The Spring 2005 issue of Great Boards will be out in a few weeks. We're working on a story about how boards can play a leadership role in the campaign to save 100,000 lives by 2006 by improving hospital quality and safety. We're also planning stories on innovative ways for boards to get involved in strategic planning, and on why taking tax exempt status for granted could be a risky move.
Meanwhile, the current issue with stories on Chief Governance Officers, "directors' rounds," and a best practices checklist for the board and CEO relationship is online at www.GreatBoards.org.
A lot has happened in the governance and healthcare worlds since our last issue. Here's a run-down. See more details and links below:
In an interim report issued in March, a study panel convened by Independent Sector offered 14 recommendations for enhancing not-for-profit governance, many of which resemble the requirements of the Sarbanes Oxley Act. The Senate Finance Committee asked Independent Sector, a coalition group of organizations interested in philanthropy, to conduct the study and identify ways to "strengthen governance, ethical conduct and accountability" of charitable organizations. Recommendations include:
The Panel plans to hold nearly a dozen field meetings across the country in March and April to hear comments and suggestions from members of the nonprofit community. For the report, go to Independent Sector's web site, http://www.independentsector.org/.
Directors' Cut: Predictions that the Sarbanes Oxley Act would be applied to not-for-profits may be coming true. Boards that are acting now to assume greater accountability and institute increased transparency will be well positioned.
Debate over the future of physician-owned specialty hospitals is moving to center stage. Congress placed a moratorium on the development of physician-owned specialty hospitals for 18 months until June 8, 2005. Responding to concerns raised by full-service community hospitals, lawmakers are raising questions about the rapid growth of these facilities, the potential for abuse of physician self-referral, whether specialized hospitals might be an unfair form of competition, and the impact these hospitals would have on the health care system as a whole, and hospitals' safety net services, specifically.
The Senate Finance Committee held hearings March 8 to examine a new report from the Medicare Payment Advisory Committee (MedPAC) showing that specialty hospitals don't save Medicare money and take patients who are more profitable under Medicare than average. MedPAC recommended extending the moratorium until Jan. 1, 2007. The MedPAC report is available at www.medpac.gov under "publications," then "reports."
Opening the hearings, Sen. Chuck Grassley signaled his sentiments, saying, "Doctors who refer patients to these places have a financial conflict of interest. Not only do the physicians get a fee from Medicare for performing surgery on the patient, but they also get a fee for use of the hospital -- which they own. And they get a share of the hospital profit, too, so the more profitable, the more money they get. This interest in profit, the bottom line, may lead physicians to ‘steer' patients. Physicians may choose where to send a patient based on whether or not they think that patient will profit their hospital. That's troubling." See the testimony at http://www.senate.gov/~finance/sitepages/hearing030805.htm.
Meanwhile, in testimony before the House Ways & Means Subcommittee on Health, hospital leaders urged Congress to close a loophole in current law that enables physicians to refer patients to limited-service hospitals that they own, according to AHA News. William Brien, M.D., director of orthopedic surgery at Cedar-Sinai Medical Center in Los Angeles , and Jon Foster, president and CEO of Saint David's Healthcare Partnership in Austin , TX , said physician-self referral represents a serious conflict of interest that could compromise patient care. "If the continued growth of these limited-service hospitals is allowed, it will have a profound impact on overall patient access to life-saving care," Brien said, adding that the facilities "should not even be called hospitals -- but rather limited-access facilities." For the testimony, go to http://waysandmeans.house.gov/hearings.asp?formmode=detail&
hearing=386&comm=1.
Directors' Cut: Boards needs to be informed and take part in advocacy efforts, which will grow more pointed as the moratorium expiration nears.
In separate advisory opinions issued in February, the Department of Health and Human Services' Office of Inspector General said it would not impose sanctions on arrangements proposed by two hospitals to pay certain physician groups a share of the cost savings achieved by specific changes in the respective group's cardiac catheterization lab or operating room practices.
The OIG analyzed the arrangements under the anti-kickback statute and the prohibition on paying a physician to reduce or limit services to a patient under his or her care. The OIG said the circumstances and safeguards of the proposed arrangement posed a low risk of patient or program abuse. Key elements included a carefully drawn methodology that links incentives to demonstrable quality improvements, not just cost cutting.
For more information, go to http://www.oig.hhs.gov/w-new.html.
Directors' Cut: With the federal government‘s new open-mindedness, many hospitals will want to review opportunities for enhancing quality and efficiency through well-designed gain-sharing programs. Ask about gain-sharing at your next board meeting.
Fairness opinions, which are used by boards of directors and boards of trustees to help support decision making about major transactions, are coming under higher scrutiny these days from many sources, says a new report from Cain Brothers. Recent trends have raised questions about the standard practice of using the investment bank that assists with an organization's merger and acquisition transaction to also write the related fairness opinion. Overall attention to corporate responsibility as a result of the Sarbanes-Oxley legislation, recent interest in the general topic of fairness opinions by the National Association of Securities Dealers, and nonprofit regulatory cases are all signals that boards need to be careful in using and contracting for fairness opinions.
Directors' Cut: Worth reading: A new volume in Cain Brothers' Strategies in Capital Finance series that describes what fairness opinions are and what they are not, when boards may want to obtain one, and when boards may want to obtain a second one or one from a qualified expert that is not otherwise involved with the transaction under consideration. "Fairness Opinions -- Is the One You Receive Beyond Dispute?" can be downloaded today at www.cainbrothers.com.
Hospitals in the only state in the nation with minimum nurse-to-patient staffing ratio rules are having trouble meeting the requirements, despite increased pay and intense recruitment efforts. More than half of the hospitals inspected for alleged violations by state officials do not comply with the rules, according to a Los Angeles Times investigation of recent state inspection reports. The Governor has tried to delay the implementation of even more stringent standards, which would drop from a 1:6 to 1:5 nurse-to-patient staffing ratio in medical-surgical units.
