Here's how David LeMoine says Ascension Health does it. The Audit Committee members adopted a multi-page "charter" detailing its roles and responsibilities. The document serves the function of bylaws for the committee, and outlines the group's responsibility, the work to be done, the timeline for the work and the procedures for doing the job.
Prepared by the system's internal auditor, Catholic Healthcare Audit Network of St. Louis, the charter lays down the law about which kinds of people should comprise the Audit Committee, what authority the group has for internal and external auditing and how often the committee will meet.
Network CEO David LeMoine says he reviews the document and the committee's responsibilities for at least an hour with the Audit Committee each year. He repeats the exercise for each of his clients.
"They need to understand what their roles and responsibilities are, and they need to understand what my roles and responsibilities are," he explains. The charter, he says, "assists them in fulfilling their responsibilities because it's all laid out there-what they have to do at each meeting."
LeMoine also prepares the agenda for each Ascension Health Audit Committee meeting. The group meets at least three times a year.
Decades ago, volunteer boards actively engaged in managing their hospitals on a daily basis. Today, with highly trained executives at the helm, effective hospital boards stay out of operations and focus on governance, not management.
Effective boards concentrate on these six essential aspects of governance:
Governance is the process by which a board of directors ensures that a company is run in the best interests of the stockholders, the owners of the company. Directors govern by setting company goals and direction, adopting policies, making major decisions, selecting and evaluating the chief executive and monitoring corporate performance.
Not-for-profit organizations don't have shareholders, but they do have "stakeholders," constituencies that benefit from the organization's good works. Faith-based organizations such as Catholic hospitals have "Sponsors," often the local diocese or a religious community that sponsors the hospital as a ministry of the Church.
In a not-for-profit or faith-based organization, governance means the board ensures that the organization is run in the best interests of the major stakeholders. A hospital's stakeholders include its patients, their families and the community, including the poor and medically indigent. Stakeholders also include Sponsors, employees, physicians, local businesses and government, all of which have a stake in the hospital's success.
"Policy" may be generally defined as a recommended course of action, a guiding principle, or a procedure that is established to guide current and future decision making.
It’s often said that the board makes policy while management implements it. Implementation is an operating responsibility.
Of course, an organization has numerous administrative policies developed and approved by management without board involvement, such as personnel and travel policies. No board that understands its role wants to be involved in such details. So what is the appropriate arena for policy making?
Effective boards limit their policy making to broad, high level matters. Establishing clear board policies on high-level matters helps directors to stay out of operations by articulating clear guidelines for operational decision making.
What types of high-level policies should boards adopt?
Several types of policies are appropriate for a board to adopt:
Some policies are nearly universal while others are found in some organizations and not others. For example, virtually all organizations have an equal opportunity policy and a conflict of interest policy for directors and officers.
From time to time, however, an organization needs the board to express its posture on a particular issue that is generating controversy or for which the organization needs a powerful statement of the board’s values and expectations. Examples of policies developed by some hospitals and health systems to meet particular needs include:
Some of our board members have a hard time distinguishing policy from operations -- how should we get everyone singing the same tune?
Have your Governance Committee, Executive Committee or hospital counsel draft a board policy distinguishing policy from operations, and then discuss it during a board meeting or at a retreat. For an example, please see "Governance Policy Statement On Distinguishing Policy From Operations" (PDF).
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.