4 Best Practices for Hospital CEO-Board Relationships

Healthcare reform will greatly change many aspects of the hospital industry, and it does not leave the CEO-board relationship untouched. The following points are characteristics of a successful CEO-board relationship in the wake of healthcare reform.

1. Open communication and accountability between the board and CEO. The CEO should be comfortable sharing ideas with the board and using their ideas and feedback. Valuable expertise and resources go to waste when CEOs do not routinely communicate with boards. The board's chairperson should especially have an open relationship with the CEO, but one that maintains well-defined borders. The chairperson and CEO should work to define the expectations the board has for the CEO and the CEO has for the board and communicate how well these have been met through performance evaluation processes.

Since healthcare reform will change the evaluation process for boards and CEOs, organizations need to establish new metrics for quality, access, bearing risk, evaluating strategic partnerships and the success of new delivery models such as ACOs. "The CEO should take the lead in working with the board and other leaders as they begin to identify these metrics," says Connie Curran, EdD, RN, CEO of Best on Board. "Boards should also consider how these metrics should become part of the CEO evaluation and compensation process."  

2. Routine contact and shared understanding with medical staff. A board and CEO's relationship with clinical staff will become even more critical with the emergence of ACOs and the need for better hospital-physician alignment. Tension has been part of hospital-physician relationships in the past and will likely increase in the current environment, particularly since 20 percent of physicians have voiced distrust with hospitals, according to recent surveys.  With this sort of friction, boards and CEOs must shift into high-gear and actively work to improve rapport with clinical staff and involve them in difficult decision-making.

Alignment and collaboration should be high-priority for boards, as they provide direction but look to the CEO to create a process or structure for achieving this goal. "Boards need to work with their CEOs now to make sure that the hospital aligns with physicians who share the hospital's goals and can work productively, adding value in an ACO environment," says Ms. Curran. Alignment will likely result in a hospital choosing to work with some physicians over others. This can become a "thorny area," according to Ms. Curran. Boards and CEOs must work closely to ensure hospital-physician alignment is pursued in a fair, consistent and transparent manner.

3. Active engagement in CEO succession planning. Because of the turmoil that often results from an unanticipated change at the top and the significant costs associated with replacement of a key leader, the CEO succession process cannot be pushed to the backburner, even if it seems awkward to the CEO-board relationship. Boards should develop a succession plan at least two to three years in advance of the CEO's intended departure. The plan will detail emergency succession procedures, how company officers are elected and replaced, how successors are to be chosen, the roles of the board and the incumbent CEO in the process, the type of outside resources (search firm, succession planning consultants, etc.) that will be engaged and other information to ensure an orderly transition between leaders.

A thorough succession plan strengthens the information flow between boards and the senior management team. The two will regularly meet as part of the board's review of candidates that are being developed for senior leadership positions in the organization. The entire board should review the succession plan twice a year, along with a senior human relations executive. As part of the CEO selection process, boards need to be willing to turn inward and assess how well they have done their job in CEO oversight and correct flaws. "The 800-pound gorilla in this arena is obviously the board taking responsibility for CEO succession planning and ensuring the CEO has developed internal successors," says Ms. Curran.

4. Balanced representation to prevent ingroup bias. The best boards are those comprised of members with diverse specialties, talents and fresh perspectives.  Diversity among non-executive directors is particularly important, since they bring outside perspective and can raise issues and questions that might not be apparent to insiders who are familiar with healthcare jargon, politics and complexity.  

"In the last two years, there are more and more physicians moving into CEO or president positions. This may bring about better clinical outcomes and improve clinical quality, but a big part of running a hospital involves financial skills, strategic planning and compliance," says Ms. Curran. Among their membership, boards should incorporate competencies that are complementary to those of executive leaders so both groups can lead collaboratively and effectively. Boards with diverse skills can also mentor executive leaders to strengthen and further develop the executive team.

Also, only about 2 percent of hospital board members are nurses, according to Ms. Curran, meaning the position that "really know what's going on in the hospital" often does not have a seat at the board table. Although there is a national focus on recruiting nurses to hospital boards, the issue extends beyond the nursing profession, spilling over to female representation on boards in general.

Additionally, boards should be balanced in age. Ms. Curran says a board she once served on made a deliberate effort to recruit younger board members, which may now prove exceedingly difficult. "In this day and age, when everyone in the country is unsure of healthcare, people are going to be nervous about participating on boards," says Ms. Curran. "The conscientious people, who are the board members you want, will be hesitant because they may not feel the most informed or understand the terminology." Strong, capable CEOs who have an open, honest and supportive relationship with their boards will not only help retain the best board members, but also attract the caliber of new trustee needed for effective governance in the current climate of transformation and change.

Learn more about Best on Board.

Read more about CEO-board relations:

- When Should You Should Fire Your CEO?

- Survey: Less Than Half of Hospitals Rate CEO Performance Based on Healthcare Quality

- 4 Trends in Hospital Executive Compensation

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