AHLA's Speaking of Health Law
Health Care System Governance Structures: Trends and Issues
Dan Grauman, Managing Director and CEO, Veralon, speaks with Cristina Cavalieri, SVP and University Counsel, Thomas Jefferson University Hospital, and Jeannie C. Frey, SVP, Chief Legal Officer and General Counsel, CHRISTUS Health, about health care system governance structures. They discuss the drivers of health care governance structure changes, how governance models are evolving, challenges of implementing governance structure changes, governance issues related to mergers and acquisitions, and issues related to senior management. Sponsored by Veralon.
To learn more about AHLA and the educational resources available to the health law community, visit americanhealthlaw.org.
Dan Grauman, Managing Director and CEO, Veralon, speaks with Cristina Cavalieri, SVP and University Counsel, Thomas Jefferson University Hospital, and Jeannie C. Frey, SVP, Chief Legal Officer and General Counsel, CHRISTUS Health, about health care system governance structures. They discuss the drivers of health care governance structure changes, how governance models are evolving, challenges of implementing governance structure changes, governance issues related to mergers and acquisitions, and issues related to senior management. Sponsored by Veralon.
To learn more about AHLA and the educational resources available to the health law community, visit americanhealthlaw.org.
Support for A HLA comes from Velon Partners, Inc. A national leader in valuation transaction advisory, compensation, and strategy exclusively in the healthcare industry. LAN's Brain Trust approach pulls together focused teams of trusted advisors that work together to provide comprehensive solutions for an organization's complex and interrelated needs. For more information, visit velon.com.
Speaker 2:Greetings listeners. Uh, happy to be here with you today. Um, we are going to have a chat , uh, on all things hospital governance. Uh, I'm Dan Grauman , managing director and CEO of Velon Partners. Uh, we're a consulting firm working in strategy, finance, valuation, and , uh, uh, offering also a virtual board education solution, particularly germane to today's , uh, discussion. Uh, joining me today are to , uh, prominent , uh, chief legal officers for , uh, major health systems , uh, Chris Cavalier and Ginny Fry . And I'm gonna ask , uh, each of them to , uh, briefly introduce themselves. Uh, Chris , if you can get started, that would be great.
Speaker 3:Happy to. Um, I've been , uh, practicing for several years now. Um, my background is a nurse, and I've been fortunate to be at Jefferson for almost 20 years , uh, when we started out as a university, and now we are a system of 14 hospitals, soon to be over 20 hospitals with our relationship with Lehigh Valley Network up in the Lehigh Valley. Gone through a number of mergers and looking forward to chatting about , uh, the trials and tribulations of governance in m and a
Speaker 2:<laugh> . Great. Thank you. And , uh, Jeannie.
Speaker 4:Um, hi, I'm Jeannie Fry. I'm the Chief Legal Officer in general counsel for Christus Health. We're a nonprofit health system with operations in the south and southwest United States, as well as in several countries in Latin America. Uh, I've been in , uh, with Christus for about six years. Uh, before that , uh, I was chief legal officer for two successive through merger nonprofit health systems in Illinois for a total of about 14 years. So, like Chris had been in-house , uh, in , uh, in healthcare , uh, leadership role for , um, about 20 years. Uh, before , uh, going in-house, I was partner in the health law department in a large national firm. So in all those roles I've been involved in , um, uh, nominal and often extensive governance restructuring to reflect changes in the, in the healthcare environment and the systems in which I worked.
Speaker 2:Great. Thank you both. Uh , well, we're excited to , uh, dive in. So let's, let's jump in. Um, so we wanna talk a little bit about , um, the evolution of boards, especially as they relate to , uh, not-for-profit health systems. And I think the relevant backdrop here is that , uh, over the last 50 years , um, the hospital industry, the not-for-profit hospital industry in particular, has evolved from a cottage industry to one where we're now , uh, realistically in the fourth decade of ongoing , um, consolidation and corporatization of, of the hospital business. Uh , and with that, there's a lot of learnings and a lot of need to continue to change, evolve, and adapt. So , uh, first up , uh, Jeannie , if I could ask you to get the conversation going , uh, if you can share some thoughts about what the major drivers are , uh, for , uh, board structure changes that, that have taken place and likely need to continue to take place.
