NEW ISSUE OF GREAT BOARDS NEWSLETTER NOW AVAILABLE
The Governance Institute and the Joint Commission are co-sponsoring a new seminar on "Ensuring Patient Safety: The Role of Leadership," on "November 15, 2005 in Phoenix Arizona. Topics include national governance trends and strategies to drive improved patient safety, a healthy organizational culture, and continuous governance improvement. Speakers include Barry Bader of Bader & Associates; Robert Charles of North Star Advisors; Guy Masters of The Camden Group; Leo Brideau of Columbia St. Mary's in Milwaukee; and Russell Massaro, MD, of JCAHO. For a program brochure, go to http://www.greatboards.org/resources/education.asp.
In December, Barry Bader and Maulik Joshi, President of the Delmarva Foundation, co-lead a session at the National Forum on Quality Improvement in Health Care, December 11-14 in Orlando, FL. Entitled "Hospital Boards: No Pain, No Gain," the interactive session highlights the practices board can use to add organizational value as they carry out their responsibility to oversee quality of care and patient safety. For a brochure, go to www.ihi.org.
The IRS and Department of the Treasury have issued proposed regulations on the requirements for exemption under Internal Revenue Code section 501(c)(3). The proposed regulations, which amend existing regulations, add examples to illustrate the requirement that an organization serve a public rather than a private interest. The proposed regulations also provide guidance on factors the IRS will consider in determining whether a 501(c)(3) organization that engages in one or more excess benefit transactions described in section 4958 will continue to be recognized as exempt under section 501(c)(3). Comments on the proposed regulations and requests to speak at a public hearing are due by December 8, 2005. For a copy of the proposed rules, go to http://www.irs.gov/charities/article/0,,id=147429,00.html.
The influential Fitch Ratings, which evaluates the credit worthiness of corporations issuing debt, has issued a report saying that not-for-profits should pursue not just the "easy to implement" provisions of Sarbanes-Oxley (SOX) , but all the provisions, including controversial Section 404, which calls for costly audits of financial controls. When it assesses charitable organizations, Fitch plans to probe governance practices more deeply based on SOX requirements.
In future reviews, Fitch says it plans to ask about the board audit committee's makeup, processes, and policies, and whether the board requires rotation of the audit firm or lead partner, which SOX mandates every five years. Fitch will ask if the organization plans to disclose quarterly and annual audited financial statements to bondholders, as most large, publicly owned companies do, and if it plans for the CEO and CFO to certify the statements, as SOX requires. Fitch also will inquire whether the provider plans to adopt Section 404, to what extent, and if not, how management and the board assess internal controls over financial reporting.
For a copy of the Fitch report, go to http://www.fitchratings.com/corporate/reports/
report_frame.cfm?rpt_id=246754. (If that doesn't work, go to http://www.fitchratings.com/corporate/index.cfm, enter Sarbanes in the search field, and choose "Sarbanes-Oxley and Not-For-Profit Hospitals: Increased Transparency and Improved Accountability.")
A new report from Moody's notes that hospitals are once again developing more tightly integrated relationships with physicians (a subject we address in the Fall issue of Great Boards), and Moody's expects hospitals can benefit from these arrangements -- if they are financed and managed appropriately. The report highlights eight forces driving closer hospital-physician ties, six types of arrangements, and the key factors Moody's will evaluate in determining whether the arrangements affect a hospital's bond rating. For example, Moody's will consider the extent to which a joint venture with physicians will siphon existing patients from the hospital, or conversely, if it will attract new patients and therefore be accretive to revenues.
For a copy of the report, go to www.Moodys.com.
In a much watched shareholder suit charging the Walt Disney company's board was negligent in overseeing the hiring, compensation and severance for deposed President Michael Ovitz, a Delaware court absolved the directors of liability because they met the standards that existed in 1995, when Ovitz was hired. The fact that the directors acted in good faith, having nothing personal to gain, helped their case.
But the judge said in the future, corporate boards could expect to be held to today higher expectations and best practices for transparency, independence and effectiveness. Health attorneys and governance experts say the case is an admonition to boards to realize that the best practices described in Sarbanes-Oxley, the recent Independent Sector Report, and elsewhere could be touted in future litigation.
The American Health Lawyers Association has released an excellent summary of the case by Michael W. Peregrine of McDermott Will & Emery and James R. Schwartz of Manatt Phelps & Phillips LLP. They assert the case has "important implications for the standard of conduct to be applied to healthcare corporate directors in the exercise of their oversight function." Get a copy at http://www.mwe.com/info/pubs/Disney0905.pdf.
It might, according to a provocative article in the new issue of Harvard Business Review. IT represents huge investments and huge potential risks, as well as offering major opportunities to reduce costs, improve quality and service, and create new products and markets. With that backdrop, some major corporations such as Home Dept are breaking with tradition and establishing IT governance structures with functions similar to board audit committees.
For a copy, see the September issue of HBR, available online at www.hbr.org.
The AHA launched a national partnership with leading public and private health care organizations to reduce surgical complications by 25% by the year 2010. The Surgical Care Improvement Project will provide hospitals and caregivers with "strategies proven to reduce four common surgical complications: surgical wound infections, dangerous blood clots, perioperative heart attack and ventilator-associated pneumonia." For more information, go to http://www.aha.org/aha/key_issues/patient_safety/
resources/scipindex.html.
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Barry S. Bader, Bader & Associates
12225 Seline Way, Potomac MD 20854, 301-340-0903
www.GreatBoards.org *** bbader@GreatBoards.org