Category Archives: Board

Outsourcing A Hospital Turnaround And The Team Involved

Posted on by • Posted in Board, C-Suite, CEO, CFO, Execution, Health System, Honesty, Hospital, Hospital Industry, Integrity, Interim CFO, Interim Executives, Interim Resources, Judgement, Leadership, Objectivity, Outsourcing, Trust, Truth, Turnaround, Turnaround Plan • Leave a comment

https://www.healthtechs3.com/outsourcing-a-hospital-turnaround-and-the-team-involved/

Outsourcing A Hospital Turnaround and The Team Involved - HealthTechS3

Hospitals are constantly faced with challenges that require them to reassess how they deliver care to their communities.  Continuous improvement is necessary as expense inflation consistently outpaces reimbursement gains.  However, more fundamental issues threaten hospital fiscal viability such as payor mix deterioration, population or market share declines, and utilization changes. Amplify this environment with a difficult EMR installation and a “perfect storm” creates a fiscal crisis that necessitates a turnaround.

If covenants are breached, bond agreements often require an external and independent consulting firm that is engaged to help create and oversee the implementation of a turnaround plan.  Otherwise, a CEO must make a value judgment on whether to outsource the turnaround balancing cost considerations with an honest assessment of (1) their management team’s bandwidth, and (2) ability to prepare and execute a turnaround.

There are multiple models for outsourcing a turnaround.  In a complete outsourcing, an engagement letter with the “performance improvement” consulting firm would include an assessment phase and the preparation of a comprehensive plan that covers all areas of operations followed by implementation support services.  The firm may require an on-site presence of one year or more to assess, validate, and assist in the implementation of recommended interventions.  This can be effective, but the fees can easily reach seven figures even for modest community hospitals.  In addition, even in a complete outsourcing there is still a major demand on the time of senior leadership.  As a result, management sometimes chooses to limit the scope of a performance improvement engagement, which results in a partial outsource.  The limitation may be to only outsource the plan development in the form of a report.  This would detail the operational interventions and the implementation steps, but it would leave the heavy lifting of implementation to existing leadership.   Alternatively, the scope may be limited by excluding certain areas of review.  While there may be valid reasons for the latter approach, limiting the areas of review can be counterproductive to a turnaround plan because many issues are systemic such as patient throughput or revenue cycle.  Further, restricting certain areas for review may create the appearance of “untouchables” or “sacred cows,” which should be avoided in a turnaround.

While the CEO should always be the ultimate leader of the turnaround, the CFO is indispensable in the process whether it is fully or partially outsourced or done completely in-house.  These abilities are not always in the CFO’s skill set; some executives are most effective in a steady-state as opposed to a turnaround environment. The CEO will be relying on the CFO to demonstrate the following traits, which require a large degree of emotional intelligence:

  • Delegate some responsibility to their lieutenants but communicate the financial imperative and manage overall execution of the turnaround
  • Appropriately raise the alarm when progress is not being made. Too much alarm can be seen as crying wolf and too little can add to complacency.
  • Do not be averse to confrontation but do not create it where it is not necessary. Only use the CEO for those most difficult situations where it cannot be avoided to ensure execution remains on point.

Human nature dictates that self-interest may compromise the CFO’s objectivity.  There will be times when the best interest of the organization and the individual are in conflict.  If the incumbent CFO is not up to the task, replacing them with an interim CFO with turnaround experience is a better option.

An experienced interim CFO in a turnaround situation has several advantages.   First, it can afford the CEO the opportunity to underscore the urgency of the situation by making an example. The experienced interim CFO understands their primary role is to be a key asset in the execution of the turnaround.   They are not there to make friends but to influence people (although the best ones do both).  Because they are not angling for promotions or favor for future consideration from the board, they are apolitical, and their intentions are more transparent.  Having been through turnarounds before, they possess the tools to assist the CEO and the board navigates the ups and downs.  Perhaps most importantly, the interim CFO is in the best position to tell the CEO and the board things they may not want to hear such as the need to give up independence or consult bankruptcy counsel if the situation warrants.

Obviously, it is necessary that the hospital must continue to operate safely, securely, and legally during a turnaround.  This can be a difficult balancing act, not just for the CFO but for all senior management.  The CFO must continue to safeguard the assets of the organization.  Likewise, other members of senior management must push back if a turnaround plan may imperil patients, visitors or staff, or violate the law.  Consequently, it may be beneficial to bring in other interim C-Suite leaders who are able to effectively manage the multiple critical priorities during a turnaround in addition to, or instead of, an interim CFO.  However, this must be carefully weighed against continuity of management and the organization’s ability to attract and retain talent.  Senior management turnover creates stress on the organization and is ultimately a reflection on the CEO.

