear and concise input that results in an effective scoring ofthe board’s performance. A good scale to use is one that ratesboard performance on a scale of level 5 – level 1, including aclear definition of what each rating level rating represents.Below is an example of a “Level 5 – Level 1” rating scale:Level 5: I strongly agree with this statement. We alwayspractice this as a part of our governance. Our performancein this area is outstanding.Level 4: I generally agree with this statement. We usuallypractice this as a part of our governance, but not always.We perform well in this area.Level 3: I somewhat agree with this statement. We oftenpractice this in our governance, but we are not consistent.We perform fairly well in this area.Level 2: I somewhat disagree with this statement. Weinconsistently practice this as a part of our governance.We do not perform well in this area.Level 1: I disagree with this statement. We never practicethis as a part of our governance. We perform very poorlyin this area.N/S: Not sure. I do not have enough information to makea determination about our performance in this area.Assessment of overall board performance should be dividedinto several leadership responsibility areas, such as:Mission, values and vision;Strategic direction;Leadership structure and governance processes;Quality and patient safety;Community relationships;Relationship with the CEO;Relationships with the Medical Staff;Financial leadership; andCommunity benefit and health.Rating Committee Performance. The committee performanceevaluation asks trustees to rate criteria specific to the charterand goals of each committee. The committee evaluation mayalso ask trustees to provide additional ideas for ways eachcommittee can improve its leadership performance.Below are some examples of areas to be rated for variouscommittees. These are limited examples, and are not intendedto be all-inclusive:Finance CommitteeGoals of a Board Self-Assessment1 Set measurable objectives for improving hospital performance2 Gather information to assess board effectiveness in improvinghospital performance3 Use pre-established, objective process criteria to assess boardeffectiveness in improving hospital performance4 Draw conclusions based on findings, and develop andimplement improvement in governance activities5 Evaluate board performance to support sustainedimprovementReviews and refines the annual operating and capitaldevelopment budget prepared by management48

20 Questions Every Washington Hospital Board Needs to be Able to AnswerConducting a “Best Practices” Board Performance AssessmentMonitors the implementation of major initiatives thatimpact strategic and financial objectives, makingappropriate recommendations to the board on an asneededbasisReviews monthly financial statementsRecommends hospital investment policies andmonitors the hospital's investmentsQuality CommitteeOversees the development, implementation andreporting of a hospital-wide program that measuresquality, risk management and clinical resourceutilizationReviews results of regulatory and accrediting bodyreview of the hospital's performanceReviews quality and patient safety indicatorsPeriodically reviews trend reports that reflect theoverall performance of the hospital in providingquality care in a customer-focused, cost-effectivemannerCompensation CommitteeEvaluates the CEO's performance at least one a year inlight of the established performance goals andobjectives, using the evaluation to set the CEO'sannual compensation, including salary, bonus,incentive and equity compensationQuestions to Consider About Your Board Self-Assessment Process Do you conduct a board self-assessment annually?Does your full board participate in the board self-assessmentprocess?Is your self-assessment anonymous, allowing trustees to freelyand candidly express their opinions and ideas for governancechange?Does the full board review the results of the self-assessment,discuss their interpretation of the findings, and determinepotential areas for necessary board improvement?Do you use the self-assessment results to develop actionableand measurable plans for governance improvement?Do you communicate the results of the self-assessment and theboard’s governance improvement plan to hospital employees?To the local community?Ensures that the CEO'sperformance evaluation isbased on pre-determinedand clearly communicatedperformance criteriaRecommends the CEO'sannual compensationpackageEnsures that the CEO'scompensation package is tiedto performance and iscomparable to CEO salaries ofhealth careorganizationssimilar in sizeand scopeAudit CommitteeAssists the board of directors in fulfilling its oversightresponsibilities with respect to the independentauditors' qualifications and independenceIs financially literate and possess a generalunderstanding of basic finance and accountingpracticesHas at least one member that is determined to be an"audit committee financial expert," possessingaccounting or related financial management expertiseMajor Governance Issues and Priorities. When done correctlyand consistently, a board self-assessment process enables theboard to identify critical “leadership gaps,” and achieve andmaintain the level of governing excellence required for successin today’s challenging health care environment.In addition to rating the board’s performance in the importantareas outlined earlier, the self-assessment should also providetrustees with an opportunity to answer several open-endedquestions, such as:Your board self-assessmentmay use a printed survey or beconducted online using theInternet.What is your single highest priority for the board in thenext year?What are the governance strengths that must bemaximized in order to ensure leadership success in thenext year?49

20 Questions Every Washington Hospital Board Needs to be Able to AnswerConducting a “Best Practices” Board Performance AssessmentMeasuring Board Performance: Key Leadership ResponsibilitiesThe assessment process should be unique and reflective of the board’s leadership challenges, issues and needs. Here are some broad leadershipareas and assessment criteria ideas. These are not actual rating criteria, but are instead thought starters for the development of potentialcriteria. When developing your actual criteria, you should state them in the form of a positive statement, and then have trustees rate their level ofagreement with board performance in the area:Leadership Responsibility 1: Effectively Carrying Out the Hospital’sMission, Values, Vision and Strategic Direction Appropriateness for community health leadership role Periodic review of mission, values and vision Policy and strategic decisions support the mission, values andvision Measurement of progress toward goals and objectives Evaluation of hospital programs and services for fit with mission,values and vision Governance workplan Skills necessary to enable the board to achieve its objectivesLeadership Responsibility 2: Ensuring Appropriate Board Structureand Processes for Building Optimum Service and Value Adherence to board procedures Board understanding of environment Range of qualities on board Meeting agendas Committee structure Information provided by management Director orientation and education Review of structure, committee practices, tenure and bylaws Meeting frequency, length and attendance Board problem solving skills Team building Adequacy of time for discussing significant issues Clarity of board, management and medical staff leadership roles Corporate compliance plan Quality improvement program Physician representationLeadership Responsibility 3: Developing Strong CommunityRelationships Understanding of community needs and issues Consultation with community leadership Assertive leadership in the community Development of positive image for the hospital Board success in local political advocacyLeadership Responsibility 4: Providing Strong, Focused and EffectiveBoard Leadership Representation of community’s health needs Appropriate direction in support of mission, values, vision andstrategic objectives Encouragement of group participationUnderstanding of others’ roles in achieving mission, values, visionand strategic objectivesDevelopment of group and individual decision-making skillsCriteria for board member selection“Conflict of interest” policy and resolution plansLeadership Responsibility 5: Effective Board Planning for Long TermSuccess Board involvement in strategic planning Operational plans to meet strategic objectives Board awareness of factors that affect services and programs Medical staff leadership involvement in strategic planning Mission, values, vision and strategic plan use in policy and strategicdecisions Regular measurement of progress toward vision and strategicinitiativesLeadership Responsibility 6: Ensuring Effective And CollaborativeBoard/CEO Relationships Communication Climate of trust, respect and support Board support of CEO in implementing policy Annual evaluation of CEO using predetermined targets Ensuring that CEO is fairly compensated Quality and timeliness of information provided by CEO Executive succession planLeadership Responsibility 7: Ensuring Effective And CollaborativeBoard/Medical Staff Relationships Regular review of medical staff organization and bylaws Process of approving appointments and reappointments Effective communication between board and medical staff Physician participation in decision-making processesLeadership Responsibility 8: Ensuring that New Services Meet theNeeds of the Market Policies on new services Process for evaluating potential services Ensuring new services fit with mission, values, vision and goals Monitoring new services to ensure that they meet goalsLeadership Responsibility 9: Ensuring Strong Financial Focus andLeadership Oversight of fiscal resources Financial reports50

20 Questions Every Washington Hospital Board Needs to be Able to AnswerConducting a “Best Practices” Board Performance AssessmentAnnual budget and performance monitoringReview and adoption of capital expenditures budgetApproving targets for debt, liquidity, ROI, profitability, etc.Leadership Responsibility 10: Ensuring Community HealthImprovement Commitment to building a healthier community Involvement in initiatives to improve community healthUnderstanding of community needs and issuesResources for community initiativesDefinition and measurement of community health improvementCollaborative partnerships for improving community healthPeer-To-Peer Leadership Assessment CriteriaIn addition to the full board self-assessment, the peer-to-peer leadership assessment enables trustees to rate one another individually, providingtrustees with unique insights into their leadership attributes and needs from the perspective of their trustee colleagues. Trustees should rate themselvesand their colleagues in two areas: 1) governing attributes, the factors that define their performance in fulfilling their governance duties; and 2)personal attributes, the factors that describe their personal strengths and abilities to be effective trustees. Below are some potential rating criteria:Governing Attributes Demonstrates understanding of the hospital’s mission and visionthrough his/her governance participation Builds a strong working relationships with other board members Builds a strong working relationship with the CEO Understands key issues and challenges facing the hospital Understands the trends shaping the future requirements ofhospital trusteeship Focuses attention on long-term policy issues rather thanadministrative/operational issuesAsks for and listens to one another’s ideas and inputMaintains confidentiality when requiredIs effective in presenting ideasEffectively communicates with and relates to othersHandles ambiguous situations wellContinually seeks to improve his or her leadership performanceOpen-Ended Question: What suggestions do you have for ways thistrustee colleague can improve his or her governing performance?Prepares for and participates in board and committee meetingsMakes unique skills available to the hospitalUnderstands the relevance and value of the hospital’s programsand servicesPrepares for active and informed participation in board meetingsAsks probing and insightful questions intended to further thehospital’s progress and performanceHas a high level of commitment and interest in the organizationRepresents the hospital as required in local professional, civic andservice organizationsComes to meetings prepared to engage in meaningful discussionand thoughtful decision-makingPersonal AttributesIs able to discuss controversial topics effectivelyWorks easily with other board members and administrationKeeps an open mind on issuesWilling and enthusiastic promoter of the hospitalMeets time commitmentsThinks quickly and assimilates ideas well51

20 Questions Every Washington Hospital Board Needs to be Able to AnswerConducting a “Best Practices” Board Performance AssessmentWhat are the governance weaknesses that must beovercome in order to ensure the hospital’s success in thenext year?What do you see as the most significant health care trendsthat the hospital’s leadership must be able to understandand deal with in the next year? In the next five years?What challenges or issues are most critical to be addressedif the board is to be most successful in leading strategicchange in the next year?personal attributes, the factors that describe the personalstrengths and abilities required for effective trusteeship.In addition, each trustee should answer one simple questionafter rating each individual board member: “What suggestionsdo you have for ways this trustee colleague can improve his orher governing performance?”The process provides trustees with unique insights into theirleadership attributes and needs from the informed perspectiveof their trustee colleagues.Individual and Peer-to-Peer Performance Assessment. Acritical piece of a quality board self-assessment process is theindividual performance assessment. Trustees may have oneview of the overall board’s performance, and have an entirelydifferent view of their own individual performance. A personal,introspective look at individual leadership enables trustees tofocus on the essentials of good leadership and their personalimpressions of their individual performance.A good way to evaluate personal governing performance isthrough a “peer-to-peer” assessment. This enables trustees topersonally evaluate their performance, and the performance ofeach of their board colleagues, using a short list of relevantcriteria (see the previous page for ideas).Trustees should rate themselves and their colleagues in twoareas: 1) governing attributes, the factors that define theirperformance in fulfilling their governance duties; and 2)Compiling and Analyzing Self-AssessmentResultsThere are a variety of ways to compile and analyze the resultsof your board self-assessment, from simply tallying responsesby hand to using customized self-assessment softwareapplications. Although every organization may approach theprocess differently, it is critical that the results are reported inan easy-to-understand format that sparks meaningful dialogueabout the findings.The five steps below outline one potential process foranalyzing self-assessment results:Compile the results in a database, such as Microsoft Excel,that allows the creation of graphs using a variety ofcombinations or sorting.(Continued on page 54)Physician leaders participate in decisionmaking at the board and committee level, andare actively involved in important organizationaldecisions6921After self-assessment resultsare compiled the boardshould review the individualscores in each leadershipresponsibility area. Theboard should establish a“target zone” which definesdesired performance ranges,and delve into the reasonswhy any area falls outsidethe zone.Trustees understand the roles andresponsibilities of the Medical ExecutiveCommitteeThe board ensures that the interests of thephysician community are addressed as theorganization strives to fulfill its mission13111263There is effective communication between theboard and the medical staff79 110 3 6 9 12 15 18Level 5 Level 4 Level 3 Level 2 Level 1 N/S52

20 Questions Every Washington Hospital Board Needs to be Able to AnswerConducting a “Best Practices” Board Performance AssessmentSample Spider Graph: Overall Self-Assessment ScoreStrategic Direction5.00Displaying overall boardscores in key areas of trusteeleadership accountability isan easy way to identify areaswith performance gaps.Several criteria within a broadleadership competency maybe scored on a Level 5 - Level1 rating scale (seerecommended rating scale onpage 2), and combinedtogether to provide a meanscore snapshot of leadershipperspectives.Organizational EthicsCommunity HealthFinancial Leadership4.003.002.001.000.00Leadership Structure andGovernance ProcessesQuality and Patient SafetyCommunity RelationshipsRelationships With the MedicalStaffRelationship With the CEOTrustees' Mean ScoreSenior Leaders' Mean Score40%35%39%The degree of consensusamong trustees reveals muchabout commonunderstanding, teamworkand unanimity. Once thisknowledge is gained theboard can discuss the reasonsbehind the differences, andexplore potential solutions.30%25%20%15%21%29%10%5%0%10%0.1%1.4%Level 5 Level 4 Level 3 Level 2 Level 1 N/S53

20 Questions Every Washington Hospital Board Needs to be Able to AnswerConducting a “Best Practices” Board Performance Assessment(Continued from page 52)Develop “stacked bar” graphs that display the ratings foreach of the self-assessment areas, ordered from highest tolowest scores, and that depict the number of trusteesassigning each rating to the criteria.Develop a written report or PowerPoint presentation thatincludes summary graphs of the criteria in all of the ratingareas, as well as key themes from trustees’ open-endedcomments.Present and discuss the results at a special board meetingor board retreat, allowing ample time for trustees todiscuss their interpretation of the findings as well asdevelop “governance gain” action plans to address lowperformingareas.If a peer-to-peer evaluation is conducted, each trusteeshould receive a report that includes his or her personalrating of their performance and their colleagues’ ratings oftheir performance, using the same criteria. Each trustee’sunique report should be then reviewed in a one-on-onemeeting of the individual trustee and the board chair.The report should include a summary of trustee performanceratings, in graph form, to enable quick analysis of the degree ofconsensus on important leadership criteria. It should alsoinclude analysis of the ratings, highlights for board discussion, asummary and analysis of verbatim ideas and answers toquestions, and recommendations for improving boardperformance in each rating area.Putting Your Self-Assessment Results to WorkConducting the board self-assessment is just the first step inimproving governance leadership performance. The key tosuccess of the full process is not simply the measurement oftrustee viewpoints, but is instead the action that is taken as aresult of a careful examination of trustee viewpoints.The self-assessment results should be a catalyst to engagetrustees in a wide-ranging discussion of findings that highlightperformance gaps and areas where trustees lack consensusabout the board’s performance.A full review of trustees’ viewpoints should stimulate the boardto discuss their opinions and ideas for improving boardsuccess, and result in the development of a governanceimprovement action plan with clearly defined responsibilities,time frames and projected outcomes (see next page for moreinformation). Boards should then monitor their progress toensure that projected outcomes are achieved, and revise thegovernance improvement action plan when necessary.Communication with Employees and theCommunityThe practice of using board self-assessment results to not onlyachieve a higher level of board and organizationalperformance, but also strengthen employee and communitytrust, is often an overlooked advantage. The most importantelement of the self-assessment process is what happens afterthe assessment is complete.In addition to using the results of self-assessment to developspecific governance improvement goals and action plans, theboard should communicate its process and general results tohospital employees and the community at-large. Thiscommunication will help employees, the medical staff andothers to understand the challenges the hospital faces andrecognize the board’s efforts in addressing those challenges.Support from employees and the local public is vital to hospitalsuccess in the face of increasing public scrutiny fromlawmakers, regulators, community groups and the media.Communicating with key stakeholders will deepenunderstanding of the board’s commitment to the hospital andthe community, raise awareness of the depth and range ofchallenges the board faces, and demonstrate the highstandards the board holds itself accountable for.The results should be shared with hospital employees first;boards will build trust with employees by ensuring that theyhear about the self-assessment first, before it is reported in thelocal media. The employee memo should include:An overview of the process, why it was conducted andhow often it is conducted;High-level results;Board improvement opportunities identified; andSpecific actions the board intends to take to creategovernance gain.Boards should also tell employees that a news release isexpected to be published in the local newspaper promotingthe hospital’s emphasis on transparency and willingness toshare its strengths, opportunities for improvement andchallenges with the community. Following distribution of theemployee memo, the news release should be provided to thelocal newspaper, and should include information similar to thatin the employee update.54

20 Questions Every Washington Hospital Board Needs to be Able to AnswerConducting a “Best Practices” Board Performance AssessmentUsing Your Board Self-Assessment Process for Governance GainAfter reviewing the results of your board self-assessment, developing a “Governance Gain Plan” will assist the board to createactionable, measurable next steps for improving leadership. The plan should include specific ideas for governance improvement ineach area the board believes needs the most attention. Specific items to include for each governance improvement include:Initiative Description. A detailed description of the governance improvement initiative, effort, program or action to be taken thatwill result in governance gain.Priority. The initiative’s priority on a scale of 1, 2 or 3, such as the following:1 = Critical to achieve - accomplishment is vital to governance and leadership success;2 = Very important to achieve - accomplishment is a major factor in governance and leadership success; and3 = Important to achieve - accomplishment is a significant factor in governance leadership success.Projected Outcomes. Specific goals and outcomes that will be achieved as a result of the completion of the governanceimprovement initiative.Primary Responsibility. The individual, group or committee primarily responsible for ensuring the governance improvementinitiative is completed.Resources Required. The estimated cost of implementing the initiative.Start Date. The assigned date for work on the governance improvement initiative to begin.End Date. The target date for completion of work on the governance improvement initiative.Governance Gain ExamplesThe items in your Governance Gain Planner will be unique to your board’s self-assessment results. For example, if corrective action isneeded in the area of “ensuring an appropriate board structure, and effective processes for building optimum hospital service andvalue,” your Governance Gain Planner may include some of the ideas below.Education InitiativesProvide trustees with the background information and intelligence resources required for active participation in board dialogueConduct a regular community healthcare environmental assessment; ensure trustee understanding of the changes taking placein the healthcare environment, and their implications on the hospital, its physicians, and local healthcare consumersDevelop an education plan that ensures trustee understanding of the issues essential to effective governance; conduct educationand orientation at every board meeting, and annually at the board retreatStructural InitiativesExamine board composition, and match present skills against current and emerging trends, challenges and issues; ensure thatskills are/will be in place to successfully deal with the futureClearly define board, medical staff leadership and management strategic planning roles and responsibilitiesInvolve physicians in meaningful ways as key participants in governance decision making, including trusteeship, committeeappointments, strategic task force involvement, etc.(Continued on page 56)55

20 Questions Every Washington Hospital Board Needs to be Able to AnswerConducting a “Best Practices” Board Performance Assessment(Continued from page 55)Develop comprehensive and usable governance policies and proceduresDevelop a process for governance “renewal” to ensure that committees, policies, procedures and overall board structure andfunctions create a high-performance organizationEfficiency InitiativesEnsure that trustees receive agendas at least one week in advance of board, committee and task force meetings; providebackground materials (articles, white papers, talking points, etc.) that ensure trustee understanding of critical governance-relatedissuesExamine the board committee structure to ensure responsiveness to evolving challenges and opportunities. Considerestablishing “strategic issues teams” to replace some traditional standing committeesEvaluate the quality and quantity of information used by the board to make policy and strategic decisions; ensure thatinformation is relevant, timely, understandable and actionable, and that it facilitates high-quality board decision makingExamine the content of board meetings to ensure that the most significant and meaningful issues are being effectivelyaddressed, that trustee time is respected and used efficiently, and that trustee involvement and participation are enhancedExamine the prior six board agendas; assess the ratio of time spent discussing issues and opportunities vs. time spent on approvalof minutes, committee reports, and other more procedural issues; make discussion of strategic issues the centerpiece of everyboard meeting56

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat’s the board’s role inbuilding trust and connectionswith its community?Hospital trustees face a broad array of complex challenges in their continual quest to meet thecritical health care needs of their communities. Too often, trustees become so consumed withthe organizational issues and challenges that they lose sight of the need to consistently andforcefully connect in meaningful ways with their communities.With growing scrutiny of the “community benefit”provided by hospitals, hospital boards have aunique opportunity to ensure that theirorganizations consistently engage in meaningful ways with abroad range of community stakeholders. Although a lack oftrust in America’s hospitals in some quarters may be primarilyattributed to wrongdoing by a few hospitals, the problem iscompounded by a lack of effective action and communityengagement.Hospital boards of trustees must not ignore this growingcommunity trust challenge. Most Americans don’t understandhow hospitals are organized and managed, while even fewerstill understand and appreciate the many challenging forcesthat are impacting local hospitals today. Instead, they tend torely on personal experiences, and the opinions and beliefs ofthe media, friends and associates to shape their viewpointsabout their local health care system. Trustees should activelyengage their organizations in meaningful communitypartnerships, lead the design of community healthimprovement initiatives, and engage in community dialoguesthat promote the hospital’s efforts and demonstrate thehospital’s genuine interest in the health care needs andchallenges of the community.The Business Case for Community HealthInitiativesIt’s simple: strengthening community relationships andimplementing initiatives to improve the community’s health isthe right thing to do for hospitals’ patients, families andcommunities. In addition to helping hospitals fulfill theircommunity-focused missions and visions, community healthinitiatives provide several significant business-strengtheningbenefits, including:Credibility and leverage in representation and advocacy;The potential to increase market share;Development of allies to address common challenges;Creation of new partnership opportunities;Foundation fundraising;Strengthened support and public trust for the hospital andits efforts;Increased awareness of hospital challenges andunderstanding of the hospital’s commitment toaddressing community needs;Strengthened employee morale and sense of purpose; andPreservation of not-for-profit hospitals’ tax-exempt statusas the community benefit provided by hospitals andhealth systems becomes clear and measurable.The Need for Trustee Leadership andInvolvementHospital trustees are trusted leaders in their communities.Trustees also have a unique and powerful role as keycommunicators of the benefit provided by their hospital.Because they are volunteers, they are viewed as unbiasedimpartial protectors and stewards of the hospital’s cherishedmission, values and vision.57

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBecoming a Community-Centered BoardA board emphasis on the importance of improving communityhealth sets the stage for hospital leaders, employees and themedical staff to develop strategies for community healthimprovement. To effectively lead their organization in buildingand strengthening community health, boards must:Rule 1Rules for Building Sustainable CommunityPartnershipsIt’s not an event or a one-time fix, but a continuouscommitment to community1. Define the “community” (or communities) the hospitalserves, creating a focus for the community healthimprovement initiatives, and enabling measurement ofthe impact and success of the hospital’s efforts.Rule 2Rule 3Lasting partnerships cannot be created overnight, andmust be sustained over timeDon’t reinvent the wheel; learn from and use the successof others2. Develop partnerships with other health care providersand community organizations that can bring diverseresources to the table.3. Develop a shared community health mission, values,vision and plan, including specific goals and measurableoutcomes to track success.4. Create a “culture of community commitment”throughout the organization, with the hospital’s leaderssetting the tone for the medical staff and hospitalemployees.5. Conduct routine assessments of the community’s healthstatus, using the first assessment as a baseline by which totrack progress and the success of community healthinitiatives.6. Develop community health status indicators androutinely report them widely to all key stakeholders,highlighting both areas of success as well as areas in needof improvement.Rule 4Rule 5Cultivate broad-based buy-in and commitment from allstakeholdersCommunicate, communicate, and then communicatesome more7. Consider creating a board committee to oversee thecommunity health partnership and ensure the partnershipis “staying on track” and making progress toward achievingits goals.8. Hold the CEO accountable for achieving communityhealth improvement objectives by developing specific,measurable outcomes that are mutually agreed upon withthe CEO.9. Continuously integrate existing initiatives forcommunity health assessment with new ones.10. Build and sustain the concept of board responsibilityfor community assessment, involvement andimprovement, including an emphasis on communityhealth at board meetings and in the board’s regular boardself-assessment process.Testing Community CenterednessThe following statements include key components of a community-centered hospital or health system. How would you respond to the followingstatements? We have clearly defined our community. Our mission describes our commitment to the community, and is used to evaluate key decisions facing the hospital. We promote and support specific initiatives whose sole purpose is improving community health. We assess various stakeholders’ needs and interests when developing goals and strategies. We regularly discuss community health improvement challenges and barriers. We meet regularly with community partners to assess and discuss our progress in meeting community needs. We have formal working relationships with organizations that share our community health improvement mission and vision, and that leverageour services and resources for maximum benefit. We regularly assess the value and impact of our joint community health improvement efforts. We communicate our efforts and results widely in our community in the form of a community benefit report. CEO performance objectives include a focus on improving community health.58

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBecoming a Community-Centered BoardCommunity Centeredness: Questions to ConsiderIdentify and invest in existing community assets ratherthan creating new assets;What is the state of public trust in your hospital?Do people in your community see your hospital as beingcommunity-centered?Can you describe your community partnerships and their valueand results?What does community accountability mean to you? How doyou define and measure it?What are you doing to ensure that the entire organizationembraces community accountability?What strategies do you use to engage the community in thehospital’s long-range planning?What information about hospital performance do you report toyour community?What approaches do you use to advocate in your communityand to legislators?What is the individual community and political advocacy role ofevery trustee?Be willing to let go of control;Be transparent, open and inclusive; andBe accountable through ongoing measurement, reportingand action plans for improvement.Identifying, Evaluating and Including Partners. Althoughpartnership potential varies greatly from community-tocommunity,the guidelines for determining the mostappropriate stakeholders remains the same. When developingpartnerships, hospital leaders should consider whether theprospective partner:Can commit to the partnership’s vision and goals;Brings something unique and valuable to the table;Using Community Connections to BuildCommunity Health and Strengthen Public TrustHospitals and health systems impact their community in manydimensions, giving hospital leaders and trustees a uniqueopportunity to connect with and influence a variety ofstakeholders. Potential stakeholders hospitals should considerpartnering with include patients and families; advocacy groups;churches; schools; health policy makers; physicians; hospitalemployees; the media; insurers; lenders; and the general public.Ensuring Collaborative CommunityGovernanceCollaborating in meaningful ways with key communityinfluencers and stakeholders is no easy task. Every partnershipwill be different, as each organization has its own structure,strategies to addressing local challenges, and individualagendas and goals. In addition, partnerships often lack aformal structure and may not have a formal authority formaking final decisions.Hospital leaders can be the catalyst for developing successfulcommunity-based partnerships by ensuring a focus on sharedgoals and objectives, and creating a mutually agreed uponprocess for the group’s meetings and decision-makingapproaches. When establishing community-basedpartnerships, boards should consider the following principles:Engage a wide spectrum of the community as partners forimproving community health;Is willing to commit meaningful resources;Fits existing “zones of collaboration” or creates new ones;andIs truly interested in advancing community health.The Result of Collaborative Community Governance.Successful community partnerships are formed with a sharedvision, coordinated, sustainable solutions to improvecommunity health. The shared efforts and resources translateto a better use of limited resources, thus ensuring that the rightcare, service, test or treatment is provided in the right placeand the right time. Effective partnerships also result inimproved understanding and trust between the hospital andthe community as a whole, and an expanded pool of powerfuladvocates for local and regional health needs. In addition,collaboration to improve the community’s health sends apowerful message to the community about the hospital’scommitment to providing community benefit and improvingthe overall health of local citizens, resulting in increased localsupport for the hospital.Avenues for Building Community CenterednessIn addition to building and sustaining partnerships, there are avariety of avenues by which hospital trustees and leaders cangain a greater understanding of the community’s health careneeds and challenges, increase awareness of existingprograms, seek feedback and ideas for new initiatives, andbuild trust and promote the hospital’s image. These include:59

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBecoming a Community-Centered BoardCommunity surveys;Focus groups with key stakeholders;Task forces with hospital leaders, employees and keystakeholders;Conducting a community needs assessment;Advertising and promotion of the hospital’s services andcommunity benefit initiatives;Presentations throughout the community;and trust. This will not only build greater community supportfor the hospital’s efforts, but will also help patients and thecommunity as a whole trust that the hospital, its staff andphysicians are committed to the hospital’s mission and visionof community care, not to simply create economic gain.Making Community Centeredness Happen atYour OrganizationHospital boards can take steps now to become a communitycenteredboard. Key action steps include:Interviews with patients, key stakeholders, and thecommunity at-large; andEnsuring that the board has a clear, consensus-drivenunderstanding of community health issues and needs;Healthy community initiatives.The “bottom line” value of being a community-centeredorganization is that the community will better understand thechallenges the hospital is facing, the hospital’s efforts toaddress the challenges, and the barriers to success. Thehospital must connect with stakeholders and key constituentsin ways that can be leveraged to more successfully advancethe hospital’s agenda. The benefits that result from thehospital’s community benefit initiatives must be defined,reported and discussed throughout the community to build asense of the hospital’s health care and economic value.Pricing, quality and governance transparency are becomingincreasingly important to the business community,governments, payers and consumers. Hospitals should provideinformation on pricing, quality, compensation and governancepractices to enrich the community’s awareness, confidenceConducting an annual or semi-annual community healthneeds assessment;Establishing a process for eliciting community input andviewpoints;Ensuring that board policies support communityengagement and involvement programs;Monitoring and evaluating the hospital’s progress inmeeting its community service goals;Ensuring that board composition represents a broadspectrum of community perspectives;Staying continuously aware of the extent of thecommunity’s health care needs; andEngaging in community-centered thinking and actions atevery board meeting.AHA Study: Re-Establishing Community BondsA study by the American Hospital Association and American College of Healthcare Executives identified seven key strategies that leading hospitalsuse to maintain their focus on community health. Strategies include:1. Envision a healthy community: set goals that incorporate community health as part of your strategic initiatives.2. Finance a healthy community: Compensate management based on achieving pre-established community health criteria.3. Educate about a healthy community: Establish a curriculum to teach community health initiatives to your hospital’s staff, physicians andboard members.4. Personnel decisions for a healthy community: Establish a senior management position for community health.5. Market for community health: Promote community health with and through partners.6. Structures to support community health: Create a committee of the board to promote quality and community health.7. Processes that enhance community health: Develop an ongoing board improvement process.Source: Dolan, Thomas. Rekindling the Flame. Hospitals & Health Networks. October 2001.60

20 Questions Every Washington Hospital Board Needs to be Able to AnswerHow does the board ensure aloyal medical staff?The hospital/medical staff relationship should be a trusting partnership, where both the medicalstaff and hospital work closely together to provide quality care for patients. But hospitals andmedical staffs often have differing perspectives and unique cultures, which can lead to adisconnect between the two. There are actions that board members can take to improvealignment to build a high functioning, strong hospital and medical staff relationship.“The general surgeon sat down in the chair acrossfrom the CEO’s desk with a nervous look on hisface. “Fred,” he began, “I have to tell yousomething and I know you’re not going to like hearing it. Mypartner and I were approached several months ago bySpecialty Surgery Associates, the big general surgery group inWestport, to join with them in building an ambulatory surgerycenter here in Hastings.”“We’ve signed a letter of intent to join with them, and we’reannouncing it in the newspaper tomorrow. The press releasesays we’ll break ground in two months, and that we expect thatwe’ll do our first surgery in about nine months. I wanted you tohear it from me first.” Shocked, Fred at first was too stunned tospeak. “Dan, I can’t believe you and Joan made this decisionwithout talking to me. We’ve had a good, open relationship allthese years, and you and Joan are critical to the success of thishospital. If you move your surgical services somewhere else,we’ll be in the red within 30 days.”“I understand, Fred, and we have had a good relationship formany years, one that’s been good for us and good for thehospital too,” said Dan. “But times are changing. Medicarekeeps cutting our reimbursement, making it harder and harderfor us to increase our income. And the board has beenunwilling to invest in equipment and the new operating roomswe need. We just can’t continue to grow our practice withoutmore resources. That’s our bottom line.”“But what about our bottom line, Dan?” said Fred. “Ourreimbursement isn’t keeping up with costs, either. And everypayer is cutting payments. We can’t afford to lose surgeryservices. We don’t have the money to recruit new generalsurgeons to take your place. And even if we did, we’d just becompeting with you. You know we depend on the revenueand profits from surgery services to subsidize the badly neededservices we don’t make money at, or can’t charge for.”“I guess you and the board should have thought about thatearlier,” said Dan. “And as far as hospital revenues go, ourconsultants told us you’d cry financial hardship. But maybewhat you need to do is just cut your expenses like we’ve hadto, and find some other new services to offer. And don’t makeme feel guilty about not being able to subsidize money-losingservices. That’s what your not-for-profit tax exemption is for.”“Cut expenses? We’ve already cut everything we can,” Fredsaid. “We’ll have to lay off people, and cut salaries. And whatabout the investments we’ve already made in equipment andfacilities for you and your partner? We’re still paying for thosenow. And new services? By the time we identify and developanything to take the place of what we’ll lose, we’ll be so far inthe red we’ll never be able to climb out. This is going to hurtthe hospital, our employees and the community. This is justnot right Dan.”“Fred, you’re making this all about you and the hospital. That’snot what it’s about,” said Dan. “It’s about patients and quality.We think we can do more surgeries at less cost and with betteroutcomes in our own surgery center. That all adds up to betterpatient service and patient satisfaction. All that’s in thehospital’s mission. If you really believed in your mission, you’dsupport us in this venture, not be critical of us.”There was a long, uncomfortable silence. Neither Fred nor Danwanted to look the other in the eye. Finally, Fred said, “I can’tbelieve after all these years it’s come to this, Dan. Is this reallythe way it has to be? Can’t there be another way?”61

