OPINION: Better governance leads to better health care systems
Chris Carruthers, MD
Health care and hospitals are among the most complicated industries to understand, manage, and govern. Canadian health care is governed by boards responsible for various geographic regions depending on the province or territory. The governors are mostly volunteers.
Each province determines its own scope of governance as appropriate. They have various board structures: some good and some that could be better. Ideally, there should be some consistency of board structures and membership based on best practices.
Some provinces, like British Columbia and Quebec, have a regional structure while others, like Saskatchewan, Alberta, and Nova Scotia, have one governing body for the entire province. Ontario formerly had a tiered governance system with local health integration networks (LHINs) and hospitals maintaining their own boards. Today the hospital boards are still in place but the LHIN boards have been disbanded.
Boards today are actively addressing the need for director diversity, some better than others. The culture and organizational structure of a hospital system is unique and important to understand to achieve successful oversight results. As for all boards, the number one role of health care boards is the hiring and evaluation of the CEO. However, health care boards differ from corporate boards as they have responsibility for safety and quality of patient care.1
Diversity of skills is often lacking on health care boards. Although boards are populated with dedicated volunteers, the skill mix could be improved to ensure better governance. Specifically, the knowledge of independent physicians (i.e., not working in the organization) and other health care professionals should be valued as much as legal and auditing expertise. Physicians and nurses know the business and understand patient quality and safety.2 They are knowledgeable about the culture of an interprofessional organization where physicians are not hospital employees. Top
Several Canadian corporations and health care organizations have failed or functioned poorly over the recent years. The lack of skill diversity of the directors of these organizations contributed to their failure: Nortel,3 Research in Motion,4,5 and Brant Community Health Care System1 in Canada, and Theranos6 in the United States are examples. A key deficiency of these boards was the lack of members who fully understood the industry and could challenge the CEO and senior management on their strategic plan and their ongoing operational results.7
The membership of hospital or health care boards varies across Canada. Some boards will have all independent directors, while others will include people, often ex-officio, who are part of the organization. These inside directors, particularly in Ontario hospitals, could be the CEO, chief of staff, chief nurse, or president of the medical staff. Some of these roles may be limited to one or two years (e.g., president of the medical staff) leaving little time for that person to understand governance and gain enough experience to contribute as a board member. Top
Some boards have little to no clinical experience among their directors, particularly their independent directors. When a board addresses the skill mix of its membership, it immediately recognizes the need for legal, accounting, governance, communication, business, and information technology skills. Its members often do not identify the need for an independent director to be fully knowledgeable of the health care industry. These boards may rely exclusively on the advice of inside employee directors, who are not independent. Without independent clinical knowledge on the board, there is a risk that the board may not be capable of fully carrying out its fiduciary duties. The board may not have the capability of effectively challenging management on their strategy and clinical quality outcomes. Those directors not from the health care field will need significant education to understand patient quality and safety and appropriate metrics.8
The risk resource guide of the Healthcare Insurance Reciprocal of Canada states: “Boards must focus on looking after quality, and expect resources to fall out of that process, not the other way round.”9
Physicians and nurses know the “business” of health care. Some recent governance reorganizations by provincial governments have recognized this needed knowledge and addressed it appropriately. Saskatchewan just went through a governance restructuring with one board now of 10 directors, including two physicians.10 Similarly, the recently established Nova Scotia Health Authority Board of 14 directors, includes two physicians and one nurse.11 Top
Ontario had 14 LHIN boards. Many, if not most, lacked directors with direct inside industry skill, knowledge, or experience. An LHIN board that did stand out as an exception was Champlain. Its board chair, J.P. Boisclair, recognized the need for clinical health care knowledge on the board and included two physicians and four nurses among its 12 directors.
These boards are making critical decisions that affect quality of health care. Some of the most important involve resource allocation. They also determine the distribution of medical services: what is to be available in local communities and what services are centralized. Many of these decisions are based on quality metrics. Similar to the audit and finance committee, which most often are chaired by a director with financial expertise, the quality committee should be chaired by a director with significant knowledge of clinical quality of care. Without such knowledge, it is difficult to understand the decision metrics in this area and the influences on them. Directors with clinical health care experience and knowledge can properly question and, when appropriate, challenge management on quality and safety results within the organization; this is key to successful quality committee and board oversight.
