It feels like governance questions are coming to the fore in a lot of places these days, at least judging by several recent conversations we’ve had with health system CEOs. Probably not surprising, given the number of potential mergers and other partnerships under consideration.
As one CEO told us, growth by M&A raises particularly thorny issues for a not-for-profit system board. “Our governance structure grew out of a single hospital board, which was made up of community members and local physician leaders,” he told us. As the system acquired hospitals in adjacent markets, the combined board took on a representational character—each hospital had local stakeholders involved in governance. “Now we’re talking about merging with an out-of-state system, and our board suddenly seems way too parochial and unsophisticated. Everyone’s still asking what’s in it for their community.” That’s a frustration we hear frequently.
There are legitimate reasons why a tax-exempt community institution should have local representation on the board, advocating for local priorities and resources. But a larger, multi-state board must also oversee the entire portfolio of assets, and make trade-offs across markets, sometimes making decisions that favor one hospital over another.
The larger system board also has a greater need for sophistication, both on business and healthcare issues, as its members are often responsible for billions of dollars of assets. What frequently results from this tension is a nesting series of system and community boards, with varying degrees of accountability—a recipe for tangled, lengthy decision processes, and an enormous time-sink for senior system executives. We’re keeping our eye out for next-generation solutions to the governance question in healthcare—let us know what you’re seeing.