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Constructive Hospital/Physician Relationships and AlignmentWhy Would Something Like This Happen?Hopefully, this is a scenario that you’ll never see play out atyour hospital. And in order to do everything to ensure that itdoesn’t, it’s important to understand what would cause asituation like this to occur.While there are many pressures that may be at the center ofthis type of issue, there are four key factors that would mostlikely drive it:The first factor is that hospitals and physicians simply havedifferent kinds of financial needs and financial pressures.These pressures can result in split interests, and a sense ofdisconnection. It’s important for board members tounderstand how those financial pressures differ, as well aswhere they converge;Secondly, hospitals and physicians don’t always share thesame mission, values and vision. The hospital’s missionand vision is typically much broader and more communityhealth improvement centered, while physicians mission ismore narrowly focused on individual patients and practicedevelopment;Thirdly, Fred and Dan, while they know one another well,had a damaging lack of meaningful, close and timelycommunication. Had they been on the same page, andworking on ways to align their interests as much aspossible, their split could have been averted; andFinally, like everything that happens in the hospital/medical staff relationship, board inattention to theimportance of building a culture of collaboration,cooperation and the pursuit of opportunities with mutualself-interest can contribute to the development ofproblems that may remain below the administrative andgovernance radar screen.The hospital/medical staff relationship should be a trustingpartnership, where both the medical staff and the hospital’sexecutives and governing board work closely together toprovide consistently high quality, safe care for patients.Unfortunately, there is too often a “division” between hospitalsand their medical staff, a sense of “us” vs. “them” in many areascritical to the hospital’s success in achieving its mission andvision.What Alignment CreatesAlignment between the hospital and the medical staff creates anumber of positive outcomes that are vital to success inmeeting the needs of patients and the community. OnceBuilding TrustThe following list includes both suggested tactics that can helpbuild trust and also behavior that should be avoided. When creatinga strategy to improve alignment consider your organization’s level oftrust and whether these tactics may encourage building trustingrelationships.Tactics That Work: Begin by listening. Encourage open sharing of information—before, during, and after strategic and financial planning Refocus on values and create a mutually shared statement ofmission, vision and values centered on quality patient care.Then live by it – assess every decision against the statement tosee if the decision fits Appoint special project teams for program planning to buildrapport among all participants Emphasize working together in “community healthenhancement” teams to face common opportunities for healtheducation, health screening, etc. Define roles and responsibilities clearly Recognize that the system creates rivalry, and study and refinethe “art of compromise” and respectful idea exchange throughcommunication Support physician leader development that helps clinical chiefsmake better decisions and manage two-way communicationwith their physician colleagues Ensure that the infrastructure and bureaucracy of theorganization is streamlined and does not prevent providersfrom doing their jobs efficiently and effectively Rally all parties into a cohesive group when faced withcommon enemies or challenges Remember that employees play a critical role in convincingphysicians that leadership is trustworthy Define expectations for meaningful governance involvementBehavior to Avoid: Rigid behavior models where the board mandates,management dictates, and physicians vacate Negativism or poor communication Mindsets or behavior characterized by control, manipulation, orthreats Mindset that working with doctors is like “herding cats” Being secretive about hospital plans and budgets Surprising physicians with big plans that affect themSource: Developing a Partnership Culture. Healthcare Executive. May/Juneeffective alignment occurs, it creates strong and meaningfulparticipation, collaboration and mutual benefits for both thehospital and its medical staff. It encourages a sense of62

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Constructive Hospital/Physician Relationships and Alignmentempowered and interdependent interaction at multiple levelsthrough which both the hospital and the medical staff canbuild teamwork and align their understanding and solutions tocommon challenges.In addition, it creates the capacity to form an agreementaround a common commitment and a common strategicdirection for achieving common objectives. And finally,alignment creates an atmosphere for the potentialdevelopment of meaningful, value-driven economicintegration that meets the needs of both the hospital and itsphysicians.There’s Much at StakeThere’s much at stake in the enhancement and success of thehospital/physician relationship. In order for the hospital to besuccessful in achieving its mission and vision, it must besuccessful in ensuring that it’s able to offer the mostappropriate and needed services with high quality and safety.Patient loyalty is a critical component in sustainable servicesuccess. That loyalty is driven by the patient’s sense that thehospital and its physicians are working together in acoordinated way to ensure that their health care needs aremet.Patient loyalty and service success drive the hospital and itsphysicians’ market reputation as collaborative health careleaders committed to a common purpose, and united in theirdrive for quality, safety and patient satisfaction.And clearly, the community will benefit significantly morewhen hospitals and their medical staffs understand thecommunity’s most critical health care needs and perceptions,and put their collective shoulders behind unified solutionsdesigned to deliver the highest level of community benefitpossible.All of this - success and service delivery, building and sustainingpatient and community loyalty, building an unassailable marketreputation, and delivering a level of benefit the communitywants and deserves - result in the greatest opportunity to buildsustainable financial strength that will fuel the growth andrelationships of the future.Aligning Hospital and Physician Interests:Different Cultures, Differing Perspectives,Changing NeedsIn order to successfully align the interests of the hospital and itsphysicians, it’s important to understand what’s on physicians’Three Things Physicians WantHospitals seeking to improve cultural and organizational alignmentwith their medical staffs should recognize that among the manythings physicians are seeking, three things stand out:1. All physicians continually seek ways to ensure that they’re ableto meet their patients needs. A major factor for physicians ishaving access to the equipment, services and workforce theyneed to do their jobs well2. Physicians want to know hospital leadership is as committed toimproving quality and safety in the hospital as they are toproviding quality and safety in their does3. Physicians want to know that the hospital is not satisfied withthe status quo, but that instead hospital leadership iscontinually focusing on ways to improve the practiceenvironment and respond to the dramatic changes that areoccurring in the health care environment in ways that willminds today - what motivates their thinking, what challengesthey face and how the significantly different mindsets andpersonalities of physicians and hospital leaders can be broughttogether around a common commitment and purpose.Physicians face many significant practice development andprofessional growth challenges that can create either barriersor opportunities for greater alignment.In an environment where costs are rising dramatically on allhealth care fronts, physicians’ payments are under constantattack. Compensation limitations today, as well as concernsabout compensation trends for the future, are causing anincrease in physician interest in establishing “niche” servicesand facilities. While these niche services may increasephysicians’ volumes, they may erode the hospital’s service base,and create new challenges for the hospital, particularly whenthe services are profitable, in its quest to provide under orunreimbursed vitally needed services.In addition, the litigious nature of American society, coupledwith broad access to information about quality and safetystandards and performance, has fueled a striking increase inmedical liability costs for physicians. This has caused somephysicians to move their practices to states with less exposureto the risk of malpractice lawsuits, or close their practicesaltogether. In some areas, this has in turn put pressure onhospitals to curtail needed services, and invest significantresources into new physician recruitment.Finally, many physicians today view the traditional expectationto perform call and serve on a variety of hospital committees asa burden rather than a privilege. Many physicians, particularly63

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Constructive Hospital/Physician Relationships and Alignmentyounger physicians, will increasingly expect to becompensated by the hospital for these kinds of activities.Key Physician ChallengesPhysicians are challenged by many of the same issues facinghospitals today. Hospital boards need to recognize theparallels between the challenges they face and the challengestheir physicians face, and determine strategies to address theseissues collaboratively with their medical staff.Because of years of payment squeeze by Medicare, Medicaidand commercial payers, physicians are increasingly seekingways to generate new sources of practice revenue.In addition, in order to reduce their practice costs physiciansare increasingly looking for ways to improve the efficiency oftheir practices and the effectiveness of their operations.Coupled with that is a desire to achieve a greater level ofprofessional satisfaction during a time when financial,regulatory and operational pressures are greater than everbefore, and a need among many physicians to improve theirlifestyle, which oftentimes means asserting more control overtheir professional and personal time.The Goal: A Tight and Trusting RelationshipWithout a strong, robust, trustful relationship based on mutualneeds and expectations, the medical staff and hospital will notbe fully aligned, and the quality, efficiency and effectiveness ofcare may be affected. Both must see the arrangement as apartnership with equal give-and-take, and listen openly to theother’s ideas and needs. With a strong, vibrant relationship,quality care is provided to patients, preserving services andimproving patient loyalty and market share. This helpshospitals build financial strength and improves workforcemorale.A Hospital Where Physicians Would Send Their Family. Theultimate achievement is creating a hospital that physicians areloyal to, a hospital where they would send their own familiesfor care without hesitation. How is this done? According to arecent survey by Press Ganey Associates Inc., the best ways topromote physician loyalty are to improve ease of practice,improve quality of care and stay adaptable.Improve Ease of Practice. What will make a staff physicianloyal? Making their job easier. How can you do that?Make sure they have the tools they need— the services,the equipment and the personnel they need to effectivelydo their job.Improve Quality of Care. Physicians are genuinelyconcerned with quality of care. When they see highquality of care, they are more likely to recommend thehospital to their patients. It is important that physicianssee the leadership’s commitment to quality of care. Thisleads to physician loyalty to the leadership, and to thehospital itself.Stay Adaptable. When physicians perceive that thefacility’s leaders are adaptable to the health careenvironment, they become more loyal.A Shared Mission: It’s All About QualityBoth hospitals and physicians place a high importance onquality of care. Unfortunately, when the two are misalignedquality may suffer. Patients also recognize that wellcoordinatedcare is needed, but more than 40% reportedexperiencing “poorly coordinated, inefficient or unsafe care” inthe past two years, according to a 2006 Commonwealth Fundsurvey. 6 Improving quality continues to be a major initiative atmany hospitals in the U.S., however misalignment ischallenging improvement to quality of care.When physicians and hospital leaders work together anenvironment of higher quality of care is created. Increasedefficiency results, imaging and testing services are used moreappropriately, and therapies are prescribed more carefully.Positive outcomes also may include a reduction in medicationerrors, better use of services, (such as outpatient servicesinstead of inpatient), use of disease management programsand improving end-of-life care.A quality project undertaken by the Centers for Medicare andMedicaid Services (CMS) demonstrates the potential quality ofcare improvement when the hospital and medical staff arealigned. Between 1991 and 1996, a CMS demonstration projecttested the effectiveness of gainsharing. Gainsharing is apayment arrangement aligning physician incentives with thatof the hospital. Four hospitals agreed to accept a global ratecovering Medicare Parts A and B for patients having a coronaryartery bypass graft (CABG). Two of the hospitals chose toimplement a gainsharing program.These hospitals found cost reductions in intensive care,laboratory, routine nursing and pharmacy services costs. Notonly were costs reduced, but operating room procedures,64

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Constructive Hospital/Physician Relationships and Alignmentintensive care unit stays, and post-ICU stays were all reducedand patients had better outcomes overall. 7 Participatinghospitals determined that “aligning surgeons’ goals withhospital incentives to reduce costs was absolutely critical inchanging practice patterns and improving departmentefficiency.” 8When medical staffs and hospitals are aligned, medical errorsare reduced, patients have better outcomes, efficiency isimproved and overall quality of care improves. Increasedcooperation between the hospitals and physicians leads tobetter patient care and improved satisfaction. This commonmission should drive alignment initiatives.Causes of MisalignmentThe differences in the drivers and mindsets of physicians,administrators and trustees are often significant. But the factsof professional training, experience, needs and expectationsmust be taken into account as alignment strategies aredeveloped.Think for a moment about the environment in whichphysicians do their jobs, and the environment in whichadministrators and board members carry out theirresponsibilities.Differences in Perspective. Physicians are trained to reactquickly and provide evidence-based diagnoses and treatments.In many cases they’re expected to have an immediate responseand make rapid decisions under her intense time andemotional pressure. In addition, they work autonomously andindependently as advocates for individual patients in their care.They identify primarily with others in their profession, and bynature think, plan and act independently.Now think about administrators and boards of trustees. Theirperspectives and mindsets are almost opposite. They’re longtermplanners and thinkers who engage in broad groupdiscussions about organizational issues that may not bedecided for weeks, months or years. They’re individuals whodelegate much of their work to others and collaborate withbroad range of constituents and stakeholders. And rather thanfocusing on individual patients, they have a fiduciaryresponsibility to meet the needs of the broad community inboth clinical and non-clinical ways. Rather than relying on theirindependence, they instead value an ethic of interdependenceon one another for consensus-based thinking and decisionmaking.Besides the differences in the drivers and mindsets ofphysicians, administrators and trustees, several factors candisrupt the hospital/physician relationship, including a lack ofconsistent and meaningful physician involvement in hospitaldecision making; governance and leadership in attention to thecurrent and emerging challenges that physicians face inbuilding their practices; taking a dangerous “generic” view ofthe medical staff as a cohesive and like-minded group, ratherthan recognizing and understanding the real challenges, issuesand needs of individual physicians and practices; and findingthemselves in a situation like Fred and Dan, where the hospitaland its physicians compete in the service arena rather thancollaborate in ways that add strength and value to theirrespective missions and visions.Noblis recently studied the root causes of hospital/physicianmisalignment. Noblis, formerly known as Mitretek Healthcare,is a nonprofit science, technology and strategy organizationthat helps clients solve complex systems, process andinfrastructure problems.Noblis’ electronic survey targeted 3,000 Society for HealthcareStrategy and Market Development members, and wascompleted by 362 individuals. In addition, more than 60phone interviews were completed. One member, RicharddeFilippi, a Massachusetts Hospital trustee, characterized thedifferences between physicians and hospital executives thisway: “Physicians are not different creatures. Physicians do haveWarning Signs of MisalignmentBelow are some warning signs to be on the lookout for that mayindicate a seriously damaged medical staff/hospital relationship:Communication breakdowns inhibit flow and accuracy ofinformation between medical staff and the boardLack of common goalsSense of “separateness” and competitionBoard heavy-handedness and isolated decision makingInsufficient physician representation in governanceRoles and responsibilities of the board and medical executivecommittee are not well-defined or clearly understoodLack of mutual leadershipLack of meaningful development programs for physicianleadersLack of mutual leadership encounter opportunities such asretreatsDysfunctional personalities tend to be elected to medical staffleadership positions65

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Constructive Hospital/Physician Relationships and Alignmenta very different kind of pressure on them, though. It’s hard formost of us to really imagine the decisions and judgments thatphysicians have to make every single day. I’m not sure werealize how difficult physicians’ jobs are or how personallydriven they are to do their jobs right.”Similarly, physicians and executives have different expectationsin relation to time. According to Dr. Joseph Bujak, VicePresident of Medical Affairs for Kootenai Medical Center inIdaho and a leading health care consultant, perceptions of timecan create a division between physicians and hospital leaders.The definition of “now” is different to a physician than it is to anexecutive. For example, a member of the medical staff may tellan administrator that he needs new surgical equipment “now”and the administrator may agree to purchase the equipment,but it may not be purchased until the next budget cycle, whichis “now” to the executive. These varying expectations cancreate frustration for physicians and lead to anger or distrust.Poor Communication. Communication problems can alsocontribute to misalignment and are often due to culturaldivisions and false assumptions between physicians andexecutives. Dr. Bujak states that physicians have an “expert”culture while hospitals have a “collective or affiliative” culture.In the latter, process is more important and respectingemotions is essential. On the other hand, accomplishing goalsand exerting power motivate the physicians working in theexpert culture. 10Dr. Bujak also lists two specific false assumptions that impactcommunication, negatively affecting hospital/medical staffrelationships:The medical staff is organized and structured. Bujakargues that physicians long for autonomy, but are asked towork as a collective group, making decisions for theorganization as a whole. This can cause the group to bereactive and not proactive. It hinders leadership, becausewhen acting collectively, “physicians function as a townhall democracy in which one person gets one vote andmajority rules.”All physicians are alike. Another false assumption is thatall physicians are alike. Bujak believes that there is notenough dialog between the hospital leaders, boardmembers, and physicians, and this creates a hostileenvironment where money and control becomes thefocus.Building an organizational culture and dispelling falseassumptions will improve communication betweenhospital leaders and physicians creating a stronger, robustalignment.Financial Pressures From Physician Competitors. Let’s goback to the conversation between Fred and Dan. Dan and hispartner Joan were striking out on their own to join a largeindependent general surgery group. What’s motivatingphysicians like Dan and Joan to do that?The desire to form or join physician-owned organizations is afunction of the health care times we live in. Physicians areseeking more autonomy, independence and control. In manycases they are frustrated by systems, facilities and processesthat stifle their desire for efficiency and productivity.More than ever, physicians want to avoid bureaucracy andstructure that impedes their ability to serve their patient’sneeds with speed, efficiency, cost effectiveness and quality.In addition, physicians want to capitalize on the availability ofnew technology, which they sometimes are not able to getthrough hospitals’ typical capital planning and allocationprocesses. They also want to improve their ability to providehigh quality patient service and satisfaction, as well as increasetheir incomes and gain greater personal satisfaction from thework they do.Traditionally hospitals and physicians have worked closelytogether in a synergistic, if not always sympathetic andstreamlined manner, with each recognizing that it needs theother in order to be successful.Today, however, in some cases physicians have emerged as thenew competitors on the block, creating what hospitals view asadditional strains on the hospital/physician relationship, andpotentially eroding the hospital’s ability to create the mostcoordinated, collaborative and customer-centric care possiblefor its community.Physicians, on the other hand, maintain that by carving outspecialty services they are providing improved customerchoice, improving access and quality, and bringing neededcompetition to the marketplace.The problem for hospitals is that in many cases, competingwith physicians in duplicated service areas reduces thehospital’s ability to successfully subsidize programs andservices that are not reimbursed, or are inadequatelyreimbursed, but which are a critical part of the hospital’scommunity mission.Competition with physicians over services can increasefinancial pressure on the hospital, and potentially cause66

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Constructive Hospital/Physician Relationships and Alignmentcommunity confusion about who is providing the bestservices, and why physicians are choosing to provide servicesoutside the hospital setting.In addition, competition contributes to medical staff turmoil,impacts workforce morale and can result in a loss of valuableemployees who may choose to work in another care settingrather than continue to work at the hospital.Not-for-profit hospitals are increasingly challenged to achievetheir underlying mission and serve their communities ascompetition grows from specialty providers that tend to focuson profitable procedures, often called “physician-owned,”“specialty care,” “limited service” or “niche” providers.Although the idea of limited service providers is nothing new,their recent rate of growth is. Limited service providers can bein the form of cardiac hospitals, cancer centers, imagingcenters, mammography centers, ambulatory surgery centers(ASC), pain centers, dialysis clinics and other facilities generallyowned or at least part-owned by physicians who refer patientsto them. The services and procedures offered at limited servicehospitals are often the same profitable procedures thatAmerica’s hospitals rely on to help subsidize the proceduresthat are under-reimbursed or not paid for at all, such asemergency departments and burn units.In response to growing financial pressures and frustration withthe health care system, physicians open limited service facilitieswith the objective of enabling their practices to be moreprofitable, increase their productivity and build greatersatisfaction for their patients. In addition, by focusing on asmaller number of services and procedures, physicians’ liabilityis limited and malpractice insurance becomes more affordable.As a result, limited service providers have grown steadily overthe last decade. According to the American HospitalAssociation, limited-service hospitals grew an average of 20percent each year, from 1997 to 2003. Currently, surgicalcenters are the most common type of limited service provider,followed by providers specializing in cardiac and orthopedicservices.Lack of Trust. A lack of trust can directly affect alignmentbetween hospitals and physicians. When physicians becomeunhappy or disgruntled with their experience with a hospital,they may become competitors.Although both hospital executives and physicians believe intreating patients with quality care, each may have its ownvision as to how to execute that goal.A lack of trust will only continue to negatively affectrelationships between hospital leaders and the medical staff. Inorder to create a meaningful partnership for patient care, bothphysicians and hospital leaders must move beyondcompetition to build better relationships and improvealignment.Lack of Hospital Appreciation of Physicians’ Challenges. Thechanging health care environment continues to strainphysicians as they experience a loss of autonomy, highmalpractice costs, increased administrative responsibilities,competition, regulatory requirements, and tighterreimbursement. Many board members and executives do notfully understand the difficult economic pressures faced byphysicians, in many cases they are not aware or educatedabout these issues, alienating physician participation becauseof the lack of understanding of the challenges they face.The board needs to be willing to listen to and work withphysicians in order to provide a positive outcome. It is alsoimportant to identify key objectives that affect both the boardand physicians, strengthening the working relationshipbetween the two through open communication. Effort mustbe made to recognize physicians’ goals and work to align thesewith hospital practices in order to encourage the two parties towork together.But despite differences in mindset and direction, and despitethe factors that can disrupt the hospital/physician relationship,one critical, single thing binds both hospitals and physicians,and has the potential to bring them together - a jointcommitment to service, quality, patient safety and patientloyalty.This is the centerpiece of creating meaningful hospital/medicalstaff alignment. Because while hospitals and physicians maydisagree, or find themselves at odds on many things and inmany areas, the commitment to providing the right care in theright way at the right time, in the safest manner and with thehighest level of quality will always be at the heart of whathospitals and physicians are all about.Bridging the Gap: Strategies for SuccessDr. Bujak suggests getting rid of the “generic image ofphysicians.” He explains that boards “see doctors as thisgeneric entity and are constantly asking questions conveyingthis bias. ‘Tell me, what do the doctors think?’…What ‘he said’suddenly becomes the gospel. The medical staff is not a67

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Constructive Hospital/Physician Relationships and Alignmentsingular entity, it is pluralistic. Boards…must stop dealing withTHE medical staff and start dealing with physicians in subsets.”The question is, how do you do that?The three strategies described below will help encourage asuccessful, steadfast relationship between hospitals and theirmedical staff. They include: 1) involving physicians; 2)understanding physician needs; and 3) creating mutuallybeneficial collaborative business relationships.Involve Physicians. One key strategy for success is to involvephysicians in hospital leadership. Physician leadershipencourages loyalty to the hospital, and physicians haveexperience and knowledge that is beneficial to leadership.What does the ideal physician leader look like? According to aroundtable discussion of health care experts, a number ofimportant characteristics describe the ideal physician leader.Building Strong and Sustainable TrustBuilding strong and sustainable trust is achieved in a number ofways, including:Making physicians well aware of the board’s support in helpingthem cope with the challenges they face every dayEnsuring that physicians are included in meaningful ways astrue partners for hospital progress, and making sure they areinvolved in all critical areas of hospital decision-makingHolding both management and the board fully accountable fordefining physician alignment, and including it in the strategicplan as a strategic imperativeEnsuring that all commitments are backed up with concreteactions and accountability, walking the walk, not just talking thetalk of hospital/physician alignmentListening to physicians, not simply hearing what they have tosayMaking sure that physicians know that the hospital iscommitted to providing a consistent, well-defined andpredictable commitment to helping them achieve their goalsDeveloping joint statements of mission, values and vision thatare mutually shared, but more importantly truly believed in andpracticed by both the hospital and physiciansRecognizing that while today’s health care system naturallycreates tension and competitive challenges, it also createsunique opportunities for meaningful collaboration and jointventures where additional value can be created and betterservice to patients and communities can be providedThe experts discussed the importance of key personalitycharacteristics. Good communication, people skills, honestyand the ability to be straightforward are all vital to gain respectas a leader. For those physician leaders who do not haveformal business training, developing business skills throughexperience and further education can be important tosupplement a clinical career. Keep these in mind as you makedecisions about physician leaders. Encourage physicianleaders, as they can improve physician loyalty and improverelations between the medical staff and the hospital.Understand the Needs of Physicians. To maintain physicianloyalty to the hospital, it is important to understand theirneeds, demonstrate to physicians the hospital’s understandingof the difficulties they face in practicing medicine, and showthem what action is being taken to minimize or remove theseobstacles. To ensure understanding, it is a good idea toconduct an annual medical staff satisfaction survey. This surveywill clarify physicians’ opinions about a broad range of issuesrelating to their practice needs, and their relationship with thehospital.Create Mutually Beneficial Collaborative BusinessRelationships. As previously mentioned, limited serviceshospitals are causing a disconnect between hospitals andphysicians, and are threatening the financial stability of manyhospitals. In today’s health care environment there are twochoices for hospitals and physicians: either compete orcollaborate. As Dr. Charles Peck stated in a story in ThePhysician Executive, “Physicians and hospitals collectively sufferfrom ‘mural dyslexia,’ characterized by an inability to read thehandwriting on the wall. The handwriting is indeed clear.”“Hospitals must collaborate with doctors because the mostexpensive piece of medical technology is the physician’s pen.In turn doctors must collaborate with someone, and thehospital remains the natural partner.” Creating mutuallybeneficial collaborative business relationships can lead to arobust, successful alignment and increase financial success.Joint ventures are growing in popularity because they benefitboth hospitals and physicians. Collaborative businessrelationships provide both defensive and offensive solutions, ashospitals want to continue to protect their existing marketshare and grow. It also allows them to have better control ofthe market while improving patient satisfaction and efficiency.Steps to Build AlignmentConsider the five essentials below to help build a strong,sustainable relationship with the medical staff. When these five68

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Constructive Hospital/Physician Relationships and Alignmentelements are embedded in the relationship, physician andhospital allies will be created.1. Trust. Trust is an essential part of any successfulrelationship and is critical for building successful, lastingrelationships. Without trust, doubt, uncertainty andreservations will ruin any potential for alignment.According to a recent article in the Journal of HealthcareManagement, “no matter how innovative, equity-oriented,or financially beneficial the physician-health systemrelationship may be, they will fail in the absence of mutualtrust and feelings of shared destiny that are engenderedby the environment in which the relationships are forged.”Physicians and hospital executives must trust one another.Barriers to trust include miscommunication, differentbackgrounds, and other issues discussed earlier. Renewtrust and create an alignment between the hospital andmedical staff by understanding the needs of both entitiesand using a board-driven alignment strategy.Specific ideas for establishing trust include:Creating Opportunities for Collaboration Ask what makes a physician’s life more convenient Invest significant time in building relationships Engage physicians intellectually Challenge physicians to advance the institutionwith the board about these issues before decisions aremade; Create means for regular communication with theentire medical staff; and Provide physicians with a forum to provide input intoimportant decisions before they are made.3. Voice. Allow physicians to share their expectations,experiences and ideas in order to encourage a relationshipbuilt on trust and communication. Provide physicians witha voice by:Make a clear commitment to support physicians inthe turbulent economic and operational challengesthey face;Giving physicians adequate representation on theboard of directors and on relevant board and hospitalcommittees and subcommittees;Answer commitments with concrete actions to makethe hospital a more productive, efficient environmentfor physicians;Include physicians in various stages of planning andbudgeting to give them more responsibility for thehospital;Respond to physician input about quality and thegeneral practice of medicine at the hospital; andKeep the board up-to-date on increasing restrictionsand economic challenges that physicians face. Allowopportunities for the medical staff to share theseissues with board members directly.2. Communication. When good communication is lacking,misunderstanding occurs. Steps for improvingcommunication include: Make the CEO regularly available to physicians throughdedicated time listening to and communicating withmembers of the medical staff; Create systems that alert physicians of critical issues.Allow the medical staff an opportunity to provide inputIncluding medical staff leaders at meetings wherecritical issues are discussed; andCreating a formal program for training physicianleaders.4. Relationships. Building positive relationships betweenphysicians and executives is critical. Tips and strategies toimprove relationships include:Conduct an assessment of the current relationshipand identify strengths and weaknesses that need tobe addressed;Provide assistance to help physician groups developorganizational maturity;Improve communication between the hospital, theboard and physicians. Include physicians on theboard, and in joint planning activities, leadershipretreats and social events;Address conflict at the earliest possible stage;Monitor the relationship and look for opportunities toconstantly improve it;69

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Constructive Hospital/Physician Relationships and AlignmentTen Tips for ImprovingHospital/Physician RelationshipsIn starting a campaign to improve hospital/physician alignment,consider these tips for better relationships.1 Open and honest communication2 Physician involvement in decision making3 Economic alignment with physicians where it makes sense4 Improve efficiency to strengthen the practice environment5 Support physician practice needs6 Strong physician leadership7 Positive organizational culture8 Consistently high quality and safe care9 IT partnerships10 Board visibility and accessibilityHost informal social gatherings to promoterelationship growth between administrators, boardmembers and medical staff; andCreate opportunities for community events whereexecutives, physicians and board members can seefirst-hand the impact of their joint initiatives.5. Connections. Creating mutually beneficial collaborativebusinesses will establish a link between physicians andexecutives. Although creating joint ventures may not bean option for every hospital, there are many other ways tobuild alliances between the hospital and physicians andcreate opportunities for success for both.Potential Problems with CollaborativeBusinessesCreating a collaborative business enterprise is no easy task, andis not for every organization. Hospitals and physicians mustcomplete a rigorous business assessment to determine thepossibilities for success based on industry, market, financial andorganization-specific factors. It is also important to investigatepotential problems and issues. According to a recent article inTrustee Magazine, the following ten issues need to beexamined before starting a new collaborative business:1. Business Activity: Can this business legally be owned by ahospital and physicians that refer their own patients?What is the technical legal description of businessactivities?2. Scope of Business: What businesses are the parties willingto invest in? Does the hospital agree to share services ithas been in control of in the past?3. Ownership: Will the hospital accept ownership less than51 percent and under what circumstances? What are thetax implications for different ownership ratios?4. Control: Who will control the joint venture? Will it have aboard or will the owners control it? Will control determinethe ownership percentages?5. Investors: What are the investment restrictions? Will allpotential partners be allowed to invest? What about newpartners? What about for-profit firms, like managementcompanies?6. Reserved Powers/Guarantees: Will there benoncompetition agreements prohibiting investment inother competing businesses? Are there any othercompliance issues to iron out?7. Payment and Free Care: What are the policies for patientswho can’t pay? Will Medicare and Medicaid patients beaccepted? A charity care policy should be established toaddress these concerns.8. Valuations: Are all parties willing to use third-partyvaluations of assets? This can add expense, but it protectsparties under Medicare law and the IRS.9. Unwind Provisions: Organized legal documents need tohave unwind provisions written in. Have all partiesconsidered what would constitute the deal to beunwound and how these scenarios would be handled?10. Structuring the Joint Venture: Is a joint venture the bestoption for the business? There are alternative businessstructures that may be a better choice.Complete transparency is needed for all parties involved injoint venture planning and formation. With an absoluteunderstanding of the risks and technicalities of the business, allindividuals included will know what they are getting into.70

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Constructive Hospital/Physician Relationships and AlignmentNine Steps to Understanding Physician Challenges and Building AlignmentThe following nine steps describe a plan to gain understanding of the challenges and needs of physicians and the community and how to create aplan to improve alignment between medical staff and the hospital.1 Develop a service area analysis. Research the payer mix, economic data and gather historical market and community health information inorder to paint a picture of the needs of the community.2 Profile the medical staff, examining hospital admissions and turnover and recruitment trends, listing physicians, by specialty type, age andclinic affiliation. This step will reveal how to create the right balance within the medical staff.3 Survey and interview the medical staff to determine how to keep current staff loyal and motivated to provide great care for patients.4 Interview trustees and hospital administrative staff to understand their view of medical staff needs for the hospital.5 Examine trends in discharges and market share trends by major diagnostic code and zip code to understand market trends like outmigration.6 Survey the community, examining viewpoints about physicians and the hospital, health risks and barriers to care in order to understand theneeds of residents in the area.7 Identify “gaps” in the medical staff, like emerging staff shortages, while involving physicians in planning to create a common mission andvision.8 Create a medical staff/community needs summary report, summarizing the needs of the community and medical staff and incorporating themission and vision of the hospital, projecting the staff needs and opportunities, and recognizing the factors needed for success will facilitatecollaboration on opportunities.9 Present results to the board, medical staff, management and others so they can understand and learn what is needed to improve alignmentand build the best hospital to serve the community.The Role of the Board: Creating a Culture ofCollaborationThink about the initiatives that hospital boards are pursuing toimprove relationships and alignment between the hospital andphysicians. What governance leadership is the board providingto ensure constructive relationships? In establishing goals,what is your future vision for hospital/physician relationships?Create Partners for Progress. As trustees you must work tocreate partnerships between the medical staff and the hospital.The Center for Healthcare Governance suggests that the boarddo three things to facilitate a business partnership betweenhospitals and physicians.First, move beyond operational relationships into morephysician-based partnerships for system-wide services,governance, accountability and incentives, and continuityof care and care improvement through technology.Second, create an environment that encouragesphysicians to work on business development, quality ofcare, customer service, simplifying internal systems, stayingabreast of business trends and balancing risks and rewards.Finally, build an entrepreneurial infrastructure based oncollaboration that develops funds for investment,establishes a business strategy, develops new businessopportunities, and publishes results. For someorganizations creating a business partnership between thehospital and physicians is the best way to align the twoand improve relations.Promote Collaboration. Board members need to besupportive and open-minded about new business venturesand the potential for improving the current business model.There may be many risks involved and trustees shoulddetermine if the benefits outweigh the risks. In order tomaximize benefits and decrease risks, create hospitalcollaboration policies and principles. Boards need to adviseand consent to the mission, vision and goals, and create anenvironment of collaboration. All of these should emphasizepartnership and acceptance of nontraditional health caremodels.The Center for Healthcare Governance encouragescollaboration that is supported by the board. “Hospitalgoverning boards will need to take the lead in moving theirorganizations beyond only seeking excellent relationships withphysicians to creating an environment of ongoing marketbasedcollaboration. While proven models and emergingopportunities for these types of collaborations exist, theimpetus for them needs to start with the board.” 1971

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Constructive Hospital/Physician Relationships and AlignmentUnderstanding Needs, Aligning Focus, BuildingBridges: A Board-Driven ProcessOne of the ways to build trust, open up lines ofcommunication, provide physicians with a real voice and buildpersonal relationships is to involve physicians in verymeaningful ways in understanding community needs anddesigning collaborative strategies for meeting those needs.Accomplishing that requires a board driven process thatengages physicians in assessing service area needs, gaugingmedical staff needs and opportunities, and collaborating onmutual opportunities for community service and communityhealth improvement.Here’s a nine step process for accomplishing these importantobjectives:1. The Market You Serve: First, work with the medical staff toassess your service area. That includes gathering historicalmarket information, developing a demographic profile,with projections for the future, gathering and assimilatinglocal-area market and economic data, assembling readilyavailable information on community health status andrisks, and analyzing the payer mix, and potential changesto that mix based on projected market trends.2. Medical Staff Resources Today and Tomorrow: Next,work with the medical staff to develop a medical staffprofile that defines medical staff resources today, anddevelopment needs for tomorrow. This part of the processwould include an assessment of physicians by specialty,age, clinic affiliation, and other relevant factors; admissiontrends and volumes, by specialty; and an analysis ofturnover and recruitment trends, with an eye towarddetermining medical staff development needs the future.3. The View from the Physician Front Lines: Third, secureviewpoints from the physician front lines. You can do thisby conducting a medical staff survey of physicianviewpoints about the hospital, equipment and supportneeds and major issues and challenges facing physicians.In addition to a broad medical staff survey, some physicianleaders should be interviewed personally to gain theirinsights about emerging opportunities, areas of physicianneed and requirements for future medical staffdevelopment.The medical staff needs assessment can be conducted asan online survey or printed survey (or both), whicheverbest meets your medical staff’s needs. Questions on thesurvey should be precise and focused, and the surveyshould be constructed to determine areas of agreementand disagreement in a variety of areas. It should alsoinclude several open-ended questions where physiciansare invited to express their verbatim views in a variety ofimportant areas.Areas you may want to assess in your medical staff needssurvey included viewpoints about hospital performanceand support, ways to build increased hospitalcompetitiveness, influencers of individual practice success,views about significant community health issues that needto be addressed, patient care issues, hospital strategicdevelopment challenges, information about referralpatterns and the rationale for those patterns, ideas forservice expansion of service improvement, and viewsabout hospital recruitment needs and objectives.4. Expanding the View: Additional Perspectives: Otherpersonal interviews should also be conducted as part ofthe strategic assessment, including interviews with thehospital’s administrative staff and trustees. Theseinterviews should be used to compare and contrast nonphysicianleadership ideas and viewpoints with those ofthe medical staff to determine areas of concurrence andareas of divergence.5. Where Do They Go, and Why? The fifth step in the processis to develop an analysis of patient outmigration trends.Outmigration should be determined by measuringdischarges from various hospitals of residents of zip codesin the primary and secondary service areas. It shoulddefine the hospital’s market share by major diagnosticcategory, or by DRG.6. What Are the Needs? Making the CommunityConnection: The sixth step in the process is to conduct anassessment of perceptions about community healthneeds. This involves surveying residents’ viewpoints aboutphysicians and the hospital, community satisfaction withavailable health resources, an assessment of health risks,barriers to access to care, and perceptions about unmethealth care needs. It should result in a projection of bothcurrent and future needs that will provide clear insightsinto service expansion opportunities and medical staffdevelopment needs.7. Identify the Evidence-Based Medical Staff Gaps: At thispoint in the process you’ll have the evidence you need todefine any gaps between medical staff needs and medicalstaff supply. Your physicians will have been intimatelyinvolved in the strategic assessment process, and shouldbe fully engaged in helping to design solutions andrecommendations to fill the emerging gaps.72

