summer 2013

TrusteeBulletin
Table of contents
Presidents update................................6 Conference preview. .............................7 Board self-evaluation ..........................8 Certified trustees .............................. 11 Buzz word . ........................................11 Compensation issues.........................12 Trustee profiles...................................15

Health Care Philanthropy: Building a Meaningful Revenue Source for Your Hospital
By Betsy Chapin Taylor, Third Sector Strategy

Hospital trustees face a complex financial landscape in their role as stewards of vital health care organizations. They not only facilitate strategic financial investments to enable a strong and sustainable organization but also ensure that adequate financial resources exist to power these plans. These complementary fiduciary roles have been increasingly difficult to reconcile as health care organizations grapple with slim bottom lines that reduce available dollars to invest in the organizations advancement. However, while many organizations see their potential revenue sources as limited to income from operations, sale of assets and debt, there is another strategic revenue resource that not all have pursued or optimized: health care philanthropy, or voluntary community charitable giving. While it may seem a hair-splitting detail, it is worthy to distinguish philanthropy from fundraising. Traditionally, health care fundraising has been transactional in nature and rife with special events, leaving the endeavor as more decorative than strategic. Health care philanthropy, however, seeks to build vibrant and values-based partnerships with donors to accomplish mutual goals for the common good. The impact of this nuance in approach is powerful because data shows focusing on relationship-driven, investment-level gifts offers a higher total return and a stronger return on investment.

Health care philanthropy offers a meaningful, sustainable and potentially transformational revenue source. According to the Association for Healthcare Philanthropy, more than $8.94 billion was given to U.S. nonprofit hospitals and health care organizations in 2011, and on average, these organizations raised $3.24 for every $1 invested in fund development. While the average health care organization must generate about $38.4 million from operations to add $1 million to its bottom line, a fund development organization needs to raise about $1.53 million in contributions to generate $1 million. Moodys Investors Service Inc. further underscores the value of the endeavor, stating that philanthropy is an important consideration in [its] credit assessment that can positively impact bond ratings. With philanthropy consistently offering a return on investment stronger than most clinical service lines and with its ability to positively impact bond ratings, many forward-thinking health care trustees are seeking to optimize philanthropy as a core revenue source. So what specific levers can health care trustees pull to better position health care philanthropy as a meaningful revenue resource for their organization? Here are a few key ways trustees can help encourage philanthropy.

w w w. t h t . o r g

t e x a s h e a lthcare trustees

h hn C h ae ra e dp h i l a n t r o p h y se a cl tt io

credibility in representing the value of the health care organization. Trustees also can support executive participation by including expectations for involvement in philanthropy in the chief executive officers job description; only 36 percent of CEOs have philanthropy in their stated expectations.

Shared Purpose
A common challenge when advancing philanthropy is having clear roles and responsibilities for both governing board trustees and foundation trustees. Lets have an honest moment here: Many governing boards created foundation boards to wash their hands of the distasteful task of fundraising. It is perhaps understandable from a historical perspective in that fundraising often was seen as a softer, social endeavor. However, it is time to bring philanthropy back into both boardrooms to maximize opportunities to forge community partnerships and to position philanthropy as a strategic revenue source to strengthen and sustain the mission. The reason is simple: The fiduciary responsibilities of governing board members mean they must not only spend dollars but also ensure the availability of adequate dollars. Many organizations also hardwire collaboration and communication between the two boards by having one or more overlapping members.

It costs the average U.S. nonprofit hospital or health care system $0.3086 to raise $1 through philanthropy and $0.974 to earn $1 from operations.

Leadership Engagement
The meaningful engagement of key organizational advocates, including trustees, senior executives and physicians, is highly correlated with success in raising charitable dollars. In fact, securing the participation of these allies is the single-largest step forward an organization can take to drive more robust charitable giving. Leveraged roles for advocates include driving a culture to support high performance fund development and fostering relationships with community partners. Trustees are especially effective in an outreach role because they are seen by community peers as having unmatched

Strategic Alignment
THT Officers
Chair, Randy Clapp, J.D. El Campo Memorial Hospital Chair-Elect, Lilia Escajeda Northwest Texas Healthcare System, Amarillo Treasurer, Sister Marie Therese Sedgwick Providence Healthcare Network, Waco Secretary, Levi Davis Methodist Health System, Dallas Immediate Past Chair, Sharon Joseph Hill Country Memorial Hospital Foundation, Fredericksburg

