The document provides an introduction to the role and responsibilities of healthcare boards of trustees. It discusses the typical duties of boards which include governance, oversight of the CEO, financial resources, budgets, and performance. For healthcare boards specifically, their unique duties include fiduciary responsibility for quality of patient care, regulatory compliance, and operating within governmental rules. The board has gravity of responsibility and can be held individually liable for lapses in safety, quality or compliance. The board must set the tone from the top for these issues. The document then reviews healthcare system operations including the value chain and goals to improve outcomes, safety, staffing and financial performance. It provides historical context for how boards of directors developed from early European examples like the Catholic Church,

1. The Role of Healthcare Boards of Trustees
An Introductory Module
Developed By:
The American College of Healthcare Trustees
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2. Purpose
2
The purpose of this presentation is to
provide an introduction to the role and
responsibilities of healthcare boards of
trustees.

3. Agenda-unit one
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1. Introduction
2. Duties
3. Gravity of the Board’s responsibility
4. Healthcare System Operations
5. Agency
6. Historical Perspective

4. Introduction
• Overview of Boards
• Typical Duties of Boards
• Unique Duties of Healthcare Boards
• Roles on a Board
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5. Introduction: Overview of Boards
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• A board of trustees is a body of elected or appointed members
who jointly oversee the activities of a company or organization.
• Other names include board of directors, board of managers, board
of regents, board of governors, and board of visitors.
• A board's activities are determined by the powers, duties, and
responsibilities delegated to it or conferred on it by an authority
outside itself. These matters are typically detailed in the
organization's bylaws. The bylaws commonly specify the number
of members of the board, how they are to be chosen, and when
they are to meet.

6. Introduction: Typical Duties of Boards
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• Typical duties of boards of directors include:
• Governing the organization by establishing broad policies and
objectives including risk management
• Selecting, appointing, supporting and reviewing the performance of
the chief executive
• Ensuring the availability of adequate financial resources
• Approving annual budgets
• Accounting to the stakeholders for the organization's performance
• Setting the salaries and compensation of company management
• Strategic Planning

7. Introduction: Unique Duties of Healthcare
Boards
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• Unique duties of boards of directors of healthcare
organizations include fiduciary responsibility for:
• Quality of patient care
• Regulatory compliance
• The operation of healthcare Boards of Directors often influenced by
the rules of governmental agencies like The Joint Commission, CMS,
and state health departments

8. Gravity of Responsibility
• Courts have found Members of the Boards of
Directors of Healthcare Institutions
individually liable for lapses in
– Patient safety
– Compliance with financial regulations
• It is worth referring to this government website
– http://oig.hhs.gov/fraud/docs/complianceguidance/Corporate
%20Responsibility%20and%20Health%20Care%20Quality%20
6-29-07.pdf

9. Directors have a fiduciary
responsibility for quality and safety
• Board Members have both an oversight role and a
decision making role and, in non-profits, must insure
adherence to organizational mission.
• Board Members must set the tone from the top and
can not delegate their responsibilities to anyone else
• Board should require reports from the medical staff,
CEO and Chief Medical Officer, and nursing and
hospital safety committee
• Must be knowledgeable enough to ask right
questions

10. Compliance
• Compliance is a topic of other courses by our organization
developed by major authorities in the field including our own
officers and directors.
• Baker and Peterson, in their treatise, “Post-Caremark
implications for HealthCare Organization Boards of Directors”
published in the Seattle Journal of Public Justice in 2004 make
some important points:
– Concern over waste, fraud, and abuse is a top concern of Justice
Department
– The Government is aware of economic benefits of qui tam
(whistle blower suits)

11. Baker and Peterson continued
• Executives run the day to day business but
Board Members have an oversight function.
– Must have requisite knowledge of the business
(hence the need for our organization)
– Must have a monitoring structure in place
– Members of both for profit and not for profit
corporations have the responsibility for
• Duty of Care

12. Office of the Inspector General
• Baker and Peterson quote the Office of the Inspector General (OIG) as
stating that the duty of care requires that Board Members conduct their
business “in good faith” and with a level of care that an ordinarily prudent
person would exercise in like circumstances and in a manner that she
reasonably believes is in the best interest of the organization. Liability can
stem from a Board decision considered ill advised or negligent or failure to
prevent a loss from failure to act where due attention may have prevented
the loss. Liability usually arises from the business judgment rule which
states that the decision must be the product of a
• process that was deliberated upon in good faith or was otherwise
rational. Directors may be exempt from liability under the business
judgment rule if the decisions were made in good faith, the Board
Member was disinterested(i.e. had no conflict of interest) was well
informed, and the Board Member thought the decision was in the best
interest of the organization.

