2022 Trends in Healthcare & Governance

Tips for Board Oversight for Financial Turnaround
December 2022

Hospitals and health systems are facing a severe financial crisis caused by pandemic-related factors including workforce shortages and corresponding skyrocketing labor costs, declining revenues, persistent supply chain disruptions and shortages, significant general inflation, higher interest rates and volatility in capital markets. Healthcare finances have been devastated and it will be a long, challenging process to recover financial stability.

Results from a new hospital survey by HANYS and the allied regional associations confirm the dire fiscal condition of New York’s hospitals and health systems. We encourage you to use this survey report and HANYS' other advocacy tools in your state and federal advocacy in the coming months.

This financial crisis is a governance issue and it is appropriate and necessary for boards to engage more deeply. In his American Hospital Association Trustee Services article, "Financial Turnaround Needs Board Oversight," Jamie Orlikoff recommends the following strategies and approaches for boards to effectively oversee the financial turnaround of their organizations:

  • Do not rush to blame management. The board should be clear that this crisis happened all around the country, the same way, at the same time.
  • Do not expect management to have easy fixes. The board must quickly establish a working partnership with the CEO and executive team that recognizes the uncharted territory the organization is in and achieves a new balance in the governance/management partnership.
  • Prepare to make the most difficult decisions your board has ever made. Your board must focus on making the difficult decisions to oversee a successful financial turnaround and organizational survival but must use the mission as its guide in doing so.
  • Ask about your commercial revenue. Boards should become familiar with the rates their organizations are paid for commercially insured patients. One of your turnaround strategies must include how to leverage better rates, likely through tougher negotiating with payers.
  • Examine ways to reduce your expenses. Inflated labor costs are the primary driver of expenses outpacing revenues and your board must closely examine these costs.
  • Identify underperforming services and facilities. The board must ensure that the major cost areas are identified and then verify that an honest assessment is made about the likelihood of bringing these areas to profitability through focused improvement efforts.
  • Ask about the revenue cycle. The revenue cycle tends to be one of the largest areas of inefficiency, of “leaving money on the table” for hospitals, so it tends to be one of the areas with the greatest potential of immediate and significant financial return if it can be significantly improved.
  • De-emphasize money losers and emphasize money makers. In the past, hospitals generally made money on surgeries, but now not all surgeries are equal from a profitability perspective. The board should request information from executive management to ensure that payer mix, case mix, severity index, and expense profile are being measured and managed to maximize profitability.
  • Assess your capacity and focus on your “back door.” Housing patients who should not be in an inpatient bed but have nowhere else to go can prevent a hospital from being able to respond to demand and increase its ratio of profitable surgical services. Boards should query management about their “back door” status and on strategies to improve flow to minimize clogging and maximize surgical and procedural capacity. (For more information on patients being “stuck” in hospitals, see HANYS’ white paper on complex case discharge delays.)

In light of the financial crisis, the AHA recently hosted a webinar discussion, Using Investment Governance to Achieve Financial Excellence, which explored successful approaches to creating stronger governance and greater financial resilience to further the organization’s overall mission. Listen to the recording to learn about proven best practices for investment oversight including key policies and procedures, ideal board composition and effective committee structures.

This unprecedented financial crisis requires that boards have a good understanding of, and stay informed on, their hospital’s or health system’s finances. Deeper board engagement will be necessary to ensure that your organization survives for the long term to fulfill your mission.

Information for this article was obtained fromAHA Trustee Services article, "Financial Turnaround Needs Board Oversight"; and AHA Trustee Services webinar, "Using Investment Governance to Achieve Financial Excellence". © Used with permission of American Hospital Association.

Year-end activities for healthcare boards
November 2022

The last few months of the year provide an opportunity for healthcare trustees to reflect on the successes and challenges of the past year and start planning for the year ahead. The end of the year is also a time for boards to complete several annual tasks that are essential for delivering effective board governance. Below are five common end-of-year activities for healthcare trustees to consider.