There is not a one-size-fits-all approach to creating and executing a turnaround plan.  Outsourcing to consulting firms can infuse new ideas and analytical talent, but it is expensive and still often leaves management with the bulk of the responsibilities.  Experienced interim management can add independence and objectivity to create a glidepath for execution.

 

 

 

 

Navigating a Post-Covid Path to the New Normal with Gist Healthcare CEO, Chas Roades

Posted on by • Posted in Affordability, Board, Board Assessment, Board Competency, Board Engagement, Brand Loyalty, Branding, Business to Consumer Model, Capitation, Cash, Cash Reserves, Competition, Consumer Loyalty, Consumer Trust, Consumerism, Coronavirus, Corporate Overhead, Corporate Strategy, Cost Management, Cost Reduction, Crisis, Crisis Management, Cross Subsidy Model, Debt Service, Decision Making, Demographics, Disruption, Disruptive Technology, Economic Crisis, Economic Stimulus, Efficiency, Elective Procedures, Elective Surgery, Fee for Service Reimbursement, Financial Incentives, Financial Viability, Financially Distressed, Focus, Governance, Health Insurance Coverage Adequacy, Health Insurance Industry, Health Policy, Health System, High Deductible Health Plans, High Drug Prices, High Prices, Hospital, Hospital Industry, Job, Job Market, Job Search, Job Security, KPI Dashboards, Labor Spend Management, Leadership, Leadership Alignment, Leadership Trust, Market Consolidation, Market Power, Market Share, Market Trends, Market Uncertainty, Medical Group, Member Health, Mergers & Acquisitions, Net Income, Nonoperating Income, Objectivity, Operating Expense Reduction, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue, Out of Pocket Expenses, Pandemic, Physician, Physician Employment, Physician Independent Network (IPA), Physician Multispecialty Network, Physician Practice Management, Price Transparency, Pricing, Primary Care Delivery Model, Primary Care Loyalty, Private Equity, Profit Model, Quality, Quality of Care, Safety, Strategic Alignment, Strategic Leadership, Strategy, Streamlining Operations, Supply Chain, Surprise Bills, Telemedicine, Trust, Trusted Brand, Truth, Value, Value Creation, Value Proposition, Value-Based Healthcare, Virtual Healthcare, Virtual Reality, Virtual Visit, Workplace Safety • Leave a comment

https://www.lrvhealth.com/podcast/?single_podcast=2203

Covid-19, Regulatory Changes and Election Implications: An Inside ...Chas Roades (@ChasRoades) | Twitter

Healthcare is Hard: A Podcast for Insiders; June 11, 2020

Over the course of nearly 20 years as Chief Research Officer at The Advisory Board Company, Chas Roades became a trusted advisor for CEOs, leadership teams and boards of directors at health systems across the country. When The Advisory Board was acquired by Optum in 2017, Chas left the company with Chief Medical Officer, Lisa Bielamowicz. Together they founded Gist Healthcare, where they play a similar role, but take an even deeper and more focused look at the issues health systems are facing.

As Chas explains, Gist Healthcare has members from Allentown, Pennsylvania to Beverly Hills, California and everywhere in between. Most of the organizations Gist works with are regional health systems in the $2 to $5 billion range, where Chas and his colleagues become adjunct members of the executive team and board. In this role, Chas is typically hopscotching the country for in-person meetings and strategy sessions, but Covid-19 has brought many changes.

“Almost overnight, Chas went from in-depth sessions about long-term five-year strategy, to discussions about how health systems will make it through the next six weeks and after that, adapt to the new normal. He spoke to Keith Figlioli about many of the issues impacting these discussions including:

  • Corporate Governance. The decisions health systems will be forced to make over the next two to five years are staggeringly big, according to Chas. As a result, Gist is spending a lot of time thinking about governance right now and how to help health systems supercharge governance processes to lay a foundation for the making these difficult choices.
  • Health Systems Acting Like Systems. As health systems struggle to maintain revenue and margins, they’ll be forced to streamline operations in a way that finally takes advantage of system value. As providers consolidated in recent years, they successfully met the goal of gaining size and negotiating leverage, but paid much less attention to the harder part – controlling cost and creating value. That’s about to change. It will be a lasting impact of Covid-19, and an opportunity for innovators.
  • The Telehealth Land Grab. Providers have quickly ramped-up telehealth services as a necessity to survive during lockdowns. But as telehealth plays a larger role in the new standard of care, payers will not sit idly by and are preparing to double-down on their own virtual care capabilities. They’re looking to take over the virtual space and own the digital front door in an effort to gain coveted customer loyalty. Chas talks about how it would be foolish for providers to expect that payers will continue reimburse at high rates or at parity for physical visits.
  • The Battleground Over Physicians. This is the other area to watch as payers and providers clash over the hearts and minds of consumers. The years-long trend of physician practices being acquired and rolled-up into larger organizations will significantly accelerate due to Covid-19. The financial pain the pandemic has caused will force some practices out of business and many others looking for an exit. And as health systems deal with their own financial hardships, payers with deep pockets are the more likely suitor.”