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Constructive Hospital/Physician Relationships and AlignmentAt this point you’ll also begin to engage physicians inidentifying ideas for joint hospital/physician planning tomeet emerging needs, and you’ll begin to come to aconsensus around a common mission and vision formoving forward.8. Collaborate on Opportunities: Once all this work hasbeen completed you’ll be in a position to develop a reportthat will summarize your process and findings to-date.The report would likely include the mission and vision, andrelevant elements from the hospital’s strategic plan thatrelate to process findings. In addition, it would include aprojection of future medical staff development needs andopportunities, critical factors in ensuring alignmentsuccess moving forward, and joint recommendations tothe board of trustees from medical staff leaders,administrative team members, trustees and others whoworked together in the process.9. Come to a Consensus: And finally, with a properlyprepared and well-executed process will come aconsensus that will be evident in the report that ispresented to the board of trustees, the medical staff, themanagement team and others whose understanding andbuy in to the process is critical.Have a focused discussion about the state of alignment atyour hospital - your risks, needs and opportunities;Ask what initiatives are being pursued right now toimprove hospital/physician relationships and alignment;Assess the scope and value of the specific government’sleadership your board is providing to ensure constructivehospital/physician relationships;Conduct a thorough, evidence-based, physician-centeredcommunity needs assessment; andMake hospital/medical staff alignment a strategic boardpriority, and back it with the appropriate resources.ConclusionIn the final analysis, trust between the hospital and the medicalstaff will be built on a foundation of collaboration,communication, common objectives and mutual dependence.Nurturing a trust-based hospital/medical staff relationship willhelp to ensure the hospital’s ability to respond effectively tofuture issues and challenges.Action AgendaReal, effective alignment may not occur without strongleadership from the board. Here are some ideas for putting thepower of governance to work:Sources and Additional Information1. Rice, J. Developing a partnering culture: the role of board and management in improving medical staff relations. Healthcare Executive. May/June, 2002.2. Berenson et al. Hospital-physician relations: cooperation, competition, or separation? Health Affairs. December, 5, 2006.3. Orlikoff, J. and Totten, M. The hospital-physician relationship: redefining the rules of engagement. Trustee Workbook. February 2005.4. Are you looking for a fresh start with your MDs? Hospitals and Health Networks. May, 2005.5. Mitretek Healthcare. Strengthening hospital-physician relationships presentation. Trustee Conference. January, 12, 2007.6. Schoen et al. Public views on shaping the future of the US health care system. August, 2006.7. Wilensky et al. Gain sharing: a good concept getting a bad name? Health Affairs. December, 5, 2006.8. OIG. Fact sheet: federal anti-kickback law and regulatory safe harbors. November, 1999.9. Jeffries, C. “Herding Cats: Leadership is Possible.”10. Bujak, Joseph. How to improve hospital-physician relations. Frontiers of Health Services Management. 20:2.11. Schein, EH. Organizational culture and leadership. San Francisco: Jossey-Bass, 1992.73

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding Constructive Hospital/Physician Relationships and Alignment12. The Governance Institute.13. Fabrizio, N. What can MDs bring to your board? Trustee. January, 1999.14. HealthLeaders panel of experts. Physician leadership: more than clinical excellence. HealthLeaders Roundtable. October 2002.15. Thrall. Money matters, but MDs want much more. Hospitals and Health Networks. February, 2007.16. Peck. The Enterprise Circle. The Physician Executive. January/February 2001.17. Boards and docs: a critical relationship. Trustee. February 2007.18. Lifton and Bryant. Establishing principles for hospital-physician joint ventures. Trustee. February, 2006.19. Developing a Partnership Culture. Healthcare Executive. May/June 2002.20. Healthcare Financial Management Association. Baylor finds success with joint venture specialty hospital. HFMA wants you to know newsletter.February, 8, 2006.21. Baylor Healthcare website. http://www.baylorhealth.com/aboutus/press/2007/012607b.htm. Accessed 6/13/07.22. Healthcare Financial Management Association. Report 4: joint ventures with physicians and other partners. Financing the future II white paper.2006.23. Center for Healthcare Governance. Exploring hospital-physician business relationships: what trustees need to know. Monograph Series. 2005.74

20 Questions Every Washington Hospital Board Needs to be Able to AnswerHow should the board gauge thehospitals’ financial performance?The board is responsible for the financial success of the hospital. In order to fulfill this fiduciaryresponsibility, trustees must have a solid grasp of the indicators of the hospital’s financial health,and be knowledgeable about key financial interrelationships.For the lay person, or the person with limited knowledgeof financial statements and financial statement analysis,the issue of corporate governance and oversight as theyrelate to financial statement analysis can be an intimidatingtask. In order to effectively serve as a board member, trusteesmust begin by understanding their responsibility as a boardmember, and then learn the financial basics necessary to fulfilltheir role.The Board’s Role in Financial OversightThe board is responsible for the financial success of thehospital, and fulfills a fiduciary responsibility that is defined as: aduty of organizational loyalty; a duty of care throughapplication of business judgment; and a duty of obedience inabiding by laws, regulations and standards of hospitaloperations. Given recent fiascos such as the Enron, WorldComand HealthSouth governance failures which have led tocharges against board members entrusted to protect thecorporation’s assets, the responsibilities of hospital boardmembers are greater than ever.Applying firm and consistent ethical practices to decisionmakingresponsibilities is a necessary hallmark of the hospitalboard. An abiding interest in utilizing a “moral compass,” wellestablishedethical principles to be used when deciding aboutboard actions that concern ethical/moral dilemmas of servicesprovided to the community served, provides the necessarybalance to board decisions.Boards have a broad responsibility to protect the limitedresources of the hospital to ensure optimum services andbenefit to the community. The board must ensure the costeffectiveutilization of resources and the establishment of bothlong-range and short-range financial plans. The board shouldregularly review meaningful and understandable financialreports, ensure that adequate capital is available for thehospital’s investment strategies, and actively participate in andencourage regular philanthropic efforts.One of the most critical functions of the governing board isprotecting the hospital’s financial status. The board shouldestablish financial goals in a variety of key areas includinggrowth, debt capacity, return on equity and other areas thatdefine financial success. The board approves the annualoperating and capital budgets, receives and approves a varietyof budget reports throughout the year, primarily through afinance committee, and oversees the hospital’s investmentpolicies and goals.In addition, boards of trustees are typically involved inassessing the impact of the hospital’s pricing strategies anddiscount policies, and become involved in discussing andapproving contractual arrangements and other determinantsof financial performance. Boards also determine policy onuncompensated care, provision of needed community servicesthat may not be financially viable, and development ofdiversified revenue streams.Furthermore, boards are responsible for ensuring that thehospital consistently complies with all applicable laws andregulations. In recent years, particularly as managed caredeveloped, Medicare and Medicaid payments have not keptpace with inflation, and hospitals have increasinglyexperienced financial difficulties. With the federalgovernment’s emphasis on detecting and punishing healthcare fraud, trustees must ensure that an ethical businessclimate always exists in the hospital, and in particular thatfinancial procedures and processes are conducted in an ethicalmanner.75

20 Questions Every Washington Hospital Board Needs to be Able to AnswerFinancial Basics for TrusteesActions Boards of Trustees Can Take: Financial Focus and LeadershipEnsure that annual operating and capital budgets are developed and approved, and that rolling 3-5 year financial forecasts are producedIdentify, review and approve targets for debt, liquidity, ROI, profitability, and other important measures of financial and operationalperformance needed by the board to monitor organizational performance and make timely, informed decisionsEnsure that key financial ratios are monitored at least quarterly, and that financial and operational implications and corrective measures aredeveloped by management, when appropriateDevelop a reporting style that is easy to understand, highlights major trends, and stimulates creative discussionExercise broad authority to protect the limited resources both of the institution and the communityEnsure the cost-effectiveness utilization of resourcesLead the development of long-range and short-range financial plans, performance evaluation against the plans, and regular financial reportsto the boardReview the types and scope of services being offeredEnsure that adequate capital is available for the organization’s investment strategiesActively encourage philanthropic supportApprove the budget and provide for day-to-day cash needsDetermine fiscal policy relating to insurance coverage, discount policies and third-party reimbursementDetermine policy on the provision of needed community servicesComplianceA strong and effective compliance plan is a comprehensivestrategy that ensures that the hospital consistently complieswith all state and federal laws governing its activities and thedelivery of health care. It also ensures that the hospitalconsistently complies with the applicable laws relating to itsbusiness practices.A key board responsibility is determining the hospital’s financialgoals and monitoring its operations to ensure the attainmentof those goals. The annual budget is the primary vehicle for theboard and administration to establish financial objectives.Board members must clearly understand the assumptionsupon which the budget is based. Budget assumptions shouldbe reasonable and clearly understood, and should tie directlyto service development and to the hospitals mission, vision andstrategies.The governing board also has a responsibility to engageexternal auditors to perform an annual audit of the hospital’sfinancial records. This audit helps the board determine if thefinancial position and operations are accurately and fairlypresented, and are in accordance with generally acceptedaccounting principles. The board should use the auditedfinancial statements to determine whether the hospital isreaching its established financial and operational targets; itshould be a tool in helping to determine progress and assesswhether goals and strategies require modification.The board’s financial planning direction and decisions shouldflow out of the hospital’s long-range strategic planninginitiatives. Studies of the financial feasibility of new programs orcapital acquisitions should be regularly performed andreported to the board. The board should then use financialperformance against budget and compared to peer groups asa tool for gauging organizational progress and effectiveness.Financial BasicsAs a general overview, there are three basic statements thatboard members should review. These statements, the BalanceSheet, Statement of Operations and the Statement of CashFlows, should be reviewed together, rather than on a standalonebasis, since they are all interrelated. Problems that mightbe masked by looking at one or two statements become easierto identify when examining all three together.The Balance SheetThe balance sheet lists the assets, liabilities, and equity of thehospital. It also classifies those assets which are expected to beturned into cash within one year (identified as “current assets”),and those debts which are going to be due for payment to thelender within one year (identified as “current liabilities”).The Statement of OperationsThe statement of operations (or “income statement”) identifiesthe sources and amounts of revenue after they have beenadjusted for contractual allowances, as well as the operationaland non-operational expenses of the organization. It providesthe reader with the “bottom line” of the organization, fromboth an operating and non-operating basis.76

20 Questions Every Washington Hospital Board Needs to be Able to AnswerFinancial Basics for TrusteesThe Statement of Cash FlowsThe statement of cash flows is without a doubt the statementthat provides the most confusion in financial statementanalysis. This is unfortunate, since it can in certaincircumstances be the most important statement reviewed. Thestatement of cash flows identifies the sources and uses of cash.It attempts to explain to the reader where the cash is comingfrom, and what it is being used for.What is your organization’s cash balance? What is that cashbeing used for? Is there a declining balance? Are largepayments due to be paid on debt which will reduce theamount of cash further, and which will strain the organization?How can you find the answers to these questions?These questions can be answered by looking at the statementof cash flows and the balance sheet. The balance sheet lists thecash balance as the first item. On comparative statements(statements with balance information from prior periods listedfor comparative purposes next to the current information) youcan see if the cash has increased or decreased since that time.But the most important question to ask is what is causing thecash balance to go up or down. This can be answered byreviewing the statement of cash flows. This statement tells thereader where the cash is coming from and where it is going.For instance:If the source of the increase or decrease in cash is from theoperations of the organization, than there will be anincrease or decrease in the line “Net increase (decrease) incash from operating activities”If the source of the increase or decrease is from purchasesor sales of fixed assets or from purchases or sales ofinvestments of the organization, there will be an increaseor decrease in the line “Net increase (decrease) in cashfrom investing activities”If the source of the increase or decrease in cash is fromincurring debt or repayment of debt, or from equityrelated activities, then there will be an increase or decreasein the line “Net increase (decrease) in cash from financingactivities”The question to ask is “why is our cash balance increasing ordecreasing?” Just because a hospital has more or less cash thanit had in the prior month is not necessarily a cause for alarm.The reasons are many and varied, good and bad. Did yourefinance or incur new debt? Did you make a large debtpayment? Is operations using cash, or providing cash to theorganization? Did you purchase fixed assets or property?Financial Warning SignsBelow are several key warning signs boards must watch for whenreviewing hospital financial statements. When these warning signsoccur, trustees must ask management for more information, anddevelop an action plan to address the problem.1. More accounts receivable and/or accounts payables2. Shrinking operating margin3. Less cash4. Decreased market share5. Loss of key admitting physicians6. Organizational inability to measure monthly financial andoperating performance, and report in a timely manner to theboard7. Negative variations from approved budgets8. Organizational inability to respond to regulatory actions9. Advisor turnover (especially legal or accounting advisors)10. Rating agencies’ debt downgrades and/or change to negativeoutlook11. Violations of restrictive covenants in borrowing and creditenhancement agreements12. Executive compensation and benefits packages that arecontrolled by management and not the board13. Management recommendations to diversify in order toincrease revenue when internal operations are not wellcontrolledSource: Best Financial Practices for Trustees, James S. Vaughan, Principal,Catherine J. Robins, VP, Cain Brothers. Trustee Magazine. March 2001.Another question to ask related to cash is “what is our cashbalance anticipated to be in the future?” Do we have any largedebt payments or other obligations that we are going to berequired to pay in the near future? This can be answered bylooking at the balance sheet and seeing if the current liabilitiesare large, or if they have increased over the prior comparativebalances.Accounts Receivable and RevenueMost of the revenue derived from patients is received basedupon contractual arrangements with payers. The hospitalrecords revenue for the services at a standard amount, calledthe Gross Revenue amount, and then adjusts this amountdown through a Contractual Allowance or Adjustment to77

20 Questions Every Washington Hospital Board Needs to be Able to AnswerFinancial Basics for Trusteesrecord the actual amount which it will receive. Thecorresponding accounts receivable for the balance due isbased upon the adjusted or Net Revenue amount.InvestmentsInvestments by the organization are a critical area to monitor.When the organization invests in an affiliated or unaffiliatedentity, such as a medical office building or a partnership with amedical imaging organization, the income and losses of thoseinvestments need to be recorded by the investingorganization.Those persons responsible for oversight of the organizationneed to be aware of the results of operations of theseinvestments and management’s level of responsibility in theinvestment. Is your organization responsible for debt of theinvestee organization if the investment becomes insolvent? Askmanagement for details of all material investments. Ask if theorganization is liable for losses. Ask if all losses are beingrecorded properly.LiabilitiesManagement is required to record a liability when theybecome aware of the liability and when the amount of theliability can be determined. Management is given some leewayin estimating the amount of liability to record, based upon theirjudgment of the likelihood of occurrence of the event or thedegree to which changes in the amount due could changeover time.Increases in accounts payable on the balance sheet should beunderstood by those responsible for oversight. Anunderstanding of why there have been increases is necessaryfor proper governance. Is management holding back paymentto increase cash balances? Has the aging of accounts payableincreased and are large repayments going to be required in thenear future?Current and Long Term DebtCurrent and long term debt is a very important area tounderstand and monitor. Increases in debt without increases ininvestments or fixed assets could signal borrowings being usedfor operational purposes. Understanding the dates that thedebt facilities are due to be paid off is critical for cashmanagement. Shortfalls in cash balances should be forecastedby management and discussed. Are bond repaymentsanticipated in the cash flow model of the organization? Couldexisting debt be refinanced to obtain better interest rates andrepayment terms? A review of the statement of cash flows willreveal how much cash is being paid out for principalrepayment, as well as the amount of new debt which has beenincurred by the organization during the period.Understanding Financial and Operating RatiosDeconstructing your hospital’s financial statements into anumber of financial and operating ratios enables trustees tobetter analyze financial performance. In addition, it enables theboard to benchmark the hospital’s performance comparedwith a variety of peer groups (other hospitals with similarrevenues, geographic locale, highest performance, etc.). Agood starting point in using the ratios is to graph a 3-5 five yearhistorical trend line for each. Below is a list of ratios, what theymeasure, and the implications of each.Profitability RatiosTotal Margin. Total margin is the excess of revenues overexpenses divided by total revenues, net of allowances anduncollectables. It reflects profits from both operations and non-operations. Hospitals in the high-performance group realizesignificant improvements in their total margins. Improvingtotal margins are a reflection of success in cost managementefforts. Implications: An up trend is considered positive.Free Operating Cash Flow to Revenue. Free operating cashflow to revenue is cash flow from operations less capitalexpenditures, divided by revenue. Free operating cash flow torevenue is a measure of profit often used in valuations becauseit better reflects the available cash return. A value less thanzero most likely indicates an operating loss. The primarystrategy for correcting a low free operating cash flow situationis tight cost management. Implications: An up trend isconsidered positive.Free Operating Cash Flow to Assets. Free operating cashflow to assets is defined as cash flow from operations lesscapital expenditures, divided by assets. A value less than zeromost likely indicates an operating loss. The primary strategy forcorrecting a low free operating cash flow situation is tight costmanagement. Implications: An up trend is consideredpositive. A free operating cash to asset less than zero mostlikely indicates an operating loss.Return on Equity. Return on equity is the amount of netincome earned per dollar of net assets or equity. High valuesfor return on equity indicate a hospital’s ability to add newinvestment in plant, property and equipment without addingexcessive levels of new debt. Return on equity values aresignificantly lower in smaller hospitals. Implications: An uptrend is considered positive.78

20 Questions Every Washington Hospital Board Needs to be Able to AnswerFinancial Basics for TrusteesLiquidity RatiosCurrent Ratio. Current Ratio is the number of dollars held incurrent assets per dollar of current liabilities. It is the mostwidely-used measure of liquidity. More profitable hospitals arelikely to have higher current ratio values. Implications: An uptrend in this area is positive.Days in Patient Accounts Receivable. Days in patientaccounts receivable is the average time that receivables areoutstanding, or the average collection period. Highercollection periods lead to greater AR short-term financingrequirements. High-Performance hospitals maintain lowerdays in AR, which leads to better overall asset efficiency andreturn on total assets. Reductions in days in patient ARtranslates into higher values of cash and investments.Implications: A down trend in this area is positive. Reductionsin accounts receivable reflect improved hospital managementin the receivables area. High performance hospitals routinelyand aggressively focus on collecting cash as quickly as possible.Average Payment Period. Average payment period is ameasure of the average time that elapses before currentliabilities are paid. High values may indicate potential liquidityproblems. Implications: A down trend is considered positive.Days Cash on Hand. Days cash on hand, all sources measuresthe number of days of average cash expenses that the hospitalmaintains in cash and marketable securities. It is a measure oftotal liquidity, both short-term and long-term. Implications:An up trend is considered positive. High-performancehospitals have higher days cash on hand, from all sources thanlow-performance hospitals. Low-performance hospitals mayface major liquidity problems. High-Performance hospitalsmaintain needed, but not excessive, cash positions.Capital Structure RatiosEquity Financing Ratio. Equity financing ratio measures thepercentage of total assets financed with equity. High valuesimply that the hospital has used little debt financing in its assetacquisition, and has relatively low financial leverage.Implications: An up trend is considered positive.Long Term Debt to Capitalization. Long-term debt tocapitalization is the proportion of long-term debt divided bylong-term debt plus net assets or equity. Higher values imply agreater reliance on debt financing, and may imply a reducedability to carry additional debt. High-Performance hospitals relyless on debt and more on equity. Higher bond ratings areusually associated with lower long-term debt-to-capitalizationvalues. Implications: A down trend is considered positive.Cash Flow to Total Debt. Cash flow to total debt is thepercentage of cash flow to total liabilities, current and longterm.It is an important indicator of future financial problems.High-performance hospitals show an increasing trend in cashflow to total debt. Implications: An up trend is consideredpositive. Low performance hospitals have a dangerousdeclining trend in Cash Flow to Total Debt.Debt Service Coverage. Debt Service Coverage measurestotal debt service coverage (interest plus principal) from thehospital’s cash flow. Higher values for debt service coverageindicate better debt repayment ability. Implications: An uptrend is considered positive.Cushion Ratio. The cushion ratio measures the relationshipbetween total debt service, both interest and principal, andtotal cash reserves, both current and non-current. A high valuemeans that the hospital is less likely to default on debt servicepayments because it has the cash reserves to meet itsexpected obligations. Implications: High-performancehospitals have higher cushion ratios than low-performancehospitals.Asset Efficiency RatiosTotal Asset Turnover. Total asset turnover provides an indexof the number of operating revenue dollars generated perdollar of asset investment. Higher values for this ratio implygreater generation of revenue from the existing investment inassets. Implications: High-performance hospitals have lowertotal asset turnover ratios than low-performance hospitals.Fixed Asset Turnover. Fixed asset turnover measures thenumber of operating revenue dollars generated per dollar offixed asset investment. High values imply good generation ofrevenues from the existing fixed asset base and are a positiveindicator of operating efficiency. Rural hospitals have higherfixed asset turnover values than urban hospitals due to olderplants in the rural sector and less investment in capital-relatedassets. Implications: An up trend is considered positive. Fixedasset turnover is a good measure of hospital utilization.Current Asset Turnover. Current asset turnover measures thenumber of revenue dollars generated per dollar of investmentin current assets. Higher values imply a greater efficiency in theemployment of current assets than do lower values. Higherinvestments in cash and accounts receivable will reducecurrent asset turnover. High-performance hospitals have lowerinvestments in patient accounts receivable, and therefore morecash. Implications: Increasing values are desirable.79

20 Questions Every Washington Hospital Board Needs to be Able to AnswerFinancial Basics for TrusteesOther Financial RatiosAverage Age of Plant. Average age of plant provides ameasure of the average age in years of the hospital’s fixedassets. Lower values indicate a newer fixed asset base and,thus, less need for near-term replacement. Average age ofplant may also be indirectly associated with the quality of careprovided. Implications: Higher values for Average age of plantare negatively correlated with most measures of debtfinancing. High-performance hospitals have significantlynewer plants than low-performance hospitals.Depreciation Rate. Depreciation rate provides a measure ofthe rate at which the organization is depreciating its physicalassets. Increases in this rate often imply that newer assets arebeing added to the organization’s depreciable asset base.Larger hospitals have a higher Depreciation rate than smallerhospitals. This is an indication that greater capital expenditureshave taken place in larger hospitals and also that they havenewer physical facilities. Rural hospitals have lowerdepreciation rates than urban hospitals. Less capital is beingexpended in the rural hospital sector. Implications: Hospitalsthat curtail capital expenditures will see the average age oftheir physical facilities rise and their depreciation rates fall.Depreciation rates for high-performance hospitals have beenstable over the past five years, while they have decreased forlow-performance hospitals.Capital Expenditure Growth Rate. The Capital expendituregrowth rate is defined as the percentage of the organization’stotal gross property, plant and equipment that was added in agiven year. This percentage will vary greatly over time ascapital expenditures fluctuate. Higher values for this indicatorimply an active capital expenditure program of additions andreplacements. Rural hospitals have lower capital expendituregrowth rate values than urban hospitals due to less intense useof newer technology. Implications: Financial inability to fundcapital expenditures in low-performance hospitals. Furtherdeclines will result in even older physical facilities and theabsence of state-of-the-art technology. This may furthercompound the problems of low-performance hospitals bydriving away needed customers, especially physicians.Price IndicatorsGross Price Per Discharge. Gross price per dischargemeasures the average charge per unadjusted discharge. Grossprice per discharge (adjusted for case mix & wage index)adjusts for differences in case mix complexity and differencesin prices that may be a result of cost of living differencesamong regions. Rural hospitals have gross price per dischargevalues that are lower than those of urban hospitals on both anadjusted and unadjusted basis. However, when hospitals arecategorized by size, rural hospitals and urban hospitals havesimilar prices. Implications: High-performance hospitals havehistorically had higher gross prices than low-performancehospitals. High-performance hospitals maintain higher netprices than low-performance hospitals.Gross Price Per Visit. Gross price per visit measures theaverage amount of charges per unadjusted visit. Contractualallowances, bad debts and other discounts are not subtractedin this price measure. It reflects what a patient might pay ifthere were no discounts or allowances granted. Implications:High-performance hospitals make more money fromoutpatient operations than low-performance hospitals. Highperformancehospitals appear to generate their profit throughhigher prices and lower costs. This may reflect differences incomplexity. It may also reflect greater ability to charge higherprices in these areas.Medicare Payment Percentage. Medicare paymentpercentage provides a relative measure of the hospital’sreliance on Medicare patients. Rural hospitals have consistentlyreported higher values for Medicare Payment Percentage thanurban hospitals. Some of this difference may be related to size,as larger hospitals are more likely to have a greater range ofservices than smaller hospitals. Implications: Medicare is adesirable payer for many hospitals, especially those with highpercentages of managed care patients.Contractual Allowance Percentage. Contractual allowancepercentage defines the percentage of gross patient revenuethat is discounted to third-party payers. Increasing values forthis indicator put tremendous pressure on hospital prices inthose limited areas in which fuller recovery of rate is possible.Significant negative pressure on hospital profitability has beenincreasing contractual allowance percentages. Much of theincrease in contractual allowance percentage results frominadequate increases in Medicare and Medicaid payments, andto increasingly larger discounts granted to managed carepayers. Implications: High-performance hospitals have similargross prices on a case mix-adjusted basis, but they have highernet prices. Lower write-offs in high-performance hospitals areeither a reflection of a better payer mix, especially privateinsurance, with lower discounting, or better coding of cases.High-performance hospitals may do a better job of optimizingthe DRG codes assigned to Medicare patients than lowperformancehospitals. Coding can have a pervasive impactupon payment.80

20 Questions Every Washington Hospital Board Needs to be Able to AnswerFinancial Basics for TrusteesVolume IndicatorsAverage Daily Census. Average daily census provides ameasure of inpatient volume. Average daily census is afunction of both discharges and length of stay. Increases inaverage daily census should ideally come from increases indischarges rather than from increases in length of stay. Urbanhospitals have much higher values for average daily censusthan rural hospitals due to larger number of beds and greaterlengths of stays. Implications: Average daily census isexpected to decline as the focus of care continues to shift tooutpatient facilities.Occupancy Percentage. Occupancy percentage provides ameasure of facility utilization based on licensed beds. The useof beds to measure capacity does not reflect the substantialamount of hospital capacity that is not involved with inpatientcare. Implications: Occupancy is higher in high-performancehospitals. It is not a filled bed which generates revenue, butrather a new admission. High-performance hospitals havemuch higher discharges per bed than low-performancehospitals.Occupancy for Staffed Beds. Occupancy for staffed bedsprovides a measure of facility utilization based on staffed beds.Implications: High-performance hospitals have lower valuesfor occupancy for staffed beds than low-performance hospitals.This may indicate that low-performance hospitals have plantsthat are less utilized, but they are more willing to designatebeds as not staffed.Length of Stay IndicatorsLength of Stay. Length of stay measures the average time aninpatient spends in the hospital. In today’s environment offixed payment per case, a reduction in length of stay is usuallydesirable. The reduction in length of stay is a reflection ofcooperative relationships between hospitals and physicians.Implications: High-performance hospitals have been able toachieve slightly lower values for length of stay than lowperformancehospitals.Efficiency IndicatorsFTEs Per Adjusted Occupied Bed. FTEs per adjustedoccupied bed is a traditional measure of inpatient productivity.As Length of Stay declines, the amount of service per dayincreases because a significant amount of hospital service isfront-loaded.Implications: Controlling FTEs per occupied bed is animportant element of total labor productivity. Control overtotal case cost is the primary objective. High-performancehospitals have reported lower values for FTEs per adjustedoccupied bed than low-performance hospitals.Total Revenue Per FTE. Total revenue per FTE is defined astotal revenue, (or net patient revenue plus other operating andon-operating revenue), divided by the number of FTEs. Totalrevenue per FTE is a useful measure of productivity in anincreasingly diversified industry. Implications: Highperformancehospitals have higher values for total revenue perFTE than low-performance hospitals, and the gap appears to bewidening. The ultimate measure of productivity is valuecreated per FTE.81

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat does it mean to be aneffective advocate for yourhospital?Trustees often become so consumed with organizational issues and challenges that they losesight of the need to consistently and forcefully connect in meaningful ways with theircommunities. With growing scrutiny of the health care field in general, and of the “communitybenefit” provided by hospitals specifically, hospital boards have a unique opportunity to ensurethat their organizations consistently engage in meaningful ways with a broad range ofcommunity stakeholders.But as many of the case examples exploreddemonstrate, hospitals contribute in many significantways to their communities, in both clinical and nonclinicalways. As a trustee, do you know all the ways yourhospital contributes to the community? Does your boardsupport those activities, seek out additional opportunities toimpact the community, and understand and communicate theresults and impact they have?For some boards, the first step may be as simple as identifyingor re-defining your commitment to the community. Next, youneed to understand what you are already doing, and what youcan and should be doing more of. Finally, and veryimportantly, you should communicate what your organizationis doing well to key stakeholders and the general public.Trustees have an opportunity and an obligation to impact thenegative-to-positive ratio of stories and statistics about healthcare heard by federal and state legislators, the media, andindividuals in their own communities.The Business Case for Community Health Initiatives. It’ssimple: strengthening community relationships andimplementing initiatives to improve the community’s health isthe right thing to do for hospitals’ patients, families andcommunities. In addition to helping hospitals fulfill theircommunity-focused missions and visions, community healthinitiatives provide several significant business-strengtheningbenefits, including:Development of allies to address common challenges;Creation of new partnership opportunities;Foundation fundraising;Strengthened support and public trust for the hospital andits efforts;Increased awareness of hospital challenges andunderstanding of the hospital’s commitment toaddressing community needs;Strengthened employee morale and sense of purpose; andPreservation of not-for-profit hospitals’ tax-exempt statusas the community benefit provided by hospitals andhealth systems becomes clear and measurable.A big part of what’s right about health care in America today isthat many hospitals are doing these things already. Theproblem is that their stories aren’t being sufficiently told, so thelocal community, the media and lawmakers don’t know aboutthe valuable community health initiatives already underway. Ifyour organization is already doing this, look for opportunities tostrengthen your community health initiatives to bothstrengthen your community relationships and take advantageof the business benefits. If community health initiatives andcommunity benefit activities are not high on your board’s radarscreen, they should be.Credibility and leverage in representation and advocacy;The potential to increase market share;The Need for Trustee Leadership and Involvement. Hospitaltrustees are trusted leaders in their communities. They alsohave a unique and powerful role as key communicators of the82

20 Questions Every Washington Hospital Board Needs to be Able to AnswerAdvocacy Basics for Trusteesbenefit provided by their hospital. Because they are volunteers,they are seen as unbiased, impartial protectors and stewards ofthe hospital’s cherished mission, values and vision. This role iscommonly referred to as “advocacy,” and is a key part oftrustees’ responsibilities.Despite its critical importance, the advocacy component oftrustees’ jobs isn’t always prominently discussed. Advocacy isan opportunity to bring valuable information to electedofficials that they otherwise would not have. Legislators haveto make decisions about a broad range of issues, many ofwhich they aren’t intimately familiar with. Trustees can providelegislators and their staffs with the perspective and facts theyneed to make educated decisions about issues that have asignificant impact on local health care and the local economy.When trustees form long-term relationships with electedofficials, the legislators look to them for valuable insight andinformation on issues for which they may have limitedknowledge or first-hand experience. 1,2Trustees’ Advocacy Carries a Powerful Message. Trusteesprovide a fresh perspective to supplement the efforts ofhospital CEOs, hospital associations and other membershiporganizations that conduct advocacy efforts on behalf of thehospital. Trustees’ voluntary commitment to the hospital andto the community makes their message powerful, and carriesgreat weight because it doesn’t have the real or perceived“bias” associated with the potential personal benefits that maybe derived from hospital CEOs or lobbyists.Experts agree that in many cases trustees are the most effectiveadvocates for their hospital, largely because of their volunteerstatus. Dan Sisto, President of the Healthcare Association ofNew York State (HANYS), says that “trustees have moreinfluence with legislators because they are voluntary boardmembers and community leaders…Politicians pay attention totrustees because a trustee’s livelihood does not depend on ahospital’s financials.” 1 That opinion was echoed by Joe DaSilva,previous Senior Vice President for Advocacy and Education forthe Texas Hospital Association in a Trustee Magazine article,where he explained that “the trustees are the most importantcomponent of the grassroots effort because they don’t haveany personal gains other than the gains that may be passed onto the community by their success…They have stature withinthe community that garners respect, they bring businessacumen to the discussion, and they have friendships withelected officials.” 3 In another Trustee Magazine article BarbaraLorsbach, Senior Vice President, Member Relations for theAmerican Hospital Association, reiterated the importance oftrustee advocacy when she explained that “trustees arepersonally willing to commit their time and energy, and thatsays a lot about how important the hospital is.” 4The board is ultimately responsible for ensuring that thehospital has the resources it needs to carry out its mission, andeffective advocacy plays a critical role. At CHRISTUS Santa RosaHealth Care in San Antonio, TX, two staff members work solelyon advocacy issues. While not all organizations are largeenough to warrant this level of staff dedication, CHRISTUSSanta Rosa’s investment in staffing and funding for advocacyactivities demonstrates how important the board believesadvocacy is. At CHRISTUS Santa Rosa, the advocacy staffprovides information to the board so they are well-prepared foradvocacy opportunities, such as representing the organizationin civic and government settings. And as members of thecommunity, trustees attend civic meetings and other functionsalong with the hospital staff, which helps them to have a betterunderstanding of community issues and opinions and alsoprovides opportunities for them to communicate the benefitthat the hospital provides. 5While not all hospitals will take the same approach asCHRISTUS Santa Rosa, every hospital should look for ways tomaximize trustees’ credibility in ways that the hospital staffcannot do alone. Opportunities include:Communicate the Impact of Potential Decisions.Trustees can help communicate the impact of budget cutsand other potential legislation on their hospitals andcommunities in personal ways, such as the impact onpatient care on an individual, personalized level, or theimpact on the hospital’s workforce or the local economy.Talk about Community Benefit, Don’t Just Ask for MoreReimbursement. As recent investigations and lawsuitshave demonstrated, some lawmakers are becomingincreasingly skeptical about hospitals’ true “financialneeds” and whether they are deserving of their tax-exemptstatus. Lawmakers are increasingly interested in theamount of charity care hospitals provide, the communitybenefits they offer, and the ways in which they handlepatient billing and collections. According to Joe DaSilva,“We have lost some opportunities by focusing so much on‘Just give us more money.’” Trustees need tocommunicate a deeper message about what’s right abouthealth care and opportunities to do even more, ratherthan simply focusing on needing more money.Look for Opportunities to Tell Stories. People tend totake for granted the great work that hospitals do, and theyneed to be reminded. Lawmakers, key stakeholders, and83