1. Evaluate current and upcoming vacancies

Start making a plan to fill vacancies with the right people. Examine the background and expertise of your current board members to identify gaps. Use a board of directors skills matrix and read about tips for successful board recruitment and taking action on board diversity.

2. Evaluate CEO performance and compensation

This is a key responsibility of the board, but according to a report from BoardSource:

  • Only 53% of CEOs have had a formal, written evaluation in the past 12 months.
  • More than one-fifth (21%) of CEOs have never had a formal evaluation of their performance.
  • Nearly half (45%) of boards don’t have a formal process for setting appropriate CEO compensation.

For recommendations in this area, read a governWellTM BoardBrief about The Board’s Role in CEO Compensation and Performance yamaha kick drumEvaluation.

3. Board member assessments

The end of the year is an appropriate time to assess the performance of the board, its committees and members. Conducting an annual board self-assessment helps to improve the performance of the board by identifying areas of strength and opportunities for improvement. According to the AHA’s 2019 Governance Survey Report:

  • 69% of respondents overall reported using a board assessment in the past three years.
  • 78% of those who conducted assessments reported that it focused on understanding of board structure, roles and responsibilities and 71% focused on achievement of board goals/work plan.
  • 87% indicated they used assessment results to create an action plan or provide feedback to improve board performance.

4. Re-examine the board’s mission and identify new opportunities for engagement

Achieving the hospital’s mission and vision is the board’s top priority. Although the mission should be kept in mind all year long, the end of the year provides an opportunity to reexamine it and identify new opportunities for engagement based on emerging trends and issues. The best way to ensure that the mission and vision are achieved is to have a strong strategic plan. Learn more in governWellTM’s BoardBrief, The Board’s Role in Strategic Planning.

5. Ensure the organization meets all legal compliance requirements

Hospital boards may use the end of the year to review their conflict of interest policies and sign and update any necessary disclosures. To learn about conflicts of interest and how they impact healthcare trustees, read HTNYS’ Conflict of Interest Primer.

Information for this article was obtained from OnBoard’s "5 End of Year Board Activities.”

Cybersecurity Awareness Month
October 2022

October is Cybersecurity Awareness Month, highlighting the need for individuals to protect themselves online as threats to technology and confidential data become commonplace.

But it’s not just individuals. Hospitals and health systems are prime targets for cyberattacks from state actors and ransomware groups, and their executives and boards need to be proactive and monitor cybersecurity threats. Cybersecurity awareness is critical to prevent and minimize attacks, and hospitals must have a robust and documented approach. Patients and regulators expect healthcare organizations to protect patient data and strengthen their security.

Those who attended this year’s trustee conference learned why cybersecurity should be a priority in the boardroom, the role of the trustee and the need for a whole-community approach to defend your organization. Key takeaways include:

  • the costs of cyber incidents for healthcare institutions are the highest of any industry and average over $10 million;
  • the number of ransomware attacks on U.S. healthcare organizations increased 94% from 2021 to 2022 and continues to climb;
  • it’s important to proactively identify your law enforcement contacts and establish a relationship with your FBI contact; and
  • there are resources available from the many groups improving cybersecurity, including CISA, H-ISAC, FBI and NYHCA.

This year’s CISA Cybersecurity Awareness Month campaign theme, See Yourself in Cyber, focuses on the “people” part of cybersecurity, providing information and resources to help ensure all individuals and organizations make smart decisions at work and home. We encourage all hospitals and health systems to engage in this year’s efforts by creating your own awareness campaigns.

Take advantage of the Cybersecurity Awareness Month 2022 toolkit and presentations to help your organization learn the basics of cybersecurity.

Invest in employee engagement now to thrive in the future
September 2022

Like healthcare organizations across the nation, New York’s hospitals and health systems face unprecedented challenges recruiting and retaining the workforce needed to deliver timely and high-quality care. These workforce challenges have been exacerbated by the pandemic and have not abated.