 

 

 

 

These Hospitals Pinned Their Hopes on Private Management Companies. Now They’re Deeper in Debt.

Posted on by • Posted in Board, Capital Structure, Health System, Hospital, Hospital Bankruptcy, Hospital Closure, Hospital Industry, Investment, Investments, Leadership, Management Company, Rural Health, Rural Hospital, Turnaround, Turnaround Plan • Leave a comment

https://www.propublica.org/article/these-hospitals-pinned-their-hopes-on-private-management-companies-now-theyre-deeper-in-debt?utm_source=ActiveCampaign&utm_medium=email&utm_content=Does+the+US+Spend+Too+Much+on+Police%3F&utm_campaign=TFT+Newsletter+06042020

At least 13 hospitals in Oklahoma have closed or experienced added financial distress under the management of private companies. Some companies charged hefty management fees, promising to infuse millions of dollars that never materialized.

Revenues soared at some rural hospitals after management companies introduced laboratory services programs, but those gains quickly vanished when insurers accused them of gaming reimbursement rates and halted payments. Some companies charged hefty management fees, promising to infuse millions of dollars but never investing. In other cases, companies simply didn’t have the hospital management experience they trumpeted.

Click on link above for examples of rural hospitals that pinned their hopes on private management companies that left them deeper in debt. They are based on interviews, public records and financial information from the Centers for Medicare and Medicaid Services and the American Hospital Directory.

Coronavirus: 15 emerging themes for boards and executive teams

Posted on by • Posted in Board, Capability Building, Capital Structure, Cash, Cash Reserves, Cash-Flow Improvements, Conflicting Stakeholders, Consensus, Debate, Economy Reopening, False Hope, Free Market, Future, Hope, Innovation, Leadership, Mergers & Acquisitions, Realism, Speed, Supply Chain, Trust, Uncertainty, Undefined, Volatile • Leave a comment

https://www.mckinsey.com/business-functions/risk/our-insights/coronavirus-15-emerging-themes-for-boards-and-executive-teams?cid=other-eml-alt-mip-mck&hlkid=0e0b80570bfe48508db4370a1999a949&hctky=9502524&hdpid=b867bc22-e8f5-41b6-b080-40a5d4c21c71

11 Ways To Create More Time To Think | Auguste rodin, Rodin, Rodin ...

Board directors and executives can pool their wisdom to help companies grapple with the challenge of a lifetime.

As Winston Churchill said, “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” We are seeing some faint signs of progress in the struggle to contain the pandemic. But the risk of resurgence is real, and if the virus does prove to be seasonal, the effect will probably be muted. It is likely never more important than now for boards of directors and executive management teams to tackle the right questions and jointly guide their organizations toward the next normal.

Recently, we spoke with a group of leading nonexecutive chairs and directors at companies around the world who serve on the McKinsey Resilience Advisory Council. They generously shared the personal insights and experiences gained from their organizations’ efforts to manage through the crisis and resume work. The 15 themes that emerged offer a guide to boards and executive teams everywhere. Together, they can debate these issues and set an effective context for the difficult decisions now coming up as companies plan their return to full activity.

Managing through the crisis

1. Boards must strike the right balance between hope for the future and the realism that organizations need to hear. There are many prognostications on what comes after COVID-19. Many will be helpful. Some will be right. Boards and managers may have some hopes and dreams of their own. Creating value and finding pockets of growth are possible. It is important to have these aspirations, because they form the core of an inner optimism and confidence that organizations need. However, leaders should not conflate aspirations with a prescience about the future.

2. The unknown portion of the crisis may be beyond anything we’ve seen in our professional lives. Boards and managers feel like they might be grappling with only 5 percent of the issues, while the vast majority are still lurking, unknown. Executives are incredibly busy, fighting fires in cash management and other areas. But boards need to add to their burden and ask them to prepare for a “next normal” strategy discussion. Managers need to do their best to find out what these issues are, and then work with boards to ensure that the organization can navigate them. The point isn’t to have a better answer. The point is to build the organizational capability to learn quickly why your answer is wrong, and pivot faster than your peers do. Resilience comes through speed. This may be a new capability that very few organizations have now, and they will likely need to spend real time building it.

3. Beware of a gulf between executives and the rank and file. Top managers are easily adapting to working from home and to flexible, ill-defined processes and ways of working, and they see it as being very effective and also the wave of the future. Many people in the trenches think it is the worst thing to happen to them (even those that are used to working remotely). Remote working is raising the divide between elites and the common man and woman. There is a real risk of serious tension in the social fabric of organizations and in local and national communities.

