Are Hospital Boards Asleep at the Switch?

Hospital “Edifice Complex” Alive and Well

English: Cancer Hospital in final stages of construction at the University of Florida. (Photo credit: Wikipedia)

A couple of recent stories in Healthcare Finance News drove home to me the message that many of America’s hospitals continue to be run with last century thinking.

The first one’s entitled “20 Most Beautiful Hospitals Announced“. It illustrates the glaring disconnect between the biggest challenge facing America’s hospitals – re-engineering their systems and processes to provide lower-cost, higher-value healthcare – and what they choose to make their priority.

I recently visited a hospital with a majestic several-story-high waterfall in its main lobby. Adding insult to injury was the handful of fast food emporiums that dotted its walkway. It was as if they were defying us to find a connection between their hospital and health, much less the frugality our healthcare spending crisis demands.

In an era when excessive healthcare spending is lamented in virtually every news cycle and medical errors continue at indefensible levels, a reasonable person might ask why hospitals are still being rewarded rather than penalized for such grandiosity.

Back in the day when I worked as a regional healthcare planner, we called this bricks-and-mortar obsession by hospital leaders an “edifice complex”. It’s apparent that any efforts to treat this chronic condition have failed miserably.

We don’t need beautiful hospitals that stroke the egos of their leaders. We need safe, efficient and affordable hospitals.

We don’t need transparent hospital waterfalls. We need transparent hospital pricing.

And we don’t need more grandiose hospital architecture. We need more frugal and safety-conscious hospital management.

Speaking of hospital management, let’s consider how…

Hospital CEO Bonuses Drive Behavior

The second report that caught my attention was about hospital CEOs’ bonuses being largely based on their hospitals’  volume of patient activities.

If there’s a singular explanation for our runaway medical spending in America – where everything healthcare costs twice what it does in other developed countries (see “A Nation of Suckers“) – it’s a fee-for-service payment scheme that rewards volume of medical interventions rather than the quality of their outcomes.

This has bred all manner of unethical and illegal practices that have left healthcare as literally the most corrupt industry in America (see Our Healthcare Sucks for details).

Yet hospital boards continue to compensate their CEOs with bonuses based on – you guessed it! – volume of patient activities. Instead of preparing for a new and long overdue agenda of value-driven healthcare, many hospital boards of directors continue to apply yesterdays’ answers to tomorrow’s problems. This kind of vestigial thinking will ultimately  land them in hot water – and it will be of their own making.

It’s not like hospital boards are dominated by know-nothings. They’re mostly composed of local and regional business leaders who ought to know first-hand how unaffordable and “unsustainable” our healthcare spending has become. (Disclaimer: I’ve served on a hospital board of trustees).

But once appointed, they quickly become enamored of “their” hospital’s unique “mission” and set aside all objectivity in a quest for their hospital’s greater glory. It’s not unlike how college alumni become uncritical cheerleaders for their alma maters – except here the disconnect with their own business realities is a far greater mystery.

Hospital Boards Need Training

Boards of Directors can easily be co-opted and manipulated into putting the institution’s financial needs before all else. Their purported role in representing a broader community their hospital is meant to serve is easily subordinated – and often lost altogether – as real and perceived threats to their hospital’s survival are trotted out at every board meeting.

When you’re constantly faced with impending doom – much of it inflated, if not outright fabricated – it becomes virtually impossible to maintain the critical eye on hospital management that the position requires. Caught up in an “us-vs-them” mentality, many hospital boards devolve simply into uncritical acceptance of what hospital management spoon feeds them at and between board meetings.

And as business leaders, they’re often enlisted – and recruited – to lobby state legislators on their hospital’s behalf. This, in turn, feeds their egos as they feel they’re contributing to the cause. Whether it’s actually a cause they should be supporting is often lost in the drive to appear a team player – and someone with clout, no doubt.

Here we can look to state and national hospital associations for failing to educate, train and support hospital board members in what their proper role should be. When I served on a hospital board and the state hospital association’s Trustee Advisory Committee, whenever I raised the subject of boards needing more training – they generally receive little-to-none – I received only high-sounding lip service.  When I suggested that a minimum of 15 minutes be set aside at every board meeting for such purposes, the response was a figurative eye-roll. Bigger fish to fry, you know.

The truth is there are no bigger fish to fry for America’s hospitals. Until their boards of directors (or trustees, or whatever they may be called) start DIRECTING – and stop mollycoddling their management – we’ll have more “beautiful” hospital edifices and wrong-headed bonuses rather than greater patient safety, quality care, and pricing transparency that all patients need and deserve.

John Lynch: John Lynch was founder and CEO of Medical Diagnostics, Inc. - twice named to Business Week's "Best Small Companies" in America. He's since founded MedSmart Members to publish consumer health education publications.
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