TRUSTEE BULLETIN STAFF

Stacy G. Cantu, CAE THT President/Chief Executive Officer, Editor Amy Knitt THT Manager, Member Outreach and Development, Managing Editor Shirley Robinson THT Director, Education and Programs, Associate Editor Barbara Battista Graphic Designer Debbie Ritenour Editorial Coordinator

an affilIate of:

Texas Healthcare Trustees

Inspiring excellence in health care governance 1108 Lavaca, Suite 700, Austin, TX 78701 www.tht.org

Donors seek to support high-impact projects that are tightly aligned with the strategic aspirations of the health care organization. However, many organizations do a poor job fostering alignment between the health care organizations strategic priorities and charitable priorities. In addition, many health care organizations fund the most important projects while giving lower-priority projects to the foundation to fund. Trustees can harness greater donor interest by ensuring funding priorities align with strategic priorities. This allows donors to participate in meaningful work while simultaneously freeing money to invest in lower-level priorities. To facilitate the selection of strategically aligned funding priorities, start by creating a clear process to identify appropriate, strategic projects with implementation timelines that enable donor participation. Setting funding priorities can be an ideal point of collaboration between the governing board and the foundation board; for example, consider creating a joint task force that includes governing board trustees from the finance and strategic planning committees, foundation board leaders, and key health care executives to bring all the right perspectives and decision-makers to the table.

TRUSTEE B ULLET IN

summer 2 0 1 3

confere sn ec e t ip or neh ve ie aw d

Powerful Case
Donors give to organizations that share a clear and compelling rationale for giving that resonates with them both intellectually and emotionally. However, many health care organizations do themselves a disservice by simply saying, Were a hospital, so give to us. Failing to explicitly share how philanthropy will advance the organization leaves donors with a hollow ask that dampens response. Trustees are ideally suited to help shape a compelling case for why the organization merits charitable support since they are both educated insiders and objective outsiders. It also should be noted that donors do not give to meet needs but rather to enable solutions, so health care organizations should stress their value in advancing community health and providing community benefit instead of bemoaning financial obstacles to their progress.
(continued on page 5)

Other Opportunities for Trustees

If you do not have a formal fund development program, consider creating one. Set a standard that partial funding for any major capital project come from giving. Track one key performance indicator for philanthropy beyond total dollars raised. Open doors to those who have an affinity for the organization and the ability to give. Discuss expectations for individual trustee giving; you set the pace and example. Have explicit discussions about the role of philanthropy in financial planning.
n n n n n n

w w w. t h t . o r g

t e x a s h e a lthcare trustees

ENDORSED

COMPANY

Jackson Healthcare provides hospitals with physicians, clinicians, and allied health professionals to ensure the delivery of timely, high quality patient care. www.jacksonhealthcare.com

h e a l t h C a r e psh eic lt ain otnr o hp eh ay d

Other Considerations for High-Performance Philanthropy

High-performance philanthropy is strongly rooted in having a culture for philanthropy, which involves properly positioning the endeavor in the organization and ensuring it is supported by advocates and aligned with the mission. Several other factors that improve performance are described below. Grateful patients are most likely to become major donors, so excellent clinical service that inspires confidence and gratitude is essential. It also is worth breaking down internal barriers to allow fund development staff to appropriately utilize HIPAA-allowed patient information. Adequate financial investment must enable both capacity and growth in the fund development program. Many organizations fail to evolve from basic annual giving to higher-value relationship-driven strategies due to lack of investment. Meaningful evaluation enables the fund development program to optimize effectiveness and efficiency. Those who are systematic in tracking performance and utilizing benchmarking simply do better. Institutional embrace weaves acceptance of the idea that the health care organization is a nonprofit organization with a noble mission worthy of community investment into the organization from the frontline to the boardroom so that the entire organization is positioned to share the case with conviction. Disciplined fund development organizations are process-driven, data-driven efforts that utilize diverse strategies for annual, major and planned giving. Structured community partnerships enable thoughtful outbound philanthropy from the health care organization to other community nonprofits so that giving does not occur in a way that is confusing or offensive to donors. Synergy between fund development and marketing enables one inspiring and consistent brand to foster community confidence, understanding and trust.