Speaker 4:Sure, absolutely. Um, as you talked about, you know , Dan, over , uh, the past many decades, there have been , um, a strong evolution in healthcare from where in the 1980s there are a lot of individuals, standalone hospitals with active boards. Uh, and over time for economic reasons and strategic reasons , uh, hosp, individual hospitals started coming together in partnership then in as smaller systems and then moving to larger systems. And as that evolution occurred, the structure of the roles between the system level and the individual hospital level also changed. Initially, systems were generally working on , um, what we call a, a holding company model, where they provided certain general services, you know, that, that were appropriately done at scale, but a lot of the decisions were still strategic, financial, budgetary, were still in the hands of the individual hospitals or maybe hospitals within a regional location or area. Um, over time, and I think, you know, in the past 10, 20 years, particularly hospitals started moving to the operating model where the decision making was done at, at the parent level, the key strategies, the key, the budgetary decisions were made for the organization as a whole, and with input from the individual hospitals and regional areas, but with, you know, more of a organization-wide orientation. And as with all of those changes, and part of that was to be competitive within the healthcare industry. Uh, um, over time, also within the past multiple decades for profit healthcare has been much more of a factor than , uh, than in than originally. Originally, hospitals were set up as nonprofit health systems , um, often by , um, men or women, religious or community members to serve the needs of the community without, without really , um, without a strong profit motive. That change as , as for profit healthcare , uh, really came to the fore. And nonprofit health systems such as Chris and I work with , um, really be needed to , uh, to do business differently on a , you know, on a, on a , um, on a more , um, professional consolidated method. And that, that then required a lot of changes in the governance structure to reflect the operational structure that was being put into place. And that's , um, and there's continual evolution as needs and size of organizations change to figure out where the, where the right locus of decision making is , um, and then reflecting that in the governance structure.
Speaker 2:Okay . Great. Thank you. Uh, Chris , uh, any thoughts to share on this, on this topic in terms of , uh, the evolution and the drivers of, of , um, you know , uh, boards?
Speaker 3:Yes. I think it , um, uh, the form should follow function. And one of the areas that's, that I've seen evolved is as , um, financial pressures from a myriad of, of , uh, external factors started to put more and more pressure on community hospitals. The areas in which those local boards were really focusing on was capital. Okay, how are we going to generate enough both from debt and operations Mm-Hmm . <affirmative> to be able to continue to fund the mission. And it was clear that the challenges , uh, of doing that were becoming virtually impossible for institutions to be able to navigate on their own. And it was a difficult realization for those community board members because most of them grew up in that community. Their families were from that community. And, and boards were very, very connected to the local developer, the local banker , um, et cetera. And so , um, it was a difficult decision for these boards to come to the conclusion that , um, they could not stay alone and continue to exist. And , um, that was a huge challenge because not all of those trustees felt the same way about giving up a portion of their identity, right? So in, in addressing the kind of governance issues , um, that, that we tackled here , um, it was almost bringing all the board members on to a one, one board that ended up being a combination of a holding company and an operating company, depending upon the powers that were reserved to what I will call the, the parent board versus the local subsidiary , uh, boards. So the first challenge ended up being extremely large boards that were very difficult to, to manage, and also gave challenges to the board members as to what their fiduciary role role was. Was it to their legacy organization or was it , um, to the newly created organization. And , um, that's why I use the term trials and tribulations , um, because it is definitely a tension filled environment. Um, uh, if you're going to be successful, the decision making needs to be based upon the whole rather than the individual parts. And that's just not something that , uh, nonprofit hospital trustees were used to grappling, right . Uh , with.