4. Don’t overlook the risks faced by self-employed professionals, informal workers, and small businesses. These groups are often not receiving sufficient support. But their role in the economy is vital, and they may be noticed only later, when it is too late.

5. Certain industries and sectors are truly struggling and require support. Several disrupted industries and many organizations in higher education, the arts, and sports are severely struggling and require support to safeguard their survival.

Return to work—the path ahead

6. Mid- to long-term implications and scenarios vary considerably. It’s important to differentiate between industries and regions. Some industries may never come back to pre-COVID-19 levels.

7. What went wrong? Boards and executives, but also academics, need to debate the question. Where should we have been focusing? Take three examples. Why did companies ignore the issue of inadequate resilience in their supply chain? The risks of single sourcing were well known and transparent. Also, why did we move headlong toward greater specialization in the workforce, when we knew that no single skill was permanently valuable? Finally, why did we refuse to evolve our business models, although we knew that technology and shifts in societal preferences were forcing us down a treadmill of ever decreasing value-creation potential?

8. How can we prevent a backlash to globalization? The tendency toward nationalism was already strong and is growing during the crisis. The ramifications will be challenging. For example, in pharmaceutical development, residents of the country where a pharma company has its headquarters may expect to get the drug first. Global companies, despite their experience, may find it harder to address and engage directly with diverse, volatile, and potentially conflicting stakeholders. In such times, societies may need someone to mediate between the private sector and some of these stakeholders.

9. Companies need help with government relations. Strong government interventions are occurring on the back of a serious loss of confidence in free-market mechanisms. There is little question that different governments will land on different answers to the debate around how free markets really ought to be structured. The corporate community has been thrust into a new relationship with government, and it is struggling. The government landscape is fragmented, with highly varied approaches and competencies. Companies are looking for a playbook; no one has an infrastructure to manage this complexity.

10. Where will the equity come from, and with what strings attached? Governments are propping up various sectors with new capital. What will they receive in return? Will they distort markets? How can companies manage this process carefully to emerge from the crisis with a stronger balance sheet? Further, much more capital is likely needed; presumably some of it will come from the private sector. Will capital markets be effective and trusted in such times? Who governs this overall process, and what role should the government play? Is it the time for more state funds?

11. The balance between profits and cash flow is tricky, and essential to get right. Many companies are caught right now and are sacrificing their bottom line in order to pay for their financing. That’s not sustainable; companies will need guidance on how to balance the two.

12. It may be time for responsible acquisitions, including to help restructure certain industries. Many “resilients” have “kept their powder dry,” and are now ready to acquire. But they need to be sensitive and allow sellers a good path to exit. We need guidelines for responsible acquisitions.

13. Cyberrisk is growing. Remote working increases the “attack surface” for criminals and state actors. Both are more active. Chief information officers and chief information security officers are grappling with the overwhelming demand for work-from-home technology and the need for stringent cybersecurity.

14. Innovation may never have been so important. Innovation has always been essential to solving big problems. The world is looking not just for new things but also for new ways of doing things (especially on the people side, where we need new behaviors, long-term rather than short-term), capabilities, and work ethics.

15. The path ahead will surely have ups and downs and will require resilience. As lockdowns are relaxed, and segments of the economy reopen, viral resurgences and unforeseen events will keep growth from being a straight line going up. It will likely be a lengthy process of preserving “lives and livelihoods” over several months, if not years. The reality is that many or even most business leaders made choices over the past decades that traded resilience for a perceived increase in shareholder value. Now may be the moment to consider that the era of chipping away at organizational resilience in the name of greater efficiency may have reached its limits. This is not to say that there are no efficiencies to be sought or found, but more that the trade-off between efficiency and resiliency needs to be defined far more clearly than it has been in recent years.

It is the board’s responsibility to coach and advise its management team, especially when the terrain is trickier than usual. However, boards should not mistake the need for vigorous debate with the need for consensus. More than ever, a bias to action is essential, which will frequently mean getting comfortable with disagreement. Apart from all the operational focus needed for the return to work, it is even more important that boards and management teams take a step back to reflect upon these 15 core themes. In summary:

  1. Take the time to recognize how the people who (directly or indirectly) depend on the company feel.
  2. Have aspirations about the post-COVID world, but build the resilience to make them a reality.
  3. Strengthen your capability to engage and work with regulators and the government.
  4. Watch out for non-COVID risks, and make sure to carve out time to dedicate to familiar risks that have never gone away.
  5. Find out what went wrong, and answer the uncomfortable truths that investigation uncovers.

