Thinking of all the factors that are critical to ensuring your practice’s ability to retain its independence, strong governance is high on the list. Without it, your practice may lack direction, the ability to manage its own members, make timely decisions and/or effectively communicate with facility partners. Decisions may contradict each other, or be undermined by people or behaviors, and staying current with the times may become impossible. All of these are threats to a group’s ability to stay independent.
So how do you create an effective governance structure? To some extent, it depends on the size of the group. Clearly a ten-member group has different challenges and needs than a two-hundred-physician group. The latter is likely spread across multiple facilities and geographic regions, making communication and engagement more challenging. But members of larger groups are also more likely to have accepted that everybody cannot be involved in every decision, to have developed a defined governance structure and succession policy and determined the best ways to engage members.
Smaller groups may be more likely to try and involve every physician in every decision. This ceases to become practical once group size gets into the double digits, if not before. Yet, we still see groups of thirty or forty physicians clinging to the notion that “I am an owner and therefore I have a right to weigh in on (or, in some cases, obstruct) every decision.” This is highly problematic and can easily lead to the demise of the group. These groups cannot make timely decisions, people on the outside become frustrated because they do not know who the leaders are, and the leaders themselves become frustrated with “spinning their wheels” without the ability to make decisions or move forward.
To counteract, it is not uncommon for a benevolent dictator to emerge in these groups, someone who is fundamentally trusted by most (at least initially) and can communicate with facility leadership to get things done. This can be a welcome relief after the chaos of a group that is run too democratically. The problem is that it rarely continues because, no matter how benevolent and trustworthy the leader is, people start to become suspicious of his or her actions and efforts ensue to undermine his/her decisions, if not the leader him/herself.
One common structure to emerge when initially thinking about developing a more formal governance structure is constituency-based representation. Most groups have some type of formal or informal “divisions” or “sub-groups,” whether aligned by sub-specialty, healthcare system, facility, age or work style. Clearly, for a governance structure to be effective, it is important for each of these constituencies to have a voice and to feel a connection to the leaders. While it is tempting to structure the model to ensure that each of the constituencies has representation, one problem with that is that people who are elected to represent a particular constituency may feel compelled to frame their opinions in consideration of what is best for that constituency, rather than the entire group. A classic example of this might be a division along the lines of sub-specialty. Perhaps the group needs to make some changes to its compensation to better facilitate recruitment. But a certain faction of the group is opposed to the change because they have an advantage under the current system. Under a constituency model, a representative of that faction might feel compelled to oppose the change because it was not in the best interest of his/her constituents even if s/he agreed that facilitating recruitment would be in the best interest of the group overall.
Another issue with constituency models is that they may not bring forth the best, or most interested, candidates. Perhaps Constituency A has three qualified candidates, while Constituency B has only one interested person who really is not a good leader and Constituency C has nobody interested at all. Under a constit-uency model, each constituency might have to bring forth a representative, meaning Constituency A would have to choose between its three good can-didates, while Constituency C would have to scramble to find someone who really did not want to do it and Constituency B might bring forth its suboptimal candidate.
Under a competency-based model, candidates are elected at large based upon their ability to fill an agreed upon list of needed competencies, as well as their ability to represent different constituencies within the group. For example, perhaps perhaps Candidate A is a young, female cardiac anesthesiologist who works primarily at Facility B and has a strong background in strategic planning through her community service work. While her strategic planning experience could bring value to the board, she would also be able to relate to, and communicate the perspectives of, multiple factions within the group (cardiac anesthesia, Facility B, younger generation, female and, perhaps, young parent) without being beholden to defend the specific interests of any of them. While understanding constituency perspectives is necessary, it is critically important that the members of the governing body wear their “group” hat in making decisions. Having a competency-based structure facilitates this. One thing that needs to be considered under this structure is the fact that candidates from smaller facilities within a larger group may be at a disadvantage in garnering enough votes to get elected. For this reason, many groups create a nominating or governance committee to vet candidates and make recommendations for a slate.
