Moving from “Yes Boards” to “Best Boards”: 5 Things to Consider

Volatility demands more from a governing board. It requires tough decisions and a highly strategic response to the growing challenges health systems face. For many health system boards, the inclination is to go on defense when business risks emerge. However, the complex pressures today’s organizations face means boards must go on offense when confronted with unexpected results and challenges. They also necessitate self-reflection, starting with the toughest question confronting boards: “Do we have the right people in the right seats to make decisions that address the current environment while positioning the organization for strategic success?”

Guidehouse met with some of the nation’s top financial advisors, investment bankers, and lawyers to gain their perspective on what it will take for health system boards and leaders to drive financial stability and a growth strategy amid high degrees of uncertainty. One of the key takeaways from those discussions is the danger of passive board engagement. Typically, this manifests in “Yes Boards” that are more likely to approve senior leaders’ plans than to delve deeper and question whether they are the right responses right now.

The level of volatility healthcare organizations are encountering today has exposed flaws in what used to be considered “tried and true” approaches, such as concentrating on ways to grow revenue faster than expenses or the dependence on investment portfolio returns. One investment banking executive said, “The reliance on some of these trends is no longer working—and [boards] need to peel back layers of the onion to understand how to fix it." To get there, boards must carefully consider whether they have the appropriate structure and composition to press back on the strategies health system leaders present to get to the best solution. In effect, they must transition from “Yes Boards” to “Best Boards.”

Getting There from Here

How can health system boards most effectively move from a state of uncertainty to one of transformative leadership? It starts with self-reflection and self-awareness. Here are five things to consider.

1. Recognize that we’re experiencing a new normal in healthcare

Most healthcare boards were not immediately responsive to the changing dynamics of the healthcare market, although some have demonstrated greater skill in governance than others. Now, many board members must consider: What will it take to move away from a “rubber stamp” model of governance toward a more active role in determining their organization’s path forward?

“Health systems need boards that are comfortable enough to lead change,” a managing director for an investment banking firm said. “Many leaders are worried about scrutiny, but ‘no change’ isn’t an option. Instead, a willingness to take on risk is imperative.”

2. Consider whether your board has the right composition to meet today’s challenges

For instance, COVID-related pressures and workforce shortages and burnout have stretched healthcare resources to their breaking point. To navigate these pressures, health system boards should include a clinician who understands marque industry trends and can speak with a high degree of authority on the needs of healthcare teams and the communities they serve, as well as who understands the operational breakdowns that hinder care delivery and the resources and tactics that could make a difference.

Similarly, at a time when big tech is making big moves in healthcare and well-capitalized disruptors are rapidly acquiring physician practices, health system boards should have members who are skilled in data analytics—all the better to detect changes in the market or in utilization before they become issues—as well as those who possess experience in developing alternative revenue sources, including nontraditional sources of revenue.

Also critical are members whose professional backgrounds include experience in leading organizations in a disruptive business environment. One question to consider: Do board members need to come from the geographic area of the health system—or can the health system draw some of its governance from top talent across the country according to its needs? To access additional starting points for discussion, view the American Hospital Association’s (AHA’s) resource, “The Guide to Good Governance for Hospital Boards.”

3. Assess the level of board member engagement

Do board members meaningfully engage in conversations around the initiatives, proposed responses, and strategies presented by senior leaders—or do some have a tendency to avoid looking beyond what’s presented and consider whether another approach could offer greater benefits? “Yes Boards” are more likely to be directed by their senior leadership team than to take the opportunity to critically assess the plans that are presented and assume a lead role in determining the organization’s strategic direction. In an era of economic turmoil, for instance, “mission versus margin” should be a critical area of discussion.

“Leaders want to focus on the mission—no money, no mission. But they need to understand the balance of their services, who they’re being provided to, and the economics behind them,” a partner for a national law firm that specializes in healthcare shared. “Best Boards” have the capability and the expertise to ask hard questions related to balancing mission, operations, strategy, and finance. The AHA’s self-assessment for board members is an excellent place to start.

4. Determine whether new processes for evaluating board performance are needed

“Best Boards” have a process for evaluating the commitment of individuals selected to govern the organization and their ability to effectively function as a board member. In some boards, this responsibility falls to the board chair; some rely on a consultant to perform this evaluation based on national standards for assessing board engagement and effectiveness, given the potential for discomfort and hurt feelings. Boards that are intellectually honest with themselves invest in meaningful individual board member evaluations as well as evaluations of the board as a whole, which are vital both during periods of volatility and strength.

5. Evaluate your board’s capacity for assessing risk at all levels

This includes reputational risk, which is critical to assess at a time of industry consolidation and breakdowns in public trust in our nation’s healthcare system, especially when it comes to health equity and environmental impact. Risks to an organization’s reputation can stem from actions taken to reduce financial risk, such as closing a struggling hospital in a market with too many beds, or operational risk. Today’s health system boards must have the technical skill to assess all risk or access to this capability—from inside or outside the organization. They should also have the fortitude to respond to risk in ways that may make the communities they serve uncomfortable, but that have the potential to promote long-term stability and growth.

By making the commitment to become a “Best Board” over a “Yes Board,” hospital board members can make a deeper impact on the communities they serve, protecting one of their community’s most important resources.