Recent research articles highlight data elements showing the far-reaching impacts of the shortage. Recent statistics reported by Gallup on one aspect of the shortage (employee engagement) include:

  • Half of the U.S. workforce is "not engaged" at work, defined as doing the minimum required and psychologically detaching from the job.
  • Everyone else is either engaged (32%) or actively disengaged (18%).
  • The ratio of engaged to actively disengaged employees is now 1.8 to 1, the lowest in almost a decade.

The drop in engagement began in the second half of 2021, according to Gallup. In the second quarter of 2022, the proportion of engaged workers stayed steady while the proportion of actively disengaged workers increased, as listed above. This evidence of increased disengagement demonstrates the need for organizations to focus on this issue as one piece of the workforce challenge puzzle.

The HTNYS Trustee Conference in Syracuse later this month will include a session aimed at this topic. Quint Studer will join us on Oct. 1 to lay out a roadmap for trustees and leaders to move their organizations toward employee engagement to thrive in the future. He asserts that we must be intentional about creating places people want to be — places that replenish and tap into our staff’s calling. He believes that this, more than any other capital expense, must be the centerpiece of our investment strategy. Attend to learn actions your hospital can take now that will set the stage for the future.

Trustees play a critical leadership role in helping to improve employee engagement and retention by establishing a clear retention strategy with metrics that can be monitored over time. Keep in mind that a strong culture starts at the top of the organization; investing in this will drive strong organizational performance and increased retention.

For more workforce resources: The American Hospital Association Board of Trustees’ Task Force on Workforce developed a report with provider input to help hospitals navigate workforce challenges and opportunities, and to highlight strategies and resources to assist in these pivotal efforts. HANYS works closely with our members on workforce issues, advocating on key legislative and regulatory proposals. Resources are available online.

Information for this article was obtained from the Becker’s Hospital Review article, “'Quiet quitters' make up at least 50% of workforce: Gallup.”

Analyses highlight immense value of hospitals and health systems to their communities
June 2022

We know that all hospitals, regardless of ownership type, size and location, provide a comprehensive range of benefits and essential services to their communities. To be able to speak on behalf of their hospitals and be advocates, trustees should be well versed in the economic and community benefit impact their hospital or health system has on their communities.

HANYS released our economic and community benefit analyses for 2022 earlier this year, which trustees may use to understand the tremendous impact of hospitals across the state. Trustees can browse our statewide, regional, legislative and hospital- and system-specific reports to see how New York’s hospitals and health systems significantly impact their local economies and communities.

The reports also include a Statewide Financial Challenges section to highlight the extraordinary impact of the pandemic, given that the data for these reports are primarily from 2020.

Key fiscal data points include:

  • Hospitals statewide reported a -1.4% average hospital operating margin (compared to 5.5% nationally in 2020).
  • Collectively, New York’s hospitals reported the narrowest average operating margin in the country in 2020.
  • Forty-nine percent of New York’s hospitals reported negative operating margins in 2020 (83% if federal Provider Relief Funds and state supportive funding are not considered).
  • Fifty-five percent of New York’s hospitals reported fair or poor financial condition in 2020 (70% if federal Provider Relief Funds and state supportive funding are not considered).
  • Collectively, New York’s hospitals reported the seventh-worst commercial insurance reimbursement rate in the country.

For each dollar of care provided in New York, Medicare pays 89 cents and Medicaid pays 61 cents. The value of public reimbursement levels has declined from previous years mainly from the increase in costs required to appropriately staff and deliver care.

Despite these significant challenges, HANYS’ analyses highlight that New York’s hospitals continue to be a major driver of economic activity throughout the state. New York’s hospitals were responsible for $188 billion in economic activity — 10.6% of the state GDP — and generated 867,000 jobs across New York’s economy in 2020.

To further highlight the value of hospitals to the public, policymakers and press, the American Hospital Association recently released two reports that trustees may use to build their knowledge:

Hospitals are encouraged to publicly share the many ways they support their communities. You can find further resources on the AHA community benefit webpage and on the Seizing the Conversation webpage.

Now, more than ever, we must support our healthcare providers — the health of New York’s people and economy depend on them. And trustees can help be a voice. Information for this article was obtained from HANYS and the AHA.