Speaker 2:Yeah. That , that , that's a really , uh, some excellent points there. Uh, it, it does seem, from my observation that the, the roles of of board members can be unclear , uh, especially in the early going of combinations because they're , uh, you know, there's been a corporate transaction. And, and even though I know from experience, it's been explained to them many times, and it's laid out pretty clearly in definitive agreements, <laugh> , uh, and the like. Um , but then when the rubber hits the road, there's still confusion
Speaker 3:That a and we try to, to limit that confusion. We would, I don't know , um, what genius experience was, but we would develop a, a grid, an authority grid. Mm . And , you know, it would have what the parent's authority was, what the , let's say they came in and it was a system that came in rather than a single hospital. And okay, what was the systems board and what was the hospital boards? And it was so artificial , um, that it really, it didn't help anybody. I mean, we felt the need to do it, but it, it really wasn't making anybody's life easier. And it, it posed a lot of frustrations 'cause it was, all right , well, what do you give to the board to enable them to exercise their fiduciary duties? What data do they need? Mm-Hmm . <affirmative> . And it was very different based upon what they had been getting before. So it ended up being almost an expansion of what would be two hour board meeting now to a four hour board meeting. Mm-Hmm . <laugh> , which was really ineffective and , uh, efficient for both the board members and management.
Speaker 4:Right? Yeah . And if, yeah, I can , uh, go ahead, Jeannie . I can definitely relate to, to , uh, Christina's experience that off , you know, of that board confusion, even when you do have charts and the bi and you carefully construct the bylaws to show where the, who has what approval powers, who has consulting powers, who has optional recommendation powers still, there's just has been a strong pull to revert , um, in the structure board meetings to a traditional board meeting. So even though you might have a local board that doesn't approve the budget, that doesn't approve the appointment of the CEO or approve even the other board members that there, there has still been a default to giving the board members reports on all of these things as an update, but without any ability to influence those decisions. Um, and as , um, at an , on an equal weight with those decisions that they are still empowered to do, such as largely quality oversight and medical staff matters. So there's also been a confusion in how information's been presented to them as , as Chris Christina said in the board meetings, because we're sending a mis a mixed message.
Speaker 2:Got it. Um, Dan , go ahead Chris. Yeah .
Speaker 3:Just a point here. I mean, it was very difficult for these board members that had control over the c their president before, regardless of what title that you gave them, that they were still sitting on the same board on the hospital board.
Speaker 2:Right.
Speaker 3:But they had no control over budget, and they had no hiring and firing authority over , uh, over the CEO . And they, no matter how hard you tried to explain it, it's logical from their perspective that how could my role have changed so much that I don't, I don't have that authority. Right. Um, and, and so it, it was , um, it would pose a lot of challenging discussions on exercise of fiduciary duty.
Speaker 2:Yeah, that makes sense. Um, so , uh, why don't we , uh, uh, sort of raise another topic that's related , uh, and that has to do with , uh, some of the different models that, that are out there that perhaps you, that each of you have seen and, and worked with. We've made, you've already made some reference to them, but, you know, how are the models changing and evolving and , and what are the factors that any particular organization should be considering in , um, uh, in as they c consider evolving their, their governance structure or model? Um, Chris, maybe you wanna start with that one.