20 Questions Every Washington Hospital Board Needs to be Able to AnswerAdvocacy Basics for Trusteesthe general public need to hear stories about what theirlocal hospitals are doing to save patient lives, improveindividuals’ quality of life, contribute to new research anddevelopment, and make a difference in the health of theircommunities. Without hospitals taking the initiative toensure these stories are heard, the public may only hearthe more negative stories about hospitals and health carethat tend to dominate the news and personalconversations.Be Engaged. Boards need to be engaged andknowledgeable about their hospital’s community benefitactivities and charity care so they can effectivelycommunicate it with legislators and key stakeholders. Themore trustees are engaged, the more they will be able tocommunicate their hospital’s story on a personal level,sharing individual stories and talking from personalexperience. 3Trustee Advocacy Provides Stability. Successful advocacy ishighly dependent on relationships. It involves buildingongoing relationships that include regular interactions andcommunications, not just seeking out a lawmaker orcommunity representative when the hospital wantssomething. When forming deep and long-term relationships inthe community, an experienced trustee with a personal interestin the community is the best voice to form lasting partnershipsthat can benefit the hospital.As trustees work to form long-term relationships, they shouldlook for opportunities with politicians at every level - city,county, state and federal. In many cases, forming relationshipswith a lawmaker’s legislative staff can be just as important asforming relationships with lawmakers directly, since most relyon their staffs to provide them with research, information andperspective on issues.One way to form relationships with state and federal legislatorsis to take advantage of opportunities that already exist. Whenpossible, seek out legislators or their staff members at socialgatherings or civic meetings to begin forming relationships.Host legislator visits to your hospital and take them into thecommunity to see the community benefit work you’re doingoutside the hospital.Many state hospital associations often hold advocacy days andoffer support for trustees who want to visit their state capitalsto meet with legislators and key decision-makers. In addition,the American Hospital Association organizes trips to Capitol Hillduring their annual meeting every spring. 2Grassroots Advocacy: Using Community Connections toBuild Community Health and Strengthen Public T rust.Successful advocacy is about more than establishingrelationships with legislators. One of the most important rolesof the board is to maintain strong and vibrant communityrelationships that build community understanding and loyaltyto the hospital. Trustees play a vital role in securing strongpublic perceptions of the hospital and raising its profile as apremier community financial, health care and social servicesasset.As a part of hospitals’ grassroots advocacy efforts, everycommunity has a broad range of key constituencies orstakeholders who should be communicated with andinfluenced by the hospital. The hospital board is the idealconduit between the hospital and these community groups,including:Community spokespersons or health advocates;Purchasers of health care;Insurers and other payers;Patients and families;Legislative and regulatory bodies;The news media;Civic groups, agencies and organizations;Religious leaders;Business owners; andEducational institutions.This type of grassroots networking is an opportunity toleverage already existing relationships. For example, trusteescan educate the community through one-on-oneconversations and presentations before local organizationssuch as Kiwanis and Rotary clubs. These relationships shouldinclude two-way communication – trustees have anopportunity to share what the hospital is doing well and thechallenges it faces, but they should also seek out communitymembers’ opinions and perspectives and take that informationback to the board and hospital leadership. 1Getting Started: Strengthening Trustees’ Advocacy Role.Successful hospital advocacy in today’s environment requirestrustees’ commitment and involvement to share the “hospital’sstory” and strengthen their relationships with community84

20 Questions Every Washington Hospital Board Needs to be Able to AnswerAdvocacy Basics for Trusteesmembers, opinion leaders and elected officials. Some specificsteps trustees can take include: 1,6Key Trustee Roles in Legislative and CommunityAdvocacyAdvocate: Taking the hospital’s message to legislators throughlobbying or delivering testimony at hearings, representing thecommunity’s interests in board decision-making.Educator: Speaking on issues facing the hospital at schools orcivic groups; appearing on local television or radio shows todiscuss health care, and highlighting what the organization isdoing to contribute to the community’s health well-being.Conduit: Participating in public forums to discuss issues facingthe hospital, share what the hospital is doing in thecommunity, and learn about community opinions or healthcare needs.Ambassador: Representing the hospital at importantcommunity social gatherings.Host: Presiding over visits of legislators, senior citizens, or keybusiness leaders to the hospital to help them learn aboutavailable services and to hear about their interests or needs.If you haven’t already, talk with your CEO and find out howyour organization is engaging the community and whatrole you can play;Talk about the hospital and health care in general withfamily, friends and colleagues, noting the manycontributions that your organization makes to the health,economy and quality of life in your community;Ask to do a short presentation about your hospital thatinvolves active listening at a meeting of one of the clubs ororganizations to which you belong;Make sure that you “talk up” the hospital and solicitopinions about what is happening in health care at thelocal level, at meetings, parties, and other events that youattend; andReview the American Hospital Association’s CommunityConnections toolkit entitled “Telling the Hospital Story:Going Beyond Schedule H,” which includes tips andquestions for a communications strategy to bolster thehospital’s public messages, a sample community benefitreport and presentation, and a community benefit reportworksheet to guide your thinking and help summarize theways in which you help your community.Avenues for Building Community Centeredness. In additionto building and sustaining partnerships, there are a variety ofavenues by which hospital trustees and leaders can gain agreater understanding of the community’s health care needsand challenges, increase awareness of existing programs, seekfeedback and ideas for new initiatives, and build trust andpromote the hospital’s image. These include:Community surveys;Focus groups with key stakeholders;Task forces with hospital leaders, employees and keystakeholders;Conducting a community needs assessment;Presentations to community groups; andInterviews with patients, key stakeholders, and the peoplein the community at-large.Five Steps for Bolstering Your Advocacy EffectivenessWhether you already have a trustee advocacy approach in place or are starting from scratch, the following five recommendations from CHRISTUSSanta Rosa Health Care suggest ways you can either begin or strengthen your board’s advocacy effectiveness.1. Discover existing relationships. Find out where relationships exist between your hospital, members of Congress and state/local governmentofficials.2. Find interested participants. Identify individuals who are willing to become public policy advocates.3. Participate in advocacy initiatives. Trustees typically write letters, make phone calls and visit lawmakers to present policy facts andinformation about the hospital.4. Contact your legislators. Develop relationships with your legislators before your hospital needs them, in order to be ready to contact themon advocacy issues. Use your relationship-building time as an opportunity to tell the hospital’s “story” without asking for anything in return.5. Develop an advocacy profile. Evaluate your existing relationships with senators and representatives and develop methods for building andstrengthening these relationships.Source: Beeler, Don A. Be an Advocate for Your Community. Trustee Magazine. November 2008.85

20 Questions Every Washington Hospital Board Needs to be Able to AnswerAdvocacy Basics for TrusteesThe “bottom line” value of being a community-centeredorganization is that the community will better understand thegood work the hospital is doing, challenges the hospital isfacing, the hospital’s efforts to address the challenges, and thebarriers to success. The hospital must connect withstakeholders and key constituents in ways that can beleveraged to more successfully advance the hospital’s agenda.The benefits that result from the hospital’s community benefitinitiatives must be defined, reported and discussed throughoutthe community to build a sense of the hospital’s health careand economic value.Rules for Building Sustainable CommunityPartnershipsRule 1: It’s not an event or a one-time fix, but a continuouscommitment to communityRule 2: Lasting partnerships cannot be created overnight, andmust be sustained over timeRule 3: Don’t reinvent the wheel; learn from and use the successof othersRule 4: Cultivate broad-based buy-in and commitment from allstakeholdersRule 5: Communicate, communicate, and then communicatesome moreSources and Additional Information1. Health Care Trustees: Essential Partners in Advocacy. Trustee Leader. Healthcare Trustees of New York State. May 18, 2006.2. Greene, Jan. A Natural Fit. Trustee Magazine. January 2008.3. Sandrick, Karen. The New Political Advocacy. Trustee Magazine. December 2009.4. Larson, Laurie. Telling the Story. Trustee Magazine. December 2009.5. Beeler, Don A. Be an Advocate for Your Community. Trustee Magazine. November 2008.6. Telling the Hospital Story: Going Beyond Schedule H. American Hospital Association. March 2009.www.caringforcommunities.org.86

20 Questions Every Washington Hospital Board Needs to be Able to AnswerHow does the board ensuresuccessful leadership fortomorrow?Recruiting new trustees to serve on your board is every bit as important as CEO recruitment.How well boards plan and execute this vital process defines the hospital’s leadership success foryears to come.The importance of governance succession planning isgrowing as health care organizations and theirgoverning boards face increased pressure for highperformance, transparency and accountability. When currenttrustees’ terms end, who will replace them? Where will youfind highly qualified board members who are “experts” in theareas of governance in which you need the most help, who arefree of potential conflicts of interest, and who are able to meetthe required time and energy commitment?Governance succession planning is the key to not only filling anempty seat on the board, but to improving board andorganizational performance. By regularly assessing the board’sleadership strengths and weaknesses, and using the hospital’sstrategic plan to define critical future leadership requirements,your board can identify governance “gaps” that can be closedthrough targeted trustee recruitment.A trustee succession plan should be developed to recruittrustees that meet the specific governance needs. These“gaps” will be different for each board and organization; whileone board may need increased diversity another may seekgreater financial expertise or an improved balance betweenvisionary, “big picture” thinkers and more practical, shortertermthinkers.Increased Trustee DemandsBoards of health care organizations govern highly complexorganizations. The nature of hospitals requires trustees toengage in ongoing education, time-consuming individualpreparation for board and committee meetings, andattendance at trustee conferences and other educational andgovernance development events.According to the Governance Institute, La Jolla, CA, boardmembers spend an average of 20 hours per year on health careeducation. In addition, the average board member spendsbetween 120 – 200 hours annually preparing for andparticipating in board and committee meetings andconducting other board activities. 2 An average of 150 hoursalone is the equivalent of nearly 20 additional work days in oneyear. Many hospitals are challenged to find trustees who notonly meet specific board leadership requirements, but who arealso willing to commit a significant amount of time to fulfilltheir growing responsibilities and accountabilities.Recruiting the Right TrusteesProperly identifying, assessing and successfully recruiting a newtrustee involves several steps. Boards should begin byconducting a comprehensive governance self-assessment todetermine where they may have potential leadership “gaps,”either now or in the future. After identifying specificcharacteristics and skills sets desired, the board should seek outKey Factors to Consider When RecruitingRecruit trustees with the skills that will best complement thehospital’s future strategic needs.Select trustees who have the passion and time to becommitted to the organization’s mission.Seek candidates who have experience working with bothcorporate and not-for-profit boards.Ensure a commitment to the organization, experience as atrustee, and a willingness to learn about health care issues andtrends.Source: Earle, P. and Jack Schlosser. “The Next Trustee—What Skills DoesYour Board Need?” Trustee Magazine. April 2005.87

20 Questions Every Washington Hospital Board Needs to be Able to AnswerPlanning Today for Tomorrow’s Trustee LeadersBreaking Barriers to Board DiversityThe just-like-me syndrome. Too often nonprofit boards lookfor candidates similar to themselves in their career positions oreducation. The result is either outright failure, if no willing orsuitable candidates can be found in the narrow segments thatare searched, or a superficial increase in diversity that neglectsdiversity of ideas and experiences.Ineffective nominating procedures. Board members aretypically drawn exclusively from the local community, andrecruitment can be hampered by the limited scope of contactsand life experiences of the existing board members, who oftenact as the primary board recruiters. To achieve a broaderperspective, boards should consider expanding recruitment oftrustees to qualified individuals outside of the area.Inflexible board membership requirements. Overly strictcriteria for board membership can be counterproductive.Eliminate requirements for recruiting individuals that representspecific constituencies or occupations (unless, for example, youseek a financial “expert” for your audit committee). Lookinstead for the very best thinkers and leaders.Source: McCrory, K. “Breaking Barriers to Board Diversity.” AssociationManagement. January 2005.and talk with a variety of candidates who may meet their boardservice requirements. Once a new trustee is selected,orientation and ongoing education is critical to ensuringtrustee success in providing strong and effective leadership tothe hospital on behalf of the community.Identifying leadership gaps. In order to gauge leadershipstrengths and weaknesses, boards of trustees should conductan annual board self-assessment. A comprehensive,meaningful self-assessment includes ratings of leadershipperformance in a broad range of areas. Each area shouldinclude several positively worded statements about the board’sperformance; trustees should rate the board’s performance ineach statement, and each broad area should be followed withone simple question: “How can the board improve itsperformance in this area”? The assessment should also includea section in which trustees evaluate their personal performanceKey Steps in the Trustee Recruitment ProcessThe following steps are recommended for recruitment of trustees to serve on community hospital boards. The philosophy and process may besimilar for governmental hospitals whose trustees are appointed, however the process is only a recommendation to the officials who will make theappointment.1. Secure board agreement on a long-term recruitment plan and process: Purpose, participants and objectives2. Appoint a board development committee to oversee the recruitment process3. Develop appropriate background material on the hospital and board of trustees: Bylaws, board member biographies, information about thehospital, its market and its challenges, information on trustees and officers liability insurance, conflict of interest statement, board selfassessmentprocess, board orientation process, etc.4. Develop a one-page “candidate profile,” a board and trustee job description, and a letter to be sent to prospective trustees indicating thehospital’s interest in discussing potential trusteeship opportunities5. Develop a candidate rating tool, based on the criteria included in the candidate profile and job description; assign a “weight” to each criteriathat reflects the relative importance of the criterion (e.g. 5 = greatest weight, 1 = least weight); include specific questions to ask candidates todetermine motivation and willingness to serve, ability to devote time required, knowledge of issues, conflict of interest, etc.6. Secure board approval of the board development committee’s recruitment process and recruitment materials7. Identify potential field of candidates8. Make preliminary contact (letters and/or telephone calls), assess initial candidate interest and willingness to serve, if chosen9. Review candidates and arrange interviews with members of the board development committee10. Rank candidates using the candidate rating tool, and prepare a brief written summary of each candidate (occupation, length of residency,community involvement, answers to questions, etc.)11. Determine top-rated candidates, and present to the board development committee12. Board development committee makes recommendation to full board13. Nomination of candidate(s)14. Follow-up letters to candidates not selected; determine other ways for candidates to be involved, such as serving on the foundation board, ontask forces, etc. Assess interest in filling future vacancies88

20 Questions Every Washington Hospital Board Needs to be Able to AnswerPlanning Today for Tomorrow’s Trustee LeadersAnytown Community Hospital Trustee Candidate ProfileA one-page candidate profile should be developed to clearly describe the responsibilities, success factors and skills and assets the hospital seeks in anew trustee. The profile should begin with a one-two paragraph overview of the hospital, followed by specifics about the trustee role.Major Responsibilities. Anytown Community Hospital (ACH) trustees are responsible for overseeing the progress and success of ACH. The boardof trustees must ensure that the organization achieves its mission, vision and values. The board also assists in the development and approval ofACH’s strategic plan, evaluation of the plan’s implementation, and taking corrective action when necessary. Anytown Community Hospital’s boardof trustees is responsible for hiring, determining the compensation of and evaluating the CEO. The board of trustees assumes ultimateresponsibility for the quality of care and patient safety provided by the hospital, and is accountable for the financial soundness and success of ACH.Success Factors. The successful trustee will have strong interpersonal skills, and will be comfortable with interacting with other board members, theCEO, medical staff leaders and the hospital’s executive team. The trustee must be willing to commit the time necessary for successful board service,and have a willingness and a desire to learn and understand the complexities of the health care environment and the challenges of meetingAnytown Community Hospital’s patient and community needs. The ability to constructively challenge the status quo, understand and evaluatefinancial information and collaborate with a broad range of diverse stakeholder groups is key to the success of the trustee. The trustee shouldunderstand and follow the fiduciary requirements to the organization and not serve any individual constituency or group.Personal Skills and Assets. The successful trustee will build positive relationships with other board members, the hospital’s executive team,medical staff leaders and the organization’s other key stakeholders. Adaptability, flexibility, organization, initiative, leadership and analytical skills arekey qualities which will enable the trustee to be successful as an Anytown Community Hospital trustee. Other important personal assets includesound, independent judgments and decisions; the ability to analyze complex issues and develop effective solutions; and the ability to create avision for the future, given the many uncertainties prevalent in today’s health care environment. The trustee should have a basic generalunderstanding of the health care field, be committed to preparing for active insightful involvement in board and committee meetings, and be ableto read, understand, and apply industry information and financial acumen to strategic decisions. Strong communication skills are essential. Thetrustee should be deeply committed to the hospital and the community it serves, and have no unresolvable conflicts of interest with AnytownCommunity Hospital’s operations or key stakeholders. When conflicts of interest do arise, the trustee must be willing to abstain from discussionsand votes surrounding the issue.in several areas of leadership effectiveness. Broad areas ofboard performance to be evaluated may include:Ensuring attainment of the mission, vision and values;Defining a purposeful strategic direction;Ensuring a sound leadership structure and governanceprocesses;Ensuring quality and patient safety;Building and sustaining community relationships;Building strong relationships with the CEO;Building strong relationships with the medical staff;Providing sound financial leadership;Ensuring improvements in community health; andAdhering to organizational ethics.Once board strengths and weaknesses, leadership challengesand future leadership needs have been identified, the boardcan then develop a list of specific skills, attributes andcharacteristics that are important for new trustees to possess.The specifications should complement existing boardmembers’ skills and competencies, and assist the organizationin furthering its ability to provide high-powered, thoughtful,diligent leadership. In essence, instead of simply accepting anyperson who expresses an interest in serving on the board, orpersuading a reluctant potential trustee to serve, recruittrustees with the skills and personal characteristics thatcomplement existing board members’ resources results in amore well-rounded board.Finding qualified board members. Once specific desired skillsand characteristics have been identified, the board must recruitindividuals that meet these specifications. Several approachesmay be undertaken to find candidates, including: 3,5Maintaining a list of potential board candidates, oftendeveloped by the Nominating Committee or the BoardDevelopment Committee, including the specific skillsthey can bring to the organization;Assessing the leadership potential of individuals whoalready volunteer for the hospital in other capacities,such as serving on the hospital’s foundation, orparticipating in ad hoc committees and task forces;89

20 Questions Every Washington Hospital Board Needs to be Able to AnswerPlanning Today for Tomorrow’s Trustee LeadersSeeking out individuals who have a record of successfulgoverning service on other boards, and who have thepotential to bring credibility, expertise and communityconnections to board work;Asking the CEO and former board members to suggestreplacements for outgoing members;Contacting successful former board members who werehighly regarded for their leadership skills, and ask if theywould be willing to serve again. These individuals areoften a deep well of information and perspective; andConsidering expanding the “network” of potentialcandidates, perhaps looking outside the immediatecommunity for qualified trustees.Throughout the recruitment process, stick to the board’s predefinedspecifications for new trustees. When interviewingpotential trustees, do not “sugarcoat” the job; be honest aboutboard members’ roles and responsibilities and the timecommitment required. The last thing a board needs is to selecta new trustee who did not understand the commitment andwho is then unable to fulfill his or her duties.Once a potential trustee (or trustees) has been identified,several additional steps should be taken before extending anoffer to serve on the board: 5Double-check for potential conflicts-of-interest;Invite the prospective board member to meet with theboard chair and the CEO for a detailed overview of theorganization as well as relevant organizational materials, aboard member job description, etc.;Provide the candidate with the names and contactinformation for board members he or she may contactwith questions; andInvite the prospective new member to observe a boardmeeting, and follow up with the candidate after themeeting to discuss his or her continuing interest.Sources and Additional Information1. Hembrock Daum, J. and Neff, T. “Cornerstone of the Board: The New Steps of Director Search.” Spencer Stuart.www.spencerstuart.com. October 2004.2. Kazemek, E. and Peregrine M. “Health Care Boards: Who Will Serve?” Trustee Magazine. September 2003.3. Blecher, M. “Wanted: A Few Good Trustees.” Trustee Magazine. March 2002.4. Earle, P. and Schlosser, J. “The Next Trustee—What Skills Does Your Board Need?” Trustee Magazine. April 2005.5. McNamara, C. “Guidelines for Recruiting New Board Members.” Corporate Board Member Magazine. www.boardmember.com.January 2001.6. Walker, L.. “Nurturing a Precious Commodity.” Trustee Magazine. July/August 2003.90

20 Questions Every Washington Hospital Board Needs to be Able to AnswerHow does the board ensure thequality of its medical staff?As a board member you most likely understand the commitment your organization has to thecommunity to ensure quality patient care is delivered at your institution. Do you know,however, the impact you have on this commitment at every board meeting when you appointand reappoint members of the medical staff?Medical staff credentialing is one of the mostimportant tasks boards undertake to ensure qualityof care in their organizations. The overall objectiveof credentialing is to ensure that only qualified doctors areadmitted to (and remain on) the hospital’s medical staff, andthat they practice within their scope of experience andcompetence.requires primary source verification – direct contact of thesources of credentialing, such as schools, residency programs,and licensing agencies – to guarantee that statements ofeducation, training, experience and other qualifications arelegitimate. Primary source verification is not only important inmeeting requirements of main accreditors, such as JCAHO, butalso critical in avoiding legal problems and ensuring qualitypatient care.What is Credentialing and Privileging?Medical staff credentialing is a two-pronged process thatinvolves establishing requirements and evaluating individualqualifications for entry into a particular medical staff status.Credentialing first involves considering and establishing theprofessional training, experience, and other requirements formedical staff membership. The second aspect of credentialinginvolves obtaining and evaluating evidence of thequalifications of individual applicants. Basically, credentialing isverifying that each applicant:1. Is who he/she claims to be;2. Has been properly licensed;3. Has appropriate malpractice insurance; and4. Meets minimum requirements established by the hospitalto be on staff.In past years, credentialing verification was no morecomplicated than having the applicant present some form ofdocumentation, such as a diploma or certificate. Today’scredentialing, however, goes far beyond this approach andAnother aspect of the credentialing process is privileging themedical staff applicant. Privileging is a three-pronged processthat determines:1. The diagnostic and treatment procedures a hospital isequipped and staffed to support;2. The minimum training and experience necessary for aclinician to competently carry out each procedure; and3. Whether the credentials of applicants meet minimumrequirements and allow authorization to carry outrequested procedures.Often called “delineation of clinical privileges,” this processdetermines what procedures may be performed or whichconditions each medical staff member may treat. As newtechnologies are developed and new subspecialties arediscovered, privileging medical staff member will becomemore challenging for organizations and their leaders.Delineation of privileges is an ongoing process that must notonly be flexible enough to add new procedures or conditionsto treat, but also be firm, fair and consistent.91

20 Questions Every Washington Hospital Board Needs to be Able to AnswerMedical Staff CredentialingRoles and Responsibilities of Key Individuals inthe Credentialing ProcessTo ensure that the credentialing process is carried out asefficiently and effectively as possible, all participants in theprocess must fully understand their roles. In smallerorganizations, individuals may be responsible for multiple roles.Applicant. The applicant’s responsibility is to ensure that thehospital receives, in a timely manner, all of the informationneeded to evaluate his/her application for medical staffmembership. The applicant must be up front and honest, andwilling to come for a personal interview if requested.Medical Staff Services Professional. The medical staffservices professional is responsible for processing andmaintaining the applicant’s credentialing file.Department Chair (in a departmentalized hospital). Thedepartment chair is typically the first person to see thecompleted credentials file (other than the medical staff office)and the first person to review the file. Further, the departmentchair makes a recommendation to the credentials committeeor the medical executive committee.Credentials Committee Chair. The credentials committeechair oversees the credentialing program and ensures that thehospital is carrying out it the credentialing activities in the mosteffective, efficient manner. The Chair also ensures that thecredentialing program is in compliance with all of the hospital’scredentialing policies and other outside regulators.Credentialing Committee. The credentialing committee isresponsible for reviewing each complete application and formaking the recommendation to the medical executivecommittee (MEC) regarding appointment, reappointment andclinical privileges. Committee members may also be asked tosolicit information from past practice settings during theapplication process.Medical Executive Committee (MEC). The MEC hastraditionally had a significant role in the credentialing process.The Joint Commission requires that the MEC at least makerecommendations to the board of directors regardingappointment, clinical privileges, reappointment, and correctiveaction, and to develop specific policies for the MEC’s role in thefair hearing, investigation, appointment and privilegesdelineation processes.Chief Executive Officer (CEO). The CEO has a largelyadministrative function in the credentialing process. He/sheassists in ensuring that the application and its supportingdocumentation reach the appropriate individuals/groups atthe appropriate steps of the process. The CEO is responsible forforwarding the application to the MEC for submission to theboard, and for ultimately informing each candidate by letter iftheir application was approved or declined.Governing Board. The board of directors assumes all legalresponsibility for the hospital and is ultimately responsible forapproving all bylaws, policies and procedures. The board hastwo key functions in credentialing and privileging: 1) Attend toprocess; and 2) Decision-making.Attend to process – The board must delineate steps of thecredentialing process and specify/approve criteria that it usesto make recommendations or decisions at each step. They alsomust ensure that the process is thorough, fair, consistent andfunctioning effectively.Questions the board may want to ask to ensure theseobjectives are being met in the process:Medical Staff Credentialing BasicsBasically, credentialing is verifying that each applicant:1 Is who he/she claims to be2 Has been properly licensed3 Has appropriate malpractice insurance4 Meets minimum requirements established by the hospital tobe on staffAre the steps of the credentialing process and the specificresponsibilities of various groups clearly delineated in theboard’s bylaws and/or policies?Are the criteria used at each step of the process explicit,objective, valid and reasonable?Does the board periodically assess the extent to which itfollows the specified process?Within the last several years, has the board evaluated itscredentialing process to ensure that it is conforming toapplicable laws, regulations, and Joint Commissionstandards?Decision making – The board must ultimately decide whichdoctors will be admitted to the medical staff (initialappointment), allowed to remain on the medical staff(reappointment), and which procedures they can perform anddiseases/conditions they may treat (privilege delineation).92

20 Questions Every Washington Hospital Board Needs to be Able to AnswerMedical Staff CredentialingAlthough in the past the board’s role in credentialing andprivileging has often been minimal, recently boards arebecoming intricately involved in the credentialing process. Inmany instances, boards are designating responsibility forappointment and privileges decisions to a boardsubcommittee that better understands the credentialing issuesand that the board has authorized to act on its behalf in suchmatters. The credentialing process requires more oversightfrom the board than most areas of hospital management, andboard participation in the process is integral in assuring aviable, effective credentialing process 6 and a high qualitymedical staff.Background ChecksOne essential component of credentialing is utilizingpractitioner data banks that allow organizations to gatherpertinent background information on physicians. The intentionof these data banks is to protect the public from incompetentmedical practitioners and reveal any negative sanctions takenagainst specific physicians. The three data banks that are usedmost often are:1. The National Practitioner Data Bank (NPDB): www.npdbhipdb.com– the NPDB is a national register of physicians,dentists and other health care practitioners that wasestablished by the federal government in response to aneed for improved quality of health care. It was establishedin a midst of a malpractice “crisis” and was initially createdto reduce the incidence of medical malpractice. Contentsof the NPDB include:Medical malpractice payment informationDisciplinary action taken by the Board of MedicalExaminersProfessional review actions that result in suspensions,limitations or reductions of clinical privilegesAdverse membership actions taken by a professionsociety that engages in peer review activities2. The Board Action Data Bank of the Federation of StateMedical Examiners (FSMB): www.fsmb.org – the FSMBfunctions as the representative organization for the statelicensing agencies and is responsible for carrying out manydifferent services related to physician licensure anddiscipline. Contents of the FSMB include:Disciplinary actions, such as revocation, probations,suspensions, consent orders and Medicare sanctionsNon-disciplinary actions, such as reinstatement oflicensure, replacement of lost or destroyed license, orlicense denials3. American Medical Association Physician Masterfile(AMA): www.ama-assn.org - the AMA database is acomprehensive source of demographic, educational, andpractice information on all United States physicians withMD degrees. Contents of the AMA database include:Full name, address, and telephone numberDate and place of birthAMA membership statusMedical or osteopathic school name and year ofgraduation;State licensure--year(s), state(s), status, expiration date(s), and type(s) (temporary, limited, or unlimited)Year of national board certification;ABMS certification and subcertification year(s) andexpiration date(s)Professional activity historySpecialty area (primary, secondary, and tertiary)Residency training (hospital name, dates of training,and specialty)Federal Drug Enforcement Administration (DEA)registration statusMedicare/Medicaid sanctionsSelf-reported area of practice (primary and secondary)ECFMG applicant numberIn addition to basic background checks, many health careorganizations are now doing criminal background checks tofurther guarantee the safety of their patients. There are severalresources to use for criminal background checks, which canprovide such information as a county criminal records search, astate criminal records search, a national wants and warrantssearch, a motor vehicle report, social security numberverification, and other itemized searches.93

20 Questions Every Washington Hospital Board Needs to be Able to AnswerMedical Staff CredentialingInvestigative/Correction ActionEven though most organizations go though a stringent processof physician credentialing and privileging medical staffmembers, there are times when organizations or individualsmay want to “reverse the process” and remove a physicianfrom the medical staff.An investigation may be initiated whenever a practitioner withclinical privileges exhibits behavior – either within or outsidethe hospital – that is likely to be detrimental to the quality ofpatient care or safety, the hospital’s operations or thecommunity’s confidence in the hospital. An investigation maybe initiated by any medical staff officer, the chair of thedepartment in which the practitioner holds appointment orexercises clinical privileges, the CEO, the MEC or the governingboard. . All requests must be submitted in writing to the MEC.Prior to determination by the MEC if an investigation should beundertaken, oftentimes the individual or committeeconsidering the investigation request may ask for an interviewwith the involved practitioner. This assists in the decision ofwhether or not there is relevant cause for further examination.If the decision is made to continue the investigation there aretwo forms of suspensions that may affect the individualinvolved:Automatic Suspension. Automatic suspension of theinvolved practitioner will take place if:The practitioner’s state license or DEA number is revoked,suspended, restricted, or placed under probation;The practitioner fails to maintain malpractice insurance;and/orThe practitioner’s medical records are not completed in atimely manner.Summary Suspension. The CEO or any member of the MEC orthe governing board may initiate summary suspension on theinvolved practitioners medical staff status or clinical privileges.Summary suspension is typically initiated whenever apractitioner’s conduct requires that immediate action be takento prevent immediate danger to life, or injury to him-or herself,patients, employees, or other persons present in the hospital.After a summary suspension, the MEC will typically convene toreview and consider the suspension. The MEC mayrecommend modification, continuation or termination of thesuspension. Unless the MEC recommends immediatetermination of the suspension, or one of the lesser sanctions,the practitioner is entitled to the procedural rights contained ina fair hearing. Any and all decisions or conclusions that aredrawn by the MEC are assessed by the governing board beforeany final decision is made.Finally, any applicant who has been denied appointment,clinical privileges or reappointment, or who has been removedfrom the medical staff during the appointment year, may notreapply to this hospital for a period of one year (12 months),unless specified otherwise in the terms of the specificcorrective action.The practitioner fails to satisfy an interview requirement;Sources and Additional Information1. Pointer, Dennis D. PhD. What Role Does This Board Play In The Medical Credentialing Process? Trustee Magazine. April 1996.2. Health Care Terms. HcPro’s. www.credentialinfo.com/cred/glossary.cfm.3. Ohlsen, Joel D. MD. Presentation: Physician Credentialing and Quality Management. Western Regional Trustee SymposiumOrientation for New and Interested Trustees. June, 2000.4. How To Verify Credentials. HcPro’s. www.credentialinfo.com/cred/quanta/verifycred.cfm.5. Our Credentialing Approach. HcPro’s. www.credentialinfo.com/cred/fundamentals/credapproach.cfm.6. Roles and Responsibilities. HcPro’s. www.credentialinfo.com/cred.fundamentals/hosproles.cfm.7. The National Practitioners Data Bank. HcPro’s. www.credentialinfo.com/cred/dbintros/databank/npdb.cfm.8. The Board Action Data Bank of the Federation of State Medical Boards. HcPro’s.www.credentailinfo.com/cred/dbintros/databank/fsmb.cfm.9. The American Medical Association Physician Masterfile. HcPro’s. www.credentialinfo.com/cred/dbintros/databank/ama.cfm.10. Investigation and Corrective Action Policy. HcPro’s, www.credentialinfo.com/cred/pandp/investigative.cfm.11. Routine Investigation Procedure. HcPro’s, www.credentialinfo.com/cred/pandp/routine.com.94

20 Questions Every Washington Hospital Board Needs to be Able to AnswerIt’s possible in hospital boardrooms today to just “get by”on what you know. However, trustees who want to be truegovernance knowledge leaders must prepare themselvesby continuously improving their knowledge in order to deliverpenetrating, insightful leadership that their communities wantand deserve.Governing boards need to be able to make sense out of verycomplex issues and possibilities. That “sense-making” requiresa strong grounding and awareness.How does the board ensurecontinuous growth in its criticalleadership knowledge?Health care is moving at the fastest pace in history. What trustees needed to know five yearsago is no longer sufficient in today’s world, where governance “knowledge capital” is one of ahospital’s most valuable assets.meeting. The key to success is to develop trustee knowledgethat enables governance leaders to put the bigger issues andchallenges into a local market framework, identify local marketimplications, and lead with confidence.A well-planned and financially well-supported effort will resultin better decisions based on better knowledge and insights; animproved capacity to be a well-informed advocate for thehospital and its community; increased capacity to engage inchallenging and productive governance dialogue; and anability to think beyond “conventional wisdom.”Education vs. Knowledge and IntelligenceGovernance education is a continual process, not an end result.Education is the vehicle for improved governance knowledge.The end result and benefit of governance education is greaterknowledge and heightened leadership intelligence thatensures trustees are fully-prepared to engage around criticalissues, and make evidence-based vs. “gut”-based decisions.Well-planned and well-focused governance education buildsthe “knowledge capital” the board needs to ensure that theright decisions will be made, using meaningful information anddata.Working with Individual Trustees to Assess andMeet Education NeedsTrustee knowledge-building must take place continuously, andthrough a variety of venues. Sources of information includestate hospital association conferences; reading and absorbinginformation and ideas in trade journals including Trustee andHospitals & Health Networks; through reports and studiesavailable online, such as HealthLeaders, the Kaiser Daily HealthPolicy Report, Health Affairs, and online versions of nationalnewspapers; and though targeted education at every boardIn order to be successful in evaluating trustee education needsand ensure a successful education process, several factors arecritical, including: board dedication to and investment inknowledge building; trustee participation; clearly statededucation expectations; intimatetrustee involvement; and educationthat is individualized and customizedto trustees’ unique needs.The board must invest inknowledge building, bothfinancially and intellectually. Thegovernance education processGovernanceeducation is acontinual process,not an end result.should be undertaken with a firm and defined purpose. That is,the board should define for exploration several months inadvance the issues and topics that are most critical for boardmembers to understand in order to make critical decisions.These topics should be drawn from the forces and factors thatare driving hospital success in achieving the mission, vision andstrategic objectives. Knowledge-building venues and availableresources for delivering the education (meetings, publications,trustees themselves, consultants, etc.) should then bedetermined. A basic strategy should be set, with objectivesand outcomes; success should be evaluated periodically; and95

