“The times they are a-changin.”—It was true 60 years ago when Bob Dylan sang those iconic words, and it is true today.
Never in my 37 years in the industry have I seen the pace and force of change we have experienced in healthcare over the past few years—and I’ve seen a lot of change. We know the instigators—technology, consumer attitudes and expectations, a growing aging population, workforce challenges and AI. Add to that, competition from nontraditional players, the “disruptors” by the names of Amazon, Walmart, Walgreens, Microsoft, Google, UnitedHealth Group/Optum and others.
Acknowledging, addressing and surviving this change compels leadership to change. We cannot just continue to be reactionary. What made us successful in the past is no longer guaranteed to make us successful today or tomorrow. The industry demands a new bold mindset. We have to rethink our strategy and innovate.
Changing Mindsets
But innovation carries risk, and healthcare presidents and CEOs can only be as willing as their governing boards are to seek risk. This is why changing times also demand a change in the traditional approach to governance.
The industry faces enormous threats and pressure. We have seen huge consolidation and that will continue. A lot of rural hospitals are closing. Yet, some boards are still focused narrowly on their communities, trying to be protective of the little they have, which could stifle growth for their organizations.
Board members need to come to the realization that their “bottom line” role is to figure out how can we ensure that our organization, with limited resources, provides high-quality, equitable care to all our distinct patient populations?
To succeed in this mission, boards must foster innovative decision-making and solutions. The board should encourage the CEO to experiment and take calculated risks in efforts to fulfill the organization’s mission. Because management will not always succeed, boards must allow for failure. Working with a board that understands the dynamics of the industry and recognizes the need to take risks enables management to present ideas that are not conventional and to commit to higher-risk opportunities, backed by appropriate due diligence, of course, to reach an agreed upon strategy for moving forward.
Competency-Based Boards
For healthcare organizations to flourish within the industry’s dynamics, boards must change, too. Boards are often stifled by the homogeneity of their composition—a remnant of the Hill-Burton Act, which funded the construction of community hospitals nationwide post-World War II. Since their inception, these community hospitals have been governed largely by members of the community—historically, people with means. This resulted in governing boards comprising members with similar backgrounds, experiences and skill sets.
A lot has changed since the proliferation of the community hospital. Healthcare—both the business and clinical side—has become much more complex and vulnerable to the industry’s accelerated pace of change. More diverse perspectives and skill sets in the boardroom will enhance the board’s capacity to define and address current and future challenges within the industry and foster creative solutions.
But most boards are what I call “perpetual” boards, where they appoint new members from the community who “look” like them—bankers, lawyers and businessmen. We are at a point where the competency-based board should be standard across the industry. There are still places where board members should be publicly elected or political appointees. But I would advocate that every community board needs to conduct a competency assessment to be intentional in determining the gap between what skill sets currently exist on the board and what is required to bring diverse ideas and experience to boardroom discussion and decision-making.
Governance, Not Management
Just to be clear, I’m not suggesting that boards dabble into operations. The line of distinction between governance and management is one practice that should not change.
What I am urging is that boards be knowledgeable enough to know what questions to ask, encourage leaders to pursue opportunities that may be risky, and enable them to take chances on opportunities that may or may not work out. This may mean forming new kinds of partnerships with new types of collaborators or looking outside of county or state lines for growth opportunities.
The days of the rubber-stamp are long gone—or should be. Board members need industry knowledge and introspection to guide their organizations in a competitive environment.
Healthcare cannot just sit idle; we have to respond to this barrage of changes. We can’t wait for disruptors to skim off the profitable areas of healthcare. Hospitals and health systems must not react to the innovators, we must be the innovators. This bold mindset begins with governance.
Michael Ugwueke, DHA, FACHE, is president/CEO, Methodist Le Bonheur Healthcare, Memphis, Tenn., for contributing this article. He can be reached at michael.ugwueke@mlh.org.
Editor’s note: This content is excerpted from an article in the June 2024 issue of BoardRoom Press, The Governance Institute’s bimonthly magazine. Visit the BoardRoom Press webpage (Governance Institute member login required) to access the full article.