Wilson: There are two: 1. Audit Committee members should be independent of management. No hospital employees should sit on the Audit Committee. In fact, when the Audit Committee meets with the internal and external auditors, management should be asked to leave the room. 2. Trustees who sit on the Audit Committee should be financially literate enough to interpret financial statements and engage in a meaningful discussion with the auditors.
Riley: I recommend that the board have an Audit Committee that's separate from its Finance Committee. At least one member of the Audit Committee should have substantial financial expertise. But the rest of the members should represent a cross section of your board members. Some of the best communication I've ever heard take place between an Audit Committee and an external auditor has come from board members with little financial background, who are willing to ask the proverbial dumb question.
LeFever: Members must be willing to ask questions. They need to ask the auditors point-blank to go beyond the numbers and say whether this is a company that is well run and as financially strong as the records seem to indicate.
A board should be large enough to include a diversity of the competencies it needs to exercise its responsibilities but small enough to engage in active discussion, make timely decisions and bond together as a team. Generally, 9-15 members is the ideal size range for boards of hospitals and health systems.
There is a substantial amount of variance in meeting frequency. According to the 2003 survey of boards by The Governance Institute:
What are the most common committees of hospital and health system boards? According to the 2003 survey of boards by The Governance Institute, 93% of hospital and health system boards have one or more board committees. The range was one to 19 committees – with a median of five committees. The most common committees are:
Adelman: It's a huge mistake. It totally distorts the attorney/hospital relationship. I'm being asked for my unbiased advice of the pros, cons, risks, benefits and alternatives for a particular transaction. If I give that to the board, and then I turn around and vote on the decision, I've colored my advice. I'm biased. I'm saying you ought to vote how I vote.
Chresand: I would frown on that. I think it creates potential conflicts; it puts them in a less-than-objective position.
Iseman: It's a bad idea for the general counsel to sit as a member of the board. It's a conflict of interest. The general counsel needs to remain independent and to not be a part of the final decision-making process.
It depends. Some boards function as a committee of the whole, while others make extensive use of working committees.
The most common committees for boards of health systems and hospitals are:
To keep the committee structure relevant, consider abolishing all committees (except those required by law) every one to two years. Re-establish only those committees truly needed given the organization's current vision and the board's core responsibilities. Consider using task forces rather than standing committees to perform short-term projects.
The Governance Committee is generally responsible for overseeing and making recommendations to the board with regard to:
All boards should perform value-added work and not duplicate work done at another level of the organization.
In health systems with multi-tiered governance structures, it's common that local or market boards report to a parent board that has authority over finances, strategic plans, CEO appointment and even local board appointments.
Even though formal authority is vested in the parent board, local boards can be given a good deal of responsibility so they add value. The local board and its CEO should know the local market, community needs and special circumstances far better than a corporate board overseeing a national or regional system. Therefore, the local board can add value in the areas of strategic planning, quality of care, community relations and fund development. The local board should also participate in CEO evaluation.
If local boards don't have meaningful responsibilities, they won't be able to attract and retain talented trustees who could put their volunteer efforts to work elsewhere.
For more information on this subject, see "Value-added Governance in Multi-tiered Health Systems" by Barry S. Bader, available from www.governanceinstitute.com.