The implementation of the Affordable Care Act has made the regulatory environment that healthcare boards of directors face progressively more complex and demanding. In recent years, many boards in the healthcare industry have been working to bolster the effectiveness of their organization’s governance model. To run a healthcare organization efficiently, each board member must have a clearly defined understanding of the roles and responsibilities of the board from the outset.
The first step in bolstering the effectiveness of the governance model is to clearly define how the board’s responsibilities contrast with management’s. While the board is accountable for the general oversight of the organization, management is responsible for implementing the strategic initiatives the board has agreed to and running the organization’s day-to-day operations. This delineation is important, because it clarifies the boundaries between board and management team roles. The board, being responsible for governance, helps set the organization’s goals, direction, limitations, and accountability frameworks.
Let’s look at the board’s four main areas of responsibility in greater detail.
Risk assessment
The board has a duty to oversee hospital management and ensure proper controls are in place to address strategic, operational, compliance, and financial risk. To do so, the board is responsible for understanding what internal controls exist to monitor each type of risk. It’s also responsible for holding the appropriate managers accountable for following prescribed processes.
As part of managing risk assessments, the board must also ensure that management is consulting with the appropriate technical experts and that it’s conducting formal and periodic enterprise risk assessments, including assessments of regulatory and environmental risk.
Management development
Ensuring a strong management team and a consistent pipeline of potential successors for leadership in each vertical also falls into the board’s territory. Specifically, boards should address CEO and top-executive succession planning, considering both internal and external candidates.
During this comprehensive process, boards should look at the broader talent pool at their organizations and take a role in understanding and providing advice on the development programs that exist for executives. Leadership development programs at all levels of the organization are a critical aspect of developing appropriate succession throughout the organization.
