Guide Getting to Great: Principles of Health Care Organization Governance

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And with fewer boards, Ministers are getting more involved and becoming more directive.


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Our system design serves to produce job security and good election results before great patient customer service. Patients are cost centres, not welcomed customers. Governance renewal and system re-design could put patients back at the centre of healthcare. Most Ontario hospitals have quietly disenfranchised public participation in at least ratifying if not electing members of their hospital boards.

When boards become self-appointing, it can also have the unintended consequence of also making it less divergent in viewpoints.

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That may make meetings go faster, but it raises questions about how much scrutiny is also taking place around decision-making. Given the incredible fragmentation outlined in this article, it also creates confusion over who gets credit and who gets blame. While the Minister should be ultimately responsible, the present Ontario government has at times shifted the blame for unpopular decisions on the Local Health Integration Networks.

By doing so, they have also undermined their credibility. Closson is correct — there is no evidence one way or another as to whether centralization or regionalization is the best form of governance. However, we could spend a lot of time and resources continually fluctuating between the two. The goldilocks principle and Canadian health care system governance Health care system governance is important.

Leave a Comment Cancel reply. Share Reply to Shawn Whatley. Share Reply to Dr. The goal of this investigation was to identify whether boards of trustees that proactively adopt theoretical and normative guidelines for the financial oversight process are more likely to achieve better financial performance for their hospitals. An effective hospital board been shown to be related to high hospital financial performance [ 1 ].

The board of trustees has six core financial responsibilities: 1 to specify financial objectives, 2 to review and align the management financial plan with stated objectives, 3 to enhance creditworthiness, 4 to ensure capital is effectively allocated, 5 to monitor financial performance, and 6 to verify financial statements [ 2 ]. In a survey of nonfederal community hospitals both Chief Executive Officers CEOs and trustees indicated that financial aspects of organizational performance received the most attention during board meetings [ 3 ].

Financial performance was the criteria most commonly used to evaluate hospitals and CEOs of hospitals [ 4 , 5 ]. The specific aim of this investigation was to further explore the type of information hospital boards used for financial decision-making and the extent to which the interpretation of financial data related to hospital financial performance. The results will help define activities that boards need to adopt in order to establish the financial oversight necessary to improve financial performance. Such conclusions could be used by the boards of trustees for review and implementation as they adopt principles of evidence-based decision making.

The infrastructure that boards need to perform effective financial oversight includes appropriate committees and access to expeditiously reviewed information [ 7 ]. The CEOs recommend indicators for inclusion on these instruments which then underwent periodic review at the discretion of the board of trustees. Each dimension has its own strategy. Some financial indicators that can be found on a scorecard are cash flow, efficiency, charity care, debt structure, or return on investment.

A sound financial strategic plan should also be concerned with aspects of profitability, liquidity, creditworthiness, capital structure, and asset activity [ 8 ]. It is recommended that these indicators be reviewed monthly with a predetermined plan in place to take appropriate action in the event of negative variances [ 9 ]. Boards should be able to understand the main variances in financial performance and identify correction mechanisms for the management. The metrics for financial evaluation should be compared with national benchmarks. In this sense, governance effectiveness depends on the financial literacy of the board, as well as the participation of board members in continuing education [ 7 ].

Hospital boards typically have a diverse number of members, many of whom are not financial experts. Hence a board relies on its finance committee to monitor financial performance, oversee budgeting and capital expenditures, and endowment performance. It is recommended that some members of the finance committee have a business background retired accountants, treasurers, etc.

A finance committee should ideally perform several tasks with a certain consistency. Each year members of the committee need to develop a work plan to establish financial objectives. Members must also review financial planning, capital projects and financial conditions, including creditworthiness. In addition, the finance committee has the responsibility to evaluate management activity for financial success. The finance committee needs to determine, at least biannually, if the financial plan is aligned with the strategic plan, and quarterly evaluate operational budgets and review quantitative financial metrics indicators and standards [ 13 ].

As an increased amount of information becomes available to the hospital boards, healthcare organizations are also forced towards greater transparency [ 14 ]. Boards should publish financial reports for their stakeholders every trimester and send internal financial reports every month [ 15 ]. Most of the governance studies evaluated the board dynamics and decision making in terms of member selection and interaction. Previous research concerned with hospital financial performance in high performing hospitals looked at the structure of the board and the level of engagement among board members, and emphasized the relationship between the board and the hospital leadership team [ 5 ].

Empirical investigations have found partial correlation between financial performance and board effectiveness [ 1 ] or between governance configuration and hospital performance [ 2 ]. While an association was found between high financial performance and board dynamics, it was not clear how one influenced the other [ 5 ]. Thus far the relationship between board activities and functions and hospital financial performance has been explored to a lesser extent. The present study investigated whether boards used the theoretical and practical guidelines described above for their financial oversight process and how this process was correlated to the hospital financial performance.

The report further showed that financial performance was the criteria most often utilized to evaluate hospital performance. Hospitals routinely reviewed financial statements and budget performance. Among the hospitals that used benchmarks in their evaluation, financial performance had first priority. These hospitals did not routinely share their benchmarks with the community, or with the managed care organizations. The present study explored the association between specific structural and functional characteristics of the boards and their financial oversight.

