The winter issue of Great Boards is nearing completion, with articles on individual trustee assessment and improving board and committee meetings. Look for the issue around the first of the year. The current issue is available at www.GreatBoards.org.
It's been a busy month since our last issue. Read these stories below:
Concerns that charitable organizations are treating their tax exempt status too lightly have been reinforced by events at American University in Washington, DC. AU President Benjamin Ladner resigned in October after the Board of Trustees began looking into his personal and travel expenses, sparked by an anonymous letter it received in March. An audit found Ladner should repay the school $125,000 in unauthorized personal expenses and report nearly $400,000 in additional taxable income.
According to The Washington Post, which has featured the scandal on the front page, Ladner has acknowledged mistakes -- such as not immediately reimbursing the school for a 13-course engagement party dinner for his son -- but he rejected the independent report that questioned more than $500,000 in spending in the past three years. He said most of the expenses his wife charged to AU for household furnishings, food and beverages, and that was questioned by auditors, was consistent with the terms of his contract, The Post reported. However, according to one trustee, the board never approved the 1997 contract that defined Ladner's compensation and benefits, raising questions about its oversight. The university's board also has been criticized for approving a severance payment of more than $3 million. Five board members including the board chair have resigned and publicly criticized the severance package.
Sen. Charles Grassley, whose Senate Finance Committee is considering legislation to more closely oversee charitable organizations, sent a letter to the AU Board saying he was "deeply troubled" by the severance payments. "It appears the AU board could be a poster child for why review and reform are necessary," Grassley wrote. To determine what "other things" an organization that has such a "cavalier attitude toward the tax laws" might be doing, Grassley raised more than 25 specific questions about oversight of executive compensation and IRS filings. For a copy of the letter, go to http://finance.senate.gov/press/Gpress/2005/prg102805.pdf.
McDermott Will & Emery has released an On the Subject discussing the AU controversy and the broader implications for the nonprofit community. See the article at http://www.mwe.com/info/news/ots1105a.htm.
IRS is helping lead the charge to examine not-for-profits' conduct. The agency's Exempt Organizations Compliance Unit (EOCU) is considering a project to examine how hospitals determine and pay executive compensation and meet community benefit standards. The project would involve sending compliance check letters to "a significant number of hospitals" asking questions about compensation practices and community benefit, the IRS says, as well as continuing on "a comprehensive overhaul of Form 990." For a copy of the IRS report detailing its EO enforcement plans for 2006, go to http://www.irs.gov/pub/irs-tege/
fy_2006_implementing_guidelines.pdf. IRS has also released a revised, draft Form 990, with new questions designed to publicize and ferret out problems in compensation and benefits for officers, directors and other key employees. For a copy, go to http://www.irs.gov/charities/charitable/article/
0,,id=146362,00.html.
All right, minutes are not exciting stuff. But good documentation is increasingly important in the post Sarbanes Oxley world. McDermott Will & Emery has developed a guide to minute taking for the board's general counsel. The publication should also be useful to chief governance officers, board chairs, and committee chairs. For a copy go to http://www.mwe.com/index.cfm/fuseaction/
publications.nldetail/
object_id/f2896ec5-a0de-4ace-91aa-d75464a5c46f.cfm.
Audit committees have a big job to do in an organization--tough when the members have other responsibilities and the audit committee's role is part-time. Help has arrived from the American Institute of Certified Public Accountants in the form of an Audit Committee Toolkit for Not-for-Profit Organizations. Organizations can download the tools and tailor or customize them for internal use. Go to http://www.aicpa.org/Audcommctr/toolkitsnpo/
homepage.htm
The Centers for Medicare & Medicaid Services (CMS) has released for comment its long-delayed national survey to collect uniform patient feedback on hospital care. Along with other data on comparing hospitals' quality and safety, the survey results will be publicly reported and allow patients to make informed choices of where to seek hospital care. Participation by hospitals will be voluntary, at least initially. The survey includes 27 questions on nursing care, the hospital environment, physicians' care, and discharge instructions. To see a copy of the draft, go to http://www.cms.hhs.gov/quality/hospital/
#Patient%20Perspectives%20on%20Care%20HCAHPS.
Will "pay for performance" live up to its hype? The approach scored well in the first study to assess the effects of quality incentives in a large health plan. With support from The Commonwealth Fund, researchers examining a pay-for-performance program implemented by PacifiCare Health Systems found that for one of three clinical quality measures studied, a physician network that was offered bonus payments outperformed another network that was not. Performance improved more among incentivized physicians on two other measures, but the difference was not statistically significant.
