The Blind Spots for Hospital Governance

Last week, the American Hospital Association’s Center for Healthcare Governance held its National Symposium “Embracing and Effecting Change: Governance and Leadership of Transforming Organizations” The packed 3-day agenda covered consumerism, consolidation, disruptive competition, risk, compliance, board performance, population health, partnerships, leadership, innovation, policy and politics.

As the line-up of A list presenters and panels plowed through their content, I found myself wondering how a lay hospital board member could possibly understand all this. After all, it’s not completely understood by those of us who have worked fulltime in this complicated industry for decades.  And beyond these topics, I found myself pondering the areas where boards are not as well prepared and prone to assume things are OK, until they’re surprised they’re not.  They’re blind spots, where boards need independent insight necessary to fulfill their fiduciary roles:

Publicly Accessible Data and Cyber Security: There are no secrets about a hospital if an enterprising investigator is so inclined. And data security for hospitals is a menacing challenge. The $2.6 billion acquisition of Truven by IBM announced last week is the latest in the analytics arms race that’s re-shaping how reputations are built and success is defined. Hospital boards must understand relative and absolute costs at a granular level. Ditto how charges are set, the evidence around clinical protocols and step therapies is structured, outcomes defined and measured and so on.    Not understanding how the hospital’s performance is measured based on hard data can be a blind spot for a board.

Clinical Innovation: Hospitals and health system operations revolve around clinical processes based on fast-changing science. Every day, 80 randomized control trials are published, and elegant algorithms are written by medical informaticists to enhance the predictive value of treatments. How diagnoses are defined and made, how care is designed and delivered, which interventions work best and how an individual’s signs, symptoms, preferences, and values integrate as part of the care team are essentials for hospital board consideration. Hospital boards must stay on top of how clinical care is designed in their hospital: it’s a regrettable blind spot if not routinely addressed, especially if decisions about care coordination and capital budgets are based on inadequate or incomplete understanding of clinical best practices.

Regulation and Compliance Risk: Hospitals are highly regulated at the federal, state and local levels, and these rules and regulations are complicated and ever-changing. But as they partner with or build capabilities in long-term care, health insurance, and retail services, the regulatory compliance risks stakes become more complicated. Hospital boards must understand how sectors beyond acute, outpatient and physician services operate, and what constitutes regulatory compliance in each. It can be a blind spot.

Culture: Perhaps the biggest blind spot might be the board’s fiduciary role in setting the overall direction for the organization. In this regard, it’s said “culture eats strategy for lunch”.  Boards routinely review plans and authorize major projects, but they’re rarely close enough to know how the organization really ticks or understand the unwritten rules that drive individuals to behave in ways considered acceptable or unacceptable. Hospitals that are successful have a healthy culture where respect for individuals is sacred, where the environment is safe for employees and feedback free-flowing, and success is defined by measures beyond the P&L. Hospitals are stressful workplaces. Zero defect performance is expected. Cost reduction is an ever-present pressure. And the scope and scale of its services are changing, prompting discomfort among those married to old habits. Boards must understand the culture of their organization they oversee. A strategy perfectly designed can be neutered by an unhealthy culture. It can be a blind spot if not addressed by the board.

Hospital boards typically serve on a voluntary basis, contributing their time to benefit their community. Most trustees work full-time in industries outside healthcare. They trust the hospital’s leadership to keep them abreast in areas such as these but it’s tough. This industry is constantly changing, and hospitals are ground zero for the convergence of the clinical, economic and regulatory forces transforming the industry.

For hospital boards, the stakes are high. Inattention to these blind spots can be devastating; attentiveness can be transformative. 

Paul

PS: Today marks my first day as an independent healthcare data geek. I find myself facing what millions face every day: intimidating decisions about the technology I need and the connectivity I use, frustrating hours sorting through health insurance options that require wizardry to decipher, and complications when doing even the most mundane administrative tasks. I downloaded my Uber app mistakenly becoming a driver rather than rider. I bought two tickets for different flights to NYC tomorrow needing only one. And I have no idea how my new laptop and the software I purchased actually works. Like blind spots facing hospital boards, administrative tasks we sometimes take for granted can surprise us. Lesson learned.

Five Fast Facts for your Week:

Analytics: IBM has invested $4 billion in the last year in their ascent to healthcare analytics prominence: they’ve added Truven’s financial and operational capabilities, plus Explorys from Cleveland Clinic and Phytel, Merge Healthcare to their impressive Watson platform. (IBM)

Retail Primary care: Major players are upping their bets: United’s Optum Med Express now has 141 clinics in 11 states), private equity king-maker Welch, Carson Anderson & Stowe now has 52 sites in its Carespot operations, Walmart is piloting its model in Texas and South Carolina, Humana’s Concentra operation now has 340 sites and HCA’s reporting continued investment in its CareNowoffering even as investor-backed MedLion, Paladina Health, Qliance are carving out “Direct Primary Care” as a new model. There are 2150 retail clinics in drugstores, but perhaps that many more in other settings. 

Hospital Boards: the average freestanding hospital board has 12 members and multi-hospital systems 16: both up from 2011. 72% are male and 88% Caucasian—both decreasing as diversity is a focus (AHA).

Corporate Governance Issues: Two issues getting intense attention in public company boards are cyber security and activist investor activity (National Association of Corporate Directors)

Healthcare Hacking: Incidents of cyber security breaches in 2015 were higher in healthcare (34%) than government (25%) and banking (7%) (IBM)