Who’s your guide?

Advisory boards help you deliver unique value

One common shortcoming I see is the lack of a committee or board that is primarily dedicated to the relationships a health system has with physicians who are employed, contracted or affiliated with managed services organizational relationships, co-management models or group practice subsidiaries. 

This is where an advisory board comes in to provide expertise, guidance and business development insights. For example, an advisory board can help a hospital establish and offer support to its co-management cardiology service line.

Rapid changes in healthcare have emphasized the need for strong relationships and effective business strategies in provider communities in addition to structures built with significant input from medical providers. Consider the historical limitations and largely ineffective role of traditional hospital medical staff meetings as proof. I’m not advocating for the dissolution of medical staff meetings but believe that hospitals and health systems must capitalize on expertise from internal and external advisors in the form of an advisory board, advisory committee or physician enterprise committee.

Structure

An advisory board is a group of individuals who provide nonbinding strategic and operational advice to an organization’s management: the chief executive officer (CEO), subsidiary board or system board, depending on the organization’s structure. When effectively executed, this group can offer tremendous value to an organization while providing governance. For example, an advisory board can help assimilate newly employed or contracted physicians into a health system. Involving physicians and medical group administrators in this board is advantageous for hospital leaders. In many healthcare systems, more than 50% of revenues come from physician networks,¹ which include employed physicians, contracted physicians and other providers.

Control

One of the main barriers to building this type of committee is the fear of diluting control by establishing an entity that has authority or formal responsibilities. Often an advisory board is not created because the CEO does not want to establish a committee that has any fiduciary responsibilities.

In the hospital environment, there is one board with fiduciary responsibilities, but the benefits of having a structured and diverse group of individuals with specific duties and responsibilities, such as providing updates on changes in the healthcare community, can be helpful to identify strengths and weaknesses as well as growth opportunities.

Liability issues can be another concern, yet an advisory board has to take an active role in the management and decision-making of an organization before nonstatutory liability becomes a risk.

In some states, an advisory board might have statutory immunity if it acts on behalf of a tax-exempt or nonprofit organization. In many situations this only applies if board members are not paid for their time. In addition, the nature of advisory versus decision-making helps because the ultimate responsibility for decisions falls on a hospital’s board and management.

An advisory board can be concerned with 99% of the issues that matter most to physicians and do not involve fiduciary matters. Once an advisory board committee charter is established and approved, hospital CEOs often feel comfortable using this group to help ensure effective physician-hospital integration and long-term success.

These boards often work more effectively than a larger board of directors since they can dig deep into the weeds and spend more time on operational considerations, such as recommending options for quality metrics in an outpatient setting. They often include physicians who serve on the front lines and can speak as authoritative experts rather than outside observers or consultants.

Reaping the benefits

Every healthcare entity can benefit from a well-structured advisory board. For example, I participated in a strategic planning session for a medical device company that is highly profitable but struggles with rapid growth and expansion. After analyzing the business model, we determined that the company would be successful continuing on its current path, but a more comprehensive analysis of external opportunities revealed a need for more “bench strength” (that is, qualified professionals) to stay ahead of the curve and have a solid acquisition and investment strategy.

The company decided that with an advisory board, it could make contacts with key constituents in the marketplace, get real-time knowledge of the market and focus on external relationship benefits. The company already had plenty of executives who concentrated on internal operations and political forces; it needed outside individuals who had the time, knowledge and market expertise to drive a future-focused strategy that would enable the company to provide unique healthcare services in those markets.

In my experience, most healthcare organizations focus on internal pressures and factors that prevent them from introducing and executing strategic initiatives. In comparison, advisory boards usually don’t suffer from pet projects that bog down executive agendas. As a result, organizations with effective advisory boards are able to create strategies for future growth, which is an invaluable asset in these times of unprecedented change.

Note:

1. Research based on MGMA client data from 2014 to 2015.

Sidebar

Getting started

To create an advisory board, begin by determining what is being asked of the group and who needs to be advised. Then consider the following questions:

• Why are we establishing an advisory board? What is the purpose?
• Who will sit on this board? Will it include physicians and nonphysician members?
• Will we have any community involvement and representation?
• Will the community representatives have any voting authority or will they recommend strategies?
• If the group votes or makes recommendations, are there ex-officio members and do they have a right to vote? Why or why not?

Once you establish a charter for the group, you can identify the advisee. Is it the board of directors, the C-suite or some other committee? An advisory board could serve as a focus group and orient itself around a project or task with start and dissolution dates.

In a hospital environment, an advisory board might be able to provide a safer alternative for the chief executive officer (CEO) to test assumptions and strategies before taking it to the hospital governing board. The CEO might also feel more comfortable asking the advisory board to create various options and strategies, and then refining and developing those strategies for the board of directors.