How effective is your medical group governance?

Governing your medical group is difficult and important work that is often done by busy physicians and administrative leaders who oversee a large and complex organization dealing with national, legal, regulatory, financial and strategic matters that affect healthcare on a local, state and sometimes national level. All of this happens while busy physicians are practicing their craft and caring for patients.

Private practices have several governance and decision-making structures depending on the size, philosophy and history of the practice. It’s important to realize that governance in one-, two- or 10-person groups is often determined by what the founder wants while 100- or 500-person medical groups with elected boards oftentimes spell out board duties and responsibilities in the organizational bylaws and committee charter. We will focus on governance issues from a private practice standpoint here.

• Groups of fewer than five providers might not need to form a board of directors. That decision is up to the group’s owner. Here are some preliminary questions to help guide that decision:
• Why do we need a board?
• What are the issues we are struggling with and how will forming this body help improve those issues?  
• If we decide to create a board of directors, what is its purpose?
• Will board members have formal duties, responsibilities, terms of office and bylaws?
• What powers will the board have?  
• Will the board select the group’s president and chief executive officer?
• Are providers willing to relinquish control of the practice to the board? If you decide to create a board, the buck stops with that group and you need to be prepared for that shift in control.
• Are the practice’s administrative policies and objectives in place? The board should act and make decisions through consensus, which requires procedures and direction.
• Who do we represent? If you have a board, the focus must be on the organization as a whole, not individuals or a single specialty if you work for a multispecialty group.  
• How do we start the process?

First steps

If you are in a small medical practice and the owner is central to decision-making and control, separate the owner’s needs from the medical group’s needs. If you are trying to improve your governance and keep up with the changes in the national landscape, you must determine whether the owner of the group is willing to have a more participative governance structure. Even then, the owner might have certain issues that are off-limits or reserve powers related to hiring other providers, adding services or specialties, real estate matters, and the sale or merger of the group. It’s important to put this list in writing and clarify each issue before you finalize a committee charter or you will undermine the true value of a board of directors and leave members unsatisfied with their stated obligations.

Depending on the structure of your organization, your fundamental obligation is to represent the interests of your group as a whole. This might be easy if you are a small single-specialty group, but it will prove more challenging in multispecialty groups if any real or perceived favoritism is shown to one specialty.

Practical questions to ask as you get started in this process:

• How often does the group have meetings and is an agenda distributed in advance?
• Does someone take minutes and distribute the notes to participants?
• Have you discussed the purpose of your board?
• Is the president of the board the owner of the group or have a majority interest in the group?
• Does the group have a clear conflict of interest policy?

One of the most important decisions medical groups must make when forming their governing board is determining what the board should do. While there are several different areas for board involvement, mission is frequently driven by ownership structure, group size and the committee bylaws and charter. To get started, board members should ask:

• What is your role in formulating policy?
• What is your role in decision-making?
• What is your role in oversight?

Answers to those questions will help you focus your efforts. Some key duties include responsibility for executive management performance, quality of care, finances and strategic planning.

Executive management performance: Will your board evaluate the group administrator? If so, will you have a performance evaluation process that allows you to objectively monitor and measure performance against stated objectives? These objectives are usually agreed to in advance and encompass short- and long-term plans. The primary role of a corporate board is to provide oversight and assistance to the chief executive officer. In medical groups, boards should have clear expectations for the administrator and a formal process to evaluate this individual. It is imperative to provide the administrator with a detailed job description and to clearly explain expectations (in writing). The board should then evaluate results relative to their expectations. Ideally boards will evaluate their administrators on these skill sets: how well they make decisions, performance relative to expectations, use of capital and other resources, management of human resources, and ability to provide vision and direction for the group.

Quality of care: This is a core fiduciary responsibility for health system directors. Providing quality care, access and patient safety is the foundation of care delivery. As the nation focuses on quality measurement and reporting obligations, medical groups must ensure they focus their efforts on providing quality care and their ability to capture, report and provide value to patients. The board must establish and demonstrate its quality oversight process.

Finances: Healthcare reform has prompted changes in reimbursement that are significantly affecting the sustainability of small- and medium-sized medical groups. In the for-profit world, a main responsibility of the board is to maintain financial accountability. The board must ensure that the budget is aligned with the group’s strategic plan, financial objectives and overall health. It’s important that board members have a basic understanding of financial management and key financial terms. The board must also have a very good understanding of a group’s compensation plan and methodology for providers and staff.

Strategic planning: How does the group identify key challenges? And once identified, what is the process to develop goals, strategies and systems to track and monitor those goals? The board must be aware of the group’s strategic plans and use of resources to track and achieve those plans. A strategic plan should factor in your strengths, weaknesses, opportunities and threats. It should provide clear direction to those who are responsible for implementing the plan. Some medical groups lack a strategic plan and framework to develop those plans, which creates a chaotic environment in which you are constantly fighting fires. A strategic plan should be consistent with an organization’s mission, vision and value statement. If you don’t have these statements, you must spend time defining who you are, the purpose you serve and your values before creating a board of directors.

Serving on a board is a time-consuming, complex but critical task in the success of organizations. Medical groups need the same dedication to ensure their survival as corporate for-profit entities.