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding the Governance “Knowledge Bank” for Better Decision Makingnew opportunities should be incorporated into the educationaldevelopment effort as changes occur in the market. Educationshould not be a one-time event, but should instead be aninstitutionalized commitment to ensuring that the governingboard has the knowledge resources necessary to makestrategic decisions and be a highly-effective leadership body.Participation should be mandatory as a condition oftrusteeship, not a “suggestion.” Hospitals owe it to theirpatients, physicians and communities to ensure thatgovernance decisions are made and directions are set as aresult of vigorous scrutiny andinformed intelligence. This meansthat every board member, not justGovernanceeducation should beviewed by trusteesnot as arequirement, but asan opportunity tobest serve thehospital and thecommunity.some, must have a common level ofunderstanding of critical issues anddevelopments, and theirimplications for the hospital.Requirements for governanceparticipation should be expresslydiscussed in trustee recruitment.Governance educationrequirements should not be asurprise to new trustees after theybegin serving on the board.Instead, trustees should be fully informed in advance abouteducation requirements, which should be presented as anavenue to best serve the hospital and the community.Prospective trustees should embrace the importance of healthcare education in their development as a valuable leadershipasset.Education planning should be directed, where possible, bytrustees themselves. Trustees may be asked to researchcertain topics or issues, and present the findings, implicationsand possibilities to the entire board, in essence making trusteesthe knowledge-builders for the benefit of the entire board.This level of involvement not only brings credibility to theimportance of education, but also results in deeper trusteeunderstanding of the most critical topics.Education should be individualized and customized. Everytrustee is in a different “place” in terms of his or her level ofawareness and knowledge of the issues discussed and thedecisions made at board meetings. Nonetheless, every trusteehas the same fiduciary obligation, and the same responsibilityto be well-informed. Efforts should be made to understand theknowledge needs of each trustee, and plans should bedeveloped for providing each individual with the informationhe/she needs to be active, engaged, and productiveparticipants in the governance process.Designing an Effective Governance EducationProcessThe critical question remains: How to go about doing it? That’swhere commitment, collaboration and consensus come intoplay.Below is an outline of how a board of trustees may design aprocess that will ensure optimum development of leadershipknowledge and effectiveness:Step One. Define the board issues about which every boardmember needs to have a common understanding in order tobe a high-performance trustee. Subjects may include, but arenot limited to:Health care payment issues;Health care regulation;Workforce issues and challenges;Quality and patient safety;Transparency in health care;Delivering and communicating community benefit;Factors impacting patient access to care;Hospital/physician alignment; andThe board’s role in CEO compensation and evaluation.The hospital’s current strategic plan should serve as a basis fordetermining the most critical board education topics andcurrent health care trends impacting board, and ultimately,hospital success.Step Two. Assess each individual trustee’s awareness andunderstanding of the issues and situations likely to comebefore the board in the coming months. This may be donethough a board self-assessment, a simple survey, or in causalone-on-one conversations, typically between individualtrustees and the board chair and/or CEO. The individualizedknowledge assessment is not a “test,” and should not beintimidating. Instead, it is a conversation to help determine theareas where pinpointed education should be focused to mostquickly get trustees “up to speed” on the issues and decisionsfor which they are fully responsible.96

20 Questions Every Washington Hospital Board Needs to be Able to AnswerBuilding the Governance “Knowledge Bank” for Better Decision MakingStep Three. Assign an experienced board colleague to workclosely as a “mentor” with newer trustees to help themunderstand issues, questions, nuances, etc.Step Four. Develop a 12-month or longer “curriculum” oftopics that are essential to effective governance, anddetermine the most appropriate resources to assess or deliverthe information. Ensure that trustees are actively involved inthe selection of topics, and that the methodology forpresenting the information is conducive to trustee learningstyles. Delivery methods may include in-person presentations,facilitated discussions, online presentations, reading materials,and more.Step Five. Leverage the improved trustee knowledge not onlyfor board discussion and decision-making, but also throughcoordinated outreach, including legislative advocacy andconnections with the local community through trusteeinvolvement in community activities, and formal and informalcommunity discussions and presentations about theorganization and the challenges it faces.Step Six. Continuously refine and improve the process.Conducting a regular board self-assessment process is onemethod to measure year-over-year improvements in boardunderstanding and education effectiveness, and determinepotential “knowledge gaps” that still exist.Building expectations for growth and development of theboard’s knowledge capital will result in better dialogue, betterdecisions, and knowledge-based leadership that will drivefuture governance performance and organizational success.97

20 Questions Every Washington Hospital Board Needs to be Able to AnswerHow does the board keep conflictout of the boardroom?It’s a simple fact that conflicts of interest erupt in hospital boardrooms from time-to-time. It isthe board’s fiduciary duty to ensure that all governance deliberations and decisions are carriedout without conflict of interest, always with the best interests of the hospital at the forefront.Hospital board members often are involved with manyother organizations in the community, resulting in awide range of business and personal relationships.Ethical codes and policies developed by a hospital and itsboard members serve as a foundation to ensure a conflict-freeenvironment. Hospital leaders who create and adhere to astrong conflict of interest policy will be successful in ensuringopen and honest deliberation.For example, questions may arise when board members servein various roles with other organizations. There might beinterpersonal and financial relationships that call into questionwhether the individual will be able to make decisions free fromthe influence of their other roles.Questions should arise when the personal interests of a boardmember appear to be at odds with the interest of the hospital.What is a Conflict of Interest?A conflict of interest exists when a board member, seniorleader, or management employee has a personal or businessinterest that may be in conflict with the interests of thehospital. A “red flag” should be raised anytime the personal orprofessional concerns of a board member affects his or herability to put the welfare of the organization before personalbenefit.Board members are often affiliated with many business, social,charitable and religious organizations in the community. Theremay be times when trustees feel pulled in conflictingdirections, and where they must decide between loyalty andfiduciary service to the hospital, or to another communityorganization, friend, or family member where there is a closeand potentially conflicting connection.The key for boards is to establish a process for preventing andaddressing the inevitable conflicts that arise, and ensuring thatconflict of interest policies and procedures are consistentlyadhered to.Conflicts Are Not Always Cut and Dried. Conflicts of interestcan be complicated, and are almost always unintentional. Insome cases no conflict actually exists, but the perception of aconflict of interest can be just as detrimental.What Can Boards Do to Prevent a Conflict ofInterest?Having multiple systems in place to safeguard against conflictof interest ensures hospitals will minimize personal dilemmascovering a variety of issues, such as financial gain or business orfamily benefits. These safe-guarding procedures will help thehospital and its board to be prepared when real or perceivedconflicts do occur.Encourage Self-Monitoring. It may be uncomfortable to “callout” a board member on a potential conflict of interest. For“self-monitoring” to be effective, it is critical to have a clearpolicy in place and tools for board members to use to eitherdeclare a conflict of interest or to request consideration aboutwhether a fellow board member has a potential conflict ofinterest. When this happens, the process of determiningpotential conflicts becomes less personal, and instead is simplya part of the board’s standard processes and procedures. 11It is the board chair’s responsibility to oversee this process. Thechair should encourage board members to be transparentabout any potential concerns they may have. The chair shouldmeet with individuals to discuss potential conflicts, anddetermine if any issue needs to be re-opened or re-examined ifan individual’s conflict may have influenced the discussion ordecision. 11 The board chair’s understanding of the hospital’s98

20 Questions Every Washington Hospital Board Needs to be Able to AnswerEnsuring Conflict-Free GovernanceConflict of Interest Policy ComponentsThe following is a general outline of the primary components that should be included in a conflict of interest statement: Statement of purpose and duties of officers and trustees – a brief overview of senior leaders’ and trustees’ responsibility to the organization,and the purpose of the conflict of interest policy. The policy’s purpose is to both protect the organization and board members. Direct or indirect financial or other material interest – this includes a detailed description of the types of interests that must be disclosed byindividuals covered by the policy. After an individual discloses a potential conflict outlined in this section, the interest must be reviewed by thefull board or an appointed committee. Co-investment interest – individuals must also declare whether they (or a relative, as defined in the policy), have personal funds invested withan investment manager providing, or expected to provide, investing services to the hospital. Similarly, individuals must declare if they havepersonal funds invested in an investment fund in which the organization is currently investing in or considering investing in. Failure to disclose – this section describes the action the organization will take if an individual covered under the conflict of interest policy failsto comply with the policy and does not disclose a known conflict of interest. Disclosure statement – without an annual disclosure statement, the conflict of interest policy is just words on paper. The disclosure statementputs the conflict of interest policy into action, using the policies, procedures and definitions outlined in the conflict of interest policy to helpindividuals declare any conflicts they may have.Source: Kurtz, D. and Paul, S. Managing Conflicts of Interest: A Primer for Nonprofit Boards. Board Source. Washington D.C. 2006.policies and his or her role is critical to ensuring conflict-freeboard discussions and decisions.Rural Hospitals Have Greater Challenges. Small and ruralhospitals may find it more difficult to minimize or eliminateconflicts of interest because they generally have a smaller poolof potential candidates from which to choose. Often in a smallcommunity one individual may serve on multiple boards or beinvolved in some leadership or financial capacity with multipleorganizations and/or community groups.The key to ensuring conflict-free discussion and decisionmakingis to recognize and minimize conflict of interest asmuch as possible, even though it may not be completelyeliminated. Ensuring that a comprehensive conflict of interestpolicy is in place that requires full disclosure is a critical firststep, allowing for board members with conflicts to removethemselves from discussions and decisions when appropriate.Recruit Outsiders. Hospitals in smaller communities may find itdifficult to recruit individuals with specific skill sets who do nothave a conflict of interest due to other business, governance orfamily relationships. If the board seeks a new trustee with adesired skill or experience, recruiting someone from a nearbytown may be a workable option. Non-local board members canoften bring fresh perspectives to the board, and are less likelyto have conflicts of interest. The board must be assured thattrustees recruited from outside the community are committedto the hospital and the community it serves.Ensure a Proper Process for Recruiting and Selecting NewBoard Members. When selecting new board members, aprimary objective should be to ensure a wide range ofknowledge and experience. This should involve an evaluationof potential candidates’ strengths, and discussion about howthose strengths best complement existing board members’talent, knowledge and experience. Compiling a list of potentialcandidates and assigning a score to each candidate, based ontheir fit with the hospital’s needs, is one way to prioritize thecandidate pool. 13When governance candidates are interviewed, they should beasked about any potential conflicts prior to their appointmentto serve on the board. Although conflicts may not necessarilydisqualify a candidate, the candidate’s willingness to talkcandidly about and fully consider potential conflicts they mayhave should play a key role in the nominating committee’sdecision.Reporting Conflicts of InterestThe best way to prepare for conflict of interest situations is toestablish a process for declaring potential conflicts before theyarise. Declaring real or perceived conflicts in advance ensuresopen communication amongst board members and seniorleaders, and prevents potentially problematic situations downthe road.99

20 Questions Every Washington Hospital Board Needs to be Able to AnswerEnsuring Conflict-Free GovernanceQuestions Boards Should Consider WhenCreating a Conflict of Interest PolicyIs there a conflict of interest if a board member volunteers his orher skills and advice in his or her field of expertise to theorganization he or she serves?Are conflicts inevitable when board members are paid forproviding legal or other professional services to the hospital?What if a board member is affiliated with the only vendoravailable to provide certain goods or services to the hospital?May a board member or officer accept for himself an opportunitythat could benefit the organization that he serves?Should the chief executive serve on the board of directors? Whatrole may the chief executive play on the board?Does it present a conflict for a board member to serve on theboard of another not-for-profit hospital that competes for thesame sources of funding?Is there a conflict of interest if the organization’s auditors provideother services to the hospital?Is there a conflict of interest if a hospital’s patients serve on theboard?Source: Kurtz, D. and Paul, S. Managing Conflicts of Interest: A Primer forNonprofit Boards. Board Source. Washington D.C. 2006.Disclosure Statements. Once a conflict of interest policy is inplace, every trustee and senior leader should annuallycomplete a conflict disclosure statement. While the conflict ofinterest policy defines what a potential conflict is, thedisclosure statement is the mechanism for individuals todeclare any potential conflicts they may have.The disclosure statement is generally a standard form preparedby the organization that requires individuals to initial or agreethat they: 1) Have read and are familiar with the conflict ofinterest policy; and 2) Either are not aware of any direct orindirect conflicts of interest, based on the definitionsdeveloped by the organization, or have attached a letterdescribing any direct or indirect conflicts of interest that exist,based on the definitions developed by the organization. 1 Inaddition, individuals should sign a statement agreeing toreport any new conflicts that arise throughout the year in atimely manner. Each trustee should complete the statementannually.Collecting and Reviewing Disclosure Statements.Organizations may designate a compliance officer who isresponsible for reading the disclosure statements andmonitoring for potential conflicts when they arise. 7 Thecompliance officer should be responsible for collectingdisclosure statements from all board members covered by thepolicy. In addition, board members should report any newconflicts (whether actual or perceived) that arise during theyear to the compliance officer. Board members should neverwait until it is time to update their annual disclosure statementto declare a new conflict.If the board has appointed a specific committee to addresspotential conflicts, the compliance officer may also be the chairof the group or committee charged with handling conflicts. Insome cases, larger organizations may contract with a legalexpert to handle the collection and review of disclosurestatements and to help ensure compliance.Addressing Conflicts of Interest After TheyAriseConflicts of interest may happen unintentionally if an individualdoes not recognize a potential conflict of interest orrecognizes the conflict after the fact, or intentionally if anindividual chooses not to reveal a known conflict. Regardlessof the source of the breach, the board must have a process inplace for dealing with these difficult situations before theyoccur.Known Conflicts. If a conflict arises that has been disclosedthrough the annual disclosure statement, the board meetingminutes should reflect the conflict and describe the actiontaken. For example, did the board member remove himself orherself from the discussion? Did the board continue thediscussion and determine their decision was in the bestinterest of the hospital despite the potential conflict? Althoughthere are a few exceptions, in most instances the board shouldnot allow conflicted board members to participate in thediscussion or vote on any issue where a conflict of interestexists. 11Unknown Conflicts. The situation becomes more complicatedif a conflict becomes apparent that has not been previouslydisclosed. According to Board Source, there are several stepsthat may be taken. 1If either the individual board member recognizes a potentiallynew conflict that has not been declared, or another boardmember perceives a conflict that has not been declared, adiscussion should take place between the board member withthe potential conflict and the individual or committee chargedwith monitoring conflicts of interest. Ideally, all participants inthis discussion would be “disinterested” individuals, or100

20 Questions Every Washington Hospital Board Needs to be Able to AnswerEnsuring Conflict-Free Governanceindividuals that can evaluate the situation objectively. If anagreement is reached about how to address the conflict, nofurther discussion is necessary. However, if the board memberin question does not recognize the potential conflict, the issueshould be brought before the full board for discussion.If a problem arises during a board meeting discussion, it shouldbe addressed at that time. If the conflict is related to themeeting progress and/or a decision to be made, the boardmust decide how to proceed and indicate that decision in themeeting minutes. If necessary, a re-vote may be taken at thenext meeting.Sources and More Information1. Kurtz, D. and Paul, S. Managing Conflicts of Interest: A Primer for Nonprofit Boards. Board Source. Washington D.C. 2006.2. Lauer, C. Beware of Conflicts of Interest. Modern Healthcare. June 2004.3. Kazemek, E. and Bader, B. Turning Up the Heat on Institutional Integrity. Trustee. February 2007.4. Jaklevic, M. Conflict Resolution. Modern Healthcare. July 2004.5. Evans, M. Oversight Shortfall. Modern Healthcare. December 2005.6. How do We Safeguard Against Conflict of Interest? Board Source. www.boardsource.org.7. Robinson, M. (2007). Declaration of Independence. Board Source. March/April 2007.8. Larson, L. How Many Hats Are Too Many? Trustee. February 2001.9. Lister, E. Conflict of Interest: Questions and Answers for Trustees. Trustee. July/August 2003.10. Tyler, L. Conflict of Interest: Strategies for Remaining ‘Purer Than Caesar’s Wife.’ Trustee. March 2004.11. Sandrick, K. Avoiding Conflict of Interest. Trustee. July/August 2003.12. Orlikoff, J. and Totten, M. Conflict of Interest and Governance: New Approaches for a New Environment. Trustee Workbook.Trustee. April 2004.13. Mitchell, G. Rural Hospitals: A Different Take on Conflict of Interest. Trustee. March 2008.101

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat are the most prominenthealth needs in your community?Health care reform, new IRS Form 990 requirements, value-based purchasing, workforceshortages, transparency, governance scrutiny, health information technology, evidence-basedmedicine, changing demographics, economic challenges – these are just a few challengesfacing hospitals and health systems in today’s complex and rapidly changing health careenvironment.To successfully and effectively lead their organizations,boards of trustees must have a deep understanding ofthe issues, challenges and needs confronting them.They should have clear answers to questions such as:How dependent is our organization’s success on thedirection these issues take?If the hospital’s mission is to improve the community’shealth, what is the health status of the community?Does our board have the evidence and information itneeds to make effective, data-driven strategicdecisions?Community needs and environmental assessments helptrustees answer these questions. In addition, they providehospitals and health systems with unique opportunities toconnect with the community and maximize partnerships, andbuild trust opportunities for building public trust andconfidence.Why Conduct a Community Needs Assessment?A comprehensive community needs assessment provides thehospital with first-hand information about the health careneeds of the community it serves. With this “snapshot” of thecommunity’s health, the hospital can identify the mostpressing health care needs of the community, populations ofindividuals in need, gaps in care and services, barriers andchallenges to receiving services, and information about otherorganizations that may already be working to meet specificneeds. This information provides the foundation needed tobuild strategic and operational plans that will advance thehospital’s mission of service to the community. Using the dataand information from the assessment, trustees can:Assess and evaluate where and how the hospitalshould direct its attention;Prioritize strategic initiatives; andBest determine the allocation of resources.An Opportunity to Strengthen Community Relationships. Acommunity needs assessment is also a prime opportunity tostrengthen community relations and build communitypartnerships. For example, conducting an assessment providesopportunities for the hospital to collaborate with a variety ofcommunity organizations in the distribution of surveys andcollection of data. In addition, conducting community-basedfocus groups and making a dedicated effort to solicit the viewsand opinions of community members can help build andstrengthen positive perceptions of and trust in the hospital.It’s Now Mandatory for Not-For-Profit Hospitals. Conductinga community needs assessment is now more than animportant step in building community relationships andproviding hospitals with the information they need to meetcommunity needs—its also a requirement enforced by theInternal Revenue Service (IRS).The recently passed Patient Protection and Affordable Care Act(PPACA) requires not-for-profit hospitals to conduct acommunity needs assessment every three years. In addition,hospitals are required to demonstrate that they haveundertaken strategies to address the needs identified throughthe assessment.102

20 Questions Every Washington Hospital Board Needs to be Able to AnswerUnderstanding Your Environment: Practical Processes for Understanding Community Needs and Environmental TrendsWhile the PPACA does not prescribe how hospitals shouldconduct their community needs assessment, it does specifythat the assessment must 1) take into account input frompersons who represent the broad interests of the communityserved by the hospital facility, including those with specialknowledge of or expertise in public health; and 2) be madewidely available to the public. 11 The Act also states that thecommunity needs assessment may be based on informationcollected by a public health agency or not-for-profitorganizations, and may be conducted together with one oremore organizations.Hospitals will be required to submit their community needsassessment information on the Form 990, including adescription of how they are addressing the needs identified inthe community needs assessment, a description of any needsthat are not being addressed, and why those needs are notbeing addressed. 11 Hospitals that do not fulfill the newcommunity needs assessment requirements may incur a$50,000 excise tax.The community needs assessment requirements of the new IRStax code related to the PPACA go into effect for the taxableyears beginning after March 23, 2010. In the meantime, thecurrent IRS Form 990 already creates awindow of transparency into the hospital’sefforts to understand and meet communityneeds. Part IV, “Supplemental Information,”of the Form’s Schedule H asks hospitals to:Describe how the organizationassesses the health care needs ofthe communities it serves;Describe the community theorganization serves, taking intoaccount the geographic area anddemographic constituents it serves;Describe how the organization’scommunity building activitiespromote the health of thecommunities the organization serves;Some expertspredict that thepenalty for failure tocomply with the newcommunity benefitassessmentrequirements will begreater than the$50,000 fine—itcould be thepotential for the IRSto revoke ahospital’s taxexemptstatus.Provide any other information important to describinghow the organization’s hospitals or other health carefacilities further its exempt purpose by promoting thehealth of the community; andIf the organization is part of an affiliated health caresystem, describe the respective roles of theorganization and its affiliates in promoting the healthof the communities served.Trustees should note the importance of this section as a criticalopportunity to demonstrate and validate the hospital’s effortsto assess and understand the needs of their communities. TheIRS is inviting hospitals to describe in greater detail theirmethodologies for determining the community benefit andservices provided and to convey how these benefits andservices promote the health of the community. Trustees andhospital leaders should expect the IRS and lawmakers to usethis information as they determine the need for future laws andregulations governing community benefit and tax-exemption.In fact, some experts predict that the penalty for failure tocomply with the new community benefit assessmentrequirements will be greater than the $50,000 fine—it could bethe potential for the IRS to revoke a hospital’s tax-exemptstatus. 12Promoting Community HealthThe American Hospital Association (AHA) provides thefollowing guidelines to assist hospitals in planning andcommunicating their efforts to meet community needs.Hospitals’ commitment to community health asreflected in their missions, values, and goals should beunderstood and applied by everyone throughout theirorganizations.Hospitals should understand their communities’unique health needs, and work with others in thecommunity to meet those needs.Hospitals should periodically conduct a communityneeds assessment and assign responsibility for thehospital’s community benefit plan to a hospitalemployee.Hospitals should have ongoing processes for planningand monitoring how their commitment tocommunity health is met through services andprograms for the community.Hospitals should develop and make readily availableto the public a comprehensive inventory of all thecommunity programs and services offered, includingspecialty services, extended care, and programs thataddress social and basic needs, access, coverage, andquality of life.Hospitals should understand and publiclycommunicate the impact of their programs andservices on their communities.103

20 Questions Every Washington Hospital Board Needs to be Able to AnswerUnderstanding Your Environment: Practical Processes for Understanding Community Needs and Environmental TrendsPractical Steps for Conducting a CommunityNeeds AssessmentMaximizing the value of your community needs assessmentrequires careful forethought and planning. The process shouldbegin with a clear definition of the objectives of theassessment by the board and the hospital’s executiveleadership. Hospital leadership must then communicate theimportance of the assessment throughout the organization,and engage the hospital’s employees in support of datacollection efforts. In addition, involving community leadersand key stakeholders in the process is particularly critical to asuccessful community needs assessment.Although every organization’s community needs assessmentprocess will be different, the following steps provide anoverview of the steps often undertaken in a community needsassessment.Step 1: Determine a Project Sponsor and a ProjectCoordinator. The project sponsor is typically a member of theexecutive management team, but may be a board member.This individual serves as a liaison between the coordinator, theexecutive team and the board. The project sponsor providesoversight and high-level guidance, provides assistance innavigating threats or obstacles to the assessment, and isaccountable for the successful and timely completion of theassessment.The project coordinator is responsible for planning andimplementing the logistics of the assessment.Step 2: Clearly Define the Objectives of the Assessment. Thegeneral purpose of the community needs assessment is toidentify health care needs that exist in the community, and todetermine the role the hospital should serve in meeting thoseneeds. A more clearly defined set of objectives will alsoidentify:If the assessment will be used to set strategicdirection, identify organizational initiatives andprioritize allocation of resources;If the assessment is or will be used in measuringprogress against an established baseline ofcommunity need(s); andWhat elements of the assessment are required to beincluded in the assessment in order to fulfill any legal,contractual or regulatory requirements (for example,the board may want certain demographics to becollected and analyzed to substantiate the hospital’sForm 990 filing).In addition to defining the information needed and how thefindings will be used, the objectives should also define theassessment’s geographic reach, generally considered to be thehospital’s primary and secondary service area.Step 3: Identify Available Resources. Define the budget,number of employees and other resources available anddedicated for conducting the community needs assessment.Step 4: Develop a Detailed Plan. The project plan shouldinclude specific milestones, actions, accountabilities,dependencies and timeframes for completion. The planshould include processes for conducting the assessment,sources and methodologies for collecting data andinformation, a process for analyzing the results, and a plan forcommunicating findings and outcomes to the board, keystakeholders and the community.Step 5: Collect and Analyze Data. Once the goals have beenidentified and the work plan has been approved, the next stepin the assessment is to collect and analyze data. Utilizingmultiple methods of data collection is recommended to ensurethe widest possible opportunity for community representationand a clear picture of the issues, and can generally be dividedinto primary data collection and secondary data collection.Primary Data Collection. The three most common forms ofprimary data collection are surveys, focus groups and personalinterviews.Surveys. Surveys are most frequently used to gatherinput from a larger number of people at the same time.Surveys may be conducted in various forms – a writtenpaper survey, an online survey, a telephone survey, or asurvey completed in-person by a survey-taker. Regardlessof the survey format, it is important to consider the primarylanguages spoken in the community and providetranslated versions of the survey as needed by thecommunity.When deciding which format to use, consider the targetaudience and the format that is most likely to achieve thegreatest response rate. Once the format is determined,make survey submission as easy as possible. For example,if it is a written survey, design the survey form to fold into a“self-mailer” with the delivery address and prepaid postageprinted on the front. Set up “survey stations” at varioussites within the hospital, such as the entrance, lobby andwaiting areas, admissions and business offices, cafeteriaand other public spaces. Supply each station with a freestandingsign publicizing the importance of the survey andthe hospital’s desire to hear from all segments of the104

20 Questions Every Washington Hospital Board Needs to be Able to AnswerUnderstanding Your Environment: Practical Processes for Understanding Community Needs and Environmental Trendscommunity, and include copies of the survey and a dropbox for submitting the survey.Survey Design. Surveys typically consist of closed-endquestions with multiple-choice responses. These types ofquestions are easier to quantify and analyze for a largenumber of respondents. Open-ended questions may alsobe included, but responses require qualitative analysis toidentify key themes and issues. For example:A multiple choice question may ask somethinglike: “Are there health care services that are notavailable in your community that you thinkshould be?,” which the following answer options:Yes, there are some services that are notavailable in our community and should beNo, there are no additional local services IneedThere are some services not available in ourcommunity, but that is okayA logical follow-up open-ended question may be:“If there are needed services, what are the top 3services you think are most needed?”You may also want to ask questions that allowmultiple responses, such as “When you orsomeone in your family needs health care, areany of the following a problem? (Check all thatapply),” with the following answer options:ChildcareFinding a hospital or clinic that provides careto people without insurance, or offers free ordiscounted careFinding a hospital or clinic where the peoplespeak my languageTransportationSurvey Promotion and Distribution. Oftentimes,traditional survey methods fail to engage importantcommunity populations and constituencies. Thesepopulations may include the homeless, those withoutavailable Internet or telephone services, individuals withdisabilities, non-English speaking people and others. Theneeds and perceptions of these people are importantwhen considering the health of the entire community andhow health care needs are or are not being met. Whendetermining your survey methodology, it is important toconsider using more than one method in attempting toreach the broadest possible representation of the entirecommunity.To overcome a lack of widespread survey access andbarriers for some populations, begin by identifying a broadnetwork of partners willing to promote and encouragesurvey completion. Their participation may range fromwillingness to sponsor an on-site computer station foronline survey completion to survey distribution andpromotion. Ask employers if they will include the surveywith payroll distributions, include a statement of surveyavailability with hospital billing statements, and askretailers if they will allow distribution of surveys tocustomers at their store entrances. E-mail the survey tolocal chambers of commerce, civic organizations andothers, asking if they will distribute it electronically to theirmembers.The survey should be available in multiple formats,including an online version with a link directly on thehospital’s Web site, as well as a written version that can behanded out or distributed via email. The survey should betranslated into multiple languages if necessary to ensurethat all sub-sets of the community respond.In addition to distributing surveys through local employersand retailers, other alternatives to consider for surveypromotion and distribution include:Your hospital’s Web site (the survey may beavailable to fill out online, or as a downloadabledocument to print and mail in);Distribution to hospital employees, volunteers,trustees, foundation members and other hospitalor hospital related entities. Encourage employeesto distribute the survey to friends, neighbors andacquaintances;Inclusion with other hospital mailings and publicnotices;Internal hospital communications;Local media - newspaper, TV and/or radiocoverage and announcements;Distribution through physician offices, federal,state and/or county health clinics, other providersof health care and Medicaid programs;105

20 Questions Every Washington Hospital Board Needs to be Able to AnswerUnderstanding Your Environment: Practical Processes for Understanding Community Needs and Environmental TrendsLocal health insurers and agents or brokers;Civic leaders;Health fairs and job fairs;School representatives; andFood banks, homeless shelters and otherlocations where people of limited means gatherto secure resources;Community organizations and other entities suchas senior centers, libraries and churches;Chambers of Commerce, Rotary clubs and othercivic organizations;Local employers;Local health and fitness centers;Local pharmacies; andOther local opportunities as identified.Focus Groups. Focus groups provide anotheropportunity for input from people who work withcommunity groups and under-represented populations.Generally limited in size, focus group participants respondto open-ended questions presented by a group facilitator.Views and perspectives are discussed in greater depththan can be accomplished in a survey. A focus group maybe best conducted in follow-up to a survey, allowingthemes and issues identified in the survey to be furtherexplored and validated. Sample topics or questions thatmay be posed to a focus group include:Describe what a healthy community would looklike 5-10 years from now;Identify the ten most serious health careproblems that could prevent that vision frombecoming reality;Identify the groups of people most at risk; andIdentify whose accountability it is to find andimplement solutions to improving the health ofthe community.Focus group constituencies to consider include, amongothers:Members of the medical staff;Clinical care providers and managers of freeclinics;Social services agency representatives;Faith-based representatives.Interviews. Like focus groups, interviews offer anopportunity to explore and validate themes arising fromsurvey and focus group results. Brief, highly-focusedinterviews may be used as a means of gathering insightsfrom individuals, such as physicians and others, for whomscheduling focus group time is difficult. Sample interviewquestions that might be asked of physicians and providersinclude, among others:What top five symptoms do you treat in youroffice that indicate community health problemsor needs?What do you see as the root causes or primaryforces that create these health problems?What do people in your community encounterthat keeps them from getting necessary healthcare?Secondary Data Collection. In addition to collecting datadirectly from surveys, focus groups and interviews,organizations should supplement their findings with secondarydata. This information is readily available from various sourcesand can contribute to the overall strength of the assessmentfindings.When collecting secondary data, it is important to determinewhat information has the most significance and to seek outlocal as well as state, regional and national level data. Whenpossible, local health information should be benchmarkedagainst state, regional and national trends. Benchmarkingallows hospital leaders to explore questions such as: “Does ourcommunity exceed averages for various indicators ofcommunity health?” and “Is our community’s health statusbetter or worse than that of similar communities?”Identifying the potential causes and reasons behind thesefindings will help the board uncover potential opportunitiesand strategies for addressing the community’s health careneeds. Typical categories of secondary data and information toresearch include:Population growth trends and projections;Age trends;Race and ethnicity trends;106

20 Questions Every Washington Hospital Board Needs to be Able to AnswerUnderstanding Your Environment: Practical Processes for Understanding Community Needs and Environmental TrendsAHA’s Community Connections Strategy Checklist for LeadersThe American Hospital Association has identified the following questions for hospital leaders to consider as they conduct a community needsassessment and strive for strengthened community connections. Have you identified the communities you serve by geography and/or by those served? Does your organization conduct a community needs assessment? As part of that assessment, does your organization collect data on the demographics of your community, including population; incomestatistics; percentage of uninsured; percentage of Medicaid and Medicare recipients; medically underserved populations; the number ofhospitals serving the population; and other factors relevant in your service area? Does your organization collect data on the economic, social, cultural, and/or geographic barriers to care that exist in the community? Does your organization have a process to assess the health care needs of the “communities within the community” you serve, in particularhighly vulnerable populations? Does your organization work with others in the community, such as governmental, community, and/or social service organizations, toconduct your community needs assessment? Do you share the results of your community health assessment with other organizations and agencies in the community? Does your organization use the results of the community needs assessment to set priorities for community benefit efforts and programs? In setting the priorities for community benefit efforts and programs, does your organization work with others in the community, such asgovernmental, community, and/or social service organizations, and partner on needed health initiatives?Gender information;Income levels;Education levels;Uninsured rates;community needs. Part of this process may mean determiningif it is necessary to provide additional services or create newprograms. Some services may benefit the hospital withadditional income, while others may result in minimal or noprofit. When evaluating potential new services, the board mustdecide if adding the services:Unemployment trends;Provides a substantial benefit to the community;Rates of physical activity;Is important in fulfilling a specific community need;Rates for preventive screening measures;Incidents of chronic disease; andHealth care utilization.Step 6: Develop a Summary Report of Findings. A summaryreport pulls together all of the findings, and should include theobjectives of the assessment, the methodologies employed,findings, implications and recommendations. The findingsfrom the needs assessment survey, focus groups andinterviews should be synthesized and compiled in anorganized and logical manner that allows the board and thehospital’s executive leadership to identify and evaluate theimplications and develop potential strategies.Step 7: Follow-Up. Trustees are responsible for makingdecisions about how the assessment results will be used. Theassessment process should give the board a strong foundationfor strategic planning by providing clarity about neededservices and identifying specific, attainable goals for meetingContributes toward the community benefit activitiesrequired of tax-exempt hospitals; orDirectly contributes to the achievement of thehospital’s mission.Communicating the assessment results to stakeholders,partners in the assessment promotion and other communitymembers is an important step in engaging their continuedinterest, support, trust and ownership of solutions to meetingneeds and improving the health of the community.What Does an Environmental AssessmentAchieve?In addition to conducting a community needs assessment, agood environmental and market trend assessment can provideboards of trustees with new insights and help drive soundstrategic decision-making. Comprehensive environmentalassessments offer:107

20 Questions Every Washington Hospital Board Needs to be Able to AnswerUnderstanding Your Environment: Practical Processes for Understanding Community Needs and Environmental TrendsRelevant and reliable data needed for strategicanalysis and evaluation;“Early warnings” of changes on the horizon;A consistent context for discussion, debate anddecision-making;An integrated, holistic perspective of the health careenvironment;Conducting an Environmental AssessmentEnvironmental assessments typically focus on health caretrends and forces for change in the health care field, providinghospital leadership with a more in-depth understanding of theissues and trends occurring in key areas. The areas of focusmay change over time, but a good assessment will typicallyhighlight:Health care trends;Improved organizational responsiveness to theenvironment; andGreater opportunity for successful achievement ofstrategic plan initiatives.An environmental assessment should provide not only anoutside look at the surrounding environment, but should givetrustees a complete perspective by including an inward view aswell. As with a community needs assessment, a variety ofprimary and secondary sources of information and data shouldbe accessed to provide the greatest possible breadth anddepth of relevant information. When possible, organizationsshould use the information, data and reports they alreadygather and produce, but which may not have been historicallycompiled into a single resource. This will minimize duplicationof effort and ensure that all available information is included inone comprehensive and integrated location.Local demographics;Competitor information;An organizational profile;Quality and patient satisfaction performance;Financial performance;Information about the medical staff; andHuman resource issues, such as projected shortages,turnover rates and vacancies.Health Care Trends. Health care trend information highlightsthe forces for change that are projected to influence thedirection of health care. Examples of current health care trendsto consider include growing rates of uninsured andunderinsured, health care reform efforts, rising consumerInside and Outside PerspectivesExamples of data and information that should be collected and evaluated in the environmental assessment include:The Outside ViewThe Inside ViewReform efforts, new or proposed regulatory and legislativechanges occurring in the health care fieldWorkforce trends, such as nursing and physician shortages, agingand retirementDemographic trendsService utilizationCommunity health and health care access informationThe economy, finance, and economic developmentInformation technology trendsMedical technology trendsTrends in consumerismPayer trendsPolitical issuesPhysician and other provider changes and trendsQuality and patient safety mandates and developmentsCompetitive information including statistics, market share trends,areas of excellence, and facility developmentA portfolio of the services offered by the organization includingutilization trends, market share by service line and a SWOT(strength, weakness, opportunity and threat) analysisFoundation and other financial resource dataOrganizational access to and utilization of technologyFacility development needsQuality, patient safety and patient satisfaction measuresFinancial performanceMedical staff development status, trends and progress againstplans108