However, a Sacramento Superior Court Judge ruled in March that that the California Department of Health Services overstepped its authority in issuing emergency regulations in November to keep the ratio at 1:6. The California Hospital Association plans to appeal the ruling, saying the 1:5 ratio would jeopardize patient access to care by "forc[ing] hospitals to choose between closing beds and eliminating patient care services." The lower ratio would require an additional 4,000 nurses at a time when there already are 14,000 vacant positions in California hospitals.
Directors' Cut: California 's experience with nursing staff ratios so far suggests other states should be wary about the practicality of improving similar rules. For details, go to
http://www.californiahealthline.org/track/url.cfm?u=18612&
rurl=www%2Ecaliforniahealthline%2Eorg%2Findex%2Ecfm%3FAction
%3DdspItem%26itemID%3D108199%26classCD%3DCL350.
The Agency for Healthcare Research and Quality (AHRQ) has announced a new tool to help hospitals and health care systems evaluate employee attitudes about patient safety in their facilities or within specific units. The survey on patient safety culture--which was released in partnership with Premier Inc., an alliance of not-for-profit hospitals and health care systems; the Department of Defense; and the American Hospital Association--is designed to allow hospitals and health care facilities to measure organizational conditions that can lead to adverse events and patient harm, officials said.
According to AHRQ, assessments of patient safety culture typically include an evaluation of a variety of organizational factors that have an impact on patient safety, including: awareness about safety issues, evaluating specific patient safety interventions, tracking changes in patient safety over time, setting internal and external benchmarks, and fulfilling regulatory requirements or other directives.
The survey was pilot tested with over 1,400 hospital employees from 21 hospitals in the United States to ensure that the items were easily understood and relevant to patient safety in a hospital. The survey can be found online at www.ahrq.gov/qual/hospculture.
Directors' Cut: "Culture eats strategy for lunch," it's often said. Conversely, a culture that supports continuous improvement and patient safety helps achieve those goals. As culture measurement tools prove themselves, they deserve a place on the board's quality dashboard.
Approximately 1400 organizations have now enrolled in the Institute for Healthcare Improvement's campaign to save 100,000 lives by instituting proven best practices for quality care and patient safety.
You can access the 100K Campaign web site at: http://www.ihi.org/IHI/Programs/Campaign/Campaign.htm for more information. New content is being added continuously.
One of the campaign's recommended approaches involves rapid response teams," which intervene when patients first show signs of deterioration, not after they've stopped breathing. The Commonwealth Fund has published a case study on one hospital's dramatic results with the teams (http://www.cmwf.org/publications/publications_show.htm?
doc_id=256848#casestudy).
According to the report, only 17 percent of patients survive an in-hospital cardiac arrest, yet many exhibit measurable signs of clinical deterioration preceding the event. Following procedures pioneered by several hospitals in Australia , nurses at 489-bed Missouri Baptist Medical Center in St. Louis are empowered to call a critical care team when a patient shows signs of clinical deterioration.
After two months of full implementation, calls to the rapid response team reached about 70 to 80 per month. The team's average response time is one and a half minutes. Respiratory problems are the most common reason the team is called. Emergency calls for respiratory arrest and similar crisis events have declined by 60 percent and cardiac arrests have declined by 15 percent, suggesting that the approach can help to avert adverse events.
As of June 2004, the survival rate among patients assessed by the rapid response team was 81 percent. The cost-benefits of the initiative, including its effect on the overall hospital mortality rate, will be evaluated after one year's experience. Anecdotal feedback from family members indicates that they are impressed and gratified by the efforts that have been made on behalf of patients.
Directors' Cut: Board Quality Committees should discuss whether their hospital should enroll in the 100K Campaign, and if it has, how the board can learn about support the initiative.
Providing adequate on-call coverage by specialists in the emergency department has become a serious challenge for many hospitals. Required by state and federal law to assure access to specialty services, hospitals have seen the on-call crisis intensify as a result of increasing visits to emergency departments and a lack of reimbursement for uninsured, under-insured, and self-pay patients.
With funding from the California HealthCare Foundation, The Performance Alliance, in collaboration with the University of Southern California Center for Health Financing, Policy and Management, have issued a report on why the problem is occurring, how emergency departments are coping, and possible strategies for improving on-call coverage. Concluding that no single solution will resolve the many on-call panel issues, a variety of strategies are needed at both the state and individual hospital level, including:
Directors' Cut: As the traditional hospital-physician social contract comes undone, conflicts over on call ED coverage are becoming more common. There are no easy answers, but at the end of the day, the hospital's responsibilities for quality care and community service need to be fulfilled somehow. For some fresh thinking on this thorny issue, see this report at http://www.chcf.org/topics/view.cfm?itemID=108558.
McDermott Will & Emery has published an article on "A General Counsel's Guide to Avoiding the Healthcare Antitrust Minefield." The article discusses a report on competition issued by the FTC and the Antitrust Division of the Justice Department. The article points out the pitfalls and best practices that health care industry general counsels should use to reduce their clients' exposure to antitrust issues. Find the article at http://www.mwe.com/info/news/ots0305a.htm.
Although the annual increase in U.S. health spending slowed in 2003 to 7.7%, annual spending of about $1.7 trillion passed 15 percent of the U.S. gross domestic product for the first time, reaching 15.3 percent of GDP. The data appear in the January/February 2005 issue of Health Affairs, the leading health policy journal. See http://content.healthaffairs.org/cgi/content/abstract/24/1/185.
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Barry S. Bader, Bader & Associates
12225 Seline Way, Potomac MD 20854, 301-340-0903
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