Supporting Success
Trustees tend to be high-performing people who do not want to feel they are being set up for failure by being asked to participate in fund development without the necessary resources. Many trustees admit feeling significant anxiety about asking others for financial contributions even in support of a cause they care about greatly. That said, boards must fuel both the purpose and the performance of their members by providing information and tools to be successful. For example, trustees need to know how philanthropy fits into the hospitals financial plans. They also need to know that their role in advancing philanthropy is not confined to the narrow task of asking but can be fulfilled through a spectrum of activities, including making introductions, sharing the hospitals story, stewarding donors and

more. Trustees who are willing and able to ask need to know what to expect on a visit and how to handle various situations. In short, trustees do themselves and their organizations a distinct service by having honest conversations about the rationale for and their roles in health care philanthropy, starting with recruitment and continuing with targeted board education to enable the confident participation of trustees. Trustees are uniquely positioned to elevate health care philanthropy on the organizational agenda as a strategic revenue-generating strategy. Trustees choosing to embrace this role can not only create a valuable revenue stream to strengthen and sustain the organizations mission but also infuse the organization and community with a greater commitment to the mission. v

w w w. t h t . o r g

t e x a s h e a lthcare trustees

P dn e nh te s sr ee cs tio a dU p d a t e

Presidents Update
You spoke; we listened. Here at Texas Healthcare Trustees, we are shifting from talking about the issues to discussing solutions. Our members are ready to move beyond identifying a problem, barrier or concern they face and toward finding answers. With this in mind, we have created a new session at our upcoming Healthcare Stacy Cantu, CAE Governance Conference that we are very THT President/CEO excited about. THT has teamed up with industry experts to facilitate round-table discussions in order to provide a setting for trustees to have rich and pragmatic conversations with their peers from around the state. Round-table topics include: Doctors, Dollars and Health Reform: Trends in Incentive-Based Physician Compensation; New Critical Board Metrics: How Do You Know if You Are Effectively Transitioning from a Volume to a Value
n n

Model to Be Successful in the Population Health Space?; and Value-Based Economy: How Health Care Reform Changes the Talent Required in the C-suite. Our partners include:
n

Merritt Hawkins, an AMN Healthcare company; Acadian Ambulance; VHA.

n n n

Set in a smaller environment, these round-table discussions will offer an opportunity for attendees to talk about the issues they are facing as trustees and collectively brainstorm ways to help them succeed in leading their hospitals. This is a new venture for THT, and we are excited to help our members get down to the nitty-gritty and begin solving problems. These discussions will run concurrent with the breakout sessions; visit www.tht.org to see the full schedule. We look forward to seeing you in Fort Worth in July! v

TRUSTEE B ULLET IN

summer 2 0 1 3

conference preview

2013 Healthcare Governance Conference July 25-27

The Worthington Renaissance Fort Worth Hotel
When you know better, you do better. Education is valuable for health care trustees. Being equipped with the correct and current information can turn you into a valuable asset for the organization you serve. The 2013 Healthcare Governance Conference has all bases covered to help with this. From the pre-conference board orientation and advanced trustee workshop to the seminars on patient safety, physician relations and other hot issues, Texas Healthcare Trustees works to ensure you and your board are kept up-to-speed on the most relevant topics in health care leadership. Check out the full lineup at www.tht.org. With hours of trustee education conveniently located under one roof in downtown Fort Worth, this is one conference you wont want to miss. Bring your board, your chief executive officer and your thinking caps! Special thanks to Diamond sponsors AMN Healthcare and Community Hospital Corporation for their support. v

Need a Day Out of the Office?

Join your colleagues Thursday morning for the Annual THT Golf Tournament. Whether youre an avid or an amateur golfer, this scramble-style tournament will be a blast. This years tournament will be held at Cowboys Golf Club, the first NFL-themed golf course. Designed by award-winning architect Jeff Brauer, this resort-style course features: 159 acres surrounded by magnificent natural beauty; Dramatic elevation changes, forests of trees, natural waterways and wildlife habitats; An 18-hole, par-72 championship course measuring 7,017 yards; and An imaginative design with a variety of environments, hole by hole.
n n n n

Thats not all! Winners will receive amazing prizes, including:

Bushnell laser rangefinders for the first-place team; Bushnell NEO-X GPS rangefinder watches for the second-place team; and Titleist sand wedges for the third-place team.
n n n

But even if you dont win, dont despair! There will be some great giveaways for attendees. To sign up for the tournament, visit www.tht.org.

Online registration and hotel reservation information are available at www.tht.org.

