September 29, 2020

Supercharging the Health System Board

by Jennifer Stewart

THE GIST

Progressive CEOs tell us their boards are demanding more of their time and bandwidth than ever before. In order to help elevate the strategic role of the board, CEOs must help refine their structure and mechanics, diversify membership, bolster board member knowledge, and refine traditional board management approaches.

THE FACTS

  • 48 percent of hospital boards sought new board member skills and competencies between 2016 and 2019
  • 71 percent of hospitals do not have a continuing education requirement for their board members
  • 87 percent of hospital board members are white; 78 percent are over the age of 50

OUR ANALYSIS

1. As the healthcare landscape becomes more challenging, the board must increase the magnitude and change the method of its involvement in health system strategy.

The hospital board meeting of 2005 was predictable—a little sleepy, and largely focused on reviewing financial and quality performance. In contrast, today’s high-performing board moves swiftly, accepts uncertainty, and enables executives to disrupt the traditional business model. This shows the ability of high-performing boards to evolve to meet the changing healthcare market.

The chart below shows how boards needs to evolve to meet market challenges.

Traditional healthcare markets were anchored to fee-for-service, so strategic decisions were relatively clear. It was good business, and good governance, for boards to focus on supervising the executive team’s ability to execute the known fee-for-service playbook. Once the market moved toward value-based care and consumerism, hospitals began competing against new entrants. To respond, health system executives made bolder strategic bets and pursued mergers and new businesses. The board’s most important role became providing public support for non-traditional strategies. The pandemic has accelerated the shift towards consumerism and digital health. But it also destabilized health system economics. In this environment, the board’s most important role is to partner with executives to transform the traditional business model. This includes partnering with health system leadership to generate new business ideas and encourage self-disruption.

2. Most hospital boards aren’t currently equipped to be active partners on health system strategy.

The gap is widening between the average health system board’s capabilities and the strategic role it needs to play. This is because the healthcare market is changing much more swiftly than board seats turn over. This creates several challenges:

  • Board members reach the middle of their term and find expectations have changed. Many board members were recruited for a board that supervised strategy execution, but the market—and executives—are now asking for board that can partner on strategy development.
  • The pandemic environment requires board member competencies and perspectives that historically haven’t been prioritized. As one CEO told us: “It’s terrifying when we are setting our vision for our future digital strategy and I realize I’m asking for input from a room full of 70-year-old white men.”
  • Because the market is moving more swiftly and less predictably, it is challenging for board members to keep abreast of the news and understand market dynamics. And yet, 71 percent of hospitals do not have a continuing education requirement for board members.

“It’s terrifying when we are setting our vision for our future digital strategy and I realize I’m asking for input from a room full of 70-year-old white men.”

3. To build a board that can actively partner on health system strategy, CEOs need to elevate performance across four dimensions: structure and mechanics, membership, education, and board management.

To build a health system board that has the ability to partner on strategy development, we recommend four steps:

  1. Apply a “strategy first” lens to governance structure and mechanics. Reshape committees, budget authority, and meeting schedules to reflect future strategic imperatives—not historic priorities.
  2. Diversify board member skills, competencies, and expertise. Identify the competencies and perspectives that are critical to future strategy, then deliberately recruit board members with these skills. This will likely require removing some current board members whose skills are duplicative or reflect past priorities.
  3. Increase investment in ongoing board education and new member onboarding. Partnering on strategy (versus supervising execution) requires a deeper knowledge of healthcare. Executives can no longer afford for board members to gradually learn the ropes over several years.
  4. Revisit board management practices to ensure they support partnership. Assess how information is shared with board members, how ideas are socialized, how pre-wires are held, and how discussions are facilitated to determine if it enables strategic partnership or implicitly supports supervision.

In coming weeks we’ll share additional details on each of these recommendations, with the end goal of helping CEOs can equip their boards to partner on strategy, move swiftly, and grow more comfortable with market ambiguity.