Greetings from Gettysburg and the opening of The 2019 OPEN MINDS Executive Leadership Retreat. Today, I attended our seminar, Aligning Non-Profit Health & Human Service Boards For Sustainability With The New Market Landscape: An OPEN MINDS Seminar On Governance Issues In The Time Of Changing Reimbursement Models & Charitable Care Rules, led by OPEN MINDS Senior Associates, Ray Wolfe, J.D. and George Braunstein. The session focused on a key issue – how does the move to value-based reimbursement (VBR) change the role of the board?
For governing boards of provider organizations, new reimbursement models can be challenging. This is especially true considering a third of non-profit board members are unsatisfied with how the board evaluates organizational performance, and over a quarter of board directors believe their fellow associates lack an understanding of the organizational mission and strategic plan (see 2015 Survey On Board Of Directors Of Non-Profit Organizations). For a provider organization to meet change successfully, the board members, structures, and operations must align with the organization’s mission—either the old mission, or a VBR-defined mission.
My takeaway from the session? The board must be more educated and do more evaluation, in terms of financing and risk. For education, board members must understand the changing reimbursement models and obtain the necessary skills to support an organization with a VBR model. And for evaluation, the board needs to do more in planning and evaluating itself in terms of the skills that are required for optimal functioning, the expectations of commitment from each member, and the overall processes of the board, with feedback provided as needed.
Historically, the role of board members hasn’t focused on the challenges of managing financial risk and variable revenue streams. Mr. Wolfe discussed how traditional boards operate with a few very active members meeting at a regular time, often two or three months apart. This is not effective in a value-based world where the financial issues can change unexpectedly, and timely judgment calls are necessary. Put simply, traditional models of governance are not effective.
So, how does board governance need to change? Board members need an understanding of value-based reimbursement models and potential risk; they need a more operational understanding of how consumer care and coordination of services works; and they need different financial data.
Understanding value-based reimbursement models and potential risk—Board members must have an understanding of the changes in health care, different reimbursement models, and financing, particularly in the context of a value-based health care model. Boards must understand the coordination of services and care, how clinical professionals and provider organizations are paid based on consumer health outcomes, and how provider organizations are reimbursed for improved outcomes. Mr. Wolfe discussed:
A significant problem with board members is their lack of knowledge of a value-based reimbursement model as well as the changes in health care. As changes emerge when adopting these new models, this change places tension between the board and the organization. Models can have moderate risk to high risk, but how many board members have this understanding of health care financing? If board members don’t have that type of background or education, they need to have an expert or someone who is able to provide the support and advice on which contracts to sign, or not sign.
Operational understanding of consumer care and coordination of services—In the process of building a team for a governing board, a board should consist of a diverse group of individuals who are able to bring their different backgrounds and different perspectives together on the same issues. To best serve and understand what consumers truly need, the board needs to be composed of community leaders, social service and health care leaders, individuals and families who are directly impacted, and business leaders. But this should also be representative of the community—diverse in gender, ethnicity, and age. Mr. Wolfe discussed:
Consumerism is the driver of the shift to VBR. To truly understand consumerism, collaboration among individuals from diverse backgrounds is needed on the governing board. It’s not enough to just match a skill set to the board, it’s necessary to find the right people who are willing to have the education and the skill sets that are needed to fulfill the functions and the mission of the organization. Boards should be composed of family members who will be directly affected, persons in the community who can offer their perspective, and experts with specific clinical and business knowledge. A diverse group of board members can provide their unique skill sets along with their unique perspectives.
Financial data to measure organizational performance—For organizations that have shifted to value-based contracts, a shift also needs to occur from traditional reports. In the context of risk calculation and monitoring of income, traditional means of reporting are not able to provide the level of detail for VBR. For the governing board of a provider organization with a VBR model, “best practice” starts to look different. New skill sets are needed to support the changing reimbursement model including ensuring a quality assurance process is in place for measuring performance. This means embracing different techniques to identify and stratify risk, making informed decisions, and taking appropriate action based on the strategic analysis. Mr. Wolfe discussed:
The shift to a value-based contract isn’t just an incentive to do better, it shifts the risk onto the organization that is providing care. These levels of risk need to be analyzed for proper maintenance, which needs to be effectively conducted by the board members. Boards need to determine how much risk is on the company, and traditional means of analysis simply don’t provide enough detail when determining if there is too much risk on the company. The income statement and metrics are important, along with income monitoring. Contracts are written around the possibility that reductions are taken out, and then given back only if those performance outcomes are met; risk calculation has to be determined with a close monitoring of cash, 60 to 90 day cash projections, and an income statement broken down by value-based and non-value-based structures, as well as the metrics and impact of the metrics as they presently stand. Without this, it would essentially be impossible to successfully oversee the financial operations of the organization.
The key to sustainable success with VBR begins with organizational leadership, and this requires acceptance at the level of the governing board members. The modern health care board is changing with the shift to VBR, and the board requires a new set of unique perspectives and skill sets across the continuum of the health care system.
Attributes of a good board member—A good starting point lies in the personality characteristics and attributes of the board members that are sought out during the recruitment process. This requires a focus on aligning the attributes of each board member to the mission and expectations of the organization and leadership. And it’s not just about matching specific skill sets to the board, it’s about finding the right people who are motivated and willing to build the necessary skills through education, which includes having the ability and willingness to see the changing market in new ways. Good board members should be motivated to preserve the mission; however, they should also know the difference between when to pursue it, and when to redefine it.
In the context of strategy, leaders have to embrace the change (and the risk) that comes with this constantly changing environment. Aligning this new strategy with board leadership and the changing reimbursement methods will be the ultimate driver in reaching optimal organizational performance.
For more on assessing your organization’s preparedness for VBR, check out our Value-Based Reimbursement Readiness Assessment, which can be purchased in the OPEN MINDS Shop—and is available free for all Elite members of the OPEN MINDS Circle. And for a deep dive into the many ways to understand VBR and its relationships to your current and future strategy, check out these resources from the OPEN MINDS Industry Library.
- Preparing For Value-Based Reimbursement—Even Before The Contracts Are Signed
- Can Success With Value-Based Reimbursement Happen Without Analytics?
- Have You Mastered These 4 Financial Management Skills For VBR?
- The New Board Conundrum–Managing Value
- Non-Profit Governance Primer: Background & Roles Of The Board
- Get The Board Of Directors On Board For Change
- What To Look For In A C-Suite Executive In Health & Human Services
- Three Lessons Learned On The Path To A Sustainable VBR Strategy
- The Strategic Challenges On The Road To Value-Based Reimbursement
- From An Extension Of Government Policy To Competitive Service Providers – The Strategy Evolution For Non-Profit Executives
And for even more on VBR, join us at The 2019 OPEN MINDS Technology & Informatics Institute for the session, “Leveraging Technology To Expand Access, Enhance Consumer Experience & Improve Outcomes In A Behavioral Health Care Marketplace Dominated By Value-Based Models” with Alison Nelson, Senior Vice President, Optum Technology, Optum.