Speaker 3:Sure. I think , um, just what we've learned from experience is that al understanding the culture of the board and the culture of the organization is critically important. Um, and as we have evolved, we have tried to start , uh, the discussion about governance , um, in a more informal manner , manner, getting to know all of the individuals. We, we have a lot more socials in the beginning so that we get to know the people that we're dealing with. And not that you get to know them extremely well, but it's easier to build and have a difficult, somewhat difficult discussions at time . Mm-Hmm . <affirmative> , if you kinda like the person that you're sitting next to or , uh, sitting across from, we didn't do that in the beginning. And , um, it , it just didn't promote the, the kind of environment that we needed to have it be much more collaborative. The other point was, we were way , we be , have become way more deliberative and discerning in how we describe the transactions, the terms that we use. Um, and the key is that the keyboard leaders and the key management people understand is this a merger of equals Okay . Or is it an acquisition? And that ends up being , uh, we've evolved from having a structure that was a merger of equals where, you know, we had 10 board members and each entity that came in got 10 board members. And as I said, we've, we created a monster Mm-Hmm. <affirmative> . Um, and then we ended up having to pare that down. And , um, in the recent activities, we've been much more focused on saying , um, this is an operating company. The focus has to be on integration in order to be able to get the synergies that you want. 'cause as that also has antitrust implications. Right. I think that's really mindful of the fact that, that our antitrust environment has gotten much more challenging and that the only way that you can produce the synergies that you're hoping for is to be able to have , um, a , a , a group of leaders that are calling the shots, both at the trustee level that are focusing on integration. So we've gone from what we call , uh, the board seats as currency to now , um, uh, understanding that if you come on the parent board, you can no longer sit on the subsidiary board and that you have to have your full fiduciary duty to the enterprise, to the whole system, not the legacy organization. Right.
Speaker 2:How large did the board get at one point?
Speaker 3:Oh, it was 60 people. Mm .
Speaker 2:And where is how, where is , what's it at now?
Speaker 3:17.
Speaker 2:Hmm . Good for you. <laugh> .
Speaker 3:So was that , that in and of itself was a traumatic,
Speaker 2:So what happened to the other 43
Speaker 3:<laugh> ? Well, some of them decided they didn't wanna participate anymore 'cause it wasn't, others went back to the hospital boards. Okay. And, you know, we try to maintain all of these relationships because all of these board members started out as fundraisers. Right . They were not, that's why they were asked to be the board on the board. Sure . Uh, especially 'cause we were a university and, and you know, that endowed professorships , uh, et cetera. And, and , um, donor relations with respect to research was very important. So it ends up being a delicate balance , um, to be able to maintain that philanthropic relationship with trustees.
Speaker 2:Great. Jeannie , I know you have some thoughts on this, so please , uh, share.
Speaker 4:Uh, yeah. Um, very, we , we've had , uh, similar , uh, similar experiences and , uh, and it is a, a , a real deliberative process in looking at a board in an acquisition and wanting to keep the value of their community engagement and , and their , in some cases , uh, some of the existing board members have skills and experience, which would make them, you know, very, very valuable at the system level. And in every system I've been a part of, some of our best board members over time have been ones, essentially they came with , with an acquisition. And it was, and it it because there was talent there. And we always tried to look for that and move people up to the, to that system level. You know, sometimes it might be a , a system board committee and then the board or directly to the board. And that's, and then , uh, that community also knows they have a voice there. But, but you're getting a , a larger viewpoint in , in a lot of cases, existing board members, their tie is to the community. They think, okay, this big system, you seem very nice. You seem to have a nice culture. We like what you can, how you can support local hospital. They want it , their , their tie is to that community. In those cases , uh, often those board members may go to the local foundation and , you know Mm-Hmm . <affirmative> , and we look to that. Or they may have another role within if , um, if the local board is, is no longer of interest because it has a smaller , um, landscape of, of decisions, there might be special task forces for community need or community benefit or particular project where they can, those community members can be engaged formally or informally. I mean, that's where, you know, often it's the role of that local executive and the executives team to continue to have those community conversations be Mm-Hmm . You know , with those, those former community board members, if they've moved on as well as other members of the community, to make sure that, that those local , uh, feelings and sensibilities then can be reflected up and transmitted up and communicated at the system level when needed.
Speaker 2:Right . Um, so , uh, just a, just a little tangent here. I, I know you have extensive experience , uh, uh, in Catholic healthcare with , uh, time at , um, at serving as general counsel at , uh, resurrection presence, and now Christus maybe I've missed somewhere along the way, but said , notable institutions, <laugh> , uh, are there , uh, you know, just top of mind, are there particular , uh, implications for this topic that we're discussing that are, are relevant? Um, you know, when , when you think about it from , um, a , a religious , um, you know, health system?