 

 

 

How the CFO enables the board’s success—during COVID-19 and beyond

Posted on by • Posted in Board, CFO, Decision Making, Economic Recovery, Forecast, Foresight, Leadership, Leadership Alignment, Leadership Conversation, Market Trends, Market Uncertainty, Objectivity, Strategic Leadership, Strategy, Transparency, Trust, Truth • Leave a comment

https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-the-cfo-enables-the-boards-success-during-covid-19-and-beyond?cid=other-eml-alt-mip-mck&hlkid=85d408119efe4175b478a0599b8302da&hctky=9502524&hdpid=ed9aa1f2-3c88-4b89-9cd2-61a12e2d602c

How the CFO can guide the board through crises and transformations ...

Two board experts explain how in times of crisis or transformation, the CFO can serve as a rock in the boardroom, a critical arbiter of difficult decisions, and a scout for the future.

Critical business decisions cannot be made unless management teams and boards of directors are on the same page. Transparency, fair and balanced dialogue, and well-structured processes for gaining agreement on strategic plans—these dynamics must be present in every boardroom, in good times and, especially, in bad.

The CFO plays an important role in ensuring that they are.

In crises, such as the global spread of the novel coronavirus, the CFO is best-positioned to provide the most relevant and up-to-date facts and figures, which can help boards find clarity amid chaos. In corporate transformations, the pragmatic, data-focused finance leader is the only one who can prompt the board to actively consider all the short- and long-term consequences of proposed strategy decisions.

Barbara Kux and Rick Haythornthwaite, longtime board directors for multiple global organizations, shared these and other board-related insights with McKinsey senior partner Vivian Hunt in a conversation that spanned two occasions: a gathering of CFOs in London some months ago and, more recently, follow-up phone conversations about the COVID-19 pandemic.

These interviews, which have been condensed and edited here, explained the importance of finance leaders in serving both as scouts for the future and as trusted translators of critical market information.

Shaping the COVID-19 crisis response and recovery

Rick Haythornthwaite: The board’s most important functions in the wake of COVID-19 are threefold: one is making sure that employees are being treated decently and that the company is taking all the precautions it can. Second is obtaining an objective, insightful understanding of the business and trends. And third is anticipating and preparing for recovery. The key in all three areas is having high-quality data to inform the board’s decisions and to share with employees. Of course, getting data from a market in freefall is never easy. This is where you need CFOs to be absolutely on top of their game.

The board needs to know what is really happening to the top line, what short-term measures can be taken to preserve and boost cash, and all the actions you have to take during the early stage of such events to buy time. But the board must also have a handle on long-term issues.1 And now that we’re months into this crisis, people are starting to draw lessons from previous ones and bringing some historical data into board discussions. The CFO can use these data to construct hard-edge scenarios that prompt good conversations in the boardroom.

Barbara Kux: An important difference in the role of CFOs today, as compared with their role during the financial crisis in 2008, is that they need to simultaneously manage both short-term responsiveness and future recovery. The CFO must keep the ship floating through rough waters—safeguarding employees’ health, securing liquidity, monitoring cash flow and payment terms, ensuring the functioning of the supply chain, assessing effects on P&L and the balance sheet, reviewing customers’ and suppliers’ situations, and initiating cost-reduction programs. That is all very challenging indeed. But then the CFO must also serve as the ship’s scout—watching for key trends that are emerging or that have accelerated as a result of COVID-19, such as digitization and changes in consumer behavior.

The balance between opportunity and risk is being altered substantially for most companies. The CEO could be tempted to profit from immediate demands—“let’s make ventilators, let’s make disinfectants.” The CFO’s job, by contrast, is to point out the differences between quick-to-market options and long-term post-COVID-19 options. These post-COVID-19 options can be an important factor in motivating and engaging employees during these challenging times.

It is also important for the CFO to present the board with reports and pre-reads that paint the entire picture in an objective way, including potential scenarios for the future. That is the only way boards and senior management can take thoughtful and well-founded decisions—first for the recovery and then for a sustainable future for all stakeholders. The word “crisis” has two meanings, one being “danger” and the other being “chance.” Today’s CFO must consider both.

The word ‘crisis’ has two meanings, one being ‘danger’ and the other being ‘chance.’ Today’s CFO must consider both.

Shaping the general transformation agenda

Barbara Kux: Outside of crisis periods, studies by INSEAD and McKinsey show, boards spend more than two-thirds of their time on “housekeeping”—financial reporting, compliance, environment, health and safety issues, regulatory issues, and the like. Only about 20 percent is spent on strategy. It is very important for boards to get out of this “compliance cage,” as I call it, and really focus on sustainable value creation. I’m thinking of the board of a leading oil and gas company that did just that. It recognized the importance of sustainable business development early on. The company gained first-mover advantages by diversifying toward a green business, including investing in solar and battery technologies.

At the end of the day, the board is ultimately responsible for the strategy, and the CFO is best-positioned to support strategy discussions. The finance leader can serve as a neutral party among the members of the C-suite, synthesizing their transformation ideas, supplementing them with comprehensive quantitative and qualitative data, and then working with the CEO to bring it all back to the board. This is even more important today to respond to COVID-19–related challenges early on.