13. OIG continued
• Baker and Peterson further describe the liability of Board
Members as outlined in the Caremark litigation. It was found
that the Board Members failed to address violations of federal
and state law related to Caremark’s employees violating anti-
kickback statutes, using illegal billing practices, billing for
medically unnecessary and excessive services, illegal waiving
of co-payments, and inadequate record keeping at their
pharmacies. While the executive team and their managers
and other associates are responsible for the day to day
activities of the corporation, Board Members are responsible
for maintaining adequate monitoring with a robust
compliance plan. They must have a working knowledge of
healthcare law.

14. Introduction: Roles on a Board
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• Director - a person elected or appointed to serve on the board of an
organization, such as an institution or business.
• Inside director - a director who, in addition to serving on the board,
has a meaningful connection to the organization . As an example, an
officer
• Outside director - a director who, other than serving on the board,
has no meaningful connections to the organization
• Executive director –in a not for profit organization, the officers such
as president, vice president, secretary and treasurer are elected from
among the membership and are voluntary or receive a small stipend
whereas the executive director is the paid administrator that
provides full time duties and continuity

15. Board Duties
• Fiduciary Responsibilities
• Financial Oversight
• Patient Safety
• Regulatory Compliance
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16. Board Duties: Fiduciary Responsibilities (1/2)
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• The term fiduciary refers to a relationship in which one
person has a responsibility of care for the assets or rights
of another person. A fiduciary is an individual who has
this responsibility. The term "fiduciary" is derived from
the Latin term for "faith" or "trust."
• In a organization, the board of directors, as a body, has a
fiduciary responsibility for the decisions they make with
regard to organizational assets and the rights of
stockholders or the community in a not for profit.

17. Board Duties: Fiduciary Responsibilities (2/2)
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• The fiduciary responsibilities of board members includes:
• Avoiding conflicts of interest
• Acting in the interest of the company rather than the
member's personal interest
• Providing oversight to assure that all organizations
activities are transacted legally
• Making decisions to protect the assets of the
organization and the rights of stockholders or the
community

18. Board Duties: Financial Oversight
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• Financial Oversight refers to the supervision of financial
practice and policy implementation, as well as the review
and monitoring of financial transactions and reports.
• The basic requirements include:
• Preparation of a Budget Plan (including anticipated revenues
and expenses)
• Processing of Financial Transactions
• Financial Review including audits
• Internal Controls
• Strategic Planning

19. Board Duties: Patient Safety
Source: AMA “Strategies for Leadership: Advancing the Practice of Patient- and Family-Centered Care .”
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• Boards have a duty to ensure patient safety by:
• Focusing care to be “patient-centered”
• Narrowing the range in variation of care provided to patients
• Involving patients in decisions concerning their health care
• Using safety criteria from governmental and non-governmental
agencies to continually evaluate and improve their institution’s
performance
• Creating a “culture of safety” that focuses upon the prevention
and avoidance of harm to healthcare system patients, visitors,
and staff

20. Board Duties: Regulatory Compliance
Source: AMA website, Regulatory & Compliance Topics, http://www.ama-assn.org/ama/pub/physician-resources/legal-topics/regulatory-
compliance-topics.page? 20
• Boards have a duty to ensure regulatory compliance with:
• Health care organization license requirements
• Health Insurance Portability and Accountability Act (HIPAA)
• Affordable Care Act (ACA)
• Americans with Disabilities Act (ADA)
• HHS Guidelines for Limited English Proficiency (LEP) Patients
• Federal Trade Commission (FTC) “Red Flags Rule”
• Stark Law Rules

21. Healthcare System Operations
• The value chain
• Goals
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22. Healthcare System Operations: The Value
Chain
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• Inputs: Doctors, administrators, nurses and other
associates, facilities, equipment, funding
• Processes: Patient acceptance, processing, observation,
treatment, discharge, billing, organizational planning,
public relationship management
• Outputs: Patient healthcare outcomes, institutional
knowledge

23. Healthcare System Operations: Goals
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• Reduce morbidity and mortality
• Eliminate “never events”
• Reduce ambulance diversions
• Avoid bottlenecks and waiting times
• Improve staffing solutions and quality of care
• Increase patient throughput and revenue
• Retain staff and reduce overtime expenditures
• Improve financial performance

24. Historical Basis for Boards of Directors
http://www.hofstra.edu/pdf
/law_lawrev_gevurtz_vol33
no1.pdf
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This presentation may not be duplicated, shared, published, or otherwise disseminated
without the expressed written consent of the American College of Healthcare Trustees, Inc.