Speaker 4:Uh , it's a really good question. I think, you know, all nonprofits , you know , have their particular mission and their mission , mission history.
Speaker 2:Sure . Right.
Speaker 4:With Catholic Health systems, you know, they, you know, they have a long tradition of service to that community in many cases. Um, all the host system, my current system and systems I previously have been affiliated with , uh, that their , we still had, you know, some level of involvement of sponsoring congregations, the religious women whose predecessors actually came from , uh, Europe , uh, in most cases. And established the local hospital, you know, first mm-Hmm . <affirmative> just to serve those local communities, sometimes the immigrant communities. So there is a strong, strong sense of legacy in many Catholic health systems because , uh, because of that, that history that of, of tying back to the, you know , to the original sponsors and the foundresses of the , um, of many of the hospitals and those values, you know, continue to permeate the organization. Mm-Hmm . And it's mm-Hmm . It's , I know for academic, medical, you know, centers, they are , you know, they also very mission driven Sure . But a little different . So I think it's, it's, it's that particular history. Um, you know, also then moderated by the, the history of that community , uh, in many Catholic health systems, you have , uh, as in my current system and previous systems, as the systems came together, you would have systems that, that had different, were originally sponsored by different groups of Catholic religious women. Right. Uh , and, you know, and they came from different, different, slightly different traditions and experiences or, or different countries originally. So, you know , there's always a , a conscious effort to try to, to try to maintain and to keep that history alive. So people understood that, that, that, you know, we are , we are the guardians of a mission, which has been entrusted to us from Mm-Hmm . <affirmative> , you know , uh, you know, over, over decades and in many cases, 400 years.
Speaker 2:Right. Right. So, let's , uh, shift gears a little bit. Uh, so what are the major challenges of implementing these governance changes you've both referenced? Uh , specific , um, you know, change is in evolution of, of your governance model from , uh, making the boards more efficient, reducing the size , uh, sort of transitioning from , uh, holding company to operating boards, et cetera . Uh, but, you know , with change, you know, it can be painful. Uh, so , uh, maybe Jeannie , you can , uh, comment on some of the sort of top of mind specific challenges in, in this regard.
Speaker 4:Absolutely. In, in many cases , uh, when we're looking at a , um, a governance structure change , uh, within a system, because it's grown to a certain level and it's not as , uh, the governance structures don't at , um, either are not following the, the function of the organization as, as Christina had , uh, had alluded to earlier, because you don't want the governance structure to drive , uh, drive, drive the operations , uh, or, or the decisions of how time is spent. Uh, we also have, but , um, and , and there's also a concern about how much time you're , uh, expecting local executives to spend in board meetings, in board committee meetings, and making sure that time is well spent and they're not just making presentations for presentations sake. Mm-Hmm. <affirmative> , uh, often at the, if you're, if you're looking at really revising, you know, upgrading a governance structure , uh, it is important to have a , some type of task force a process over time , and for informed, often by local objective , um, experts in governance as well as the local leaders and, and sy and leaders throughout the system to come together and develop the core principles. So that there , which then then leads to a path for both explanation and buy-in over a model over time. So that mm-Hmm , <affirmative> that it , there's not a sense of it just being imposed from the top Right. When you have a, an acquisition there , uh, again, as , as Christine had alluded, or in early days, every time there's an acquisition, the governance model of the whole system changed a little bit . Uh, where now with, particularly if it's a smaller acquisition, the, the discussion will be how explaining the , the philosophy of governance within the acquiring system and how , uh, how that can serve the acquired institution and the board. And whether there's , uh, and also a timing issue of whether the local board changes immediately to the standard structure or if there's some type of runway, which gives everyone a chance to learn about each other at the system and local level. Um, or, you know, or if there's, it just makes sense to , um, to move more quickly to the , what's the standard model for that system. Yeah .
Speaker 2:Yeah . So , uh, Chris, any, any additional thoughts on sort of these challenges of , uh, uh, that have to be tackled with, with evolving models?