Special thanks to presenting sponsor CSS.

w w w. t h t . o r g

t e x a s h e a lthcare trustees

s Sec lf ti -o En v ah le ua ad tion

Board and Individual Member Self-Evaluation

While strategic planning allows a hospital to assess its current status and make modifications for the future, board self-evaluation and a self-assessment by individual board members provide an opportunity to determine the effectiveness of the board and its members.
Board evaluations should be a way for trustees to build trust, create a team, improve communication and achieve goals. Through these assessment tools, board members can: Determine what the board is doing and how effective it is; Evaluate the skills, knowledge and level of participation of individual board members; Determine the areas that need improvement; and Meet The Joint Commission requirement for board self-evaluation, and for investor-owned facilities, meet one of the key provisions in the Sarbanes-Oxley Act.
n n n n

However, to be successful, board members must be committed to governance excellence and open to change. Board members must take the process seriously and work to reach a consensus on how to resolve issues. And someone must be accountable for follow-up to ensure the board completes not only the self-assessment but also the actions agreed upon for improvement. Through both qualitative and quantitative measures, a board assessment identifies the strengths and weaknesses of the board, and what needs to be changed and how. The board self-evaluation process includes answering a number of questions related to duties, mission, organization, planning, meetings, filling vacancies and the boards authority. An effective board evaluation process should: Refresh board members understanding of the boards role and
n

responsibilities; Identify important areas of board operation that need attention or improvement; Measure progress toward existing plans, goals and objectives; Define/refine the criteria for an effective and successful board; Build trust, respect and communication among board members and the president/chief executive officer; and Enable individual board members to assess their own contributions and work more effectively as part of a team.

mittee perform the evaluation, and a few have the chair evaluate each individual member. After determining how the board will approach the self-evaluation, a process must be established. Many boards use a facilitator to help. A facilitator helps ensure that the feedback is candid. After selecting the facilitator, the survey form must be designed, or the board can use an already prepared form. During a board meeting, the facilitator should explain the process, timeline and how the data will be used. Following completion of the forms and compilation of the results, the facilitator should present the data and lead a discussion of issues identified. With the facilitators help, the board should agree on a process or action steps for resolving issues.

Conducting Board Evaluations

The boards self-evaluation can take many different forms. A basic approach to board self-evaluation involves each member evaluating the board as a whole and individually evaluating his or her own performance. A more advanced approach would include board members evaluating the chair and one another. Some boards have the governance com-

Board and Individual Assessments

While it is important to evaluate how the board as a whole is performing, it also is helpful for individual trustees

TRUSTEE B ULLET IN

summer 2 0 1 3

S e ls fe -e cv ta io ln u ah te io an d

to reflect on their own performance. Looking at attendance, preparation and participation may help an individual trustee see that he or she cannot fulfill the time commitment and perhaps should resign. Alternatively, an individual may recognize that he or she is overachieving and needs to allow other board members to participate more fully. While these types of issues may surface through an evaluation of the board, self-assessment by individual trustees may help them focus on their own performance.

Feedback and Implementation

Once the evaluations are complete, results should be shared with the entire board. The facilitator may be in the best position to provide the results and lead a discussion on points or issues in which the board is weak or there is disagreement. The most positive outcome is robust discussion among board members, which can lead to a more effective, better-functioning board.

If board members agree to take specific activities or modify processes, someone must be tasked with the assignBenchmarking ment of following through. If more education is needed on While the greatest benefit of board self-evaluation is measura topic, then someone must be responsible for researching ing how well the board is meeting its performance criteria, it options and bringing a recommendation to the board. If a also may be helpful to compare results with governing boards of similar types and size or against national standards identified process or policy needs to be modified, a subcommittee may through scientific studies. A number of governance organizations be appointed to discuss the options and bring a recommenconduct studies, and those results may help provide perspective dation to the board. for board members. As the board incorporates regular self The evaluation should not be a report that is put on the evaluation into its activities, it also will be helpful to compare shelf. To improve the performance of the board, action must the boards own performance over time. Board members can be taken on the results. determine if changes made were productive and track areas of Similarly, individual trustees should use the results of strength and weakness over time. their self-evaluations to determine how best to improve their performance as a member of the board. v

Board Self-Evaluation
Broad topics for board self-assessment include the following:
n n

Mission and strategy; Effective fiscal oversight; Effective quality oversight; Board and management relations; and Board processes and effective governance.