Rick Haythornthwaite: The biggest challenge for any CEO, CFO, or other senior leader is to institutionalize new ideas without sucking the life out of them. Each C-suite leader plays a different but important role in this regard. The CFO needs to give transformation initiatives structure and rigor, while the CEO is probably better suited to take on the motivational aspects—for instance, the context for change and definitions of success. The whole team creates the strategy map—the markets and products affected, changes in pricing, the execution plan. But the CFO needs to ensure that the financial and operational underpinnings are there. Even if they are not visible to every single part of the organization, the board can see them through the CFO.

‘Scouting for the future’

Barbara Kux: To serve as an effective scout, the CFO should establish nonfinancial KPIs, like net promoter and employee-engagement scores, that are critical for the future health and performance of the organization. CFOs should review the strategy process to see that risks and opportunities are being well-assessed. And they can raise the political antennae of the board—accessing global think tanks, for instance, to understand what’s going on in Washington, China, and other important regions or in the medical community. The CEO often is not the most long-term–focused person in the organization; we know this because our financial markets are still very much short-term oriented. The board has to be long-term oriented. The CFO, therefore, must maintain a good balance of both. That might mean introducing a lean-transformation program with a focus on short-term results while, at the same time, contributing to the definition and implementation of a sustainable strategy for the company to emerge strong from the COVID-19 pandemic.

Rick Haythornthwaite: Boards need CEOs who can handle multiple truths, who can be expansive in thinking, and who can live comfortably in the future and bring the company along for the ride. The CFO also needs to be a protagonist in the boardroom, but from a different base: you can’t move to the future until you are anchored in the present. The CFO provides that anchor. Having a balance between future and present, between CEO and CFO, is important. The board wants to feel that there is strategic momentum—but also that the company is not just heading off on a journey of delusion.

Daring to dissent

Barbara Kux: It is important for the CEO and CFO to get on well, but their relationship should not be too close. It is better for the CFO to be objective, even if that sometimes leads to constructive conflicts. At times the CEO defaults to presenting only the positive in the boardroom, which makes it harder for the CFO to play back a more objective story. But that is very much the role of CFOs. They need to raise those early warnings. As a board director, I feel better if the CFO sometimes states, “by the way, we are losing market share here.” It takes a great deal of self-assurance for the CFO to come into the boardroom and say something like that. An independent-minded CFO will always be transparent with the board. A good CEO will always strive to establish an open relationship with the CFO. It is important for the board to motivate this constructive behavior from both executives so it can truly understand what is going well or not so well.

An independent-minded CFO will always be transparent with the board. A good CEO will always strive to establish an open relationship with the CFO.

Leading constructive dialogues

Rick Haythornthwaite: The senior-management team should not be delivering full solutions to the board at the outset; there should be a period of questions and discussion. The boardroom should be the place for CFOs and boards to engage in the cut and thrust of examination and exploration, with thoughtful planning and framing of dialogues to ensure that decision making is of the highest possible quality.

I’ll give you an example. CFOs used to be able to put traditional capital cases in front of the board about things like investments in plant and equipment, and there was typically a well-grooved dialogue. The kinds of actions they are talking about have changed, though. Think about companies’ investments in platform technologies, which can involve large sums being paid for targets with very low EBITDA—the idea being that value will ultimately come from the combination of entities rather than from a singular target.

Boards may be unfamiliar with such investment cases, so rather than jumping into quick, instinctive type-one decisions forced by the imposition of inappropriate and probably unnecessary time constraints, they will need an education. The board must take time to understand what, in practice, the acquisition of a platform would look like—how it might be scaled under new ownership, how that scaling would affect the bottom line, any risks involved, and so on. This is fundamentally a type-two decision, requiring time and deliberation. The CFO has an important role to play in making sure that this process happens, that it plays out over several board sessions rather than being squeezed into one meeting, and that conversations are grounded in hard numbers.

In the wake of COVID-19, of course, these dialogues may need to happen virtually; the quality of the conversation will still be good, as people are becoming accustomed to virtual meetings.2 They are fine for certain pro-forma tasks, where the issues are well-understood and processes are well-established. But when you’re trying to bring in new voices and new ideas, that’s when you need to be together in the same room.

Growing into the role of change agent

Barbara Kux: The role of the CFO is so much more expansive than it was even five years ago, including additional responsibility for cyber and digital transformations and for IT initiatives. To get your arms around the role and grow in it, take a step back and look at the company objectively. “What other roles could I play in the company, and how does that overlap with what I am doing now?” “Which initiatives would make the most impact in the company, and how could I realize quick wins in those areas?” Maybe it’s a focus on digital or compliance or export control or political intelligence. The CFO’s professional response to COVID-19 crisis management could be a springboard for future development. Whatever it is, I would identify it and just start. Take any kind of training you can get; read as many business publications as you can. Train yourself in how to deal with activist investors. Step by step, your hat will become bigger.