Speaker 3:Yes. I think that the important factor here is , um, how the, the financial pressures Mm-hmm . That are facing the organization. If the, if the financial pressures are significant, and if they're , um, both the acquirer and the acquirer are in a challenged environment , uh, the key will be to get to full integration sooner than later. Uh, the key will be that the, the , um, trustees , uh, from the , uh, legacy organization , uh, need to understand that they're , their shelf life, so to speak, is limited. Mm-Hmm . <affirmative> , uh, because one of the challenges is quick decision making that focuses on , as I said, on the whole, and how do we use parts of the system to feed that whole mm-Hmm . <affirmative> and have , and have the trustees and management understand that the environment that they have operated under will not be the same. Okay . It will, it will still continue to serve the community, but it may not serve the community in the exact way it does now. Right. Okay. And, and I think , um, COVID has really accelerated that need for integration. Mm-Hmm. <affirmative> . And when that need is accelerated, it's harder to let things evolve organically, because that really takes time. And in our environment, most people don't have the time Right . To be able to , um, uh, let fe people come in and have a com comfort level. So, you know, we, we think it's important in that environment to help have a facilitator with respect to governance Mm . That can speak truth to power in a , in a non-adversarial, non negotiating type environment. Mm-Hmm . <affirmative> , this is the economic reality of what everybody is , uh, being confronted with. Yeah. Interesting. Um , it's imperfect, but it's better. It , it's really, it's something that is being forced upon people now depending upon environment.
Speaker 2:Sounds like what you're describing is more than ever it's important , uh, to be nimble , uh, for the, for, for boards to be able to be efficient , uh, correct. Make quick, sift swift decisions and, and , you know, just deal with all the tsunami of challenges that that are
Speaker 3:That's exactly right. Because they , they come and we, you know, like the covid, nobody knew that was coming, but we sure had to respond to it.
Speaker 2:Yeah. Yeah . So , uh, I'm just , I'm interested specifically given the m and a environment that we all continue to be in , uh, de despite the antitrust <laugh> barriers and challenges, which are at the moment , uh, heightened for sure. We'll see whether that changes or not. Maybe some of you have views on that, but , um, it does seem like there continues to be a lot of m and a activity despite , uh, the regulatory environment. Um, and, and I guess I'm curious to understand from your perspective , uh, whether it's better to , uh, given , given the challenges we've been talking about, it's better to sort of rip off the bandaid and , uh, get, you know, legacy required hospitals up to speed quickly, or , or, or is there just a certain measured pace that's required? Because you're asking organizations that maybe have a hundred year history to fundamentally change how they behave, think, and act. So I'd be curious your thoughts about this. Um, Jeanie , uh, maybe you wanna jump in first on that.
Speaker 4:Um, yeah, I mean, I think it a , it's, you know , the great lawyer answer, it depends on the situation. <laugh> , um, you know, off because there's a huge amount of implementation challenge. Um, you know, even for one standalone hospital, the EMR system, financial system, the roles , um, smaller hospital you may have have executives wearing a lot of hats. And so it's, it's there, there's a process of , uh, introducing the, you know, the newer hospital, the acquired hospital, to all the different , uh, it systems and resources that , that they may have have available to them. The same time, you're also looking at the governance structure, and I think generally the preference is to move faster on the governance structure , um, but also in a way that gives the local board, but also the local leaders who are used to talking with those board members and other community members , um, real, a real sense that the system appreciates who they are. They appreciate the culture and the history. And that is, you know, that , um, what Chris alluded to earlier, the process of really getting to know people Mm-Hmm . <affirmative> and having discussions, you know, having people from the leaders and community , uh, board members from the , uh, target or acquired hospital to come to the system headquarters and for leaders of the system to go to the, to the community where the acquired hospital is, and really have a , have that sense of, of understanding each other to build trust, and then determining what, what system really makes sense to , um, to, to feed that , uh, to serve that, you know, the, the existential needs that, that drove the reason for the transaction in the first place.
