As healthcare institutions adapt to changing reimbursement models, strategies for saving money and growing financially are in no short supply. But experts say one of the best and easiest ways to safeguard hospital finances starts right in the provider's boardroom.
It all comes down to fostering a healthy relationship between a provider's trustees and executive management.
"The board is the success and ultimate voice for the hospital, and represents the community. That's the stakeholder connection," said Craig Simms, senior vice president of the Community Hospital Corp. "In the nonprofit world, the CEO reports to the board, and from a relationship standpoint, it's vital that the CEO has a good working relationship with the board. It really is the success of the hospital."
Simms considers the board/C-Suite relationship so vital to an organization's well-being that he's assembled an outline of best practices that affect financials, communication and even trustee recruitment and retention.
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"Knowledge is power," said Simms. Effective boards are well-educated, he said, and hospitals and systems should budget for learning opportunities such as a comprehensive board orientation, planned retreats and an annual self-assessment.
"Quality is really as important as the financials, and in fact it drives financial performance," said Simms. "How we're getting paid, and how we'll be getting paid in the future … is something that the board needs to understand as well. Reading financial statements, understanding the contractual things -- these are important."
Mark Solazzo, executive vice president and chief operating officer at New York-based Northwell Health, agreed that the board/C-Suite relationship is critical.
"If the board doesn't have that trust in you to execute, and it binds you in ways that don't allow you to move quickly enough, you can affect the financials negatively in an operation," said Solazzo. "You need clear objectives, goals, and authority differentiation between governance and management. You can't come back and ask 'Mother, may I?' every five minutes. You've got to feel comfortable in your level of authority."
Echoing one of Simms' tips, Northwell's board performs an annual self-assessment, and according to Solazzo, its members aren't shy; if they feel like they're not getting proper information, they'll let the executives know.
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Northwell is also a nonprofit entity, which has grown significantly recently due to recent mergers and acquisitions. The system is going through a major governance restructuring due to the speed at which it's grown.
Solazzo points to the "no-surprise rule."
"When you're growing significantly, the no-surprise rule is important," said Solazzo. "We have so many initiatives going on at the same time. The volunteer board has a day job, and it's not us, so making sure you keep them in the loop is important. And when you're growing really fast, that can be difficult."
Solazzo cited joint ventures as a specific example. The Northwell brass, he said, considers growing joint ventures a strategic imperative, and the system has been doing so at a fairly rapid rate. Executives convinced the board that it was important to move quickly and nimbly in the marketplace. So the board gave management the authority to pursue any joint ventures below a $10 million level and only bring them to a joint committee if they were over that amount. It set a level of flexibility, said Solazzo, while maintaining respect for everyone's authority.
"A good board relationship is essential for a highly functioning organization, rooted in a good understanding of objectives, goals and level of authority," said Solazzo.
A poor board relationship, on the other hand, can be poisonous.
"We've seen dysfunctional relationships and boards," said Simms. "Individual board members may have their own agenda. When there's not trust between the board and the CEO, trying to set the focus and the vision for the future is frightening. We sometimes see a lot of stops and starts, or approaches that can be disruptive to the overall organization, and frankly, to the financials. It's bad when it's not a cohesive group that's focused on this one thing for the community. It can really damage the reputation and impact of the hospital."
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To avoid that kind of scenario, Simms recommends developing a trustee recruitment and retention process. It's something that's too important to be left up to chance, he said, and in fact, retention actually begins at the recruitment phase and never ends. Initial orientation for new board members should include one-on-one time with some of the key players -- the CEO, CFO, board chair and finance committee chair among them. Following up with trustees about their orientation and education after a six-month period isn't a bad idea either, he said.
And it doesn't hurt to make meetings meaningful. For Simms, that means starting with the "why" instead of the "what," and to that end, he suggests beginning meetings by reading the mission, vision and values of the organization rather than just jumping into reports. Productive meetings, he said, require engagement.
"The dividends pay off," he said. "It's very rewarding."
Twitter: @JELagasse