It’s Time to Revisit Healthcare Nonprofit Board Governance

Have you ever wondered where responsibility begins and ends for a board member of a nonprofit healthcare organization? In today’s healthcare environment, where change and unpredictability are the order of the day, this question has become increasingly important.
Despite a variety or resources, bad habits can be hard to break
A seemingly endless supply of opinion and sites designed to provide healthcare organizations with guidelines on how to establish and maintain effective board governance exist, such as the National Council of Nonprofits and the Nonprofit Resource Center. Furthermore, this is a topic that has been discussed for years, preceding the Affordable Care Act (ACA) and the changing face of healthcare. Yet, despite such guidance, many nonprofit healthcare boards continue to fail to heed the good advice available to them, meaning the debate remains as relevant as ever.
Here are a few general thoughts on steps board members often struggle with on this front:
  • Board members don’t always take the time to understand what is being asked of them;
  • They fail to ask enough questions initially, or throughout their tenure, and place too much trust in the few who purport to understand the issues;
  • Domineering personalities can make compromise difficult;
  • Team members possess poor communication skills;
  • There is underwhelming support for meetings to discuss strategies, which can lead to a shortfall or weakness in the board’s standing policies;
  • Board members may lack appropriate focus, and may have difficulty balancing internal with external demands.
Some specific healthcare challenges include:
  • Healthcare is a complex field, and board members may not fully understand these nuances;
  • They may not understand the compliance and regulatory environment, including patient care;
  • They often confuse the healthcare organization’s mission with its business model.
What are the general points to remember?
While being recruited to serve on a board of a hospital or a health system may be an honor, the increased level of federal government emphasis on regulatory compliance, including the False Claims Act, places the onus on the board member not to take this “honor” lightly. Therefore, the board member has the legal duty of a fiduciary, which includes the duties of loyalty, care and obedience. It is vital to understand how these duties apply in the healthcare setting:
  • Duty of loyalty — The healthcare organization or hospital must come first. There can be no conflicts of interest and no dualistic agendas.
  • Duty of care — The board member of the healthcare organization must act in good faith by asking all the right questions, getting an independent expert’s view, understanding all the laws and regulations impacting the organization and ensuring he or she is appropriately educated in areas where decisions are to be made.
  • Duty of obedience — Board members have a responsibility to be faithful to the organization’s stated mission and not to act or use its resources in incompatible ways or for questionable purposes.
What are the consequences of failing to follow the aforementioned duties?

According to Trustee magazine, failing to comply could leave the board member or trustee with significant legal liability. The authors of the linked article provide guidelines for ways the board member can avoid this liability, such as establishing the appropriate polices, committees, performance metrics for board members, as well as reviewing organizational and external resources.
To learn more, check out some of the Nonprofit Standard blog’s previous coverage of governance issues, as well as our guide on Effective Audit Committees. Additional resources to ensure nonprofit healthcare organizations achieve good board governance include the American Hospital Association’s site for Healthcare Governance and this jointly-authored publication by the Department of Health and Human Services Office of Inspector General and American Health Lawyers Association.
It’s Time to Revisit Healthcare Nonprofit Board Governance,” originally appeared on The Nonprofit Standard, the blog of BDO’s Nonprofit & Education practice, that offers thought leadership on the accounting, tax, and management challenges faced by nonprofit organizations, along with commentary on sector trends and developments.