25. Corporate Boards have basis in law
and history
• Gevurtz points out that a Board-centered form of corporate
governance is well established in the law
• Predicated on the idea that:
– distributed stockholders require central management to
run the company. The same would be true of a community
in a not for profit
– Board centered governance is based on the (contested)
concept that groups make wiser decisions than individuals
– Agency-Board must insure that officers maximize
stockholders’ value (or stake holders’ value)
• History helps us understand origins of modern Director

26. Franklin Gevurtz- Hofstra Law
Review
• Common in early medieval Europe to have a Chief Executive
Officer and Board of Directors. The practice was Prevalent in:
– The Church
• 1059 Nicholas decreed that College of Cardinals would
elect the Pope. Debate over supremacy of College vs.
the Pope in medieval times is relevant to issues of
corporate governance today.
– Guilds and Town Councils were analogous to the Board of
Directors whereas the citizens as a whole were analagous
to the stockholders or community and of course the towns
officers analogous to the executive team.

27. Hofstra Law Review continued
• The 1505 charter of the Company of Merchant
Adventurers called for the election of “the
most sadd [sic] discreet and honest persons
• Similar Descriptions often used for the most
appropriate members of British town councils
• The Ipswich Town Council and other early
medieval European town councils
demonstrated parallels to present model of
corporate governance

28. Hofstra Law Review
• town councils could have had the executives (Bailiff, coroner, etc) run the
town under the general supervision of assemblies of the entire town but
chose to have a town council oversee the executives. Potential reasons for
this are that many members of the town had no interest or no aptitude for
participation. A more nefarious explanation was that the wealthy land
owners wanted to keep power to protect their own interests. This would be
analogous to large stockholders in a corporation reserving seats for
themselves or their allies. If that were the case, one would expect to see
varied numbers of members on the various town councils whereas, in
reality, town councils tended to have twelve members, or multiples or
fractions of twelve, arguing for a theory of government rather than the
number of luminaries in the town accounting for the number of town
council members (analogous to governors or directors in today’s
corporation

29. Gevurtz
One task assigned to town councils was to “render judgments”
and reflected the belief that the collective wisdom of a group
often made better decisions than an individual. In fact, the
modern Board Member is expected to wield authority through
the group as a whole rather than as an individual. In truth, this
is often not the case and prominent Board Members often
wield great power. The author states that the need for a town
council (think Board of Directors) goes back to a doctrine in
Roman Canon Law, “quod omnes tangit ab omnibus
approbetur” meaning that which touches all must be decided
by all. Of course, it can be disputed that groups make wiser
judgments than individuals. Trial by jury seems to represent a
trust in group judgment

30. http://www.hofstra.edu/pdf/law_l
awrev_gevurtz_vol33no1.pdf
• The electoral college (analogous to Board of Directors, town council) seems
to represent a compromise between the popular vote aka will of the
people (vox populi) or town as a whole and the benevolent despot (Plato).
The tension between Alexander Hamilton and Thomas Jefferson is well
known with Hamilton fearing the excesses of the French revolution and
preferring a rapprochement with Great Britain and a return toward
monarchy and Jefferson fearing the concentration of power in the hands of
an individual (unless he were that individual). The composition of the town
council was not really determined in a democratic fashion with existing
members electing new members as vacancies arose. Similarly, members of
the Board of Directors of a modern corporation are typically appointed by
the officers of the corporation

31. http://www.hofstra.edu/pdf/law_l
awrev_gevurtz_vol33no1.pdf
• Gevurtz notes that the parallels between the modern board
and historical counterparts is incomplete. The legal issue about
whether Boards appoint or can recall officers has now been
resolved in favor of the Board, although de facto deference to
the CEO is often the case. Such tension between monarchs
and the three estates (nobility, clergy, and burghers) was high
in 18th century Europe. While councils often represented
themselves rather than the general citizenry, the modern
Board is meant to represent the stock holder and solve the
agency issue. That is, the Board is intended to insure that the
officers keep the stockholders best interests at heart. History
buff’s attention is called to Gevurtz scholarly monograph