People often ask how large a board should be. Research shows that smaller boards are more productive, with five to seven members considered the ideal size. The smaller end of this is best for most groups, although larger groups may need as many as seven to ensure all bases are covered and smaller groups may need as few as three. If there are only eight owners, a board of five would be too many. Odd numbers are generally considered better for tie-breaking purposes, although most boards try to come to a greater consensus than a single vote majority.
One thing that is important to consider when thinking about governance is the different types of governance that must be addressed: clinical, operational, and strategic. Typically, clinical governance is handled by the medical directors and/or department chair. Having a body of representatives dedicated to managing clinical issues takes this off the plate of the board and frees them to focus on strategy. Likewise, having a strong management team (typically composed of at least one non-physician administrator in a dyad with a physician president) to manage the operational side of the practice and report to the board monthly or quarterly helps keep the board out of the weeds. While the board is responsible for oversight, its primary purpose is strategic; so, it is important to try and clear its focus for that. In an ideal world, the board chair should be someone different from the president as these are two important, yet distinct, roles. The board chair should be responsible for leading the board, while the president is responsible for leading the practice. One frequent governance mistake we see is trying to put all these functions under one single governing body. In these instances, that body inevitably becomes overwhelmed by the more pressing clinical and management issues at the expense of making time for strategy and higher-level corporate governance.
Even smaller organizations should consider developing a robust committee structure to engage more people, provide leadership training for the future, and spread out the workload. At a minimum, consider creating a finance committee, a compensation committee and a recruiting committee. Larger organizations may want a governance committee to vet candidates and consider succession planning. Another benefit of having committees is that it allows people to tap into their strongest skill set. For example, someone might not have the interpersonal skills to be the President and interact with the hospital C-suite, but s/he may have significant financial acumen and be a great leader for the finance committee. If you are going to develop a committee structure, it is important for them to be empowered. Otherwise, people will quickly lose interest and consider it a waste of their time.
Creating this structure allows people to find their place to be involved and frees the board to do its most important job: determine the strategic direction of the group and keep the ship moving in the right direction. The board, board chair, clinical chair and president all need to be empowered to perform their functions. With an established election process, with appropriate term limits and succession plan in place to ensure continuity (for example, terms should be staggered and there should be a structure for automatic advancement from vice-chair to chair and vice president to president), there will be options for turnover in leadership if the group is unhappy with performance.
But, during their term, leaders need the latitude to function and make decisions (a governance manual can outline the scope of their authority and when, and with whom, they need to confer) without their hands tied or needing a full group vote on every issue. Certainly, larger issues may require a group vote, particularly in a smaller group, but the more you are able to delegate authority, the smoother the process will be.
And having a smooth process is essential in being able to make important decisions that will propel the group forward and facilitate independence. Groups who are unable to do this are often perceived as weak or disorganized by people on the outside and they may find themselves unable to maintain adequate staff or manage a problem physician. In these instances, the facility may seek a stronger partner that is able to move with the times and make the right decisions on a timely basis.
Shena J. Scott, MBA, FACMPE, founder and CEO of Scott Healthcare Consulting, Inc., has been actively involved in anesthesia practice administration for over 30 years. She has spent the last six years consulting with over 100 anesthesia practices and hospitals across the country in many areas of practice improvement, most often assisting them with hospital contract negotiations, strategic planning and and governance. She spent the first 22 years of her career as the executive director of a mid-sized anesthesia practice in Melbourne, FL. In 2013, she led that practice through a merger with five other practices in three different specialties to form Brevard Physician Associates, a 200+ provider group that provides all of the anesthesia, emergency medicine and radiology services to the largest integrated delivery system in Brevard County, Florida. Ms. Scott is a former chair of the MGMA Board of Directors, president of the MGMA Anesthesia Administration Assembly, and a current member of the ASA Committee on Practice Management. She is a frequent lecturer at ASA Practice Management, AIABPM, MGMA and other conferences. She can be reached at scotthealthcareconsulting@gmail.com.