Rick Haythornthwaite: Whether you are talking about COVID-19 or digital disruption or any other impact on the business, please remember that the board still wants to sleep at night, and when the details are lost, the board will be much less forgiving of CFOs than of CEOs. Don’t forget that part of it. Particularly in this challenging economic environment, it is very important. Chairs and boards? We like to sleep soundly at night.

 

 

 

EVERY HOSPITAL BOARD NEEDS A CEO SUCCESSION PLAN. HALF ARE FAILING.

Posted on by • Posted in Board, CEO, Executive Session, Health System, Hospital, Hospital Industry, Interim CEO, Interim CFO, Interim Executives, Interim Resources, Leadership, Leadership Continuity, Leadership Unplanned Departure, Succession Plan, Talent Management • Leave a comment

https://www.healthleadersmedia.com/strategy/every-hospital-board-needs-ceo-succession-plan-half-are-failing

The organization needs to have a strong sense for who will lead next. That’s ultimately the responsibility of the board, not the incumbent. This article appears in the July/August 2019 edition of HealthLeaders magazine.

The departure of a CEO can severely disrupt an organization’s progress, especially when the leader leaves suddenly without a clear successor. Despite the well-known need for succession planning, an alarming number of healthcare provider organizations are chugging along without a plan in place, just hoping that their top executives stick around for the foreseeable future.

Forty-nine percent of hospital and health system boards lack a formal CEO succession plan, according to the American Hospital Association Trustee Services 2019 national healthcare governance survey report. That leaves them vulnerable to the disruptive gusts of a CEO’s sudden departure, and it can inhibit their ability to pursue longer-term strategies by leaving them overly dependent on one leader’s vision.

The failure of these boards to formalize CEO succession plans is outrageous and unacceptable, says Jamie Orlikoff, president of the Chicago-based healthcare governance and leadership consulting firm Orlikoff & Associates Inc. and board member of St. Charles Health System in Bend, Oregon. “Whatever the reasons are, it’s just a fundamental and inexcusable abrogation of a basic governance responsibility, so I am nothing less than shocked that the figure is almost 50%,” Orlikoff says.

Why Plans Aren’t Made There are typically a few basic reasons why an organization may be slow to finalize a CEO succession plan. Perhaps the current CEO just doesn’t want to talk about it, Orlikoff says. Some executives are more comfortable talking to their families about their own life insurance plans than they are talking to the board about what to do in the event of their sudden departure, he says. Or perhaps it’s the board members who don’t want to talk about it. Orlikoff says at least four board chairpersons for various organizations have told him in the past seven years that they don’t want their current CEOs to leave and that they don’t want to think about succession planning because the recruitment process is too burdensome. Or there could be an unhealthy power dynamic between the CEO and the board, with the CEO asserting control over tasks that should be handled by the board members, Orlikoff says.

What makes the relationship between the CEO and the board so tricky is how it ties together two distinct relationships. On the one hand, the CEO and the board are strategic partners defining and executing a shared vision. On the other, they are an employee and an employer. “Those are two very, very different and very important functions,” Orlikoff says.

“Some boards have great difficulty envisioning the distinction between those two roles.” A board should lean on the CEO as a strategic partner because the CEO is likely to know more about the industry and more about the local market than the board members do, Orlikoff says. But when the board neglects to assert its proper place in the employer-employee relationship, the CEO may be given free rein over a broader scope of issues than is appropriate, and that can impede the CEO succession planning process, he adds.

In other words, while it’s perfectly appropriate for a CEO to groom a potential successor, the board should not defer to the CEO’s selection, and the CEO should not insist that the board do so. How to Fix This The existence or nonexistence of a formal CEO succession plan is often a symptom of whether the relationship between a CEO and the board is healthy, Orlikoff says.

Notably, the task of devising a succession plan is one exercise that can improve that relationship, he adds. While the detailed steps each organization should take will vary from one situation to another, there are two specific items that Orlikoff recommends: 1. Ask about the mundane threat of a bus.

Whether you’re a CEO or board member for an organization without a formal succession plan in place, there’s one straightforward question you can ask to kickstart productive dialogue on the topic: What do we do if our CEO gets hit by a bus tonight? The question is nonthreatening. It doesn’t signal a CEO’s possible intent to resign or retire. It doesn’t suggest the board members are thinking about giving him or her the boot.

It simply asks, as a matter of fact, how the organization will maintain continuity in the event of an unplanned CEO departure, just as parents would speak with their families about life insurance, Orlikoff says. The CEO should tell the board, without any other senior leaders present, whom the CEO would pick to step into the interim CEO role, Orlikoff says. That will inevitably prompt follow-up questions: Would the interim CEO be a good permanent replacement? Which of the requisite skills do they lack? How well do they align with our long-term needs and vision?