32. The Enlightenment in Europe
1700-1800
• The concept of what touches all should be decided
by all can be extended to the upheavals in Europe
and to the New World during modern times
• The absolute power of the monarch was questioned
• When it wasn’t practical for the entire
population(stockholders or community) to make
decisions, they should be represented by an elected
body such as the Board of Directors, Board of
Governors, or Board of Trustees (the names have
evolved over the years.

33. The Board Member’s Demeanor
SADD
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This presentation may not be duplicated, shared, published, or otherwise disseminated
without the expressed written consent of the American College of Healthcare Trustees, Inc.

34. SADD
• Middle English for grave or serious person
• Natural extension to gravitas
– Merriam Webster dictionary
• Definition of gravitas-high seriousness in bearing or
treatment of a subject
• Examples of gravitas
– “the new leader has an air of gravitas that commands
respect”
– “the comic actress (sic) lacks gravitas for dramatic roles
• Origins of word gravitas- from Latin

35. “How to command respect and get your gravitas
on” by David Peck in Huffington Post
http://www.huffingtonpost.com/david-peck/six-
ways-to-command-the-r_b_2866860.html
• Be poised and assured in the
value of your contribution
• Use great judgment about using
assertions, questions, and silence
• Avoid verbal habits such as “um”
• Be confident and kind but not
arrogant
• Watch your body language
– 80% of communication non-verbal
• Observe yourself and the
situation as you participate
Gravitas is not a mask but a way of
improving your efficacy

36. Gravitas or stature
• David Peck, in his useful post, http://www.huffingtonpost.com/david-
peck/six-ways-to-command-the-r_b_2866860.html indicates that gravitas
sometimes takes effort to cultivate. That it is a useful trait in a board
member is self-evident. He indicates that it facilitates having an influential
voice at “the big table”. He advocates being poised and assured in the
value of your contributes. You don’t need to prove yourself. One should
listen to the thoughts of content experts without being awed by them.
Peck advocates using great judgment about assertions, questions, and
silence. Be an active listener during silences and don’t be distracted by
your smart phone or ipad. Keep assertions short and in context, and
preferably about the present or future, not the past. Don’t restate others’
ideas. Avoid mannerisms or filler words such as “…at the end of the day…”
Being confident and kind but not arrogant is salutary on the face of it.
Using proper body language is key to establishing an effective presence,
gravitas. Monitor your performance as you participate so you can make
mid-stream corrections.

37. The Agency Issue
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This presentation may not be duplicated, shared, published, or otherwise disseminated
without the expressed written consent of the American College of Healthcare Trustees, Inc.

38. The Agency Issue
• The agency issue arises because the Board of
Directors is established to insure that the executive
team either maximizes the wealth of stock holders or
increases their value
• Executives may not be honest brokers if they act to
enhance their own interests instead of that of the
shareholders.
• In a for profit corporation, assets =owners equity +
liabilities. In a not for profit, replace owners equity
with community benefit

39. Agency Issue continued
• If the officers act in a fashion that would
increase their compensation or perks or
prestige rather than benefit the corporation’s
stakeholders (stockholders in a for profit,
community in a not for profit) the Board has a
fiduciary responsibility to identify and stop it.

40. A sometimes daunting
responsibility
• Even very experienced Hospital Board
Members may at times find their
responsibilities daunting
• The American College of Healthcare Trustees
(ACHT) was founded to support our members
in their efforts at wise governance.

41. The next slide has recommendations
about questions to contemplate
Contact:
David Levien, MD, MBA, FACS
Chief Executive Officer
American College of Healthcare Trustees
Tel: 443-844-9236
Email: dlevien48@gmail.com
41
This presentation may not be duplicated, shared, published, or otherwise disseminated
without the expressed written consent of the American College of Healthcare Trustees, Inc.

42. Questions to contemplate
• Am I providing first rate oversight to the
executive team and medical staff with regard
to:
– Quality of care and the patient experience
– Compliance with government regulations
– The financial health of our institution
• Is gravitas important? Am I leading effectively?
• Are there gaps in my knowledge I would like to
fill?