Activities relevant to this role depicted from the survey were examined in relationship to hospital financial performance.

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Data about the financial performance of the hospitals included in the study was extracted from — American Hospital Association annual survey. The measures of hospital financial performance used in previous studies in relation to governance were cash flow and operating margin [ 1 ].

Getting to Great: Principles of Health Care Organization Governance

Financial measures employed by Solucient to produce these rankings included expense per adjusted discharge, operating profit margin, cash to total debt and tangible assets [ 16 ]. The financial indicator selected for this study was the total marginal profit operating profit margin to mirror the profitability of the hospital [ 17 ].

The operating profit margin was calculated as a proportion of the difference between total annual revenue and total expenses from the total revenue. This approach was used because the indicator was not affected by institutional size and was also employed by the rating agencies. A summary measure was created to reflect the financial performance of the respective hospitals as an indicator of their overall financial health. This measure was obtained by averaging the operating profit margin over the three year period of the evaluation. Selected domains of the Governance survey considered indicative of board infrastructure and its financial oversight processes represented the main groups of independent variables.

The structural elements and functional characteristics of the board constituted its infrastructure. The information relevant for board structure included in the study were the selection criteria for new board members, the board size, the number and type of committees the boards were instituting in their hospitals, the compensation mechanisms available for board members, and the presence of the Chief Financial Officer CFO as a member of the board.

The frequency of annual meetings boards were engaged, the tenure board members were serving in their capacities, the length of terms they were serving on the board, and the use of financial criteria for performance evaluation of the CEO served as measures of board characteristics. The indicators for board financial oversight responsibility were based on whether they used benchmarks to evaluate hospital financial performance, the extent to which they shared these benchmarks and with whom, the actual review of financial performance, and the analysis of financial information on a routine basis.

Governance in Healthcare: The Biggest Factor in Success

A comprehensive presentation of the content of this survey along with the descriptive results of the responses to its questions can be found elsewhere [ 3 ]. Dummy variables were constructed for each response to the questions included in this study. Specifically, paired t-tests were employed in contingency analyses to estimate the association between these dimensions of board infrastructure and dynamics to their hospital financial outcomes. In addition, the extent to which financial performance was influenced by the board activities and infrastructure was explored with multiple linear regression.

The purpose was to test if there was a concordance between the dynamics of financial decision-making processes employed by the boards and hospital financial outcomes. Three regression models were developed to test the association between financial performance and each main group of board traits: structure, characteristics, and processes. Significant associations between board responses and financial outcomes found in the separate regression models were included into a final linear regression to identify the most significant factors in board infrastructure and dynamics correlated with hospital financial performance.

While in the contingency analyses financial performance was represented by total hospital profit, in the regression analyses the outcome of interest was operating profit margin calculated as a proportion from the total revenue. It is generally recommended that board members should hold non-tenured positions on the hospital board, and that the number of terms they serve should be limited.

Almost 24 percent of board directors and 19 percent of the other board members of the hospitals that participated in the survey did not have limits in the tenure for their appointments on the hospital board. While having no limits in length of term among board directors did not appear to influence the marginal profit of the hospital, this was higher at the hospitals where the rest of board members had a limit in the terms they served on the board.

Having limitless numbers of terms as board directors or board members was not associated with the way hospitals perform financially Table 1. The financial performance was expressed as the average hospital profit accumulated by the hospitals that participated in the survey over a period of three years including the year of the study. A viewpoint frequently approached in the debate about board effectiveness is whether board members should be compensated for their work as trustee. Boards used incentives such as participation fees or travel reimbursement to encourage regular meeting attendance as well as participation in continuing education.

In this study, although compensating board members for their service did not have a significant impact on performance, hospital profit was higher when board members had an annual fee set for their work, or when trustees received a fee for participating in each meeting.

Hospital Organizational Structure

The extent to which boards operated standing committees varied largely between the hospitals. Generally, there were more audit and budget or finance committees, and less governance entities. In spite of this distribution, the profit was larger at hospitals that did not have such committees. Furthermore, having the CFO serving officially on the hospital board did not contribute to a higher financial performance. Another aspect of good governance discussed in expert forums was the selection criteria used when appointing new board members.

Greater importance was given to diversity of board composition and increased expertise in hospital business mostly in the domains of finance and quality of care. Placing heavy emphasis on financial knowledge as nomination criteria for new board members was not associated with higher financial performance, but this lack of association was not significant. However, having such a competence is important as hospital boards routinely used benchmarks or standards to evaluate hospital financial performance.

Making use of benchmarks was reflected in generally higher hospital profit for all the financial indicators employed in the assessment Table 2. You can go to cart and save for later there. Average rating: 0 out of 5 stars, based on 0 reviews Write a review.

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See our disclaimer. Dennis D. Pointer and James E. Orlikoff, two of the most experienced and highly regarded governance consultants in the country, have written a definitive guide for health care boards that want to maximize their performance and help their organizations reach full potential. Getting to Great presents a set of easily applied principles and best practices based on a model that has been proven to strengthen health care governance.