A case study in healthcare disruption; Strategic questions for boards to consider
May 2022

The massive wave of investment and innovation in healthcare that began before the pandemic continues. New market entrants come from the technology, telecom and consumer industries.

  • In 2021 alone, $44 billion was raised globally in health innovation — twice as much as 2020 — and the acquisition of health and health tech companies rose 50%.*
  • Over the next five years, up to 80% of healthcare providers in the U.S. plan to invest in technologies including digital health, artificial intelligence, machine learning, and tools to support clinical staff and caregivers.*

Healthcare trustees shape the future of their organizations and therefore need to understand the strategic threats posed by market disruptors. As an example, CVS Health leaders recently provided an update about how they are executing their growth strategy and forging stronger consumer ties:

  • The company plans to spend $3 billion on digital enhancements to improve the consumer experience at its locations.
  • CVS Health’s CarePass program, a paid membership that offers free delivery of eligible prescriptions from its pharmacies and other perks, now has 5.6 million subscribers, a 40% jump from last year.
  • Nearly 80% of patients use CVS’ self-service digital tool to complete necessary forms ahead of their appointments at its HealthHUB and MinuteClinic facilities.

CVS Health is now the second-largest healthcare company in the world, with a $141 billion market cap. Aside from its pharmacies and walk-in clinics, CVS also is a pharmacy benefits manager and a health insurance company. The company has built dozens of strategic business partnerships in recent years, invested in startups and acquired companies to complement its core offerings. It also launched a $100 million venture fund targeting early-stage health tech companies.

The American Hospital Association provided a summary of CVS’ healthcare strategies in its latest Market Scan. CVS’ three key growth strategies are pertinent to health system leaders looking at their own digital plans, whether you plan to build, buy or partner with a player like CVS:

  • Care coordination and chronic disease management: CVS is rapidly expanding its capabilities through partnerships and investments in disease management startups and social factors of health solutions.
  • Health IT: This increasingly has become an area of interest for CVS Health through its venture capital arm.
  • Home health: CVS has been increasing its presence in home health, as have its competitors Amazon, Walmart and Walgreens, with CVS’ key moves involving clinically complex patients and in-home cancer care.

CVS is one massive disruptor among other major retail pharmacy chains, payers, technology companies and other, smaller and local organizations. Hospitals and health systems should view disruption as an opportunity to work with healthcare disruptors, if appropriate, by sharing their healthcare knowledge and expertise. Some questions that healthcare trustees should consider:

  • How are we keeping our organization relevant, necessary and innovative?
  • How can we proactively address these disruptive trends?
  • What are we doing to be a “disruptor” in healthcare?
  • Are we partnering with any disruptors now or within the next five years?
  • Do we have board members who have experience with technology and/or digital disruption?
  • Does our board have the skills needed to assess the opportunities to partner with disruptors?

Trustees should understand that maintaining the status quo isn’t going to work and staying on top of current healthcare trends and the strategies of the disruptors is a must.

Information for this article was obtained from the AHA’s “3 Keys to CVS Health’s Growth Strategy.
*Data reported by the World Economic Forum.

Board support is essential for behavioral health access
April 2022

Hospital and health system trustees play an important role in helping develop strategies to improve access to behavioral healthcare in their communities. To succeed, trustees need a good understanding of the behavioral health challenges and needs in their communities.

The need for behavioral health services has increased since the pandemic started. The CDC recently released an analysis of the mental health of U.S. high school students during the pandemic. According to the new data:

  • in 2021, more than one-third (37%) of high school students reported they experienced poor mental health during the COVID-19 pandemic; and
  • forty-four percent reported they persistently felt sad or hopeless during the past year.

The new analysis also describes some of the severe challenges youth have encountered during the pandemic:

  • more than half (55%) reported they experienced emotional abuse by a parent or other adult in the home, including swearing at, insulting or putting down the student;
  • eleven percent experienced physical abuse by a parent or other adult in the home, including hitting, beating, kicking or physically hurting the student; and
  • more than a quarter (29%) reported a parent or other adult in their home lost a job.