Speaker 2:Great. Um, okay. Uh , Chris, any thoughts on, on this issue of , uh, given you , you've sort of made reference to this, you've become a lot more deliberate, I think is what you said, <laugh> in , in dealing with new partners. Uh, so , uh, any thoughts about this?
Speaker 3:Um, I think that you need to do both. You need to pull off the bandaid Mm-Hmm. <affirmative> in a narrow area, and that would be the board and management. And you need then to be able to , um, allow the, the, the, the folks at, in the local area, the ability to adapt to the new environment.
Speaker 2:Right.
Speaker 3:Um, it's, I mean, it's, everybody wants to know who they're reporting to. And so the, the, the more clarity that you could have there, and if the trustees from the legacy organization are supportive of that , um, I think that you'll be advantaged. Um, and in particular, if your acquisition is environment is within close proximity Mm-Hmm. <affirmative> , I think you have a very different story when you are a very large regional system, right. Because you've got to adapt to the regions,
Speaker 2:To the local markets. Right. To
Speaker 3:The local markets. Yeah. So , um, uh, you know, I I I tend to be more of a rip the bandaid off , um, as, as the, the, the first approach. But having like all lawyers having exceptions all the way through <laugh> and think upon the circumstances.
Speaker 2:So you write that into the documents too , <laugh>?
Speaker 3:I try, but sometimes , uh, other council doesn't let me do that.
Speaker 2:Yeah. Right. Good. Uh, well, let's just , uh, begin to bring this to a close and just tackle maybe one more topic here , uh, as , uh, we think about some more specifics. And both of you had mentioned , have mentioned this, and I think it's really important is how , um, sort of the relationship between senior management , uh, down at local operating hospitals that have had a certain history with their boards, with their communities, with their community stakeholders, with existing and former bet board members, and they're used to interacting around certain issues and behaving in a certain way, making decisions in a certain way . So how , uh, that, that needs to change , uh, uh, after , um, there's been some type of , uh, you know, corporate , uh, change or, or merger. Um, what , what are the , um, uh, sort of topic issues that come to mind on the , on this topic? And I know you both , um, uh, have , uh, feel strongly about it. So , uh, maybe you wanna start Jeannie and, and share a few thoughts on this.
Speaker 4:Um , yes . There's , um, two big , uh, decisions, you know, in an acquisition and what's gonna happen to the CE and often that , you know , that is a term of the agreement. Sometimes the CEO is ready to move on. Um, sometimes , um, you know, the other people determine the CEO is, is, is ready, is ready to move on or, or may not be the best fit long term . Um, so there is a , um, there is first understanding what is the vision for, for the local leader. Often, often there is a transition of keeping that local leader because they are, they have the, have the connections unless it's time , uh, unless they make a decision , um, to go. And it's important that they be the ambassador for the system. 'cause people instinct tend not to like change. Just, you know, that that's a universal human trait . Right . So, you know, so it is , it's important that that leader and other senior executives understand the new system and the value and, you know, and can continue to convey that message to the community as well as, you know, alert the system level if needed. That there, you know, that there are certain, certain issues that are, you know, are troubling community members. Maybe there's an article in the press, well , which wasn't flattering, and just to, to reach out to the system for resources to, to help strategize how to do that. But it's, it's, these, these folks are the leaders in the community, the boots on the ground, and then the system really looks to them to , um, to provide that, that connection role and continuing education about the value of the system. At the same time, bringing to the system standpoint , uh, making sure they understand regional variations, local variations, certain issues that are important to that community that members of the system may not be aware of.