20 Questions Every Washington Hospital Board Needs to be Able to AnswerUnderstanding Your Environment: Practical Processes for Understanding Community Needs and Environmental Trendsactivism, increased hospital scrutiny and demands fortransparency, rapid advances in science, technology and IT,workforce changes, including nursing and physician shortages,and the expansion of integrated delivery systems.Demographics. The demographic section of an assessmentprovides a snapshot of local market demographics. Usefuldemographic information should include an overview of theorganization’s primary and secondary service area, populationgrowth projections, household income overviews, local areaemployment, unemployment and uninsured rates, etc.Competitors. Competitive information provides a morecomplete evaluation of potential unmet community needs andopportunities, and allows the hospital to monitor potentialcompetitive threats. This section of an assessment shouldinclude comparative statistical information on competitors’number of beds, discharges, emergency department visits,occupancy, and revenue statistics. Margin trends, profitability,an assessment of range of services and market share trendsshould also be evaluated.Organizational Profile. A strong summary of theorganization’s profile ensures that each member of the boardas well as the executive staff is working with the sameunderstanding and knowledge about the organization’scurrent performance. A profile can also provide contextregarding the resource capabilities of the organization and itsability to take advantage of emerging opportunities or toweather potential challenges to its operations. Acomprehensive profile should include information aboutrecent growth and development accomplishments such asnew facilities or implementation of services. Technologicalcapabilities and growth in patient volume should also becaptured in the profile, as well as a portfolio of services andutilization trends for surgery, outpatient services, emergencydepartment services, maternity care and other servicesavailable.Quality and Patient Satisfaction. Quality and patientsatisfaction belong at the forefront of the board’s attention.Quality, safety and satisfaction performance measures,initiatives and accomplishments should be captured and theirimplications should be continuously reviewed and evaluatedby the board. Consumer preferences and perceptions asmeasured by a national standardized survey of hospitalpatients commonly referred to as HCAHPS (Hospital ConsumerAssessment of Healthcare Providers and Systems), statereporting centers and other research sources are an importantcomponent of a comprehensive environmental assessment.Financial Performance. The hospital’s financial status andresources are critical to the organization’s ability to carry outstrategic initiatives and realize its vision. An assessment shouldaddress income and margin statistics and trends, inpatient andoutpatient revenue statistics and trends, and financial andoperating ratio analyses that identify resulting trends andimplications. The assessment should also include an analysis ofthe hospital’s payer mix.The Medical Staff. To complete an organization’s profile, anassessment should include statistical information about itsmedical staff. This data should include medical staffcomposition by specialty and membership type, recruitmentplanning goals and recent recruitment results, discharges byspecialty, and physician referral information derived from thepercentage of discharges by physician.Human Resources. Workforce shortages are a significanthealth care concern today and for the foreseeable future. Anenvironmental assessment should provide the board with theinformation and data necessary to stay abreast of this issue,including the measurement of any efforts on the part of thehospital to counter critical shortages. This portion of theassessment should identify hospital employee issues andconcerns, and should compare vacancy and turnover rates tonational trends. The implementation and progress ofleadership development and other workforce initiatives shouldalso be measured, analyzed and included in the assessment.Steps in the Environmental Assessment Process. The steps toconducting an environmental assessment are similar to thoseof the community needs assessment:Step 1: A project sponsor and project coordinatorshould be determined.Step 2: Clearly defined objectives for the assessmentshould be established.Step 3: Necessary financial and employee resourcesshould be identified.Step 4: A work plan should be developed andimplemented, and the work of the assessmentcompleted.Putting the Assessments to WorkArmed with the information provided in the assessments, theboard should first ask: “What impact will trends and forces forchange have on health care and on our hospital?” Forexample, when faced with changing medical staff109

20 Questions Every Washington Hospital Board Needs to be Able to AnswerUnderstanding Your Environment: Practical Processes for Understanding Community Needs and Environmental Trendsdemographics trustees might ask: “What are the criticalprojected changes in our physician workforce demographics?”and “based on these changes, what will be the key demandson the healthcare system in the next five years?”Once the questions are framed, the organization must makeastute assumptions about the implications and impacts theseissues hold for the future of the hospital. The board shouldwork with the senior leadership team to evaluate theorganization’s resources, abilities and capacity to successfullyrespond in face of these assumptions. The outcomes of theassumptions and evaluations will lead the board andmanagement in determining critical strategic opportunities,threats and resource gaps.Trustees are responsible for making decisions about howassessment results will be used. The assessment processshould give the board a strong foundation for strategicplanning by providing clarity about health care trends andneeded services, and help identify specific, attainable goals formeeting community needs. The board must decide if adding(or eliminating) services:Provides a substantial benefit to the community;Is important in fulfilling a specific community need;Contributes toward the community benefit activitiesrequired of tax-exempt hospitals; orDirectly contributes to the achievement of thehospital’s mission.Communicating the assessment results to stakeholders,partners in the assessment promotion and other communitymembers is an important step to engaging their continuedinterest, support, trust and ownership of solutions to meetingneeds and improving the health of the community.Three Ways to Maximize Your InvestmentLeverage the Work. The environmental assessment is asignificant resource of information that can be used in multipleways by individuals and departments throughout theorganization. It should become a dynamic “go to” documentthat is shared widely within the hospital. As requests forinformation and data are made throughout the year, theyshould be noted and evaluated for relevance. If deemedappropriate, new information and data should be incorporatedinto the assessment to continue building and improving onthe strength, relevance and usefulness of the organization’senvironmental intelligence.Put the Assessments to Work at Board Retreats. Communityneeds and environmental assessments provide a strong,evidence-based foundation upon which the board can build itsstrategic plan. Entering a retreat armed with assessment dataand information, trustees can envision and develop criticalassumptions about the trends and forces expected to influencethe health care field in coming years. Required capabilities andresources to meet those assumptions can then be identified,and the organization’s readiness can be assessed. Assessmentknowledge and the assumptions derived from it allow trusteesto better evaluate current strategies and to develop new,targeted strategies for achieving its mission and vision.Ask “What Do We Know?” Assessment work does not endwith a board or leadership retreat. Staying attuned to thecommunity and the health care environment requires ongoingeffort. Trustees must continually ask “What do we knowtoday that we didn’t know at our last board meeting? Doesthis new knowledge in any way change any of ourassumptions?” And “If so, how does that change affect ourcapabilities and strategies moving forward?”Sources and Additional Information1. Moore, Dianna. Comprehensive Community Needs Assessment Template. June 2007.2. Becker, Cinda. Community Center of Attention. Modern Healthcare. July 23, 2007.3. Francis, Theo. Lawmakers Question if Nonprofit Hospitals Help the Poor Enough. Wall Street Journal. July, 20, 2007.4. Felix, M. and Burdine, J. Taking the Pulse of the Community. Healthcare Executive. July/August 1995.5. Billings, J. and Crowley, S. Approaches to Community Needs Assessment: A Literature Review. Journal of Advanced Nursing. 1995.6. Horne, M. and Costello, J. A Public Health Approach to Health Needs Assessment at the Interface of Primary Care and CommunityDevelopment: Findings From an Action Research Study. Primary Health Care Research and Development. 2003.7. Escoffery, C. et al. Conducting Small-Scale Community Assessments. American Journal of Health Education. July/August 2004.8. Sandrick, K. Defining & Measuring Community Benefit. Trustee Magazine. November, 2006.9. Association for Community Health Improvement. ACHI Community Health Assessment Toolkit. www.assesstoolkit.org.10. Bilton, Michael. An Excellent Investment. H&HN. www.hhnmag.com. May 2008.11. Internal Revenue Service. Request for Comments Regarding Additional Requirements for Tax-Exempt Hospitals. Notice 2010-39. CommentsSubmitted by July 22, 2010.12. Sherry, Mike. Reform-Driven Assessments May Improve Care, Cut Costs. Puget Sound Business Journal. April 30, 2010.110

20 Questions Every Washington Hospital Board Needs to be Able to AnswerCongress is increasingly looking at what taxpayers aregetting in return for the tens of billions of dollars peryear hospitals receive in tax subsidies because of theirnot-for-profit charitable status. The Senate Finance Committeeand the Internal Revenue Service have stepped up their effortsto challenge whether hospitals’ community benefit programsand services are adequate to support their tax-exempt status.IRS’ New Schedule H Highlights Not-for-ProfitScrutinyIn 2008 the Internal Revenue Service (IRS) released the revisedForm 990 and an initial set of 16 new schedules, includingSchedule H, a brand-new schedule for completion by taxexempthospitals.The IRS described its efforts to develop the new form andschedules as a resource for improving transparency, promotingcompliance and minimizing filing burdens for not-for-profitorganizations. The agency stated that the new Schedule H forhospitals was an attempt to “combat the lack of transparencysurrounding the activities of tax-exempt organizations thatprovide hospital or medical care.”Connecting with the Community is EssentialIn addition to the IRS’ new Schedule H highlighting thegovernment’s desire for additional information about thecommunity benefit provided by hospitals, consumer frustrationWhat is community benefit andwhat’s the board’s role inensuring it?The U.S. health care system is at a crossroads. Debate is once again focused on the “broken”system, and identifying realistic solutions to “fix” it. As the reform debate heats up, hospitals’ not-for-profit status and the community benefit they provide will continue to come under scrutiny.In addition, turmoil in the economy is leading the government, as the largest financier of healthcare services, to further evaluate the benefit hospitals provide to determine whether they “earn”their not-for-profit status. With scrutiny coming at hospitals from all angles, clearlycommunicating community benefit is more important than ever.about health care is driven by a lack of awareness andunderstanding of the current system and its challenges,something that an effective community benefit report andcommunity engagement effort can address.Most people do not understand how hospitals are organizedand managed, how they work, what they do to provide charitycare, or what they do in their communities as a part of theirmission to provide community benefit and improvecommunity health. They do not understand the magnitude ofthe forces that are changing health care, including paymentinadequacies, the negative impacts of overregulation, thedramatic increase in “disruptive technologies,” changes in theworkforce and more.In the absence of information and evidence, people rely onpersonal experiences, their own intuitive beliefs and personalopinions to shape and sustain their belief structure aboutwhat’s good and bad about health care. Once in place, it isextremely hard to impact peoples’ strongly-held beliefs andperceptions.Hospital leaders have an opportunity to help shape positivepublic perceptions about their hospital. They have anobligation to communicate the unique challenges they face,how they are dealing with those challenges in a very difficultenvironment, and why their hospital relies on the commitmentand loyalty of its community to ensure its ability to continueproviding high quality health care services well into the future.111

20 Questions Every Washington Hospital Board Needs to be Able to AnswerPreparing for Best Practice Community Benefit Reporting and CommunicationWhat Counts, What Doesn’tAs hospitals work to create a community benefit report, a numberof questions must be addressed concerning what activitieshospitals should include. The following are points to consider forinclusion:Community Health Education. Education on specific diseaseconditions, health promotion and wellness programs, prenatalclasses serving at-risk populationsCommunity-Based Clinical Services and Subsidized Services.Free or low cost care to the uninsured, vans and mobile unitsused to deliver primary care services, hospice and home care,charity care and bad debt, free or discounted immunizationsat a health fair or mall presentationFinancial Contributions. In-kind services donated by staffduring working and non-working hours, donated space tocommunity groups for meetings, fund-raising costs forcommunity programsCommunity-Building Activities. Financial support forcommunity health programs and partnerships, participation ineconomic development council, community forums andreportsHealth Professions Education. Internships, residencies,scholarships, tuition reimbursements as an employee benefit,subsidized on-site training for nurses, nursing students andtechnicians, training for medical translatorsSource: Catholic Health AssociationGetting the Right MindsetA community benefit report is not simply a report that itemizesthe total dollars spent on charity care and bad debt, thenumber of people employed, or the number of births oremergency room visits in the past year. In fact, best practicecommunity benefit reports are much more than a list ofstatistics and numbers required to be reported on Schedule H.Instead, hospitals that produce best practice communitybenefit reports view the report as an opportunity to tell theirfull benefit story. Their reports include pictures and personalstories about patients, families, and communities impacted bythe hospital. Their reports are colorful, easy-to-read, andinclude graphs and statistics highlighting importantinformation, while using narratives and pictures to tell the story.Hospitals producing best practice community benefit reportsdon’t stop with the report. They use the information to buildrelationships with the community. Some send copies of theirreport to every member of the community. Others publishstories in their local newspaper and post their report on theirWeb site so that it is easy to find. Still others share theinformation through presentations at town hall meetings, localcommunity gatherings, and personal meetings with keystakeholders and legislators.Although every organization may employ a slightly differentapproach to communicate its story, one success factor isconstant: their mindset is to use their community benefitreport as an opportunity to build relationships and strengthentrust with the community.Preparing Your Community Benefit ReportThe American Hospital Association (AHA) recently developed acomprehensive resource to help hospitals develop acommunity benefit report, called “Telling the Hospital Story:Going Beyond Schedule H.” The toolkit includes caseexamples, sample completed written and PowerPoint® reports,and worksheets to guide hospitals in the process of developingtheir own reports and communication process.The AHA stresses the importance of making communitybenefit programs “real” to people via stories, examples andsuccesses, explaining that the “information required by the IRSon the new Schedule H provides communities with only alimited view of what hospitals do for the communities theyserve.” It is essential that hospitals communicate that they domore than treat injury and illnesses—each hospital’s programsand services meet their community’s unique needs, whether itis transportation for elderly patients, dental care for children, ora center serving the homeless.The sample community benefit report developed by the AHAincludes:A graphical summary of expenses, including itemsrequired in the Schedule H, such as charity care, bad debt,unreimbursed Medicare and Medicaid costs, communityhealth improvement programs, education, research, andcommunity-building activities;A letter to the community from the CEO and board chair;An overview of services provided to the community,including charity care and financial assistance, need-basedprograms such as a dental care clinic, elder care programand women’s resource center, educational classes forcommunity members, and employee volunteer time;112

20 Questions Every Washington Hospital Board Needs to be Able to AnswerPreparing for Best Practice Community Benefit Reporting and CommunicationBest Practice Case ExamplesBelow are examples of what some hospitals are doing to prepare for the development of their community benefit report, and to communicate thebenefit provided. For more information go to the American Hospital Association’s Web site, www.caringforcommunities.org.Munson Healthcare, Traverse City, MI, conducts a community needs assessment nearly every five years. The system also uses the CommunityBenefit Tracker software tool created by the Michigan Hospital Association to capture community benefit activities in one place in a userfriendlymanner. The information entered into the program is combined with financials itemizing the community benefit provided (such assubsidized programs) to provide a complete and accurate picture of the total community benefit provided. Munson shares its detailedcommunity benefit information annually through a printed report that highlights personal stories about the lives touched and the programsand services provided to the community. It is distributed to nearly 250 community partners, posted on the Munson Web site, and printed insurrounding newspapers.Glendive Medical Center, Glendive, MT, believes that part of its mission includes communicating the hospital’s community benefit story. Everyyear the Critical Access Hospital develops a full-color, easy-to-read community benefit report and corresponding PowerPoint® presentation.The report is mailed to 11,000 households in the hospital’s service area, and is published on its Web site. The hospital also shares its storythrough personal presentations, such as the local Speakers’ Bureau, and through quarterly employee forums with time dedicated to theorganization’s community benefit.North Shore-Long Island Jewish Health Care System, Long Island, NY, encourages employees to share with their managers personal storiesthey observe, which are often used when the organization develops its annual community benefit report. The report also includes storiesderived from letters written by patients and families. The community benefit report is disseminated to local civic community leaders, electedofficials, thought leaders and opinion makers, and other key stakeholders. In addition, the personal stories and letters are shared throughout theyear with employees through e-mails and newsletters, and play a vital role in the organization’s new employee orientation process. Finally,individuals represented in the stories serve as spokespeople for the hospital at community and town hall meetings, sharing their personalexperiences with the hospital.Sutter Medical Center, Sacramento, CA, uses its community partnerships to tell its community benefit story. As part of its mission, the medicalcenter offers grants to local community agencies, helping the organization to have a greater impact on the community and also form strongpartnerships with local not-for-profit organizations and community stakeholders. Each year the medical center distributes its communitybenefit report to more than 500 community partners and elected officials. Local partners play a key role in the medical center’s communicationwith the community, sharing the medical center’s benefit provided with their constituents using the language and communication style that ismost effective for their target population.Personal testimonials and quotes about communityprograms offered by the hospital, and their impact onindividuals and families; andHave your organization’s leaders reviewed the AHA toolkitto help you prepare a comprehensive community benefitreport?A list of organizations the hospital partners with in thecommunity.Questions to Consider: Are You Prepared?In light of the current environment and new IRS requirements,discussing your organization’s community benefit reportshould be a top board priority whether you develop a reportevery year or this is your first time. As your board prepares,questions to consider include:Does your board understand the requirements of the Form990 and Schedule H?Do you have a communications plan for how you will useyour community benefit report once it is complete? Howwill you share the information with the community? Whowill you communicate directly with? If you will hold orattend local community meetings, who will present, andwhat is the role of the board?Do you have a long-term plan for identifying communityneeds and using your annual community benefit reportingprocess to share with the community the needs you haveidentified, and how you are meeting those needs?Is your board committed to go beyond the basicrequirements and use your community benefit report asan opportunity to strengthen community ties?113

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWithout sufficient quality caregivers and supportstaff, hospitals will not be able to successfully meetthe growing health care needs of theircommunities. With the passage of health care reformlegislation and an aging population, hospitals must be wellpreparedfor increasing service demands at the same time thatphysician, nurse and allied health professional workforceshortages are looming.The shortage of needed hospital professionals is a criticalchallenge for hospitals, and should be a priority for their boardsof trustees. According to American Hospital Association (AHA)research, the pipeline of new graduates from nursing,pharmacy, and allied health education programs is insufficientto meet emerging demand across the nation. Resolving theworkforce shortage will take action on many fronts, veryimportantly through retaining valued and essential health careworkers by improving employee commitment and loyalty tothe organization and its community health improvementmission.Today’s health care workforce is changing, and the way peopleaccess health care services in the future will change – from newtechnology to in-home care to medical homes. As the fieldmoves forward to embrace a new generation of caregivers andnew ways of providing care, boards of trustees must set theagenda and provide the will and resources to ensure theirorganizations’ success. Employee motivation, dedication,commitment and loyalty, as well as encouragement ofcreativity and employee empowerment to use technology andpeople in new and innovative ways, will play critical roles inquality and patient satisfaction improvement, and employeeWhat is the board’s responsibilityfor ensuring a positive workplaceculture?Attracting and retaining motivated, dedicated, high-quality employees is a continual challenge,one that will become even more critical as the workforce ages, demand for success escalates,and competition for qualified health care workers intensifies. The board of trustees plays apivotal leadership role in ensuring their hospital has a workplace culture that will attract andretain a high-quality workforce prepared to meet both today’s and tomorrow’s communityneeds.recruitment and retention. Hospitals’ ability to successfullymeet patient, payer and community needs will be dependenton hospitals’ ability to ensure a workplace culture in whichemployees are valued, involved, engaged and empowered toplay a vital role in achieving the mission and strategicobjectives.New Times, New Workforce NeedsHealth care organizations have been coping with a workforceshortage and the impending retirement of the baby boomersfor many years, but the causes of and solutions to thecontinuing shortage are evolving, driven by the direction ofhealth care reform, technology innovation and consumerexpectation. While in the past the shortage was in large partaddressed by increasing the supply of caregivers, trustees andhospital leaders must re-think the ways they will prepare forand address solutions to future workforce shortages.The American Hospital Association’s 2009 Long-Range PolicyCommittee recently evaluated the workforce issues that healthcare organizations will likely face in the coming decade, anddeveloped recommendations for hospitals to developsuccessful workforce strategies. One of the primary findings ofthe committee was that “most workforce projections forindividual occupations assume no change in the way care willbe organized and financed in the future. The assumption of nochange in health care delivery and financing is unlikely aslegislation and/or market forces stimulate change.” As trusteeswork with senior leaders and medical staff leaders to develop aworkplace culture and workforce development strategies that114

20 Questions Every Washington Hospital Board Needs to be Able to AnswerThe Board’s Role in Nurturing a Positive Workplace Culturewill ensure success in meeting future market needs andopportunities, they should consider the key findings includedin the AHA report, Workforce 2015: Strategy Trumps Shortage.Changes are Coming in the Way Health Care is Delivered.Trustees should be prepared for changes in the way health careis delivered, and understand the imperative to use employeesand technology differently in the new, reform and technologydrivenenvironment. Key findings included in the AHA reportinclude:New scientific developments are occurringin the area of biomedical sciences,biomedical materials, medical devices, andcomputer services;Reimbursement is shifting from payment forindividual services to payments for episodesof care, requiring coordination amongstmultiple providers;Payments will be based on achieving qualitymeasures, and penalties will be experiencedfor poor outcomes;There will be fewer uninsured patients, andmore patients will be covered bygovernmental programs, particularly in thewake of the recently passed health care reform legislation;New care models, such as ambulatory, home andcommunity care will become more prevalent, replacingtraditional inpatient care, and new communication andmonitoring technologies will be increasingly used; andBroad implementation of electronic record keeping,monitoring and reporting will enable patients andproviders to communicate real-time.All Business Sectors Will Face a Tighter Labor Market, NotOnly Hospitals. Over the past several decades the U.S.workforce has fared well for several reasons: a large number ofwomen have entered the workforce, and the number of babyboomers working far out-weighed the small number of peopleborn during the Great Depression who were retiring.Requirements for the future health care workforce are differentfor two compelling reasons: 1) the aging population will needmore health care services, and 2) there simply aren’t enoughup-and-coming health care workers to off-set the largenumbers of retiring baby boomers. According to the U.S.Bureau of Labor Statistics, projections for the decade from 2006– 2016 estimate that 15.6 million jobs will be available, but thecivilian labor force will only increase by 12.8 million people.“Most workforceprojections for individualoccupations assume nochange in the way care willbe organized and financedin the future. Theassumption of no change inhealth care delivery andfinancing is unlikely aslegislation and/or marketforces stimulate change”-The American HospitalAssociation’s 2009 Long-RangePolicy CommitteeThis disparity means that health care organizations across thenation will be seeking additional caregivers to meet anincreased demand for services at the same time that all otherindustries will also be developing initiatives to attract the samelabor force.The challenge for health care organizations is amplified by theprojected increase in demand for services. Based on currenttrends, the U.S. Bureau of Health Professions projects ashortage of over 100,000 physicians in 2020, andVanderbilt University estimates that there will bea shortage of 260,000 registered nurses in 2025.And while a significant increase in enrollments inmedical schools is anticipated over the next tenyears, most of those students will not havecompleted their training by 2020. In addition,training for nurses, therapists, and other healthcare providers is limited by school budgetchallenges, faculty shortages and spacelimitations.The combination of anticipated amped upcompetition for qualified, skilled health careemployees and the fact that higher educationprograms turning out health care providers willnot be able to keep up with market demandplaces a new challenge on health care leaders:not only is recruitment and retention more important thanever, but the way that health care leaders think about how thefuture workforce will be used and managed will require greatercreativity, foresight and leadership thinking.Traditional Staffing Practices Will Change. Because of thelong pipeline for training and producing health careprofessionals, the supply of graduates increases slowly. Manyhospitals and health systems simply won’t have enoughphysicians and other caregivers in the next decade to providethe care that will be demanded in a new era as mandates andexpectations.As hospitals anticipate a tighter labor market and morecompetition for highly qualified health care workers movingforward, they will not be able to successfully recruit and retainstaff to work in a work environment known for being stressful,hectic, unappreciative or threatening. Boards of trustees havethe power to demand an environment that improves efficiencyand effectiveness, nurtures workforce loyalty and dedication,and improves the patient experience.The AHA committee recommendations state that “unlike theprocess reengineers of the late 1980s and 1990s who largelyignored the human element, you can combine flexible115

20 Questions Every Washington Hospital Board Needs to be Able to AnswerThe Board’s Role in Nurturing a Positive Workplace CultureWorkplace Problems the Board of Trustees Should Provide Leadership to AvoidThe following challenges have the potential to be detrimental to employee morale and ultimately to the organization’s overall performance.1. Dysfunctional leadership team. Lack of a cohesive, unified leadership team sends a mixed message to employees and can cause divisivenessamong the leadership team as well as employees that take “sides” with specific members of the leadership team.2. Uneven and inconsistent performance evaluation process. Lack of consistency in the manner in which employee evaluations are conductedcan not only result in employee perceptions of unfair promotions and a poor employee-management relationship, but it also tends to coincidewith employees receiving little feedback (positive or negative), limiting employees’ ability to improve their performance.3. Lack of organizational transparency and sharing of information. Building employee morale and a sense of trust is difficult when employeesdo not feel included in organizational decisions. For example, employees should never read about organizational news in the newspaperbefore hearing it first at work.4. Unclear mission, vision and strategic direction. Although the board and leadership team may have a clear direction for the future, if it is notclearly communicated to employees they may feel that the organization has no direction and/or decisions are made without a “bigger picture”in mind.5. Confusion in organizational structure and functions. Employees must know who they report to, who conducts their annual evaluation, andunderstand the “chain of command” if they need to discuss an issue with someone above their immediate manager or supervisor.6. Lack of a sense of value. Employees must feel valued and appreciated; although constant feedback from co-workers is critical, positivefeedback from management as well as the executive team plays a crucial role in ensuring that employees feel appreciated.7. Culture of blame. Developing workable solutions to problems without placing blame is a key factor in quality improvement. Likewise,employees and managers should not engage in “finger-pointing” and placing blame on one another when problems arise, but should ratheruse the occasion as an opportunity to pinpoint a performance gap that must be closed.8. Inconsistent and mixed communication. Employees must feel that they are valued enough for the leadership team to share current issuesand decisions, as well as seek employee ideas and input before making decisions that significantly impact employees and their patients.9. Lack of interaction and decision protocols. Lack of a clear definition and adherence to simple protocols addressing reporting relationshipscan create animosity among employees, supervisors or managers that believe their authority and responsibility has been undermined.10. Rumors, misinformation and mixed messages. Lack of effective communication can result in rumors about the organization or mixedmessages from the leadership team, leading to a confused workforce and a perceived lack of management consensus and cooperation.technology with engaged employees and create the work ofthe future.”Hospital boards of trustees can play a vital role in encouragingthe right environment, providing the resources necessary andasking key questions of organizational leaders about what theyare doing to be creative in redesigning work processes, usingnew technologies to increase efficiency, effectiveness andemployee satisfaction when possible, and making theworkforce the hospital’s most vital quality and patient safetyasset. The most successful work redesigns are developed byfront-line workers who create solutions customized to theirwork environment, culture and patient needs. Recent studiesprovide additional information about innovative work models,including the Transforming Care at the Bedside Projectconducted by the Institute for Healthcare Improvement andtools on the Agency for Healthcare Research and Qualitywebsite focused on work design (http://teamstepps.ahrq.gov).Expect More Collaboration. Health care organizations’ staffingapproaches should also increase collaboration and makeeffective use of multidisciplinary teams. With the likely longrangeshift toward increased care coordination, bundledpayments for service delivery and a move toward medicalhomes, coordination of care across provider types and caresettings will be essential.Creativity in Retaining Current StaffRetaining current valued health care professionals is the firstand most vital step in preparing to succeed despite comingworkforce shortages. Creating an environment thatstrengthens employee commitment and builds employeeloyalty reduces turnover and makes recruitment of newemployees less expensive and time-consuming. Hospitalleaders should consider several approaches as they developretention strategies.Find Ways to Motivate and Retain Employees on the Edge ofRetirement. Retaining employees close to retirement is anopportunity to minimize shortages while simultaneouslycapitalizing on their years of training and workplace experience116

20 Questions Every Washington Hospital Board Needs to be Able to AnswerThe Board’s Role in Nurturing a Positive Workplace Cultureand expertise. While older employees may not be able to or beinterested in working the same rigorous schedule as youngeremployees, they can bridge a critical gap by providing training,mentorship, and other roles that utilize theirextensive experience and expertise.The current economic downturn may strengthenthis opportunity for health care organizations, asmany employees nearing retirement may chooseto postpone their retirement due to declines intheir retirement funds and other investments.According to a 2009 survey conducted by theEmployee Benefit Research Institute (EBRI), 72% ofworkers report that they expect to work for pay inretirement. Although it is unknown whethercurrent economic challenges will alter thesepredictions, some experts predict that thepercentage of workers interested in working past the typicalretirement age will increase even more.Understand and Adapt to the Needs and Goals of DifferentGenerations. Today’s workforce is generally comprised of fourunique generations: 1) Traditionalists (born before 1945); 2)Baby Boomers (born between 1946 – 1964); Generation X (bornbetween 1965 – 1978); and Millenials (born 1979 – present).Each generation has unique workplace priorities andpreferences, and successful workplace cultures must respondto each of these generations at the same time. The board mustensure the necessary flexibility and creativity that ensures thateach generation’s unique needs and desires are met – whetherit’s more flexible schedules, employee empowerment,encouraging innovation, or simply more enjoyment in theworkplace.According to the AHA report, the typical hospital culture doesnot match the work expectations of the Millennial generation(the generation born between 1979 and the present). Forexample, while the typical hospital culture is hierarchical, withfixed schedules and hours, the younger generation seeksgreater workplace flexibility. In addition, the Millennialgeneration is more likely to seek to use computers, virtualnetworks, texting and other technology tools in their work.Hospitals must evaluate their cultural capacity, and determinetheir ability to attract employees in this generation.Make Employee Commitment and Loyalty a Critical StrategicPriority. Despite evolving generational expectations andchanges in the way the health care workforce is utilized, somebasic retention strategies never change. Every day, in everyBoards of trustees andsenior leaders mustcontinually strive to findnew and innovativeways to seek employeefeedback, anddemonstrate thatemployee ideas andopinions are highlyvalued.hospital, some people simply don’t get along. Personalitiesclash, priorities diverge, working styles differ, and performanceexpectations vary. These factors are magnified as employeeswork closely together under stressful conditionswhere they are highly interdependent upon oneanother’s skills and personalities to ensure a highquality patient experience.Hospital employee dissatisfaction can escalatequickly as a result of a variety of factors. Forexample, when employees feel that their opinionsaren’t sought or valued, that they aren’t paidequitably, when they believe that managers “playfavorites,” or when the workplace environment ishostile or threatening for a variety of other reasons,personal frustrations can consume employees’attention and time. This not only impacts patientcare, but it can lead to unnecessary turnover, a resultingshortage of qualified staff, and a poor community reputation.Conversely, high levels of employee satisfaction can improvepatient care, strengthen employee teamwork, improve patientsatisfaction, and ultimately result in improved retention andstrengthened recruitment, and greater levels of public trustand confidence.Governance Leadership Actions to Help Ensurea Positive Workplace CultureBe Involved At the Right Level. The board of trustees shouldensure that the executive team has a plan of action to achievespecific organizational goals, such as employee and providerloyalty and satisfaction, living the organizational ethics andvalues, employee empowerment, growth, quality and patientsafety, etc.Ensure Meaningful Performance Evaluation Methods andResults. The employee performance evaluation process shouldensure that:Managers conduct employee evaluations at least annually;All employee evaluations include a dialogue between themanager and employee, providing positive andconstructive feedback;The process effectively evaluates employees’ performancein meeting their job descriptions, overall organizationalexpectations, and assisting the organization in achievingits mission, values and vision; and117

20 Questions Every Washington Hospital Board Needs to be Able to AnswerThe Board’s Role in Nurturing a Positive Workplace CultureEmployee evaluations are conducted fairly and equitably,including if or how employee compensation is affectedbased on employees’ annual review process.Involve Employees in Organizational Decision-Making, andRecognize High Performance. Boards of trustees and seniorleaders must continually strive to find new and innovative waysto seek employee feedback, and demonstrate that employeeideas and opinions are highly valued. When seeking employeeideas, management must follow-up on the feedback received,take action and update employees on the status of their ideasand suggestions, and keep the board of trustees aware oftrends in employee satisfaction and engagement.Management recognition of individual accomplishments andachievements is also essential; while praise from co-workers ismeaningful, and receiving rewards and recognition from theexecutive team and/or the board is a critical component ofemployee morale. Developing cross-functional teamscomprised of employees and managers can help organizationsdevelop approaches to recognize and reward their highperformingemployees.Ensure Organizational Transparency. Increasing thetransparency of operations can help organizations to improveemployee satisfaction. For some organizations, becomingtransparent requires a cultural change. Transparentorganizations allow employees to see and share informationand make suggestions. They communicate strategies andobjectives to employees, and provide regular updates aboutprogress toward achieving those objectives. Updates mayinclude specific metrics the organization is striving for,challenges identified for the future, financial information, andthe organization’s progress in meeting community needs.Identification and recognition of the challenges facing theworkforce enables hospitals to redesign work and workplaceenvironments so that they are able to offer careers that attract,retain, and develop the “best and the brightest” in adequatenumbers. Nurturing a positive workplace culture should be aprominent part of the board’s strategic agenda.118

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat is the board’s accountabilityfor ensuring the rightorganizational structure?Hospitals today are under significant financial pressure, primarily as a result of the currenteconomic crisis. A recent American Hospital Association (AHA) survey revealed that half ofhospitals in America have reduced staff, 20 percent have cut some subsidized communityservices, 80 percent have cut capital spending, and 95 percent report that their capital situationhas not improved.All of this financial pressure is causing many hospitalsto consider some form of affiliation with anotherorganization that can bring financial strength andresources to help them achieve their mission and vision. Inorder to determine the alternative that best suits a hospital, it isimperative for the hospital’s governing leadership to take along-term view, and carefully determine the approach that willbest ensure the development, continuity and security of thecommunity’s health care. The organization must be operatedand structured to provide flexibility and responsiveness to thecommunity’s current health needs, and be able to effectivelyand successfully respond to emerging health needs.The hospital’s board of trustees should consider the followingkey questions as it evaluates any change to its presentorganizational structure:What is the organization’s most viable and valuable healthcare role, both now and in the future?What is the organization’s position in the regional healthcare continuum, and how can that position be solidified?What strengths and assets are most critical for theorganization to possess?What types of management and operating resources doesthe organization need to have access to in order to meetfuture community and organizational needs?How should the organization be structured to be able tobest meet the health needs of the community? Is the statusquo the best alternative, or something else?Overview of Operating StructuresHospitals have several options for changing ownership,affiliations and structure. The best option will be determinedas a result of a careful examination of the hospital’s currentoperating performance, resources and needs, projections offuture needs, challenges and opportunities, assessment ofnational and local health care trends, and community needs.Below is a brief summary that describes four basicorganizational alternatives, which is followed by a summary ofthe advantages and disadvantages of each alternative.Independence. Some maintain that an independent hospitalcannot be fully effective and successful in meeting thecommunity’s health care needs in today’s complex and rapidlychanginghealth care environment. However, a case can alsobe made that an experienced, professional and capable CEO,working closely and effectively with an educated, motivated,responsible and committed board of trustees and medical staff,can still be successful in today’s challenging environment.The keys to success as an independent hospital are leadership,vision, capital, and community loyalty and commitment. Theadministration and the board must be able to anticipate andaggressively and effectively deal with the multitude of complexissues facing the hospital, operate successfully in a climate ofrapid change, offer uniqueness and distinctiveness in servicesand customer service, deliver high quality that meets orexceeds patient needs and earns patient and communityloyalty, and be able to preserve or expand market share in theservice areas provided.119

