May 11, 2023
So much of this episode (and this podcast as a whole, really) is about one consistent theme: How do we reset or redesign our healthcare industry, including hospital chains—mostly talking about the big consolidated ones that have a lot of money here—but how do we redesign these leviathans to be more consistent with our values as a country and the values of the doctors and other clinicians and others who work in these places and who went into the healthcare profession for a reason that had, you know, something to do with patients? And I mean something to do with patients that doesn’t involve dressing up for Halloween as a giant cardboard dollar sign, like some finance department guy did at one large nonprofit hospital in the spirit of shaking money out of poor patients (see article here). Or listen to previous episodes about hospitals raising prices way higher than the rates of inflation.
Not to belabor this because we’ve already talked about it so very often, but you also have the whole thing with big, well-funded, nonprofit hospital chains going on cost-cutting extravaganzas and, at least in one case, basically creating their own staffing crisis.
Do these activities have a familiar ring to them? Do they strike you as a page out of a playbook you may have seen elsewhere? I don’t know about you, but they remind me of things that private equity or financial folks run around doing. I mean, the classic stepwise for how to maximize the financial value of an “asset” from a financial industry standpoint is to cut costs and raise prices.
Piling on this “kind of sounds like a B-school group project” thesis, what about the thing with a bunch of these big, consolidated hospital systems with rich endowments crying crocodile tears about how much money they lost last year? Except … in a whole bunch of cases, the money they lost—some of which came from the COVID CARES relief act funds they got, by the way—but this money was lost when their risky stock market investments tanked. Those are their losses. Stock market losses. From speculative investments. Are you kidding me?
But hospitals are charities, right? They are nonprofits. They aren’t owned by private equity. They aren’t owned by an investment bank or a team of financiers, so you wouldn’t expect them to be acting like they are owned by Wall Street.
But … oh, wait … how weird.
You know who is on the boards of some of these very well-known nonprofit hospitals? If you don’t, I’m not surprised, because in too many cases, if you ask me, you have to dig around in tax filings and other bureaucratic paperwork to unearth the names of these members who have quite a large amount of power (it turns out) over what goes on in the hospital. But you know who is on these boards? Yeah … almost half of board members tend to have a financial background. Almost none of them are nurses. And what about doctors? Are physicians on these boards? Well, almost one-third of hospital boards did not have a single physician member. So, there’s that.
Here’s a quote from a STAT news article written by my guest in this healthcare podcast, Suhas Gondi, MD, MBA, and also Sanjay Kishore, MD, about a study that the two of them coauthored about who is on hospital boards. Here’s the quote:
Our findings are cause for concern. If hospital executives are largely held accountable by finance professionals and corporate leaders, instead of by clinicians and patients, might they focus more on revenue and expenses than the needs of their communities or staff? While some argue that margin facilitates mission, the measure of a nonprofit organization is how these priorities are balanced by leaders who ultimately answer to their board.
So, I get there’s balance. You have to be financially sustainable. But I also get that, apparently, tigers don’t change their pinstripes. The pin-striped suit remains even when the finance tigers become the board members of a charitable organization that’s supposed to be serving the surrounding community paying its freight in the form of its tax exemptions.
This is what this conversation is about today: Who is on these hospital boards? How much power do these hospital boards have? And what might be done to switch it up some so that we can get hospitals that are reflective of our values as a nation and what we want for ourselves and our families?
Today, as aforementioned, I’m speaking with Suhas Gondi, MD, MBA, who, along with his coauthor Sanjay Kishore, MD, wrote a paper on this exact topic. Check out some great Tweets and comments. Following are some suggestions that Dr. Gondi makes in this podcast interview that follows to help us get a little less misaligned.
Here’s one mandate and three suggested models for current hospital boards, which (let’s get real) are currently comprised a lot of times of a group of people making decisions in closed boardrooms that impact a whole lot of people.
First of all, there should be transparency about who is on the board and what they are doing in those closed rooms—what decisions they are making. Second of all, the IRS could surely mandate that for anybody looking to get tax-exempt status, certain requirements are in order for the boards of said organizations.
Then here’s three suggested models to consider:
1. At other kinds of charities and even healthcare organizations with clear missions, like Federally Qualified Health Centers (FQHCs), the composition of the boards is mandated; and for FQHCs, 50% of the board has to be patients who are patients at the FQHC, for example. And, yeah with this. Hospitals are tax-exempt entities. That means that others in the community are paying more in taxes so that this hospital isn’t paying taxes. This hospital, therefore, is in debt to the community. Having a board that is reflective of the community could be one way to ensure that this hospital has an accountability to that community and can serve its needs adequately.
2. NASDAQ requires that two members of every board have some “under-represented” diversity, so that could be a thing. You could add to that professional background diversity. I was looking at a Web site the other day featuring a team photo with the caption something like “Here’s our diverse team,” and the entire photo was of, I’m going to say, literally 30+ white men. The caption clarified that they all had different experiences … in the pharmacy benefit administration space. So, nothing against white men, but … yeah, it might be a good idea to align as a community on a broad definition of diversity and what “reflective of the community” means.
3. Accountable capitalism. This was originally suggested by Senator Elizabeth Warren, who argued that 40% of boards should be elected by workers. So, not the majority of the board but enough of the board that it becomes accountable to frontline workers and others.
is a resident physician in internal medicine and primary care at Brigham and Women’s Hospital.
As an EMT in his hometown in Virginia, he saw how structural barriers impact access to healthcare for vulnerable patients. He dedicated himself to studying medicine and policy together with the goal of building a healthcare system that delivers better outcomes and prioritizes equity.
His academic work focuses on incentives in our healthcare system and how they shape the behavior of providers and payers. His work on healthcare payment and delivery system reform has been published in the New England Journal of Medicine, JAMA, and The Lancet and has been cited by the Medicare Payment Advisory Commission. His advocacy and writing have been featured by CNN, NPR, New Yorker, and USA Today.
He graduated from Harvard Medical School and Harvard Business School and previously served on the White House Health Equity Leaders Roundtable.
05:26 What’s a hospital board, and how much power do they have over goings-on?
06:51 How big is a hospital board typically?
07:45 How powerful is a hospital board actually?
09:12 What percentage of these board members have roles within the finance industry?
10:04 What percentage of these hospital board members are health professionals?
10:47 How do these hospital boards work?
12:44 Have hospital boards always been made up of financial board members, or is this a recent thing?
18:12 “The private equity model … fundamentally changes the incentives of the organization.”
23:21 Are hospital boards a potential place to create change within the healthcare industry?
25:16 “It’s about who has power.”
30:55 What’s the hope with diversifying hospital boards?
@suhas_gondi discusses on our #healthcarepodcast who is on #hospitalboards. #healthcare #podcast
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