Boards of health systems face an expanding range of concerns, decision-making and subjects, and they are evolving in many ways based on today's governance priorities and challenges.
That's the consensus from experts Celia Huber, senior partner with McKinsey & Co., and Jim King, senior partner, board services practice leader and children's hospitals practice leader at executive search firm WittKieffer. They shared with Becker's their observations and insights regarding healthcare governance priorities and challenges of today; the composition and state of today's health system boards; the board chair role; and the board chair-CEO relationship.
Healthcare governance priorities and challenges of today
Typically, the board is tasked with overseeing management, finances and quality. Per the American Hospital Association, their responsibilities also include setting the health system's strategic direction, establishing major policies affecting the organization, establishing executive compensation, and selecting, supporting, advising and evaluating the CEO.
Amid all of these responsibilities, healthcare affordability and equity remains a challenge for all types of health systems, according to Ms. Huber.
"When it comes to healthcare governance, boards typically have to grapple with questions around the importance of managing financial performance, risk concerns, and most importantly, the mission of the organization," she said. "Effectively advising on all three is key to achieving better outcomes. For academic medical centers, there are often other complexities, since these boards interact with the university's overall governance system, which creates a fourth dimension to consider."
Mr. King, who specializes in advising and identifying senior executives and board leaders for healthcare organizations, said he's also seen boards having more discussions around board succession.
"They're looking at whether they have the right leaders in the room that can become the next chair, the next vice chair, the next head of the finance committee. So they're spending a lot more time looking at, 'What's that pipeline of talent for us in the room?' and 'How are we going to build out a board that can partner with our CEO to achieve the [health system's] strategy?'" he said.
Additionally, boards are focused on C-suite succession, developing that next generation that's going to lead the health system, and technology, according to Mr. King.
"They're trying to get their arms around what's happening with AI," he said. "I think they're putting a lot more focus on challenging their CEO and their team to make sure the health system has a very progressive strategy around technology. How is AI playing into that? I'm hearing in meetings there's been a lot of conversation around making sure the system, if it hasn't already, will quickly create an overall strategy for tech and how that's going to integrate into infrastructure to set the system up for success."
He said boards are also focusing on cybersecurity and ensuring the health system can recruit the right talent in a market where demand for talent is high.
The composition and state of today's health system boards
As the challenges boards face have been evolving, so has the composition of boards. A study published in 2023 found that fewer than 15% of board members overseeing the nation's top hospitals have a professional background in healthcare.
Ms. Huber told Becker's that board membership "now reflects a growing amount of business expertise, in addition to healthcare and community leadership expertise. This changing composition may help health systems better manage some of the challenges they face today, like healthcare labor inflation, shifting regulatory requirements, and increased expenses from specialty drugs and new treatments."
Mr. King also pointed to a shift in the areas board members come from. A decade ago, many board members came from the market or markets the health system was serving, he said.
"There was a lot of familiarity because people tended to be business leaders in the community, and if they had clinical leaders on the board, they were practicing in or working in those markets. You would see local and regional composition on the board more," he explained.
But he has seen that shift and cited a discussion he had last month with the CEO of a large regional health system that has grown through acquisition.
"Their historic board was solid. Everyone came from the service area where they started. But they're at a point now where the CEO says, 'We're growing fast. We are dealing with so much rapid change. I don't have enough leaders in the room who are savvy when it comes to business, who bring senior leadership at complex organizations that actually understand how to work with the board,'" said Mr. King.
So when it comes to bringing in new board members in the coming years, the CEO asked him to cast a wider net outside of the system's service area and to bring in solid business leaders from well-branded companies that have navigated their own transformation, and board members who understand risk, are tech savvy, and "know the difference between governance and management."
Mr. King said health systems are also looking closer at how to bring more women and people of color into the boardroom.
The board chair role
Board chairs, lead directors, and committee chairs have always had demanding roles. However, the position at the top of the health system has only gotten tougher, according to Mr. King.
"Being a board chair is not for the faint of heart. It's a big job. You have to make sure whoever is the chair really does have that capacity to step in and provide that leadership," he said.
Ms. Huber also pointed to the importance of the role.
"The committee chair roles are in many ways increasingly important, due to evolving requirements related, for example, to things like board nominations in governance committees, and compliance and risk requirements in audit committees," she said. "And the chair role remains pivotal in setting the agenda, ensuring all voices are heard, and encouraging debate where needed. Many chairs are also reflecting on how to be more effective facilitators of the entire board process."
Part of the board chair's role involves a relationship with the health system's CEO. Mr. King said this relationship should involve trust between both parties and a true partnership, where the board chair and CEO are able to ask each other tough questions and call each other out when needed.
Ms. Huber said the changing role of the board has led to closer chair-CEO relationships. "Over the last 20 years, many boards have evolved to having a greater focus on collaborative oversight and strategic direction-setting of an institution, along with the management team, on board-level issues like risk, strategy, sustainability, and talent."
This was amplified during the pandemic, when boards became more involved in strategic priorities like supply chain and labor shortages. "That closer relationship has remained in some institutions, and is often reflected in the chair-CEO relationship," Ms. Huber said.
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