How do the roles of supervisory boards in US healthcare differ to that in Europe?

According to a recent study, Supervisory boards in German healthcare have a clearly defined role; decisive in special or critical situations but heavily involved in day to day decisions of strategic importance. The study also finds that the relation of the supervisory boards to organisational leadership is characterized by unbureaucratic cooperation and mutual trust: In short, the board does the work – the Supervisory Board leads the way.

These findings were based on in-depth interviews with 26 supervisory boards in Germany, mostly from university and municipal clinics, exploring the boards responsibilities, their relation to organisational leadership and their acceptance and perception within the organization.

Carried out by Patrick A. Haberland, a Partner in DHR international’s Frankfurt office, the study set out to provide an objective analysis of the way supervisory boards view themselves given the current controversy in Germany regarding the professionalization of supervisory boards in German healthcare. With similar debates in the United States, it is interesting to see where the similarities and differences lie between the role of supervisory boards in the US healthcare market, compared with those in Europe.

As is the case in the Europe, I find the relationship between executive leadership and the board in the US healthcare environment to be based on mutual trust and respect.  However, the amount of actual “controlling” that boards tend to exhibit in North America is generally a bit less. In contrast to Mr. Haberland’s findings, the function of supervisory boards in the States tends to be less decisive, the focus being to provide general advice and input on overall strategic planning processes. The board and leadership body tend to work toward transparency but in a very collaborative fashion.

Boards in the US do serve as checks and balances when it comes to adhering to good solid business practices but members rarely, if ever, get involved in any of the day to management decisions or implementations. Here, board members in no way “guarantee” financial prosperity and long term business success and are unlikely to ever be held liable for poor performance of any kind. The boards tend to guide decision making processes and add solid business acumen and insight from the board member’s prospective industries. Even the strategic plan itself is typically first drafted by the CEO and his C-suite team to later be presented to the board for their input and ultimate blessing. It is then the C-suite who drives the business strategy and is held accountable by the board for its execution.

The relation of management intensity to controlling intensity.

The relation of management intensity to controlling intensity deals with the extent to which company management and/or the supervisory board has a say in important decisions. According to the findings of Mr. Haberland’s study, the cooperation between the two can correspond to four basic models:

  1. The “potential loser” model: Neither company management nor the supervisory board shows strong management intensity. Time is taken over formulating resolutions, decisions are postponed until the outcome decides itself (or results in a fiasco).
  2. Company management as the decision-maker: Company management displays high management intensity as opposed to the supervisory board. The supervisory board functions in a controlling manner rather than as a strategic input-giver with claims to leadership.
  3. A synthesis of supervisory board and company management: The management intensity of both institutions is high, and forms the best basis for joint decision-making.
  4. The supervisory board as decision-maker: The supervisory board‘s management intensity is high and the company leaderships is low.

SB2

Within this model, the role of supervisory boards in North American healthcare tends to be most similar to model number 3; a synthesis of supervisory board and company management.

The boards here are again not involved in day to day operations and in that regard are not on equal footing. Part of the reason for this is driven by the fact that it is rare that our board members are paid anything at all on the hospital and physician driven provider sides of the equation. It is largely a voluntary role that individual’s provide free of charge unless the company is a large, for profit hospital management company. Another reason that boards typically stay away from operations in any depth is most board members on the not for profit hospital system side and public/academic teaching institutions not only are not paid but usually do not have any healthcare experience or backgrounds. In fact the CEO typically recommends members of its immediate community to serve based on having good business experience in areas such as banking, sales, production facilities, even car dealerships.

It is also not unusual for the typical board member to be an elderly member of the community who is passionate about the care the community receives but may not have either a business background or healthcare exposure, rather just a passion for the care they and their neighbours receive. At least one physician is usually asked to sit on the board but they are not the majority of the board makeup which can range from 10 members to greater than 20 in some cases of larger communities. The board gets regular reports, normally quarterly but most of their active participation comes from a committee structure and hands off involvement again reacting to what the C team shares.

Typical committees include but are not limited to:

  • Finance
  • Quality
  • Medical Executive Committee
  • Compensation
  • Information Technology

In summary, Communication, Collaboration and Cooperation are at the forefront of any board. The degree to which they truly take ultimate responsibility for performance is much rarer in the US. The board in the US is most focused on providing insight, input, around the larger strategic plan, participating as a business advisor and committed community leader/servant on a committees where again their perspective provides alternative and creative thinking. To be sure the board members take their roles seriously and are continuously advising on key issues and indeed must approve and fully assess large financial purchases or cash outlays, the hiring/ performance of the CEO, the addition of new board members and provide crisis intervention as needed but with a less active hand in the day to day outcomes and operations than their colleagues on for profit boards or boards found abroad.

To read Patrick A. Haberland’s summary of supervisory boards in German healthcare, please click here: http://www.dhrinternational.com/insights/trust-fine-checks-are-better-role-supervisory-boards-healthcare

Author: Robin Singleton, Managing Partner and head of DHR’s global Healthcare Services & Solutions Practice

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