The Guide to Good Governance for Hospital Boards
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The Guide to Good Governance for Hospital Boards The Guide to Good Governance for Hospital Boards December 2009 Center for Healthcare Governance One North Franklin Chicago, IL 60606 Phone: (888) 540-61111 www.americangovernance.com ©2009 Center for Healthcare Governance 2 The Guide to Good Governance for Hospital Boards | Center for Healthcare Governance Table of Contents About the Authors ........................................................................................................................................4 Acknowledgements .......................................................................................................................................4 Introduction to the Guide.............................................................................................................................5 Chapter 1: Corporate Governance and the Duties of Hospital Board Members ...........................................6 Chapter 2: What is the Board’s Governance Role? .....................................................................................35 Chapter 3: The Board’s Role in Credentialing Physicians...........................................................................48 Chapter 4: The Board’s Role in Strategic Planning ....................................................................................50 Chapter 5: The Board’s Role in Performance Oversight and Measurement ................................................60 Chapter 6: The Board’s Role in CEO Evaluation.......................................................................................67 Chapter 7: The Board’s Role in Enterprise Risk Management...................................................................84 Chapter 8: Board Composition and Recruitment ......................................................................................90 Chapter 9: Officers ..................................................................................................................................104 Chapter 10: Board Orientation, Education and Evaluation.......................................................................113 Chapter 11: Board Committees ...............................................................................................................125 Chapter 12: Meeting Processes ................................................................................................................129 Appendix 1: Good Governance Practices for Hospitals ............................................................................139 Appendix 2: Selected Governance Resources ..........................................................................................141 Center for Healthcare Governance | The Guide to Good Governance for Hospital Boards 3 About the Authors Douglas K. Anning is Vice-Chair of the Nonprofit on quality, medical staff credentialing, strategic Organizations Practice Group for Polsinelli planning, board orientation and evaluation and Shughart, PC in Chicago, Illinois. He advises governance restructuring. She directs content companies on their general tax and corporate law development for the AHA’s Center for Healthcare needs, navigates private and family foundations Governance and also is a long-term consultant for through complex IRS requirements and regulations, a national revenue improvement solutions consulting serves as general advisor and counselor to a number firm, where she provides strategic marketing of nonprofit organizations, and consults with health planning and implementation services. Ms.Totten care organizations regarding myriad regulatory conducts board retreats and education programs and requirements. In addition, Mr.Anning has substantial has authored six books and more than 100 articles experience in mergers and acquisitions, transactional on governance and leadership issues. She has served matters and structuring joint ventures as a trustee and board officer on hospital, health system and school boards. Fredric J. Entin offers clients extensive knowledge of health care corporate, regulatory and general counsel Acknowledgements services to U.S. and international health care The Center for Healthcare Governance would like institutions, including academic medical centers. to acknowledge the important contribution of the He is a former General Counsel of the American Ontario Hospital Association, its Governance Hospital Association and continues to advise health Leadership Council and the authors of the original care professional and trade associations. He regularly Canadian Guide to Good Governance,Anne Corbett, advises clients on a variety of legal, regulatory and Senior Partner with the law firm of Borden Ladner industry issues, including Medicare and Medicaid Gervais, LLP and Jim Mackay, Managing Partner of compliance, exempt tax and governance, antitrust, the Berkeley Consulting Group.Without their work behavioral health, medical staff and clinical in developing the Canadian Guide, the U.S. version information and technology. He has advocated would not have become a reality.The Center also on behalf of health care clients before various thanks Polsinelli, Shughart, PC for permission to regulatory agencies and in the courts. Mr. Entin reprint the following forms contained in this also counsels international health care providers on publication: Sample General Principles Regarding regulatory, liability and payment issues that emerge Conflict of Interest, Sample Board Policy on Conflict in treatment of patients from the United States. He of Interest and Disclosure Statement, Sample Code also practices at Polsinelli Shughart, PC. of Conduct, Form 990 Policies and Procedures, Sample Executive Compensation Policy and Sample Mary K. Totten is President of Totten & Associates, Meeting Minutes and Records Policy. The Center a health care governance and leadership consulting also thanks Integrated Healthcare Strategies for firm based in Oak Park, Illinois. For more than permission to adapt its Sample Chief Executive 20 years she has been a speaker and consultant to Officer Performance Appraisal Process and Assessment hospitals, health systems and other health organizations Form, which also appears in this publication. 4 The Guide to Good Governance for Hospital Boards | Center for Healthcare Governance Introduction to the Guide The AHA’s Center for Healthcare Governance is a institutions. Hospitals are therefore encouraged to community of board members, executives and customize the tools and templates to meet their thought leaders dedicated to advancing excellence, unique needs. It is not expected that hospitals will innovation and accountability in health care adopt the Guide in its entirety. Further, hospitals governance.The Center’s mission is to offer new may wish to consult the Guide for different and seasoned board members, executive staff and purposes. For example, new board members may clinical leaders a host of resources designed to utilize the Guide to familiarize themselves with progressively build knowledge, skills and governance practices and processes, while more competencies tailored to specific leadership roles, experienced board members and officers may look environments and needs.To help fulfill its mission to the Guide to supplement their practices in a the Center is pleased to provide The Guide to Good particular area.The Guide is not intended, nor Governance, a resource for U.S. hospital boards and should it be construed as legal advice. Hospitals leaders adapted from the original Canadian version concerned about the applicability of specific developed by the Ontario Hospital Association. governance practices to their organization are advised to seek legal or professional advice based The Guide contains a comprehensive overview of on their particular circumstances. the key components of good governance practices, as well as templates and tools to support these practices. As hospitals continue to improve their governance processes and practices, additional resources will be The resource materials found in the Guide are needed.The Center looks forward to developing intended for use by all hospitals, non-profit, further tools, resources and educational programs government or for-profit, however, they may need that will supplement and expand upon the contents to be adapted to meet the needs of specific of the Guide. Center for Healthcare Governance | The Guide to Good Governance for Hospital Boards 5 C H A P T E R 1 Corporate Governance and the Duties of Hospital Board Members Corporate Purpose Although nonprofit corporations do not have Members of nonprofit health care boards are well shareholders, there are several constituencies that advised to understand their fundamental governance have the authority to hold board members responsibilities. In order to discharge those duties accountable. In most states, the attorney general has effectively, board members must understand the the power to enforce the public’s interest by making corporation’s purpose. Most nonprofit hospitals take sure that charitable organizations fulfill their advantage of the benefits conferred under § 501(c)(3) charitable purposes under a theory that the assets of of the Internal Revenue Code and obtain tax nonprofit corporations are charitable assets that can exemption.To be exempt, under § 501(c)(3), the be protected by the state or the community. corporation must be organized and operated for a Attorneys general typically exercise that power by charitable purpose. Nonprofit health care making