While these data may be alarming, the CDC analysis demonstrates the need to ensure access to behavioral health services and can inform the design of effective programs. But unfortunately, gaining access to behavioral healthcare remains difficult due to the shortage of providers, stigma, lack of a connected continuum of care and other obstacles.

Given the critical importance of addressing these issues, HANYS has prioritized working with and assisting our members as they navigate the complexities of the behavioral health environment. HANYS’ website offers blogs, recorded webinars and other resources. Trustees are encouraged to take advantage of these resources, including HANYS’ blog post highlighting the sharp rise in children experiencing behavioral health crises, challenges hospitals face in responding to this crisis, and recommendations.

The American Hospital Association’s Executive Summary: Regional Networks — Improving access to behavioral health services provides an overview of common characteristics of current and emerging regional behavioral health networks across the nation and offers insights for communities interested in improving access to behavioral health services through community partnerships. The series of hospital/health system case studies details how creative collaborative solutions can reduce fragmented care, improve outcomes and deliver positive returns on investment in a variety of ways.

  • A key element identified for building and maintaining a successful regional behavioral health network is health system/hospital CEO and governing body commitment to network formation and oversight.

As stewards of their communities, improving access to behavioral health and mental health services should be a priority for hospital and health system boards. Although not the sole solution, regional networks of care could be one way to help address the behavioral health crisis.

Information for this article was obtained from the American Hospital Association’s Executive Summary: Regional Networks - Improving access to behavioral health services and the CDC’s website.

Boards can self-assess readiness for advancing diversity and equity
March 2022

Addressing health equity and diversity

As leaders of anchor organizations in their communities, healthcare trustees recognize their duty to identify root causes of health inequities and bring about systemic change.

For some boards, having these discussions may be uncomfortable. Some members of the board will have less experience, education and training on health equity than others. Before trustees can embark on advancing health equity, they should take stock of where they are as a group in being ready for these conversations.

For this reason, Via Healthcare Consulting, Inc. and Impact4Health, LLC developed a survey on board readiness to respond to health equity. The self-assessment survey can also help foster candid conversations about the growing concerns over health inequities.

The survey contains 20 different statements that reflect different best practices that can inform improved governance to address the longstanding negative impact of systemic bias in healthcare.

Four key areas of focus when assessing readiness to advance health equity

  • Establish a board culture that values diversity, inclusive leadership and health equity.
  • Create board accountability for health equity.
  • Review key metrics on health equity to inform the board.
  • Develop the board’s inclusive community engagement.

Self-assessment is the starting point for the conversation

Follow-up steps include:

  • Collect survey responses from all board members and have the results collated to show averages as well as frequency of responses.
  • Hold a special session to discuss the results of the health equity readiness board self-assessment.
  • Prioritize and focus on two to three areas.
  • Develop an action plan to address the focus areas.
  • Include a review of progress on the action plan as a regular agenda item at board meetings.

Achieving equitable care is an ongoing journey

The scores themselves are less important than the thought-provoking and educational process the self-assessment is designed to generate. Achieving equitable care is an ongoing journey. Trustees must continuously assess their board’s readiness and their organization’s performance on health equity, and seek learning opportunities for improvement.

For more details, read AHA Trustee Services’ article, Board Diversity Survey to Advance Health Equity.

The state of trustworthiness
February 2022

Trust has been a widely discussed issue since the pandemic began. Public disputes, misinformation and conflicting messages about the coronavirus and vaccination have led to questions about what, and who, can be trusted. Trust is crucial for hospitals and health systems as community anchors dedicated to achieving health equity. Healthcare organizations and their governing board members should now focus on how to maintain and grow trust with their patients and communities.

Principles of trustworthiness

In May 2021, the AAMC Center for Health Justice published Principles of Trustworthiness, a set of guidelines and actions for healthcare and other organizations to use to show they are worthy of their community’s trust. AAMC produced a toolkit of materials that can be used to facilitate discussions within communities, develop relationships with a broad coalition and track lessons learned.

