Physician Issues
How many physicians should a hospital board have?
Before asking how many, first ask why the board wants members with competence in medicine.
A hospital or health system board benefits from having physician members who help the board understand clinically related issues and the perspectives of practicing physicians and their patients. From their practices, they bring a "real world" context to the board's work and help the board make better informed decisions.
A physician board member has the same fiduciary responsibility as every other trustee. Voting physician board members must make decisions based on the best interests of the organization, not the interests of medical staff members. With the exception of the president of the medical staff, physicians on the board may reflect but not do not "represent" the opinions of the medical staff.
The medical staff president, however, is elected to represent the medical staff, and therefore, we believe this individual should be a non-voting board member. (If the staff president currently is a voting member and no problems with this have occurred, there's probably no need to rock the boat. Maintain the status quo, but be aware that a voting medical staff president has a built-in conflict of interest that down the road, could be problematic.)
Next, ask what kind of physicians make good board members. Physicians elected to a hospital or health system board should be judged by the same criteria as any other board member. Among those qualifications, several are paramount: they need to be committed to the organization's mission and values, think strategically, communicate effectively, understand the difference between governance and management, and follow the board's rules of conduct, including its confidentiality and conflict of interest policies.
All that said, what's the appropriate number or percentage of qualified physicians on a hospital board? We believe an appropriate proportion of physicians for most hospital boards is around 15 percent to no more than 25 percent. The most recent survey by The Governance Institute, conducted in 2000 and published in Value Added Governance, indicates that the median hospital board had 12 members, including two medical staff members. Among the survey respondents:
- 56 percent of hospital boards have 1-3 physician members
- 26 percent have 4 or more physician members
- 18 percent have no physician members
As an upper limit, keep in mind that the Internal Revenue Service says no more than 49 percent of a tax exempt organization's board should be "insiders," which includes management staff as well as physicians who have privileges at the hospital.
How should physician members of a hospital board be selected?
Physicians should be genuinely engaged in the leadership and decision making of the hospital -- and one part of that involves governance. Generally, the medical staff should have one official seat on the board, which may be a voting or non-voting position for the chief of staff, to give it a "voice" on medical policy issues and to provide direct access to the board. Some boards have additional ex-officio seats for the chief of staff-elect, past chief, or particular medical groups, but we do not recommend this approach. Rather, we believe that additional physicians should be selected like any other member -- for the particular skills and backgrounds they would bring. Some hospitals ask the medical staff executive committee (MSEC) or a special committee broadly representative of active physicians to make recommendations when a "physician seat" becomes vacant. The committee recommends at least two physicians for every seat, and the board chooses one (or if it disapproves, neither). Some boards require that all nominees including physicians be interviewed before their election, to be sure they understand the expectations and will be a "good fit."
Should a member of the medical staff serve on the executive compensation committee?
No. All members of the executive compensation committee should meet the board's definition for an independent director. In no way should they have any significant, or material, economic relationship with the organization. If they do, it is a conflict of interest that could be perceived to influence their decisions on CEO pay and benefits. A member of the medical staff is an "inside," non-independent director, and therefore should not be named to this committee.
What are "disabling guidelines"?
Disabling guidelines describe conflicts that are, or could appear to be, so material that an individual should not serve on the board. Each organization should develop its own guidelines; one size does not fit all. Here are examples from one institution:
"Under the following circumstances, a director should consider resigning, or may be asked to resign in the best interests of the organization:
• Repeated, intentional failure to disclose a conflict of interest
• A single but significant, intentional failure to disclose a conflict of interest
• Intentional violation of the organization’s confidentiality policy or code of conduct
• Engaging in any external conduct that the board construes
may adversely impact the organization
• Serving as a board member, partner, investor, or senior executive of a direct competitor to the corporation or its subsidiaries (not to be construed as barring physicians whose practices offer routine services, such as in-office laboratories)
• Speaking publicly against positions of the board or the best interests of the hospital
• Serving as an employee of the organization, or having an immediate family member who is a senior executive officer
for the organization
• Receiving direct compensation for ongoing services provided to the organization (i.e., serving as a “de-facto employee”)
• Serving as an owner, partner, employee, board member,
or investor of a vendor (professional services, financial
institution, or other business) receiving a substantial amount of revenue from the organization—which we define as the greater of $200,000 or 2 percent of the annual revenues of that vendor in the preceding or current
year.
What if the medical staff elects a chief of staff who competes with the hospital?
The board's conflict of interest policy should establish "disabling guidelines" that define conflicts so material that they would disquality a member from serving. Being an investor, owner, partner or principal of a direct competitor presents such a conflict. If the chief of staff is an ex-officio member of the board, then the bylaws should clearly state that if the chief is direct competitor, then the medical staff msut designate another physician to serve in his or her place.