The conversations about an unplanned CEO departure will flow naturally into questions about a planned departure. Where are we in the current CEO’s contract cycle? When does the CEO want to retire? What skills and traits will our next CEO need to lead the organization into the future of healthcare?

Conversations about an unplanned departure should begin on the very first day of a new CEO’s contract, Orlikoff says. Conversations about a planned departure should begin at the end of the CEO’s first year, he says. For a CEO with a five-year contract, the board should start asking halfway through contract whether the CEO wishes to renew a contract or leave the organization, and the board should know three years into the five-year contract whether the CEO wants to stay, he says.

Hold executive sessions without the CEO present. An increasing number of hospital and health system boards are routinely listing executive sessions on their meeting agendas, and that’s a good thing, according to the AHA Trustee Services survey. A slight majority, 52%, of all respondents routinely included an executive session in the agenda of every board meeting, according to the survey report. But 26% of system boards, 59% of subsidiary boards, and 48% of freestanding boards still don’t.

Even if a board has an executive session, though, that doesn’t mean members are able to fully discuss the topics in their purview. The survey found that CEOs participate in the entire executive session for a majority, 54%, of all boards. That includes 41% of system boards and 57% for both subsidiary and freestanding boards. That deprives trustees of an opportunity to discuss the CEO in his or her absence and might impede the CEO succession planning process, Orlikoff says.

Related: 4 Steps for Planning CEO Succession Boards should think of their meetings in three stages, Orlikoff says. The first stage includes everyone in the room, including board members, the CEO, senior executives, and invited guests. The second stage is a modified executive session that includes the board members and CEO only, which is where the majority of the meeting should take place. The third stage should be an executive session with the board members only. “Confident, secure CEOs know that their boards need to go into executive session without them present occasionally in order to perform certain governance functions. They encourage it,” Orlikoff says. “Insecure CEOs or those who are attempting to control and manipulate the board are very uncomfortable with executive sessions and don’t want the board going into an executive session.”

It’s Mutually Beneficial While it may be difficult to prompt board members to think about a future under different leadership, CEOs who do so are not only investing in the organization’s long-term success but also signaling that they are the sort of leader willing to make investments in the organization’s long-term success. “When a CEO goes to the board and says, ‘You guys need to do this,’ … it demonstrates an incredibly high degree of confidence.

It also demonstrates an incredibly high degree of commitment to the organization,” Orlikoff says. “It shows that you’re thinking beyond yourself,” he adds. “You’re thinking about the best interests of the organization, that you’re willing to have difficult conversations for the good of the organization.”

“INSECURE CEOS OR THOSE WHO ARE ATTEMPTING TO CONTROL AND MANIPULATE THE BOARD ARE VERY UNCOMFORTABLE WITH EXECUTIVE SESSIONS AND DON’T WANT THE BOARD GOING INTO AN EXECUTIVE SESSION.”

KEY TAKEAWAYS

Not having a formal succession plan may be a symptom of an unhealthy relationship between the CEO and the board.

When CEOs prompt the board to think about who will lead next, it demonstrates self-confidence and commitment to the organization.

 

 

 

Seattle Children’s sues to block release of health records; top official resigns

Posted on by • Posted in Air Handling System, Aspergillus Mold, Board, Confidential, Do No Harm, Doing the Right Thing, Health Policy, Hospital, Hospital Acquired Infections, Leadership, Medical Records, Mission, Operating Room, Public Health, Public Safety, Quality, Quality of Care, Transparency • Leave a comment

https://www.beckershospitalreview.com/infection-control/seattle-children-s-sues-to-block-release-of-health-records-top-official-resigns.html?utm_medium=email

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Seattle Children’s Hospital has filed a lawsuit to block the release of health department records regarding mold at its facility, according to court documents cited by King 5. 

The hospital’s legal team filed an amended complaint in an attempt to block the release of state and county health records.

Documents previously released to the media through a public records request revealed a nearly 20-year history of Aspergillus mold in the air handling system of the hospital’s operating rooms.

Most recently, an infant at Seattle Children’s Hospital died Feb. 12 after she developed a mold-related infection acquired at the facility, the seventh mold-related death since 2001.

The health records sought by the media are “confidential and sensitive,” Adrian Urquhart Winder, attorney for Seattle Children’s, said, according to King 5. The attorney cited a state law that says records produced for quality improvement purposes cannot be publicly disclosed.

On Jan. 10, Mark Del Beccaro, MD, former CMO and senior vice president of Seattle Children’s Hospital, resigned, according to a hospital spokesperson. King 5 could not reach Dr. Del Beccaro for comment.