The Governance Institute recommends the following 10 areas for board self-assessment:
n n

Governance knowledge is a keystone to being a successful board member and leader of an organization. Knowing your role and the support, knowledge and expertise you provide to your hospital/system is critical for good governance in health care. This article was excerpted from Texas Healthcare Trustees new Trustee Guidebook: Governance, part of a nine-module series covering the fundamentals and essentials of health care governance. For additional insight on principles and best practices of governance, check out THTs newest resource, TrusteeOnline. TrusteeOnline is the on-demand video companion to the Trustee Guidebook series and features presentations from top experts. More information about the Trustee Guidebook and TrusteeOnline can be found at www.tht.org. v

Fiduciary duty of care; Fiduciary duty of loyalty; Fiduciary duty of obedience; Financial oversight; Quality oversight; Setting strategic direction; Self-assessment and development; Management oversight; Advocacy; and Board member performance.

w w w. t h t . o r g

t e x a s h e a lthcare trustees

OUR JOB GOES BEYOND CUTTING COSTS.

THATS HOW WE OPERATE.
Todays healthcare challenges require sharper thinking. Not just a better contract, but a more surgical approach for improving not only cost, but also quality of care. At Amerinet, our members rely on us for more than saving money. We offer a full suite of performance solutions, from supply chain management to data analytics and revenue enhancement. Plus, improvements to technology, quality, safety and education. Then we do what no other GPO can connect like-minded healthcare organizations together to solve issues and share insights that improve the health of healthcare. That, perhaps, is the most important contract of all.

D ATA . S AV I N G S . T R U S T. T H E A M E R I N E T D I F F E R E N C E .

www.amerinet-gpo.com | 877-711-5700
Reducing healthcare costs. Improving healthcare quality.

C e r t i f i e d TRUSTEES

Congratulations to THTs Newest Certified Healthcare Trustees

Texas Healthcare Trustees congratulates this years recipients of the Certified Healthcare Trustee designation. Are you prepared to lead and become a Certified Healthcare Trustee? Visit www.tht.org to find out how.
Lori Baker, Palo Pinto General Hospital, Minera Wells Greg Campbell, Methodist Health System, Dallas Stephen Cooper, El Campo Memorial Hospital David Cowart, Ballinger Memorial Hospital Levi Davis, Methodist Health System, Dallas Richard Dennis, Palo Pinto General Hospital, Mineral Wells William Lee Hanson, University Medical Center of El Paso Tim Hopkins, Palo Pinto General Hospital, Mineral Wells Mary Johnson, El Campo Memorial Hospital Stephen Mansfield, Methodist Health System, Dallas Josh Murphree, Stamford Memorial Hospital Tracy Yellen, University Medical Center of El Paso Scott Fisher, JPS Health Network, Fort Worth Patricia Fuller, Chambers County Hospital District, Anahuac Roseanne Gallia, Lavaca Medical Center, Hallettsville Joe Gurecky, OakBend Medical Center, Richmond Steve Hackebeil, Medina Community Hospital, Hondo Judy Hayes, Medical Center Health System, Odessa Yvonne Hearn, United Regional Health Care System, Wichita Falls David Hillyer, Winnie-Stowell Hospital District Michael Hopkins, Palo Pinto General Hospital, Mineral Wells Lynne Humphries, OakBend Medical Center, Richmond Lisa King, Nacogdoches Memorial Hospital J. Weldon Koenig, St. Marks Medical Center, La Grange Steve Lackey, Bellville General Hospital Frank Larson, Val Verde Regional Medical Center, Del Rio Roy Lowry, JPS Health Network, Fort Worth Mark Maples, Faith Community Hospital, Jacksboro Rex Mathis, Faith Community Hospital, Jacksboro Ron McCann, OakBend Medical Center, Richmond Edward Meaux, Winnie-Stowell Hospital District Leo Mercer, United Regional Health Care System, Wichita Falls Mary Jean Moloney, Texas Health Arlington Memorial Hospital Evalyn Moore, OakBend Medical Center, Richmond Erleigh Norville-Wiley, Texas Health Presbyterian Hospital Kaufman Shelley Owen, Faith Community Hospital, Jacksboro Mahendra Patel, Methodist Healthcare System of San Antonio Trent Petty, JPS Health Network, Fort Worth Baiba Pustejovsky, Lavaca Medical Center, Hallettsville Linda Rees, Reagan Memorial Hospital, Big Lake Steve Robertson, Texas Health Resources, Fort Worth Charles Schultz, Texas Health Harris Methodist Hospital Hurst-Euless-Bedford Sister Marie Sedgwick, Providence Healthcare Network, Waco Carl Stapp, Texas Health Presbyterian Hospital Kaufman Andrew Stern, Medical City Dallas Hospital W. Dennis Stripling, Texas Health Presbyterian Hospital Dallas Edwina Swan, Faith Community Hospital, Jacksboro May Tape, OakBend Medical Center, Richmond Timothy Thomas, United Regional Health Care System, Wichita Falls Mary Thompson, Medical Center Health System, Odessa Virgil Trower, Medical Center Health System, Odessa Larry Walker, Nacogdoches Memorial Hospital Bernice J. Washington, Texas Health Presbyterian Hospital Kaufman Charles Webber, JPS Health Network, Fort Worth Ron Wensel, Hunt Memorial Hospital District, Greenville Marian Whitley, Chambers County Hospital District, Anahuac Tommy Willcox, Chambers County Hospital District, Anahuac Dorothy Williams, Texas Health Harris Methodist Hospital Hurst-Euless-Bedford James Wynne, Texas Health Presbyterian Hospital Kaufman