Although improvement was modest, bonuses were also modest, and improvement was assessed over a relatively short period of time (five quarters), the researchers noted. For example, physicians eligible for incentives boosted their rate of cervical cancer screening by 5.3% compared with 1.7% for a comparison group. They also improved mammography screening rates 1.9% compared with 0.2% for the control group. For a summary, go to http://www.cmwf.org/publications/publications_show.htm?
doc_id=307183&#doc307183. For the full report, see "Early Experience with Pay-for-Performance: From Concept to Practice" in the Journal of the American Medical Association, Oct. 12, 2005.
Meanwhile, pay for performance is expanding to physicians. CMS announced a new voluntary program in October for physicians to report evidence-based, consensus quality measures. In the first phase, which begins in January, Medicare will allow physicians to submit data on 36 quality measures, such as beta blockers given when a patient suffering a heart attack enters the hospital or screening elderly patients for falls. The information would not be public, CMS says, nor would physicians' Medicare compensation be increased. Physicians' enthusiasm could be limited by the administrative burdens of collecting and submitting data, and by a scheduled 4.4 percent cut in Medicare payments due on January 1 unless Congress steps in. Conversely, physicians may want to participate to see how their performance stacks up against their peers' and because of the trend toward "pay-for-performance" programs in both the public and private sector. For more information, go to http://www.cms.hhs.gov/media/press/
release.asp?Counter=1701.
Part of the pay for performance game plan is that savvy consumers, as well as big payers, will choose and reward providers who perform better. But that goal is a long way from reality, several new reports find. The California HealthCare Foundation explored how consumers make decisions about their health care and what tools are necessary to ease the burden of choice. The report states: "Contrary to popular notions that more information is better, decision-making research shows that more information does not always improve decision making, and frequently may actually undermine it." The report recommends that hospitals seeking to provide information for consumers tailor information to specific consumer needs, simplify information, build a reputation for trust, and promote the benefits, not features. For the report, go to http://www.chcf.org/topics/view.cfm?itemID=115327.
A second study, released in November by Health Affairs, indicates that consumer interest, which has been slow to take hold, will only grow with both tax and quality-of-care incentives. Entitled "A Report Card on the Freshman Class of Consumer-Directed Health Plans," the study says the lack of detailed information on cost efficiency and quality available to enrollees limits these plans' appeal. "If consumer-directed plans are intended to empower enrollees, insurers must give consumers the appropriate information to make good choices," the study says. See a copy in the November/December 2005 issue of the journal, at www.healthaffairs.org.
Widespread adoption and effective use of electronic medical records and other health information technology could save the U.S. health care system up to $162 billion annually and prevent a third or more of adverse drug events in outpatient settings each year, a new study by RAND Corp. projects.
Assuming about 20% of hospitals and physicians have an EMR system now, the study estimates it would cost $98 billion for hospitals and $17.2 billion for physicians to adopt a standardized EMR system over the next 15 years, much less than the $162 billion per year in possible savings.
"The potential savings from HIT is mind-boggling, but it isn't going to happen overnight," the lead author said. "The federal government will need to step in to speed the diffusion of HIT and remove some major barriers if we are going to reap the tremendous benefits it could have on improving quality, managing diseases, and extending people's lives." Key barriers include the acquisition and implementation costs for health care providers, slow and uncertain financial payoffs, and disruptive effects on practices, the authors say. The study was published in Health Affairs at http://www.healthaffairs.org/.
One thing the government needs to do is allow hospitals to help physicians join the IT age and link to hospital information systems. In that regard, the federal government has proposed regulations intended to further the adoption of e-prescribing and interoperable electronic health record (EHR) systems. The regulations, if adopted, would create additional exceptions to the Stark prohibitions against physician self referrals and additional safe harbors under the federal anti-kickback statute. McDermott Will & Emery recently released an On the Subject summarizing the proposed regulations at http://www.mwe.com/info/news/ots1005a.htm.
Community hospitals have been battling doctor-owned, single specialty facilities, claiming an unfair playing field. Physician owners rejected charges they treated healthier, better insured patients at their facilities. Now, a study casts some light on the debate. Arizona heart doctors who are part-owners of cardiac specialty hospitals were more likely than physicians with no ownership stake to treat low-acuity, high-profit cases in their own facilities and refer the more complex, lower-profit cases to community hospitals, according to a study published on the Health Affairs Web site. You can read the article at http://content.healthaffairs.org/cgi/content/abstract/
hlthaff.w5.481.
The 2006 budget nearing final approval in Congress addresses important healthcare issues, including Medicare and Medicaid spending, pay for performance, and a permanent ban on physician self-referral to new, limited-service hospitals. Stay up to date at The Commonwealth Fund website, http://www.cmwf.org/, or by subscribing to its free Washington Health Policy Week in Review.
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Barry S. Bader, Bader & Associates
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