20 Questions Every Washington Hospital Board Needs to be Able to AnswerJoining Forces: A Trustee’s Guide to Organizational AffiliationsAdvantages of independence may include:Continued status as community-owned and communitygoverned;CEO reports directly to the board of trustees, ensuringclear and direct lines of local responsibility and authority;Flexibility in making operating decisions and changeswithout outside interference; andPreservation of current structure and identities.Disadvantages of independence may include:Current financial and utilization trends may inhibit abilityto improve services and long-term viability;Potential for narrow, isolated decision-making may causethe hospital to miss opportunities;Fewer options to access capital;Greater vulnerability to competitive threats; andLack of immediate, ready access to needed personnel.Management Contract. Operating successfully under a fullservicemanagement contract requires strong communicationbetween the organization, its board and the management entity,and a clear understanding of and agreement to mutualobjectives and expectations.When management contract arrangements fail it is oftenbecause the hospital client does not adequately analyze andunderstand its true needs, select the appropriate managementfirm, structure an appropriate, mutually-beneficial contract, andthen manage the contract to ensure that the hospital’s goals,services and actions are directly related to those needs.There are two types of management contracts a hospital couldconsider: 1) full-service management contract with a hospitalmanagement company; and 2) management contract with aregional hospital or hospital system that can offer access to therange of management services the organization needs.Advantages of a management contract may include:Continued status of the hospital as a community-owned,community-governed and locally-managed organization;Governing autonomy and flexibility preservation;Management company experience provides access toproven and tested systems and programs that may besuccessfully adapted to the hospital’s needs;Easy and immediate access to a broad range of keypersonnel and management company resources makes itconvenient for the organization to access neededassistance quickly;Opportunity for information exchange with othermanaged hospitals with similar needs; andFlexibility to terminate the management contract if theboard of trustees becomes dissatisfied with themanagement company’s performance.Disadvantages of a management contract may include:Added cost of the contract to already strained financialresources;Loss of decision-making autonomy and flexibility (basedon contractual provisions);Potential to develop a “dependency” on the managementcompany’s products and services making any necessaryreturn to proprietary management difficult;Potential to lessen somewhat the board’s sense ofcommunity and fiduciary responsibility and accountability;Key personnel are employees of the managementcompany, not the hospital. Management “loyalty” is to boththe board of trustees and the management company;however primary loyalty will likely be to the actual employer(the management company), on which key personnel relyfor future opportunities;The organization pays for broad access to a range of servicesit may not need or utilize;May reduce or eliminate “comparison shopping” for vendorsin key areas where the management company providesproducts and services.Lease to or Merger With Another Health Care Organization.A hospital lease is essentially a contract that gives possession ofhospital land, buildings, equipment and services to a lessee for aspecified period. Under a lease arrangement the organizationgives full use and responsibility for the facility to another party tomanage and operate as it sees fit, within the parametersspecified in the lease agreement. A merger is essentially atransaction through which one corporation acquires the assetsand assumes the liabilities of another corporation.Advantages of a lease to, or merger with another health careorganization may include:120

20 Questions Every Washington Hospital Board Needs to be Able to AnswerJoining Forces: A Trustee’s Guide to Organizational AffiliationsAccess to new sources of capital for equipment, salaries,physician recruitment, etc.;Streamlined, fully integrated decision making may creategreater operational flexibility;Ability to improve competitiveness in the areas of cost,quality, and outcomes;Proceeds from the transaction, if any, to a newly-formedfoundation (or other not-for-profit entity), which may beused in a variety of ways consistent with the hospital’smission;Predictable source of income over the life of the lease;Potential role for some form of local advisory boardgovernance;Elimination of business risk;Single point of decision-making streamlines and speeds thedecision process;Improved ability to align services and operations; andOpportunity to streamline governance and operationaldecision-making and direction.Disadvantages of a lease to, or merger with another health careorganization may include:Loss of control: policy control is in the hands of the lessee ornew entity;At some point the hospital may seek to regain control ofoperations, and could be required to assume significantcosts to do so successfully;Under a lease, the philosophy and standard of care of thelessee prevails; there is no absolute assurance that servicesprovided will match community needs;Under a lease, the cost of payments to the lessor becomes anew cost to the lessee, making it more difficult for the lesseeto build a positive bottom line;Potential reduction in autonomy and identity; andCommunity preference for an independent hospital.Strategic Affiliation. A strategic affiliation is typically a looserarrangement under which two organizations agree to worktogether contractually to achieve a broad set of objectives.Strategic affiliations may take many different forms, with avariety of mutual commitments.A strategic affiliation, under the right circumstances, mayenable economic, governance and programmatic integrationthat could benefit a hospital and its employees, physicians andpatients. It could also enable more streamlined payercontracting, and better coordinated management, governanceand strategic planning. Services could be integrated andbroadened, and managed care contracting strength could beenhanced.Advantages of a strategic affiliation with another health careorganization may include:Ability to benefit from the name and reputation of a larger,well-respected organization;Improved professional advancement potential foremployees;Ability to improve competitiveness in the areas of cost,quality, and outcomes;Improved access to capital;Ability to reduce unnecessary duplication of servicesthrough appropriate service consolidation;Ability to be a part of a broader network of providers;Ability to be part of a unified managed care contractingeffort; andAbility to develop seamless joint initiatives.Disadvantages of a strategic affiliation with another health careorganization may include:Potential reduction in hospital autonomy and identity;The philosophy and standard of care of the controllingentity prevails; there is no absolute assurance that servicesprovided will match community needs, or how and whereservices will be delivered; andCommunity preference for an independent hospital.Regardless of the organizational structure choice made intoday’s difficult economic environment, it is the board’sresponsibility to ensure that the choice strengthens thehospital’s ability to achieve its mission and vision, and securesthe long-term health care future of the community.121

20 Questions Every Washington Hospital Board Needs to be Able to AnswerJoining Forces: A Trustee’s Guide to Organizational AffiliationsQuestions to be AddressedHow satisfied are you with the progress the hospital has made in the last five years?Is the hospital mission still an accurate description of the hospital’s purpose? If not, what should be changed?Is the vision an accurate picture of what the hospital should be striving to become? If not, what should be changed?What are the most significant characteristics of your current situation (e.g. market position, financial position, competition, opportunity forexpansion, etc.)?What are the most dominant issues facing the hospital today? Short-term (next 12 months)? Mid-term (1 to 3 years)? Long-term (over threeyears)?What are the unmet or under-met health care needs of residents of the hospital’s service area?What local market trends are most critical to understand in shaping the hospital’s strategic future?What major assumptions should we make about the environment that will impact our ability to achieve our strategies (e.g. the economy,competition, reimbursement, inflation, etc.)?What is the hospital’s unique, market-based vision in key success areas (e.g. managed care, community health status, premier provider, deliveringvalue, affiliations, community leadership, public trust, accessibility, appropriate services, innovation, financial health, etc.)?What factors are most critical to the hospital’s success over the next 1 – 3 years (e.g. cost efficiency, quality, technology, community support,information systems, patient and payer satisfaction, employee development, service innovation, consolidation, external relationships, marketcoverage, etc.)?What limiting factors will the hospital have to overcome to be successful?Where does the hospital have the most potential for growth? What services should the hospital consider in order to further solidify its marketposition?What are the hospital’s major strengths and competitive advantages? What are its significant weaknesses and competitive liabilities?What market niches or opportunities are most critical for the hospital to capitalize upon (short-term, mid-term and long-term)?122

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat does health care reformmean for governing boards?The passage and implementation of the Patient Protection and Affordable Care Act (ACA) hasleft many health care organizations, businesses and individuals with more questions thananswers, as everyone sorts out how the ACA will impact their organizations. The Board ofTrustees is responsible for providing strategic leadership to help the hospital navigate thistumultuous, uncertain and challenging time of change, a task made more daunting because ofthe large-scale impact health care reform will have on the hospital. In order to successfullyprepare for and lead their hospitals through this reformation, trustees should be knowledgeableabout various aspects of the reform legislation, and how it may impact their hospital in thecoming months and years.The problems and challenges associated with America’shealth care system have been the focus of the reformdebate for years. Individuals forced to choosebetween paying for health care and paying other livingexpenses are often used as examples of the nation’s health careproblems. In pressing for reform, President Obama’scommitment has been “to control rising health care costs,guarantee choice of doctor, and assure high-quality, affordablehealth care,” 1 a reflection of frequently cited problems with thenation’s health care system: unchecked costs, access andquality.This BoardBrief has been developed to provide hospitaltrustees and senior leaders with an understanding of some ofthe basic elements of health care reform. As public commentsare submitted, proposed rules debated and final rules issued,some details and provisions are expected to change.Regardless, we hope this BoardBrief contributes to informedknowledge of health care reform, and a greater understandingof its implications on hospitals and health systems across thecountry.significant social legislation enacted since Medicare in the mid-1960s, it remains to be seen if reform will achieve what theObama Administration set out to accomplish: 1Reduce the long-term growth of health care costs forbusinesses and government;Protect families from bankruptcy or overburdening debtbecause of health care costs;Guarantee choice of doctors and health plans;Invest in prevention and wellness;Improve patient safety and quality of care;Assure affordable, quality health coverage for allAmericans;Maintain coverage despite job change or job loss; andEnd barriers to coverage for people with pre-existingmedical conditions.Will Reform Do What it Should?The Patient Protection and Affordable Care Act (ACA) and theHealth Care and Education Reconciliation Acts are now law, butthe rules and regulations are still being defined. The mostYou’ll Get Paid if You Can Prove You’ve EarnedItUntil now, health care providers have primarily beenreimbursed for the services they provide, regardless of theoutcomes of the treatment: see a patient, perform a procedure,123

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat Health Care Reform Holds for Hospitals’ Leadership and Futureconduct a well-child check-up or counsel a diabetic patient,and get paid for the service. But that is changing. Rather thanpayment based on the number of services provided, thegovernment, private payers and businesses want to know thatthe services they are paying for are resulting in a positiveoutcome – better health, a decrease in additional servicesneeded in the longer-term, improved quality of life, increasedproductivity or some other measure of impact.While this evolution may seem threatening, it also makes sensefrom a business perspective. Those who pay for health careservices want to ensure that what they pay for makes aqualitative difference.The Quality and Cost Equation. Measuring performance andproviding financial incentives for improvement have beenpresent in health care for some time, but many reformprovisions are centered on one critical aspect: controllingcosts while maintaining or improving the quality of careprovided.Proponents argue that through public reporting, the pay-forperformanceconcept promotes transparency and the abilityfor patients to compare physicians, hospitals or health systemsbased on quality and safety standards. As consumers becomemore aware of quality and price differences among localproviders, positive results should be rewarded by an increase inpatients, and better reimbursement.As U.S. businesses and governmental leaders push for systemchanges that result in better health outcomes and reducedcosts, pay-for-performance has evolved into value-basedpurchasing, with discussions about patient-centered medicalhomes (PCMHs), accountable care organizations (ACOs) andbundled and global payments woven into the equation.Pay-for-performance is typically limited to payment forachieving specific quality outcomes or measures, such as betablockers at discharge for a heart attack patient, or providing themost appropriate initial antibiotic for a pneumonia patient. Incontrast, value-based purchasing has a broader definition,incorporating an expected financial return in the equation,either resulting directly from lower costs or from a healthier,more productive population, or both.Government Payers Want a “Quality Return” on TheirInvestment. Many employers are increasingly leveraging theirbuying power, and questioning the value they receive in returnfor their spending on health care benefits for their employees.But private employers are not the only ones increasinglyexpecting a “quality return” on their health care investments.Together, federal programs administered by Health andPreparing Your OrganizationIf nothing else, health care reform promises change. As trusteesconsider what reform and health care trends may hold for the futureof their hospital, questions to consider include: What degree of certainty, or uncertainty, has the passage of healthcare reform brought to the board’s strategic thinking andplanning? How nimble and adaptive to change is your board? What aboutthe rest of the hospital? What are the top 2-3 greatest challenges facing your hospital,today and in the next 3-5 years? What issue or challenge will have the greatest impact on yourhospital’s future success? What is within your control? What isoutside your control? Will the challenges ahead require greater or the same leadershipexpertise and effectiveness as today? How ready is your board and senior management to provide theleadership required to successfully navigate the trends and healthreform implications shaping the environment in the next 5 years? What gaps in board knowledge, experience or skills should beaddressed at your hospital? Is additional information or trainingnecessary? Are new board members with critical expertiseneeded?Human Services, the Departments of the Defense, VeteransAffairs and the Office of Personnel Management cover 93million people. 2 MedPAC, an independent Congressionalagency established to advise Congress about Medicareprogram issues, recommended in 2003 that provider paymentsinclude incentives based on quality of care. While that startedwith pay-for-performance, the trend has shifted to the morecomprehensive value-based purchasing concept.Value-Based Purchasing for Health Care Professionals. Thehealth care reform act includes development of value-basedprograms not only for hospitals, but also for physicians, skillednursing facilities and home health agencies.Acute care hospitals will be paid under a value-based programfor achieving health outcomes and cost savings for acutemyocardial infarction (AMI), heart failure, pneumonia, surgeries(as measured by the Surgical Care Improvement Project,previously referred to as “Surgical Infection Prevention”), andfor patient satisfaction determined by Hospital ConsumerAssessment of Healthcare Providers Survey (HCAHPS)measures. The Center for Medicare and Medicaid Services(CMS) has indicated that it will release information in 2012regarding the inclusion of efficiency measures, how wellhospitals manage costs, measured as the cost per Medicarebeneficiary, in the VBP program.124

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat Health Care Reform Holds for Hospitals’ Leadership and FutureIn addition, Health and Human Services must submit a plan toCongress for implementing value-based purchasing programsfor skilled nursing facilities and home health agencies. And in2015, physicians should expect a payment modifier basedupon the quality of care they provide for their patientscompared to the cost of that care.It’s Not All Bark and No Bite. While the government andbusiness’ implementation of value-based purchasing is still inthe early stages, reform provisions are putting teeth behindinitial efforts to improve the quality and cost of care.One of CMS’ initial efforts to link quality and performance wasits 2005 “Pay for Reporting” program. The process includescollecting hospital performance measures related to healthconditions common in the Medicare population, includingheart attack, heart failure, pneumonia, surgical careimprovement, and surveys of patients’ care experiences(HCAHPS). CMS expects to collect data on 44 quality measures,and payments to hospitals who fail to report the data will bereduced by two percent. The information collected is madeavailable to the public on the CMS Hospital Compare Web site.As part of the transition to performance payments, CMSstopped paying for certain Hospital Acquired Conditions(HACs) commonly referred to as “never events,” in 2008.Insurers are adopting similar policies. Under health carereform, penalties for poor performance are extended evenfurther. Beginning with fiscal year 2015, Medicare payments tohospitals in the top quartile for HACs will be reduced by 1%.This will apply to all Medicare discharges. To ensure retentionof that payment, trustees should review the reports that thehospital will receive from Health and Human Services (HHS)regarding the hospital’s rate of HACs, and take action asindicated.Even sooner than the HAC payment penalty, CMS will begintracking hospital readmission rates for high-volume or highcostconditions, and will reduce Medicare payments tohospitals with excessive or preventable readmissions. CMS’proposed definition of “readmission” is a patient’s return to anacute care hospital within 30 days after discharge to a nonacutesetting (e.g., home, skilled nursing, rehabilitation). Theyhave also proposed counting readmissions for acutemyocardial infarction (AMI, heart attack), heart failure andpneumonia. Rules for adjusting payments for readmissions willnot be issued until later in 2012 for fiscal year (FY) 2013.Transparency and information are among the tactics beingused by CMS as an incentive to improve quality performance.As a part of these efforts, HACs and readmission performancemeasures will be added to CMS’ Hospital Compare Web site. 3, 4Value-Based Payment is Not the Only Payment StructureDesigned to Improve Cost and Quality. The ACA contains anentire section (Title III, Part III “Encouraging Development ofNew Patient Care Models”) devoted to encouraging thedevelopment of new and innovative models of care, includingbundled payments, an “Independence at Home”demonstration program and a shared savings program(accountable care organizations), among others.To succeed in a reforming health care world, hospitals shouldrecognize the significance of the ACA’s focus on changing thehealth care delivery system, giving priority to programs thatfocus on quality and cost-effectiveness over the currentstructure that rewards volume of services. Trustees also needto add another organization acronym to their vocabulary: CMI.A new organization created by reform will be the Center forMedicare and Medicaid Innovation. CMI is charged withtesting innovative payment and service delivery models thatpromise to reduce program costs, with preference going toThe Reality of Changing Reimbursement: What Does It Really Mean?CMS’ plan for value-based purchasing began measuring performance July 1, 2011, and includes 12 clinical measures based on heart attack, heartfailure, pneumonia, and surgical care improvement. It also includes eight measures of patient satisfaction, such as how patients view theircommunication with nurses and doctors and the responsiveness of hospital staff. In 2012, CMS will release more information regarding inclusion ofefficiency measures, measured as the cost per beneficiary. In FY 2014, additional measures, including mortality and HAC performance standards willbe added. 54In addition to VBP, starting in FY 2013 hospitals will also be financially penalized by Medicare if they experience “excess” readmissions within a 30-dayperiod. And in 2015, 1% of Medicare payments will be taken from hospitals with the highest rates of hospital acquired conditions (HACs). 55As a trustee, do you know how these payment changes may impact your hospital? Do you know where your quality stands? According toHealthLeaders, being at the bottom quartile in terms of quality could mean millions of dollars lost annually for the typical hospital. For a 300-bedcommunity hospital with $50 million in Medicare inpatient net revenue, failure to improve on hospital readmissions (a loss of about $96,780), failurewith value-based purchasing (a loss of $750,000), and being in the lowest quartile for HACs ($500,000) would result in a decrease of $1.35 million inincome. 54125

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat Health Care Reform Holds for Hospitals’ Leadership and Futureprograms that also “improve coordination, quality andefficiency of health care services.” 5Critical Questions for Trustees. Do you know how ready yourhospital is to face an even greater focus on quality? How readyyour hospital is for value-based reimbursements? Questionsthe board should be asking to determine readiness include:If hospitals were paid today solely on the basis of quality,not procedures, how would you do?Is your hospital’s quality a distinct competitive advantage?How engaged is the board in your hospital’s quest forquality improvement?What percent of your board’s agenda is typically devotedto quality?How well is your board monitoring quality and safety? Areyou using the right measures?What are the top five safety issues at your hospital? Whatis the plan to improve safety? What progress has yourhospital made to improve quality and safety?What are the barriers to improving quality and safety?What will it take to overcome them?What is the process for reporting near misses and errors?What responsibilities does the executive team have forimproving patient safety?Is executive compensation tied to quality and patientsafety performance outcomes?Is your hospital ready for greater quality and safetydisclosures to the public?The Logistics Behind Value-Based PurchasingIn April 2011 the Centers for Medicare and Medicaid Services(CMS) issued the Final Rule for how it will make hospital valuebasedpurchasing (HVBP) incentives a reality. HVBP is viewedby CMS as an important step toward paying hospitals forquality performance on specific measures as opposed tosimply reporting data for the measures. Effective July 1, 2011,the rules established the performance periods, measures,standards and methodologies for calculating performancescores and administering payments. 38Beginning with fiscal year 2013, a percentage of hospitals’ basediagnosis related group (DRG) payments will be withheld andredistributedthrough the HVBPprogram. Thewithholding willincrease annuallyfrom one percent inFY 2013 up to twopercent for FY 2017and thereafter. 39Designed to berevenue neutral,HVBP offershospitals anopportunity torecoup some or allof the withheldpayment based ontheir performance.Key HVBP DatesApril 2011 – CMS issues Final RuleJuly 2011 – Rules become effectiveJuly1, 2011 – March 31, 2012 - Initialperformance periodMarch 2012 – CAH and hospitals with “smallnumbers” HVBP demonstrations beginAugust 2012 – CMS to inform hospitals ofestimated performance scoresOctober 2012 (FY 2013) – Medicare HVBPbegins, 1% of Inpatient ProspectivePayment System Market Basket (IPPS MB)tied to HVBP, risk adjustment of HVBP qualityoutcome measures due. IPPS MBincreases .25% annually every year thereafteruntil October 2016 (FY 2017), when it willremain at 2%October 2013 (FY 2014) – Inclusion ofefficiency measures in HVBPThe measures of Source: American Hospital Association.hospitalperformance for FY 2013 will include 12 clinical process of caremeasures in the areas of acute myocardial infarction (AMI, heartattack), heart failure, pneumonia, healthcare-associatedinfections and surgeries; and eight patient satisfactionmeasures found in the Hospital Consumer Assessment ofHealthcare Providers and Systems Survey (HCAHPS). In 2014,CMS will add 13 outcome measures, including mortalitymeasures, patient safety indicators and inpatient qualityindicators composite measures, and hospital acquiredcondition measures. Hospitals’ payments will be based on howwell they score in both achievement and improvement relativeto benchmarks and achievement thresholds. Results will bepublished on CMS’ Hospital Compare Web site.38, 40, 41HVBP is not an optional program for hospitals. In a May 6, 2011Federal Register, CMS stated that they view the value-basedpurchasing program as “the next step in promoting higherquality care for Medicare beneficiaries and transformingMedicare into an active purchaser of quality health care for itsbeneficiaries.” 38 Trustees should place an equal importance onHVBP, closely monitoring the hospital’s quality performance,asking senior management to gauge benchmark performancelevels, estimate the impact of financial withholding and predictor model opportunities to recover some or all of the withheldamount through quality excellence and patient satisfaction.126

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat Health Care Reform Holds for Hospitals’ Leadership and FutureBundled Payments: Ready or Not?To evaluate their hospital’s readiness for bundled payments, trusteesshould consider three factors: Hospital/Physician Alignment: Trust and alignment betweenthe board, the hospital and the medical staff will be built on afoundation of collaboration, communication, common objectivesand mutual dependence. Do the hospital and its medical staffhave a shared foundation of trust, including physicianinvolvement in leadership, demonstrated economic benefit for allparties, and a shared commitment to meeting community needs? Electronic Health Records (EHR): Operations under a system ofbundled payments will be significantly easier and more efficient ifthe organizations involved have organization-wide EHRcapabilities. In determining readiness to accept bundledpayments, the board should assess the progress the hospital hasmade toward implementing and effectively using an EHR, and theprogress made by other health care professionals included underthe bundled payment structure. Infrastructure to Manage and Disburse Payments: Trusteesalso need to ensure that the hospital has considered what, if any,operational or process changes might need to be made to besuccessful under a bundled payment methodology.Testing the Waters: No More “A La Carte”PaymentsOne of the most frequent criticisms of the nation’s healthsystem is its fragmented, fee-for-service structure. Critics arguethat this structure encourages providing a greater volume ofservices over focusing on services that provide superior qualityand outcomes and/or reduce costs.In order to drive value, defined by quality outcomes and costefficiency, significant attention is being paid to expanding the“bundled payment” concept. This means a shift from paymentfor a component of care, such as inpatient care orrehabilitation, to payment for episodes of care that spanmultiple providers and facilities over a period of time.The ACA furthers the concept by establishing a pilot programfor bundled payment to be developed by HHS by January2013. Designed to integrate care in order to improvecoordination, quality and efficiency of services, the servicesrendered for an episode of care may include acute careinpatient services, inpatient and outpatient physician services,outpatient hospital services (including the emergencydepartment), and post-acute care services (including homehealth, skilled nursing, inpatient rehabilitation and inpatienthospital services by a long-term care hospital). 6The incentive of the bundled payment is to provide the rightcare and avoid the unnecessary duplication of services.Success under the bundled payment structure is highlydependent on shared information and data, makinginteroperable electronic health records a critical success factorfor participating physicians, hospitals and other providers.Perhaps most critically, success will require hospital andmedical staff alignment. Alignment between the hospital andits medical staff ensures strong collaboration, and encouragesempowered, interdependent and trustful interaction betweenthe two groups. Nurturing a trust-based hospital/medical staffrelationship will help to ensure the hospital’s ability to respondmost effectively to reform issues and challenges.Bundled payment may also present new opportunities. Forexample, information technology and electronic medicalrecord systems will need the ability to communicate with otherlocal health care organizations to ensure the right care isprovided, billing information is documented, and accuratepayments are made. Strengthening these organizationalpartnerships will enhance communication to improve patientcare, prevent duplication, and strengthen relationships.Preparing Your Hospital. Strong hospital/medical staffalignment will be critical to success in the more integratedworld envisioned under reform. Trustees should consider:How well aligned is your hospital and its medical staff?Are physicians meaningfully involved in hospital decisionsthat impact patient care and physician practices?How vibrant are physicians’ voices in your hospital’sstrategic thinking and planning processes?Reining in Costs and Improving Quality throughCoordination and ResearchA recent Commonwealth Fund study conducted by HarrisInteractive asked patients about their recent care experiences,views of the U.S. health care system, and ways to improvepatient care. Most respondents (eight in ten) said they thinkthe health care system needs to be fundamentally changed orcompletely rebuilt. The most important things patients saidthey wanted include: 7Better coordinated care, with one place or doctorresponsible for their care;Easy access to medical records for both patients andproviders; andInformation about the quality and cost of care.127

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat Health Care Reform Holds for Hospitals’ Leadership and FutureSignificant Health Care Reform DefinitionsAccountable care organization (ACO) - A collection of primary care physicians, a hospital, specialists and potentially other health professionalsaccept joint responsibility for the quality and cost of care provided to its patients. If the ACO meets certain targets, its members receive a financialbonus. 9Bundled payment - Similar services are grouped together and are compensated using a single or global payment. Services could be groupedaccording to the care provided by a single doctor or multiple doctors. 9Episode of care – The ACA defines an episode of care as the period beginning three days prior to admission of a beneficiary to the hospital for anapplicable condition, through the length of stay and including the 30 days following discharge.Patient centered medical home (PCMH) – The patient centered medical home is a comprehensive primary care program in a health care settingthat facilitates partnerships between patients, their personal physician, and when appropriate, the patient’s family. 10Pay for performance (P4P) – Payment for achieving pre-determined, evidence-based quality outcomes or measures, such as beta blockers atdischarge for a heart attack patient.Value-based purchasing (VBP) – Value-based purchasing has a broader definition than pay-for-performance, incorporating an expected financialreturn, typically resulting from lower costs.Patient-centered medical homes and accountable careorganizations are being recognized as emerging deliverysystems that may be able to give patients what they want.The Patient Centered Medical Home. According to theNational Committee for Quality Assurance (NCQA), the medicalhome establishes an on-going relationship for each patientwith a personal physician. The physician is the “quarterback”for the patient’s care, leading a team of health careprofessionals at the medical home who take collectiveresponsibility for arranging, coordinating and integrating care(acute, chronic, preventive and end-of-life) for the patientacross the health care system and the patient’s community.Working with guidance from the American College ofPhysicians, the American Academy of Family Physicians, theAmerican Academy of Pediatrics and the AmericanOsteopathic Association, and based on their Medical HomeJoint Principles, NCQA launched its Physician PracticeConnections-Patient Centered Medical Home (PPC-PCMH)Recognition Program. With three levels of recognition, the PPC-PCMH recognition is based on nine categories of standards:1. Access and Communication2. Patient Tracking and Registry Functions3. Care Management4. Patient Self-Management and Support5. Electronic Prescribing6. Test Tracking7. Referral Tracking8. Performance Reporting and Improvement9. Advanced Electronic CommunicationThe goal of the medical home is to provide well-coordinatedpatient-centered care that is both effective and efficient.Accountable Care Organizations. Accountable CareOrganizations (ACOs) consume only seven pages of the entireACA, but arguably have received the greatest attention byhospitals and health systems. In 2011 an article in Kaiser HealthNews compared ACOs to the unicorn, stating that “everyoneseems to know what it looks like, but nobody’s actually seenone.” 42 The concept of an ACO is a network of providers thatshare responsibility for providing care to patients, receivingfinancial incentives for improving quality of care and patientoutcomes by meeting pre-defined cost and quality targets.The idea is similar to previously tried integrated systems likehealth maintenance organizations or physician hospitalorganizations. While those systems proved to be unpopular inthe end, the argument behind ACOs is that they are moreflexible in their structure, payments, and risk assumption. 43Common to all ACOs is their full accountability for the deliveryof care, control of costs and assurance of quality. The uniqueand perhaps most attractive characteristics of ACOs are theflexibility and practice autonomy missing from other models ofcare delivery. ACOs set their own standards and are paid forachieving savings against their own baselines. 8At a minimum, an ACO typically includes primary careprofessionals, specialists and often a hospital.In January 2012 the ACA’s first pilot ACO program began,making the concept incrementally less unicorn-like. The pilotprogram, called the Pioneer Accountable Care Organizationproject, includes 32 health care organizations which will sharein cost savings they achieve for Medicare patients. 56Since then, the number of ACOs participating in the voluntaryMedicare shared savings initiatives has continued to grow. In128

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat Health Care Reform Holds for Hospitals’ Leadership and FutureJuly 2012 federal officials announced that 89 new ACOsopened in 40 states and Washington, D.C., bringing the totalnumber of provider groups participating in the ACO programto 154, with more than 2.4 million Medicare beneficiariesreceiving care through ACOs. Almost half of those ACOs aresmaller, physician-led organizations that serve less than 10,000beneficiaries. 57In a July 2012 teleconference, Simeon A. Schwartz, MD,president/CEO of White Plains, NY-based WESTMED MedicalGroup talked about their transition to becoming an ACO andthe anticipated savings, saying “We think the savings are largelygoing to come out of hospital utilization because we seealready in our organization that there have been manyopportunities to move care to the outpatient setting...Becauseof the different price Medicare pays us versus the hospital forthe identical service outpatient services in the physician settingis a big savings right there...then if you are able to provideurgent care services instead of ER services that is a big savings.Finally if you have sufficiently coordinated outpatient programsworking with community providers such as nursingorganizations and others you are able to further decreasehospital utilization.” 57The growth of ACOs clearly has significant implications onhospitals and health systems, and their future approaches tomeeting community needs. And although there is stilluncertainty around their implementation and implications, thepush for ACOs and the concept they represent is and shouldbe a high priority for health care leaders. According to a 2011HealthLeaders Media survey, 74% of CEOs surveyed indicatedthat they either already have the components in place to beconsidered an ACO or that they will within the next five years.Of those respondents, a closer look reveals that only 16%reported having the components in place now, while 60%expect to within the next five years. 44Whether they are ready now or not, this survey highlights theimportance of ACOs to hospital leaders. For trustees andhospital leaders, this leaves many questions to consider. Tostart, ACOs will require significant up-front costs. Two big costsinclude an information technology system that is compatibleacross participating providers, and expenses related tomeasuring and reporting quality and outcomes. It will likelyalso require additional care costs, such as case managers. It is arisk for hospitals, requiring an investment to focus onprevention and improved, coordinated care that could result inimproved payments and cost savings; or it could be expensivewithout financial benefit, depending on the outcomesachieved.Comparative Effectiveness. As forces for change work to shiftthe delivery of health care away from volume of services andtoward providing high quality care in the most cost-effectivemanner, greater attention is simultaneously being paid tocomparative effectiveness, or evidence-based treatments.When recommended care protocols are well-supported byresearch and clinical evidence, the science behind theprotocols gives the recommendations credibility. The scienceis valued and appreciated by the medical staff, and can raisethe quality of care provided.Until 2009, comparative effectiveness had no formal definition.The Federal Coordinating Council for ComparativeEffectiveness Research has since created the followingdefinition:“Comparative effectiveness research is the conduct andsynthesis of research comparing the benefits and harms ofdifferent interventions and strategies to prevent, diagnose,treat and monitor health conditions in ‘real world’ settings.The purpose of this research is to improve health outcomesby developing and disseminating evidence-basedinformation to patients, clinicians, and other decision-makers,responding to their expressed needs about whichinterventions are most effective for which patients underspecific circumstances.”Under health care reform, it’s estimated that an additional 32million individuals will be eligible for care, many underMedicaid and other government paid programs. Hospitals,physicians and other care providers concerned about theirlong-term financial stability and their ability to deliver highquality care must place a new emphasis on which course oftreatment will provide the most effective, highest quality ofcare for their patients. Thegovernment and private payers,along with patients and theirfamilies, will hold hospitals andhealth care professionalsaccountable for delivering carethat is based on evidence.To best provide physicians andother health care professionalswith the resources they need topractice both efficient andeffective medicine requires aninvestment in technology. Thedevelopment of clinical decisionsupporttools and CPOE withcomparative effectiveness promptsThe governmentand private payers,along with patientsand their families,are going to holdhospitals andhealth careprofessionalsaccountable fordelivering carethat has evidencebasedresults.129

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat Health Care Reform Holds for Hospitals’ Leadership and Futureare examples of technological applications that can align withcomparative effectiveness goals and contribute to advancingan organization’s quality of care.Preparing Your Hospital. People want more from the healthcare system. In particular, they want better coordinated carewith a single point of contact, easy access to medical recordsand cost and quality information. Many are banking thatpatient-centered medical homes, ACOs, and comparativeeffectiveness will help give patients what they’re looking for: abetter health care delivery system. These models of careimprovement depend on a number of factors, not the least ofwhich include alignment and collaboration, clinical integration,IT infrastructure and visionary leadership.How well does your board understand the concepts ofmedical homes, ACOs and other care delivery modelsunder the ACA? What information do you need to buildyour knowledge and understanding?Has the board identified the benefits the hospital mightgain from exploring patient centered medical care homesor ACOs, from developing comparative effectivenessproficiencies, or exploring other new care delivery models?What might be the costs or threats to your hospital for notdeveloping new capabilities or models of delivery?Has the board evaluated the organizational strengths andresources needed to participate in the new models of care,such as IT infrastructure and clinical integration? Doesyour hospital have the capacity or ability to provide thenecessary resources?Fund’s initial appropriation was in FY 2010, and included anEducation and Outreach Campaign for preventive benefits andimmunization programs.The ACA does not stop there. It includes multiple preventiveand wellness provisions for Medicare and Medicaid programs,schools, employers and others. Chain restaurants are nowrequired to provide nutritional labeling, and a demonstrationproject is included for individualized wellness plans. Theseprovisions contribute to efforts on multiple fronts aimed atimproving the overall health of the nation’s communities.Of particular interest to not-for-profit hospitals should be thesection of the ACA entitled “Creating Healthier Communities.”The section includes grants for “community transformation”and grants for five-year pilot programs for “healthy aging, livingwell.” It also includes direction for CMS and the Administrationon Aging to evaluate community-based prevention andwellness programs and determine their potential to helpimprove the health of Medicare beneficiaries, with subsequentrecommendations to Congress. 5Preparing Your Hospital. The hospital’s leadership shouldclosely review the “Creating Healthier Communities” section inthe ACA and consider the potential for opportunities orpartnerships that would benefit the community.If your hospital’s mission is to improve the community’shealth, does the board know what the health status of thecommunity is? Is that knowledge “evidence-based”?Does your hospital offer preventive and wellness programsfor the community?Does your hospital have the relationships necessary toenter into care delivery models that span the fullcontinuum of care? Where are there gaps? What actionscould the hospital take to fill any gaps?More Prevention, Less TreatmentAs the prevalence of lifestyle-based chronic diseases such asheart disease and diabetes increases and the costs of healthcare continue to rise, steps to improve the nation’s health mustbe taken. To address the need for wellness and prevention, theACA established a National Prevention, Health Promotion andPublic Health Council. The Council is charged with developinga strategy for improving the health of Americans and reducingpreventable illness and disability. The provision isaccompanied by the creation of a Prevention and Public HealthFund to pay for prevention and public health programs. TheIs your hospital considered a leader in community effortsto improve the health and well-being of its residents?Are community programs offered by your hospital closelyaligned with the community’s most important health careneeds?Are the programs well-used by residents? If not, what iskeeping them from being successful?Has your hospital explored potential partnerships withother community organizations to promote preventivecare and wellness?Is there an opportunity for the hospital to participate inany of the ACA’s demonstration or grant programsdesigned to improve the community’s health?130

