In an article in the February issue of Trustee magazine, Barry Bader and Ed Kazemek describe the pressures facing not-for-profit organizations' boards and urge them to "reject the status quo" and focus on six high risk areas. You can find a link to the reprint at www.GreatBoards.org.
1. IRS ISSUES 2007 WORK PLAN AND DRAFT GOVERNANCE GUIDELINES
External scrutiny of tax-exempt organizations is not fading away. The Internal Revenue Service has released its 2007 work plan which includes continued scrutiny of not-for-profit organizations and tax-exempt status. According to the law firm of McDermott, Will & Emery, the plan includes these focus areas:
For more information, go to the MWE web site at www.mwe.com or directly to http://www.mwe.com/index.cfm/fuseaction/publications.nldetail/
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In addition, IRS released a draft set of nine governance guidelines for tax-exempt organizations, including hospitals. Although most parts of the guidelines are standard operating procedure for hospitals, some are not, including requirements for: a board code of ethics, a whistleblower protection policy with board oversight; and explicit board monitoring of charitable activities, the Form 990 disclosure, and fund raising policies. The guidelines call for large charitable organizations to have an independent audit committee. They take a dim view of director compensation and say if a board wants to be paid, compensation must be justified and approved by a committee of independent directors. For a copy, go to the Great Boards web site, www.GreatBoards.org.
2. PEREGRINE PREDICTS 10 CORPORATE GOVERNANCE TRENDS FOR 2007
Our colleague Michael Peregrine of McDermott, Will & Emery has released his top 10 governance trends for 2007. Among his predictions: conflicts of interest will face increasing scrutiny, and corporate compliance committees will need to adopt the same transparency and independence protocols as audit committees. Peregrine also thinks the rise of shareholder activism will trickle over into not-for-profit boards in the form of some directors, such as those appointed by political bodies, advocating for constituency-focused agendas as opposed as looking to the needs of the whole organization and its mission. A copy of Michael's always provocative predictions may be found on the Great Boards web site, www.GreatBoards.org.
3. AGB ISSUES STATEMENT ON BOARD ACCOUNTABILITY
AGB, the Association of Governing Boards of Colleges and Universities, has issued an accountability statement that calls on boards and CEOs of higher learning institutions to "examine the clarity, coherence, and appropriateness of their institutions' governance structures, policies and practices." The document is clear, eloquent and provocative, and may be useful to hospitals and health systems in crafting their governance documents in light of the increased emphasis on institutional integrity. For a copy, go to http://agb.org/.
4. GOVERNANCE IS MAJOR THEME OF IHI'S 5 MILLION LIVES CAMPAIGN
The Institute for Healthcare Improvement has announced a new "5 Million Lives Campaign" with the goal of protecting patients from five million incidents of medical harm over the next two years. One key commitment is getting "boards on board" with strong leadership and oversight of quality and patient safety efforts. For more information, including excellent resource materials, go to the Great Boards' web site www.GreatBoards.org or to IHI at http://www.ihi.org/IHI/Programs/Campaign/Campaign.htm?TabId=2.
5. PRESIDENT'S BUDGET CUTS BILLIONS FROM HOSPITAL SERVICES
President Bush has released his fiscal year 2008 budget, which calls for more than $100 billion in Medicare and Medicaid cuts. Under his proposal, payments to the hospital inpatient and outpatient prospective payment systems would be slashed by $13.8 billion and $3.4 billion, respectively, over a five-year period. Payments also would be reduced to skilled nursing facilities and inpatient rehabilitation facilities. AHA President Rich Umbdenstock called the budget "devastating news for children, seniors and the disabled who depend on the Medicare and Medicaid programs. National and state associations are gearing up to fight the cuts. To see the budget go http://www.hhs.gov/budget/08budget/2008BudgetInBrief.pdf, and to http://www.aha.org/aha/content/2007/pdf/CMS-medicare-FY08.pdf. To stay up to date, check in at the AHA advocacy web page at http://www.aha.org/aha/advocacy/working-with-congress/index.html.
The next issue of Great Boards includes articles on governance of joint ventures and proper use of board executive sessions. Look for it in March.
The winter issue of Great Boards, available now at www.GreatBoards.org identifies seven hot issues and trends for boards and healthcare organizations in 2007, and takes an in-depth look at effective practices and red flags for board oversight of executive compensation.
Barry Bader has updated his list of presentations for board retreats and conferences. Featured topics in 2007 include Institutional Integrity; Raising the Bar on Quality and Safety, Redesigning Board Agendas for "Generative Governance," The Social Enterprise/Shared Governance Model in Health Systems; and Governance 101: Orientation and refresher on board roles, responsibilities and recommended practices. For more information, go to http://www.greatboards.org/services/ or call 301-340-0903.
We've updated the committee charters for board quality and professional affairs committees. See the latest versions at www.GreatBoards.org/resources.
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Barry S. Bader, Bader & Associates
12225 Seline Way, Potomac MD 20854, 301-340-0903
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