Medical Practice Governance: How you Can Ensure Its Effectiveness

Every medical practice is governed in some fashion or another, whether by an individual owner or a formal board of directors. Governance is a difficult job for physicians who are already working long hours providing care to patients. They must find ways to cope with regulatory pressures, stressful payer relationships, sophisticated technologies and rising patient expectations. Fortunately, a competent governance structure can help physicians meet those challenges.

Many Ways to Form a Governing Board

Practices comprising fewer than five doctors are often controlled informally by their founding members. But before you form a governing board, certain questions must be addressed. For example, what's the reason for a board? How might a board help the practice address challenges currently facing it? Will it have a traditional structure, including formal responsibilities, terms of office and bylaws? What powers will it include? Will the board choose the practice's chief executive officer or will the owners and other physicians be willing to turn over control of the practice to the board?

When first establishing a governing board, it's essential that the members understand that their decisions must represent the interests of the entire organization, not those of one individual or a single specialty.

  1. Once you decide to formalize the governance process, you must address a few basic issues:
  2. How frequently should the board meet?
  3. Who should set the agenda and handle minute-taking?
  4. Who will distribute notes to participants?
  5. How do you select a board chairman?
  6. How do you compensate the board or the managing member, recognizing that much of the administrative work will be done outside of "office hours"?

When those items are out of the way, attention should turn to the board's duties in these priority areas: management oversight, quality assurance, financial accountability, and strategic planning.

Management Oversight

If the board will evaluate management's performance, it must have a process that objectively monitors and measures that performance against predetermined objectives. The board should have clear expectations for the chief executive that are expressed in his or her job description. The evaluation should cover how well that person makes decisions, accomplishes agreed-upon objectives, uses capital and other resources, drives human resources, and has the ability to provide vision and direction to the entire organization.

Quality Assurance

A core fiduciary duty of a practice's management is to provide quality care, equitable access and patient safety. To meet the practice's quality measurement and reporting obligations, it must be capable of capturing and reporting data on the value that the practice is providing to patients. It's the job of the governing board to ensure that management fulfills this critical responsibility.

Financial Accountability

Financial management is another prime fiduciary duty of governing board members. Through interactions with management, they must maintain complete financial accountability. As the board approves proposed budgets, it must ensure that they are suited to the practice's strategic plan, financial resources, and financial objectives. To accomplish this, board members must have a solid understanding of financial statements and management.

Strategic Planning

The primary tool that the board should use to steer the practice into the future is a shared vision of the planning process. The process — which should include and may be led by practice management — will identify key challenges and develop goals to meet the challenges, action plans to reach those goals, and monitoring systems to observe their progress.

A well-thought-out strategic plan takes into account the organization's strengths, weaknesses, opportunities and threats. It's founded on its mission, vision and values. A physician practice without a strategic plan will react impulsively to payer demands, government mandates and restrictions, operational calamities, and competitor threats.

Bottom Line

If physicians in a practice take the time to create a governing board that suits their needs, and commit to its consistent functioning, they will meet their challenges more confidently and successfully.

For more information, contact one of our healthcare accountants at (973) 328-1825.