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat Health Care Reform Holds for Hospitals’ Leadership and FutureNo Longer a Given: Not-For-Profit Status MustBe Earned and ProvenThe glare of scrutiny has been increasingly focused on not-forprofithospitals. As the demand for tax revenue continues toincrease to fund Medicare, Medicaid and other reformprograms, federal, state and local governments mayincreasingly challenge whether hospitals’ community benefitprograms and services are adequate to support their taxexemptstatus.Changes to the Form 990 May Mean Changes in Not-For-Profit Justification. The IRS’ Form 990 had not beensignificantly revised since 1979, and had not keptpace with changes in the law and with the increasingsize, diversity and complexity of the tax-exemptsector. The IRS determined that the Form 990 was inneed of revision. The revisions increase transparencyand disclosure for tax-exempt entities, giving the IRSmore insight into the governance and managementof not-for-profit organizations.Changes to the Form 990 also mean changes for thehospital’s board of trustees, which will be held togreater accountability for overseeing the hospital’soperations, and its reporting. More information isrequired to be collected and reported through theForm filing, which will create greater transparency andopportunity to examine the hospital’s actions andcontributions to its community. The Form has also beendesigned to allow hospitals a greater opportunity to tell theirstories of community needs and community benefits,something trustees should be sure the hospital takes fulladvantage of. A strong, detailed report of its services andefforts can build greater public trust, confidence and supportfor the hospital.IRS Form 990, Schedule H, Part B, Section V Revision. Inaddition to revising the Form 990, the IRS has added Part V,Section B (Part V. B.) “Facility Policies and Practices,” to ScheduleH of Form 990. Part V. B. incorporates the ACA’s requirementsfor tax-exempt hospitals. This section includes a number ofquestions regarding the hospital’s conduct of a communityneeds assessment, how the hospital has addressed identifiedneeds and if needs have not been addressed, why not. Thesection also includes questions regarding the hospital’sfinancial assistance policy and determination of eligibility forassistance; existence of a separate billing and collections policyand the hospital’s collections practices; existence of anemergency medical care policy; and questions regardinghospital charges for medical care.51, 52Failure to complywith these newregulations willmean a $50,000fine for every yearthe hospital is outof compliance, andHHS and the IRSwill be checking.Trustees are ultimately accountable for the informationsubmitted to the IRS and the public, and should pay heed tothe question found in the Core Form which asks if the boardhas reviewed its hospital’s completed Form 990.Play or Pay: Conduct a Needs Assessment or Else. The IRS,policymakers and others hold not-for-profit hospitalsaccountable for providing charity care and community benefitsin exchange for their tax-exempt status. In the past decadehospital billing and collections practices have often beencriticized on multiple fronts. In addition, failure to inform andassist eligible patients with access to charity care andother financial assistance has been viewed by manyas hospitals’ failure to fulfill their community benefitobligations.The ACA brings that reality home. Under the ACA,not-for-profit hospitals will be required to conduct acommunity health needs assessment once everythree years. The assessment is required to be madewidely available to the public and is expected toconsider input from a broad representation ofcommunity interests. Hospitals are also required toadopt strategies to address the needs identified bythe assessment or to explain why not.Further, hospitals must adopt a financial assistance policy thatincludes eligibility criteria, information on how patient chargesare calculated, how patients may apply for assistance and whatmay happen if patients fail to pay for their services, includingreferrals to collections agencies and credit agency reporting.Hospitals cannot charge their financial assistance patients anymore than the lowest amount they would charge an insuredpatient, and gross charges are not allowed. Hospitals are alsoexpected to publicize their financial assistance policy to thecommunity and make a “reasonable effort” to establish apatient’s eligibility, although what constitutes a “reasonableeffort” is yet to be defined.In addition, hospitals need to have an Emergency Medical Carepolicy that mandates they provide emergency care regardlessof a patient’s eligibility under the financial assistance policy.Failure to comply with these new regulations may result in a$50,000 fine for every year the hospital is out of compliance,and HHS and the IRS will be checking. The ACA requires aregulatory review of each hospital’s community benefitactivities every three years, with annual reports to Congressdelineating levels of charity care, bad debt expenses andunreimbursed costs for government programs. The131

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat Health Care Reform Holds for Hospitals’ Leadership and Futureinformation will be trended and analyzed, with a final report offindings to be submitted in five years. 5There are many implications of these ACA and new Form 990requirements on hospitals’ governance. The most critical is theopportunity for hospitals to make their case for thesignificance of their contributions to the community theyserve, building community trust and understanding for thechallenges hospitals face.Preparing Your Hospital. The IRS, HHS and policymakers willbe looking hard at not-for-profit hospitals’ practices andpolicies. They will be exploring to determine if hospitalsdeserve their tax exemption, and they may question theboard’s governance actions.If you had to justify the hospital’s tax exemption basedsolely on charity care, how would you do?When did the hospital last conduct a community needsassessment? How effective is your assessment in enablingorganizational leaders to understand the broad healthneeds of the community?Do you know the community’s top 3-5 health needs?Are community health and community health needs aprominent part of the hospital’s strategic agenda?What strategic initiatives has the hospital undertaken toaddress the community’s most urgent health needs?Do you know of a community health need that thehospital is not addressing? If asked why not, do you have agood answer (e.g., another organization is alreadyaddressing the issue fully)?Does your community benefit story demonstrate that youearn the tax benefits you receive?How well does your community benefit report buildawareness of and confidence in your organization?Provider Shortages: Creativity will be of theEssenceThe ACA has generated thousands of headlines, but among themost common are the ones highlighting the nation’s concernabout physician shortages.At its core, health care is about the relationship between apatient and a care provider—a physician, nurse, pharmacist orother health professional. These relationships make theworkforce an essential component of an effective health caresystem. If predictions hold true and workforce shortagesbecome more prevalent at a time when health care demandincreases due to a sharp increase in the number of insured,preparing for workforce and physician shortages will be morecritical than ever.Although There Are Fewer Vacancies Today, the Long-TermOutlook Remains the Same. Experts have been predicting ashortage of nurses, pharmacists, primary care physicians, andallied health professionals for years. The recession hastemporarily alleviated health care workforce challenges forsome organizations, in part because demand for services isdown in some areas, and many hospitals report having to layoff employees.Although statistics show that hospital job growth reached aplateau, the demand for physicians, nurses and other alliedhealth professionals will return as the economy strengthensand as 32 million additional individuals receive health coverageunder the ACA. According to the Association of AmericanMedical Colleges, the physician shortage is expected toincrease from 25,000 today to about 150,000 by 2025. 11 Evenprior to passage of health care reform, the number of nursesneeded in 2020 was estimated to be 2.8 million – one millionmore nurses than the projected supply in 2020. 12The greatest shortage of physicians is in primary care, with only30 percent of U.S. doctors specializing in that area. 13 Anadditional 45,000 more primary-care doctors are expected tobe needed by 2020, according to estimates by the association,yet entry into the field is on the decline. 14 Under the NationalResident Matching Program this year, only 45 percent ofprimary care slots were filled by U.S. medical school graduates,compared to a 90 percent rate for specialty care. 15New Opportunities for Care Delivery. With new emphasis bythe ACA on medical homes and expanded coverage formillions of Americans, some experts express concern about thestress it will place on primary care physicians and theimplications for emergency departments and health caredelivery systems. At the same time, others project a somewhatmore optimistic picture of the future, one in which theteamwork of the patient-centered medical home, ACOs andexpanded scopes of practice for other health care professionalsmay relieve some of the pressure on primary care providers.Many health professional associations are raising educationrequirements and seeking to expand their opportunities topractice. Physical therapists may now earn a Doctor of PhysicalTherapy (DPT), and envision opportunities for direct access andpatient referral in the future. Similarly, nurse anesthetists seek132

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat Health Care Reform Holds for Hospitals’ Leadership and Futureto administer anesthesia without physician supervision, andnurse practitioners seek to be recognized as licensed,independent primary care providers. The role of thepharmacist as a health provider is also garnering attention. 15,16Hospital leaders must be forward-looking and creative,preparing for a coming increase in demand for health care.The shortage of primary care physicians is rapidly advancingdeliberations to expand the nation’s delivery of care toencompass broader roles by other professions; however, manyof these professions are expecting shortages of their own.According to the American Hospital Association, the largestpercentage of unfilled, budgeted positions in U.S. hospitals areregistered nurses (RNs), followed by licensed practical nurses(LPNs), pharmacists, imaging technicians, nursing assistantsand laboratory technicians.Being Proactive in Today’s Environment. The shortage ofhospital workers is not likely to be solved soon. Today’sstudents will become tomorrow’s health professionals, but thepipeline of new graduates from medical schools, as well asnursing, pharmacy, and allied health education programs is notenough to meet the growing demand. Resolving the shortageon a national basis will require action on several fronts locally –from using providers in non-conventional ways to newrecruitment and retention strategies.Some action has already been taken with passage of the ACA,which includes provisions to help strengthen the health careworkforce through the establishment of a National HealthcareWorkforce Commission. The Commission is tasked with datacollection, analysis and development of a national workforcestrategy. In addition to the creation of the Commission, theACA includes provisions for tangible actions such asscholarships and low-interest loans, a Medicare bonus paymentfor primary care and general surgeons, redistributing graduatemedical education slots to increase primary care and generalsurgery training, and a demonstration program to educateadvanced practice nurses to provide primary and preventivecare. 17Physician Integration. Whether hospital leaders areconsidering an ACO or simply preparing for paymentincentives that are based on patient outcomes, hospital/physician relationships are essential. Health reform encouragesmore than hospitals and physicians cooperating to care forpatients. It requires hospitals and physicians to provideintegrated care - care that is coordinated, uses seamlesstechnology, and involves providers across the spectrumworking together to care for each patient as an entire “episodeof care.”This is a new shift in thinking for most health care leaders, but anecessary shift for both predicted changes in reimbursementand provider shortages. Hospital trustees and leaders shouldbe preparing for that shift now, working jointly with theirmedical staff and other providers in the community to developshared solutions and forge partnerships that will provide bettercare and prepare all health care providers for a more stable andeffective future.Preparing Your Hospital. Here are some workforce questionsthe board should consider:Has the board made workforce development a strategicissue?Does the hospital fill the “workforce pipeline” byencouraging clinical and non-clinical education and careerdevelopment to upgrade skills and help personneladvance in the hospital?Has the hospital joined forces with other organizations todevelop regional initiatives designed to expand the poolof interested applicants?Has the hospital developed relationships with localschools, colleges and universities that will assure studentsreceive the educational foundation necessary to pursuehealth care careers?Does the hospital offer employees and applicantscompensation that is comparable to and competitive withother positions requiring similar education andresponsibility?How healthy is the hospital’s employee satisfaction? Isemployee retention as strong as it could be?Does the hospital offer a “preferred” work environment,such as flexible scheduling, career advancementopportunities, maximizing information technology, etc.?Does the hospital work closely with the medical staff andother providers in the community to develop sharedsolutions and forge new partnerships that will be mutuallybeneficial in this new era of coordinated care?133

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat Health Care Reform Holds for Hospitals’ Leadership and FutureAdministrative Simplification and EHRsHospitals, physicians and payers alike have been underincreasing pressure to curb rising health care costs and dobetter with less. The opportunities to simplify and standardizecommon areas of administrative interface between entities arecomplex and not easily accomplished, but they promise asignificant financial yield well worth the effort it will take.According to the American Hospital Association, approximatelya quarter of total hospital spending goes toward administrativerequirements, with physicians’ offices spending a slightlyhigher percentage of their revenue on administrative costs.Others have estimated that administrative simplification maydeliver an estimated $7 billion a year in net savings. 18The ACA addresses many of the efficiency issues raised byhospitals and providers, including standard operating rules forinsurance eligibility verification, provision of claims information,electronic funds transfer, and standards for prior authorization.The ACA also requires three-year reviews to uncover new areasof operations that may benefit from standardization andsimplification.19, 20“Meaningful Use” of Electronic Health Records (EHRs).Information technology implications are woven throughoutthe health reform bill, from the push for “administrativesimplification” to quality improvement and information-sharingbetween providers. Just before the ACA was passed, theAmerican Recovery and Reinvestment Act (ARRA), otherwiseknown as the economic stimulus package, included $19 billionin incentives for “meaningful use of certified EHR technology.”The ARRA incentives are designed to motivate the adoption ofelectronic health records and promote the active exchange ofpatient data to ensure informed patient care.Participating hospitals and physicians must have the ITcapability for:Computerized provider order entry (CPOE) formedications;Cross-provider connection; andThe ability to report technological use and qualitymeasures to HHS.To be eligible for the ARRA’s Medicare and Medicaid incentivepayments that began in 2011, participating hospitals andphysicians must demonstrate “meaningful use” of EHRtechnology. Hospitals that do not demonstrate “meaningfuluse” by 2015 will not only lose ARRA incentive payments, butwill be penalized by a reduction in their Medicare and Medicaidpayments. In December 2009 CMS released its proposed rulesdefining “meaningful use,” including three stages of criteriataking place between 2011 and 2015. Hospital trustees shouldbe familiar with these incentive stages and know where thehospital stands. Will the hospital be able to take advantage ofthe stimulus money? Will it be penalized in 2015 for not beingprepared? Information technology implications are farreaching, and should be a part of governance discussions - notonly because of the potential for financial incentives andTen Things Trustees Should Know About Reform1. Medicare market basket reductions began in 2010, but potential revenue benefits (less bad debt, charity care) from an increased number ofinsured patients won’t happen until 2014.2. Many reform provisions are geared to shift payment structures away from traditional fee-for-services. New payment and delivery structures arebeing tried and include bundled payments and accountable care organizations (ACOs).3. Quality and patient safety drive many of the new payment provisions, including value-based payments, and payment reductions for hospitalacquired conditions and preventable readmissions.4. Success under the new payment structures will require alignment and good relations with physicians and other health professionals.5. Success under the new payment structures will require investments in an effective, efficient technological infrastructure.6. Community needs assessments must be conducted every three years, and financial assistance and emergency medical policies are required.Fail and be fined $50,000 a year.7. Many demonstration programs are funded under reform and could prove to be good opportunities for well-positioned hospitals.8. Increased insurance coverage may change hospitals’ payer mix to include a greater percentage of government payment.9. Fighting fraud is a presidential focus. Recovery Audit Contractors (RACs) are expanded, failure to report and return overpayment is considered afalse claim subject to fines, and compliance programs will be more than just a good idea, they will be required.10. Hospitals have twice the responsibility under reform, as both providers and as employers. Among other new reform requirements foremployers, hospitals will need to evaluate and revise benefit plans to comply with new benefit plan requirements; cover dependents throughage 26; disclose benefit values on W-2s; auto-enroll employees in the federal community living assistance services and supports (CLASS)program (large employers); and notify employees about the 2014 insurance exchanges.134

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat Health Care Reform Holds for Hospitals’ Leadership and Futurepenalties, but also the impact on quality of care, the ability tomeasure and track quality performance, and the ability tocoordinate care with other providers outside of the hospital.Preparing Your Hospital. The board should understand thehospital’s ability to establish “meaningful use” of EHRtechnology, and get answers to questions such as:How close are we to meeting the CMS definition of“meaningful use”? When can we reasonably expect tomeet the requirements?Does the hospital have the necessary resources toimplement EHR and achieve compliance with therequirements for “meaningful use”? If not, what will it taketo obtain the necessary resources?What is the value of the incentive payment(s) for thehospital? What is the value of the potential penalty if thehospital doesn’t comply?Has the hospital contracted with a vendor, in anticipationthat vendors may be in high demand as health careproviders across the country strive to meet the samerequirements in a relatively short period of time?Has the hospital discussed the importance of thetechnology’s “interoperability” between hospitals andother health care professionals, and whether currenthospital/physician relationships need to be strengthenedto ensure this happens?Increased Scrutiny of Fraud and AbuseEarly in his presidency, President Obama identified threecategories of action for reducing improper governmentpayments: 1) increased transparency, 2) agency accountability,and 3) compliance incentives. These efforts were reiterated inMarch 2010 when the President announced new efforts tocontrol fraud and waste in the government system throughpayment recapture audits. 24Reform Offers Investigative Latitude, Increased Funding andBigger Penalties. Providers and suppliers can expect increasedscrutiny if they participate in Medicare or Medicaid programs,along with tougher oversight and bigger penalties if theycommit fraud.The ACA expanded the Recovery Audit Contractor (RAC)program to include Medicare Parts C and D and Medicaid bythe end of 2010. RACs are contracted with CMS to identifyimproper Medicaid payments. The ACA gives contractors thelatitude to conduct medical claims reviews prior to issuingpayment.21, 22, 23The ACA also clarifies that providers must report and returnoverpayments within 60 days of discovering the overpayment.What’s most significant is a new provision making failure toreport overpayments a false claim subject to monetary fines;the requirement went into effect immediately upon passage ofthe ACA.In an effort to increase accountability and compliance, the ACAalso includes provisions for increased transparency ofinformation on a number of issues, including physicianownership or investment interests, prescription drug sampletransparency, pharmacy benefit manager information andnursing home ownership and interest information.The tougher stance against fraud is backed by significantlymore resources, with the ACA increasing funding for the HealthCare Fraud and Abuse Control Fund by $350 million throughFY 2020, with $250 million of that to be spent in the first fiveyears. The investment is expected to pay off; in fiscal year 2009,over 2 ½ billion in Medicare payments and $441 million inMedicaid payments were recovered as a result of thegovernment’s fraud efforts.22, 24, 25Can Your Compliance Plan Meet the Test? Over the past tento 15 years, the Office of the Inspector General (OIG) and CMShave issued and supported guidelines for provider complianceprograms. The ACA will move these guidelines from being“model guidelines” or “strongly recommended suggestions” tobecome requirements.With the exception of nursing facilities, the ACA leaves thedetails of the compliance plans unspecified. The Secretary, inconsultation with the OIG, will determine what elements mustbe included in the compliance plans, the timeline forimplementation and which providers and suppliers will beaffected.Preparing Your Hospital. It is the board’s job to ensure thatthe hospital has conducted the due diligence necessary toprevent fraud or abuse by having certain safeguards in place:Has your board adopted a code of ethics for the hospital?How is the code shared with employees? What ethicstraining and education is provided? How often is itrepeated?Does your hospital have a comprehensive complianceprogram?135

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat Health Care Reform Holds for Hospitals’ Leadership and FutureNursing Facility Compliance Requirements: Expect SimilaritiesThe ACA outlines the following requirements for the compliance and ethics programs implemented by nursing facilities: The program should have established standards and procedures (written policies and procedures) that can be reasonably expected to reduceor prevent fraud and abuse; The organization should have a designated compliance committee and/or officer, and give them the resources and authority needed to beeffective; The organization must take steps, or exercise due care to prevent delegating authority to individuals whom they should know from advanceinvestigation might engage in fraud or abuse; The organization must communicate the program’s standards and procedures either through training or other means to all employees andagents; The organization must use auditing and monitoring systems to ensure program compliance, and offer anonymous reporting; The organization must enforce discipline with the program; Violations must be responded to and corrections must be made to prevent re-occurrence; and The organization must periodically review the program for updates and changes.These eight ACA requirements are consistent with past OIG and CMS model compliance plans. It is reasonable to believe that future complianceplan requirements for other providers are likely to include the same or similar requirements as those for nursing facilities, so hospital trustees shouldbe asking now how well their organizations’ compliance plans meet these requirements. 29Does the board have a compliance committee? Has acompliance officer been designated? Do resources andauthority exist to effectively carry out complianceresponsibilities? Does the board receive and reviewperiodic compliance reports?Does the hospital have a rigorous employee compliancetraining and education program? Does the programaddress fraud awareness and reporting?Medicare spending yet deliver high quality care, the MedicareIndependent Payment Advisory Board was authorized by theACA and tasked with making necessary recommendations tocontrol costs.Hospitals may experience other revenue reductions if they failto prevent hospital readmissions or have a high incidence ofhospital-acquired conditions. To help drive cost-containment,efficiency measures will be added in FY 2014.Can employees and others anonymously report violationswithout fear of retribution?Among other core policies, does the board have a conflictof interest policy, a whistleblower policy, and a documentretention and destruction policy?Are annual financial audits conducted by external auditors(including selection of a new auditor every 3-5 years)?Does the board confirm auditors are free from conflicts ofinterest?Be Prepared to Do it All With LowerReimbursementThe Congressional Budget Office (CBO) projects a $500 billionreduction in Medicare spending through reform efforts.Beginning in 2010, annual Medicare market basket updates arebeing reduced, ultimately representing a $157 billion decrease.From 2014-2019, another $14 billion reduction will be realized,with a 75 percent reduction in payments to MedicareDisproportionate Share Hospitals (DSH). To prevent excessiveIn addition, many predict that hospitals’ negotiations withinsurers will get even tougher as insurers respond to thechanges, limits and pressures reform will place on them.The question yet to be answered is whether the increasednumber of insured patients will decrease bad debt and theneed for charity care enough to compensate for lowergovernment reimbursement. Another question is whether the$695 fine for not having insurance coverage will be enough ofan incentive for some individuals to take advantage of availablecoverage, or if they will simply elect to pay the penalty. Andadd to the equation the increased attention focused onoutcomes, quality of care, provisions for preventive care,wellness programs and community health, all of which arehoped to help rein in costs.The only answer that seems certain is uncertainty – that andthe obvious shift of health care payment from volume-basedfee-for-service to continuum of care or value-based payment.Moody’s Investors Service has observed that “those hospitalsthat can effectively change their business models and positiontheir organizations for payment reform will be most prepared136

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat Health Care Reform Holds for Hospitals’ Leadership and Futureand best able to adapt,” noting also “a well-versedmanagement team with forward-looking governance willguide the hospital or health system during these changes.” 26Preparing Your Hospital. As hospital boards prepare torespond to the knowns and unknowns of health care reform,the first question they should ask is how well informed they areabout reform – its provisions and the potential implications itwill have. Trustees should then consider:Does the board’s membership represent the knowledge,skills and experience it will need to successfully navigatereform and a changing health care environment?The question yet tobe answered iswhether theincreased numberof insured patientswill decrease baddebt and need forcharity careenough tocompensate forlower governmentWhat potential reform scenarioshas the board envisioned? Whatstrategic initiatives have beenidentified to address each?Does the board continuallyincorporate new information, newideas and new thinking to shapeand reshape strategic thinking?Do trustees believe theypersonally have the reforminformation they need to makeevidence-based strategicdecisions that will drive thehospital’s future success?Hospitals Have Responsibilities as Employersas WellHospitals have twice the responsibility under the ACA, as bothproviders and as employers. Among new reform requirementsfor employers, hospitals will need to take the following actions,many of which began in January 2011:Evaluate and revise benefit plans to comply with newhealth plan requirements; Cover employees’ dependents to age 26;Disclose health insurance coverage costs on employees’ W-2 forms;Auto-enroll employees in the federal community livingassistance services and supports (CLASS) program; andPrepare to notify employees about the 2014 insuranceexchanges.While trustees are not responsible for the day-to-dayimplementation of these requirements, they should be awareof the requirements, and be confident in their organization’scompliance with the ACA. Trustees must also be aware of thecosts associated with these employer regulations, and theirimpact on their organization’s operations and bottom line.Congressional Challenges and Attempts toStall or Overturn the LawIn their September 2010 “Pledge to America,” HouseRepublicans vowed to “repeal and replace the governmenttakeover of health care with common sense solutions focusedon lower costs and protecting American jobs.” 31 They alsodiscussed proposing to enact elements they believe shouldhave been included in the original law, including medicalliability reform, the option of purchasing health insuranceacross state borders, and the expansion of health savingsaccounts. 32Nearly two years later, as of July 2012, the House hadattempted more than 30 votes to undermine or overturn theACA. 59 While the July 2012 vote to repeal the law passed in theHouse, it was viewed as an entirely political gesture, as expertsagreed that it would not pass in the Democratic-led Senate,nor would it receive a signature from President Obama.While most political experts agree that a complete repeal isunlikely, what may still occur are some tweaks to the existinglaw, and the use of various stalling techniques, with an endgoal of affecting the 2012 elections. If repeal attempts fail,many expect Republicans to take individual, more controversialcomponents of the law to the floor for stand-alone votes.In a letter to his Republican colleagues in his campaign formajority leader, Rep. Eric Cantor (R-VA) said “If all of ObamaCarecannot be immediately repealed, then it is my intention tobegin repealing it piece by piece, blocking funding for itsimplementation, and blocking the issuance of the regulationsnecessary to implement it.” 35 There are multiple opportunitiesfor Republicans to delay the law, although some experts arguethat those opportunities are waning. For example, the HouseOversight and Government Reform Committee, can provideextensive oversight, hold hearings and make it difficult forreform to be implemented. Similarly, Republicans can delay orprevent funding using annual spending bills, hold up fundingfor agencies with responsibilities under the ACA, or preventfunding for certain reform-related activities. 35137

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat Health Care Reform Holds for Hospitals’ Leadership and FutureMany believe that Republicans will try to stall until the 2012November election, in hopes that a Republican president willtake office and either repeal or drastically change thelegislation.The Bottom Line: Keep Moving ForwardDespite the talk about repealing and replacing health carereform, those efforts have not come to fruition either inCongress or in the courts. Although some uncertainty stillremains until the outcome of the November 2012 presidentialelection is determined, the wheels of health caretransformation are already underway.As more components of reform go into effect and we movefurther down the road on implementation, it will be harder torepeal the ACA in its entirety. This will be particularly true withthe aspects of the law that are well-liked by many Americans,like the removal of insurance caps and blocks on pre-existingconditions.For now, health care leaders can continue to operate under thebasic assumption that health care reform is here to stay,although how funding is assigned and how certain segmentsof the law are overseen and codified may change from whatwas anticipated when the law was first enacted. Hospitalleaders should also be prepared for a stalemate until theelection in November 2012. If that happens, the law willremain in effect despite a lack of funding and direction, whichmay leave hospitals, other providers and patients in no-man’sland, wondering how to comply without getting the benefit ofany direction or funding.Regardless of whether the ACA is overturned, picked apart,stalled by Congress, or is left as it is, experts agree that thegeneral direction of health care captured in reform is here tostay. America’s health system will move away from its currentfragmented fee-for-service structure toward value-basedthinking and collaborative care delivery. The requirement forhospitals to focus on quality, cost-containment, andcoordinated delivery is here to stay.Americans Divided About Reform: Like SomeParts but Not Mandate16% want to leave the law as it is.35% want to change it to do more.11% want to amend it or reduce its scope.33% want to repeal it.59%68%57%65%want to keep the requirement that insurancecompanies provide coverage to people withpre-existing conditions.want to keep the section requiring insurancecompanies to allow young adults to remain on theirparents’ policies until age 26.want to keep the segment of the law that closes theMedicare prescription drug coverage “donut hole.”believe that the mandate for every American to buyinsurance is unconstitutional.Source: Poll of registered voters conducted by McClatchy-Marist, Nov 15-18,2010. 30Becoming Extraordinary Leaders of Changeand ReformMany of the ACA’s provisions that are expected to generate thegreatest impact do not go into effect until 2014, includingopening the doors of the insurance exchanges. However,trustees should not be lulled into complacency or lack a senseof urgency. Rulemaking and other ACA provisions are alreadytaking place; and three to five year strategic plans alreadybridge the gap between today and 2014.The ability to successfully steer hospitals through the changesahead will require extraordinary leadership from the board oftrustees. Trustees must be willing to embrace new ideas, thinkin new ways, and adapt their leadership focus to anticipate thedramatic changes ahead.138

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat Health Care Reform Holds for Hospitals’ Leadership and FutureSources and More Information1. Health Care. The White House. www.whitehouse.gov/issues/health-care.2. Simmons, Janice. Large Healthcare Purchaser Takes Risky Leap Into ACOs. HealthLeaders Media. April 8, 2010.3. The Henry J. Kaiser Family Foundation. Focus on Health Reform. Summary of New Health Reform Law and Health Reform ImplementationTimeline. www.kff.org/healthreform.4. Committees on Ways & Means, Energy & Commerce, and Education & Labor. Affordable Health Care for America. http://docs.house.gov/energycommerce/TIMELINE.pdf.5. H.R. 3590, 111th Cong. 2009. Patient Protection and Affordable Care Act. Washington, D.C.: U.S. Senate, 2009.6. U.S. Department of Health and Human Services, Centers for Medicare and Medicaid Services. www4.cms.gov/ESRDPayment.7. Public Views on U.S. Health System Organization: A Call for New Directions. Data Brief. The Commonwealth Fund. August 2008.8. Deloitte Center for Health Solutions. Accountable Care Organizations: A New Model for Sustainable Innovation. www.deloitte.com.9. Cys, Jane. Accountable Care Organizations: A New Idea for Managing Medicare. American Medical News. www.ama-assn.org. August 31, 2009.10. Cantlupe, Joe. Report Promotes Integration of Medical Home, Value-Based Insurance. HealthLeaders Media. March 30, 2010.11. Clark, Cheryl. If the U.S. Lack Doctors, Can Nurses, Optometrists, and Pharmacists Take Their Place? HealthLeaders Media. April 26, 2010.12. American Hospital Association. Annual Meeting Issues Papers. 2009.13. Neergaard, Lauran. Law Will Make Doctor Deficit More Acute. The Associated Press. March 29, 2010.14. Sataline, Suzanne and Wang, Shirley S. Medical Schools Can’t Keep Up. The Wall Street Journal. April 12, 2010.15. Mertens, Maggie. Primary Care Shortage Could Crimp Overhaul. Kaiser Health News. March 22, 2010.16. The American Academy of Nurse Practitioners. www.aanp.org.17. Carlson, Joe. Groups Hail Funding for Nurse Training. Modern Healthcare. March 31, 2010.18. Blanchfield, Bonnie B, Heffernan, James L., Osgood, Bradford, Sheehan, Rosemary R., and Meyer Gregg S. Saving Billions of Dollars-and Physicians’Time-by Streamlining Billing Practice. Health Affairs. April 29, 2010.19. American Hospital Association. 2010 AHA Advocacy Issues Papers. Shaping the Future for a Healthier America: Administrative Simplification.20. PricewaterhouseCoopers’ Health Research Institute. Healthcare Reform Sector Implications: Provider. April 2010.www.pricewaterhousecoopers.com.21. Carroll, James. Providers Should Prepare for RACs Expanding Into Medicaid. HealthLeaders Media. April 8, 2010.22. Blesch, Gregg. Protective Stance, Reform Law Delivers Ammo to Battle Fraud. Modern Healthcare. March 29, 2010.23. U.S. Department of Health & Human Services. Press Conference on Health Care Fraud and the Affordable Care Act. May 13, 2010. www.hhs.gov.24. The White House, Office of the Press Secretary. President Obama Announces New Effort to Crack Down on Waste and Fraud. March 10, 2010.www.whitehouse.gov.25. U.S. Department of Health & Human Services. HHS and DOJ Officials: Affordable Care Act Includes Important New Tools to Fight Health Fraudand Protect Medicare. May 13, 2010. www.hhs.gov.26. Goldstein, Lisa. Transforming Not-for-Profit Healthcare in the Era of Reform. Moody’s Investors Service. May 2010.27. PricewaterhouseCoopers Health Research Institute. Healthcare Reform Sector Implications: Provider. April 2010.28. PricewaterhouseCoopers 2009. HealthLeaders Media Breakthroughs: Aligning Hospitals and Physicians Toward Value. HealthLeaders Media.December 2009.29. Schnautz Mann, Brandy. Health Reform Mandates That Health Care Providers Adopt Compliance Programs. Jackson Walker Health Care e-Alert.May 14, 2010. www.images.jw.com.30. National House Exit Poll Results. Fox News Midterm Elections 2010. www.foxnews.com.31. Hunt, Albert. Vow to Repeal Health Care Holds Little Promise. The New York Times. November 21, 2010.32. Russell Chaddock, Gail. Health-Care Reform: After Big GOP Gains, Will it Be Repealed? The Christian Science Monitor. November 3, 2010.33. Sack, Kevin. Judge Rejects Health Law Challenge. The New York Times. November 30, 2010.34. Thomma, Steven. New Poll Undercuts GOP Claims of a Midterm Mandate. McClatchy Washington Bureau. November 23, 2010.www.mcclatchydc.com.35. Russell Chaddock, Gail. Health-Care Reform in GOP Cross Hairs. The Christian Science Monitor. November 15, 2010.36. Carey, Mary Agnes. Advocate Prepare to Challenge GOP On Health Law. Kaiser Health News. November 11, 2010.139

20 Questions Every Washington Hospital Board Needs to be Able to AnswerWhat Health Care Reform Holds for Hospitals’ Leadership and Future37. Clark, Cheryl. Federal Judge Strikes Down Key Healthcare Law Provision. HealthLeaders Media. December 13,2010.38. Federal Register/Vol. 76, No. 88/Friday, May 6, 2011/Rules and Regulations, 42 CFR Parts 422 and 480, Medicare Program; Hospital Inpatient Value-Based Purchasing Program. May 6, 2011.39. American Hospital Association. Health Care Reform Implementation Timeline. May 2010.40. Health Policy Alternatives, Inc. Medicare Program: Hospital Inpatient Value-Based Purchasing Program Final Rule. www.chausa.org. May 2011.41. Lorincz, Caitlin and Metzger, Jane. Hospital Value-Based Purchasing (VBP) Update: Overview of the CMS Final Rule. CSC (Computer SciencesCorporation). www.csc.com. May 2011.42. Gold, Jenny. Accountable Care Organizations, Explained. Kaiser Health News. January 18, 2011.43. Accountable Care Organizations: A New Model for Sustainable Innovation. Deloitte. www.deloitte.com.44. Betbeze, Philip. ACO High Priority For Health Care Leaders, Survey Says. HealthLeaders Media. February 18, 2011.45. American Hospital Association. AHA Special Bulletin: CMS Releases Proposed Rule for Accountable Care Organizations.46. U.S. DHHS. News Release: Affordable Care Act to Improve Quality of Care for People with Medicare. March 31, 2011.47. U.S. DHHS. Fact Sheet: Accountable Care Organizations: Improving Care Coordination for People with Medicare. March 31, 2011.48. Federal Register/Vol. 76, No. 67/Thursday, April 7, 2011/Proposed Rules.42 CFR Part 425, Medicare Program; Medicare Shared Savings Program:Accountable Care Organizations. www.gpo.gov. April 7, 2011.49. Demetriou, Andrew J. and Patterson, J. A. (Tony) Jr. ACO-Legal Structure, Governance and Leadership. ABA Health eSource.www.americanbar.org. April 2011.50. U.S. DHHS. Fact Sheet. Medicare Shared Savings Program and Rural Providers. May 2011.51. Internal Revenue Service Notice 1418, February 2011.52. Internal Revenue Service Announcement 2011-37, June 9, 2011.53. Pollack, Rick. Letter to Donald M. Berwick, M.C., M.P.P. RE: Medicare Program; Medicare Shared Savings Program; Accountable CareOrganizations. American Hospital Association. June 1, 2011.54. Clark, Cheryl. CMS Releases Value-Based Purchasing Incentive Plan. HealthLeaders Media. January 11, 2011.55. Simmons, Janice. How Quality Will Pay for Hospitals Under New Reform Measures. HealthLeaders Media. May 12, 2010.140

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