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Here's What Rural Hospital Boards Should be Asking

Rural hospital boards rarely get the credit they deserve – or the training. Board members are typically “pillars of the community” who volunteer their time to improve healthcare delivery for their neighbors, but it can be a thankless role with unique tensions that are less common in a rural or suburban setting.

A lot of it has to do with the social fabric of a rural community, where everyone knows everyone else and it’s difficult to separate personal and professional relationships. That kind of familiarity can make it difficult to ask the hard questions that every board should be asking. Here are three such questions, based on my experience as both a hospital CEO and board member.

Question 1: “Is there any conflict of interest?”

In a rural community, it’s almost inevitable that hospital board members will be drawn from organizations with overlapping economic interests. For instance, the debate over a new facility will have financial implications for the local bank, construction company, community college, and Chamber of Commerce – all of whom might be represented on the board.

Those board members can’t simply recuse themselves, or nothing would get done. Instead, the board should have a policy of routinely and automatically asking about conflict of interest – acknowledge that it exists, get it out in the open, and make it part of the discussion. Include the question right in the agenda so that no individual board member faces the awkward decision of whether to “confront” another board member.

Take the local bank president, for instance. She represents a specific bank with financial ties to the hospital, but the value that she brings to board is her overall knowledge of the banking industry. Since the two things can’t be entirely separated, the best policy is to acknowledge the dual role in which she finds herself.

When the board chair asks her the routine question, “Is there any conflict of interest?” it’s not a personal attack but rather a conversation starter. “Yes, our bank might benefit by making a construction loan, but here’s where the industry believes interest rates are going, and the board should consider the increased cost of borrowing if we put off the decision for another year…”

By routinizing the discussion over conflict of interest, you’re allowing board members to share their industry knowledge while explicitly acknowledging possible financial ties. That’s how the best decisions get made.

Question 2: “What is our role in hiring?”

That should be an easy question because any hospital board has only one employee: the CEO. But in practice, things can get messy.

In many rural communities, CEOs come and go fairly quickly, so it’s the board that provides continuity of leadership and vision. Sometimes that can lead to micromanaging and seeking to control hiring far beyond the CEO role.

But more often, in my experience, it’s the opposite that happens. Instead of micromanaging, the board will lure a new CEO by promising wide latitude and minimal oversight: “We’re hiring you for your experience, and we’ll let you do your thing.”

That might sound attractive to a job seeker, but it doesn’t actually foster a long, productive tenure. All board members have their own priorities and agendas, and an incoming CEO can get caught in the crossfire despite the promise of autonomy. You owe it to your future CEO to do the hard work of defining in advance what success will look like. The best relationships are based on clear expectations that are set right from the start.

In the wake of the Covid pandemic, I expect to see even more turnover than usual among rural hospital CEOs, so every board ought to be asking the question, “What is our role in hiring?” If you’re having trouble with the answer, consider hiring an outside firm to help with the hiring function. It’s an expense that can easily pay for itself in the long run.

Question 3: “What are we going to do without all that money?”

By “all that money,” I mean the billions of federal dollars unleashed by Washington in response to the Covid pandemic. Most hospitals have received federal aid for several years now, and the cash infusion has helped to mask shrinking margins and other operational issues.

Most hospital board members come from companies that run on a cash basis, but hospitals are quite different, with business models that don’t resemble any other industry. It’s a steep learning curve for any new board member, and I suspect even veteran board members will need to re-learn some of the finer points of hospital finances.

There’s no one, right way to face the end of federal emergency funding, but every rural board needs to be focused on the issue.

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