Speaker 3:Mm-Hmm. <affirmative> ,
Speaker 2:Chris, your , your thoughts on this? Yeah,
Speaker 3:I, I think , um, I agree , um, that it's, it is critically important to , um, respect and empower the local leaders. Um, I think that's where , uh, a lot of organizations trip up. Mm-Hmm. <affirmative> . And , um, the, the key for me is having them be very close to their leadership at the, let's say, at the operating company level, so that they feel participatory, rather, you know, things are done with them than done to them. Mm-Hmm. <affirmative> . And , and that takes that, that takes a lot of time. Um, but I think it affords both the , uh, legacy CEO the ability to shine , um, and as well as determine whether that legacy CEO is the right fit at that point in time. Right. You never, you will never know that Mm-Hmm. <affirmative> unless there is significant engagement , um, with, with that. Yeah . And people, I think it's important to understand that this is really where retention bonuses and change of control, right. <inaudible> come in. Yeah. So that people can , um, act with, with e economic security. 'cause you know, we , that's the reason we're working. We're not working 'cause it's all giggles and <laugh> flowers. It's, you know, how we, you know, provide for our family. And, and I think that's the most important thing to be respectful about when you're dealing with Yeah . With this is the challenges for that, what will become a middle manager. Right . Uh , uh, type of activity. Right .
Speaker 2:So before I , uh, just , uh, share some , uh, concluding comments and observations , uh, is there , uh, anything Jeannie , you want to share , uh, for the audience , uh, on , on this topic that we didn't cover that you felt like you want to impart?
Speaker 4:Uh, thanks, Dan . You know, one thing we didn't , uh, really get into in terms of governance structures is , um, the importance of knowing what board competencies and experiences that you need at the local level, regional level, you know, system level, depending on, on the, what are the operative governance levels, you know, and that includes , uh, includes making sure that you have a sufficient diversity , um, you know, age, gender, race, Mm-Hmm. <affirmative> , other demographics. Yeah . To really reflect the community and make sure you're hearing, you know, that you're hearing from a board and getting feedback, which, which reflects the general community at large or the, or the type of communities that, that you're ultimately serving. And nonprofit healthcare. We are here to serve, you know, the community and those leaders . We wanna make sure that we are, we are hearing those voices. And so that's, that's another level of challenge that, that, while you're making changes, you also wanna make sure that, that you have, you have a good range of voices at the table. Yeah.
Speaker 2:Thank you. That's perfect. Um , I'm glad you you brought that up. Uh, Chris , any other burning , uh, thoughts from your perspective?
Speaker 3:I'm gonna , uh, I , I definitely agree with Janie on the, on the competency based Mm-Hmm. <affirmative> and that the board has to evolve to that, but also they need to learn how to be a board member for an enterprise versus one institution. Okay . And the challenges is that when you are a board member for , uh, a , uh, a smaller community environment, you tend to be more in the weeds on activity. You are , some , some of these board members have grown up and quasi managed the organization. And so I think that that education as to what it means to be on an enterprise operating company board , uh, and how that's different than what you would do with a , you know, system, single system board.
Speaker 2:Yeah. Right. Good. Um, well, thank you. Uh, you know, for, for the A HLA listener audience , uh, you know, it's clear that , uh, the issues, the challenges around , uh, board structure, board design, just health system governance are, are really challenging. And they're far more than just drawing boxes and drafting up documents. Um, I took some notes here along the way and I heard references to capital culture , uh, uh, socialization collaboration , uh, being deliberative, integration synergies, of course, references to antitrust, financial pressors , a challenging environment, full integration, getting to know people. Folks are averse to change. This is about people empowering local leaders , uh, and then , uh, at the end, their board competency, diversity, et cetera. So it just touches upon a lot of issues, the , the topic of governance and it , and , uh, and it's , um, really, you know, we just scratch the surface , uh, for sure. But that, that was by design and , uh, we've gone on for a while now. So I just , um, wanna thank you both. It's been an honor and a privilege for me to be able to just, you know, ask some questions and facilitate the discussion a little bit. Uh, and, and I'm quite certain the audience will find this , uh, really interesting , um, uh, and, and a lot of thoughts , uh, for , for them to chew on. Um , so thank you for your time. Really appreciate it. And , um, perhaps we'll do this sometime . Again.
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