Another gap is the lack of depth of knowledge about governance of board members, particularly physicians. Few physician directors have formal governance training when appointed, and few attend governance education programs after their appointment. This often leads to their inability to understand what is good governance and may contribute to subsequent governance failure (e.g., Brant Community Healthcare System1). Physicians who assume a director’s role on any board must be prepared to learn about good governance and directors’ responsibilities. They should be provided an opportunity to attend educational programs, such as those organized by the Ontario Hospital Association.12 Most corporate boards have or should have a budget for director education; health care boards should have a similar budget, not only for physicians but for all directors. Top
Some governments have recognized the importance of physicians and nurses on boards, but then have limited their participation by making them non-voting directors (e.g., Ontario Hospital boards). Having voting and non-voting directors creates a two-tiered board, which in principle is not good governance. The rights of a non-voting director could vary province to province. Are they excluded from voting on a motion but otherwise have full director rights? Are these non-voting directors limited to attending only portions of the board meeting and excluded from others? Often, non-voting directors’ participation can be left up to the chair’s interpretation. Being non-voting suggests that they have a conflict; if so, are they additionally restricted on speaking to certain agenda items? In theory, non-voting members don’t own the board’s decisions as they did not participate to approve motions. As many health care boards already function successfully with physicians as voting directors (Saskatchewan), what is the evidence and proven risks that lead other provinces (Ontario) to make physicians non-voting directors? I believe all board members should be voting members. Top
Canadian physicians, patients, and governments should be concerned about the scope of skills and knowledge of the directors of health care boards. Where there are real skill gaps, they should be identified and addressed. Skilled boards should be identified and their diverse skill mix, including clinical knowledge, publicly recognized. I suggest that physician and other organizations, both nationally and provincially, monitor board membership and their skills mix. Many corporate boards are subject to an annual rating on their structure and function13; why not a similar rating for health care boards?
We should insist that board membership include independent directors who have experience with health care systems — people who have worked in the system sometime during their career and have clinical experience. Physicians on boards should have appropriate governance education. Two-tiered boards, with voting and non-voting directors, should be discouraged, and all directors should have the same obligations and responsibilities. Diversity of board membership should also be encouraged, as diversity, not only in gender but also in culture, can result in better decisions. Top
1.Rutledge T. Investigation report: Brant Community Healthcare System. Toronto: Government of Ontario; 2017. https://tinyurl.com/yxkyjewr
2.Baker GR, Denis JL, Pomey MP, MacIntosh-Murray. Designing effective governance for quality and safety in Canadian healthcare. Healthc Q 2010;13(1): 38-45.
3.Vasudev PM, Calof J. Rethinking the role of directors in the wake of Nortel’s demise. Ottawa: University of Ottawa; 2014. https://tinyurl.com/y6povfyb
4.Friend D. RIM’s rise and fall: a short history of Research in Motion. Toronto: Global News; 28 Jan. 2013. https://tinyurl.com/y6ce2acp
5.Silcoff S, McNish J, Ladurantaye S. How BlackBerry blew it: the inside story. Globe and Mail 2013;27 Sept. Updated 7 Apr. 2018.
6.Clearfield C, Tilcsik A. How board diversity might have prevented the Theranos fiasco. Globe and Mail 2018;19 Mar. https://novascotia.ca/news/release/?id=20180327002
7.Satiani B, Prakash S. It is time for more physician and nursing representation on hospital boards in the US. J Hospital Med Manag 2016;2(1):6. https://tinyurl.com/y229hgxr
8.Daley UE, Gandhi TK, Mate K, Whittington J, Renton M, Huebner J. Framework for effective board governance of health system quality. White paper. Boston: Institute for Healthcare Improvement; 2018.
9.Integrated risk management for healthcare organizations: risk resource guide. Toronto: Healthcare Insurance Reciprocal of Canada; 2014. https://tinyurl.com/yxzomyeq
10.Governance. Regina: Saskatchewan Health Authority; 2019. https://tinyurl.com/y67afvzz
11.Board of directors. Halifax: Nova Scotia Health Authority; 2018. https://www.nshealth.ca/about-us/executive-team
12.Governance Centre of Excellence. Toronto: Ontario Hospital Association; n.d. https://tinyurl.com/yxrblncb
13.The comprehensive ranking of Canada’s boards. Globe and Mail 2017;22 Nov. https://tinyurl.com/y3lnjne2
Chris Carruthers, MD, is a corporate director. He was founding president of the Canadian Society of Physician Leaders and the first winner of its award of excellence, which is named after him.
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