Health systems should rethink board governance

Boards overseeing hospitals and health systems are charged with ensuring their organizations and executives are delivering top performance.

But health systems are also facing a period of rapid change, with more complexity, an aging population, more demands for care and growing financial headwinds.

The Governance Institute, a part of NRC Health, suggests that health systems need to give more consideration to the roles of their boards and help position them to offer better guidance. The Institute released a report in the spring arguing that governance isn’t keeping up with the evolution of the healthcare industry.

David Burik, executive vice president of strategic insights for NRC Health, told Chief Healthcare Executive® in a recent interview that health systems should be thinking about board governance differently, particularly at a time of significant change in healthcare.

“It's easy to take hospital boards for granted,” Burik says.

With hospitals expected to face more financial pressures in the next few years, particularly with projected cuts in Medicaid, Burik says health systems should see a sense of urgency in preparing boards to face what’s coming.

“The world is about to get more challenging economically,” he says.

Complexity with mergers

Burik points out that the increased consolidation of hospitals and health systems through mergers and acquisitions has added to the challenge of board oversight, with the potential for unforeseen problems.

Community hospitals and smaller health systems are now being overseen by a board of leaders who, even if they are exceptionally qualified, may live hundreds or thousands of miles away from some local hospitals.

“The board ecosystem is very different than it was 20 years ago,” Burik says.

More than two-thirds of America’s community hospitals (69%) are affiliated with 397 health systems, according to the Governance Institute.

Burik says there are sound reasons for mergers, but health systems also need to recognize that local communities still want to know their needs are being addressed. Health systems must ensure they are getting feedback from the needs of those communities.

“A lot of folks are just going to keep getting larger,” Burik says. “But what does that do to an industry that's based on the local community board investing in the community?”

Even when two larger systems merge and there can be a larger board, typically the boards of the merged organizations often go down to a more typical size of 15 or so members.

“With the complexity of governance in growing organizations, it's hard to establish everybody's role and to work within those roles in harmonious fashions,” Burik says.

Keeping pace

As the healthcare industry is changing rapidly, with AI and other technologies, along with pressure for health systems to be more accessible and easy to use, many boards aren’t keeping up with those changes, The Governance Institute suggests.

The institute argues that more health systems should be asking their boards to get more education and training to understand the changes taking place in the industry.

Only 32% of health system boards require members to participate in continuing education, and 31% of hospital boards don’t have formal job descriptions for board chairs or board members, according to The Governance Institute. And health systems rarely evaluate their members.

Burik says health systems should be doing more to help their boards, and particularly newer members, get acclimated and help them to succeed.

“We generally hear the observation from our members that it takes two to three years before a board member feels that they're able to contribute in a meaningful way,” Burik says.

Burik says health systems should have guidance tailored to the individual needs of the boards, and to help take advantage of members’ strengths and ensure they can get more education in areas where it’s needed.

Looking at AI for example, he says it’s probably not realistic for every member of the board to have deep knowledge of AI.

“You're not going to get 15 AI experts on your board,” Burik says. “You might not get one. But you can give the group enough information so they can start to ask good questions, which is the goal of the board.”

But he says health system boards need to recognize that with AI playing a bigger role and growing consumer expectations, they need to think differently.

“Hospital boards, they have a unique balancing act and that balancing act with the mission and the community and quality and safety,” Burik says. “In times of stress, it's easy for organizations or for boards to revert to what they know best.”

Board membership

Some healthcare leaders have suggested that boards don’t have enough healthcare professionals.

About 1 in 7 hospital board members are health professionals, according to a 2023 study published in the Journal of General Internal Medicine. Most healthcare professionals serving on boards are doctors, while nurses account for only about 1 in 100 board members.

More than half of all hospital board members (56%) work in finance or business.

Burik says that boards should be getting good guidance from clinicians, but he also points out that board committees often have doctors participating, and committee members don’t have to be board members.

He doesn’t say boards need to have a set number of physicians, but boards need to make sure that they get good insights from clinicians.

“You shouldn't have a patient safety committee that has 22 commercial Realtors on it,” Burik says.

Some leaders have also urged systems to be sure that they have more diversity on their boards. Burik says that he has seen more recognition of the need for health system boards to reflect their communities.

But he also points out that a challenging aspect in board diversity isn’t race or ethnicity.

“The toughest one is economic,” he says. “That's the toughest one to get actual representation.”

Ultimately, Burik says hospitals and health systems should use their boards as a resource to help their organizations succeed. He sees the need for systems to be more intentional in helping boards and giving them the tools to provide guidance and insights.

“The board should make the CEOs better, and CEOs should make the boards better,” Burik says. “One doesn't manage the other. They make each other better.”

“At the end of the day, the governance is responsible for holding management accountable … There should be no ambiguity about that, but it should be an ongoing process,” he says.