In September 2021, AAMC polled a nationally representative sample of adults to gauge the following:

Their level of trust in institutions

  • Most people polled overwhelmingly trusted their neighborhood fire departments (84%), businesses (81%), pharmacies (80%) and hospitals (79%) to treat all people fairly.

How that trust has changed over the course of the pandemic

  • The largest differences were by income. Those whose income was smallest reported greater net losses in trust.
  • Net trust across all sectors for Millennials, Gen X, and Baby Boomers overwhelmingly increased. For Gen Z, however, net trust across all sectors decreased.

What institutions should do to be seen as trustworthy partners by their communities

  • Since fire departments were the most trusted sector in every age and racial and ethnic group and across all incomes and U.S. geographic regions, this suggests that they may be a unique partner for organizations to consider to bring needed change to their communities’ health.
  • Some respondents said that institutions should:
    • Be persistent and consistent and live up to stated goals.
    • Don’t overpromise or distort things to gain acceptance. Be honest even if it’s less favorable to your agency or self.
    • Have more positive interactions at times when there is not an emergency.

In sum, healthcare trustees play an essential role in building trust as they represent their hospital in their communities. This includes defending the hospital when it’s under pressure and developing partnerships with other healthcare providers and community organizations. The quality of these relationships and the smoothness of their interaction directly contribute to the overall effectiveness of the healthcare organization.

Note: Information on this topic was obtained from AAMC’s The State of Trustworthiness.

Make cybersecurity a priority
January 2022

Healthcare is unique among economic sectors in its breadth and depth of valuable data and information, making it a lucrative target for cyber thieves. Hospital executives and boards need to be proactive and pay even more attention to cybersecurity threats than those in other sectors of the economy.

Did you know?

  • More than 93% of healthcare organizations in the U.S. have experienced a data breach since the third quarter of 2016 and 57% have had more than five data breaches during the same timeframe.
  • While 91% of hospital administrators consider the security of data a top focus, 62% feel inadequately trained or unprepared to mitigate cyber risks that may impact their hospital.
  • According to the HIPAA Journal, healthcare email fraud attacks have increased 473% in the last two years.
  • There were 38 million healthcare sector records exposed in 2019, versus 7 million healthcare sector records exposed in 2018.
  • In 2019, the healthcare industry incurred an average cost of $6.35 million per breach. It is estimated that the cost of data breaches will rise from $3 trillion each year to over $5 trillion by 2024.

Governing boards have a critical role to play in terms of understanding and curtailing cybersecurity risks.

Boards should:

  • Understand that cyber risk is first and foremost a patient safety and care delivery risk issue.
  • Know that healthcare is a prime target for cyber adversaries; the threat is ongoing and constantly changing.
  • Keep cybersecurity front and center; receive regular updates on risk and risk mitigation. Treat it as an enterprise risk issue.
  • Understand that cyber risk can never be eliminated; it can only be mitigated. Proper planning can make cyberattacks less probable and less severe if they do occur.
  • Uncover the vulnerabilities within the organization and take steps to mitigate that risk.

Five questions board members should ask to ensure cybersecurity is being addressed internally:

  • Do we have at least one person on staff dedicated full time to information security?
  • Is the reporting structure of information security officers sufficiently prominent within the organization to provide sufficient status, authority and independence for effective functioning?
  • Does the board have a risk committee and is that committee briefed regularly on evolving cybersecurity risks?
  • Do we have an incident response plan that includes contingencies for various cyber scenarios, such as ransomware, and how secure are our backups?
  • Does the board receive regular briefings and updates on the strategic cyber risk profile, and on how risks are being mitigated?

Looking for cybersecurity resources?

HHS recently launched a new website, “Aligning Health Care Industry Security Approaches.” The new 405(d) program website is presented as a useful place for organizations looking for additional “resources, products and tools that help raise awareness and provide vetted cybersecurity practices.”

Note: Information on this topic was obtained from AHA Trustee Services (for AHA members only) and HHS’ Aligning Health Care Industry Security Approaches.

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