Special thanks go out to all of THTs Certified Healthcare Trustees for their commitment to excellence in health care leadership.
Mary Lou Anderson, Medical Center Health System, Odessa Cathy Ashby, Hendrick Medical Center, Abilene Lee Ayres, Texas Health Presbyterian Hospital Kaufman James Bagwell, Chambers County Hospital District, Anahuac Anne Bass, Texas Health Resources, Fort Worth Jay Beavers, Texas Health Resources, Fort Worth Joe Bob Bergin, Hopkins County Memorial Hospital, Sulphur Springs Barry Blackman, Methodist Healthcare System of San Antonio Katherine Boswell, Palo Pinto General Hospital, Mineral Wells Sharon Burgess, Winnie-Stowell Hospital District Rosemary Burns, East Texas Medical Center Athens Tracy Clanton, Rankin County Hospital District Randy Clapp, El Campo Memorial Hospital J.C. Colton, Palo Pinto General Hospital, Mineral Wells Billy Cypert, Faith Community Hospital, Bowie David Dunn, Medical Center Health System, Odessa Bobby Dyess, Baylor Medical Center at Waxahachie Ralph Emerson, JPS Health Network, Fort Worth Ron Epps, Providence Healthcare Network, Waco Bob Ferguson, Texas Health Presbyterian Hospital Dallas

Tired of reacting to compensation and benefit trends?

Well help you see whats coming.

INTEGRITY

INDEPENDENCE

INSIGHT

I N F O R M AT I O N

www.sullivancotter.com 888.739.7039

w w w. t h t . o r g

t e x a s h e a lthcare trustees

11

c o mp e n s a t i o n

Top 5 Issues for Health Care Compensation Committees in 2013

By Steve Sullivan, Terry Brown and Jim Hudner, Pearl Meyer & Partners

In a global economy, the rapidly escalating cost of compensation and benefits programs puts U.S. companies at a major competitive disadvantage. Health care services purchasers are focused on comparing the costs and outcomes of multiple providers around the country, making transparency regarding accountability, costs and outcomes critical. The traditional fee-for-service model is increasingly questioned as health care providers realize that keeping people healthy costs less than treating them when they become ill. Given the high percentage of business and government operating costs attributable today to medical coverage, its not surprising that executive pay practices within the health care industry also have become a major focus of attention. A hospital boards compensation committee must rigorously reassess whether the programs it oversees effectively support the organizations mission and strategies and meet accepted standards of good governance. The top 5 issues for health care compensation committees in 2013 are: 1. Mission alignment; 2. The quality mandate; 3. Compliance demands; 4. Non-qualified retirement plans; and 5. The need for transparency.

philosophy should describe the structure and business rationale for each pay component, the significant aspects of the executive compensation program, including the structure, and the business rationale for each element of pay. It also should explain the rationale for benchmarking methodology and the market positioning strategy.

The Quality Mandate: Linking Key Organizational Goals with Executive Compensation Opportunities
Many boards already are taking a more active role to align leadership goals and executive compensation programs with the specific measures set forth in the Patient Protection and Affordable Care Act, including quality of care, safety, patient satisfaction and the cost of providing care. In a significant change, Medicare will be paying hospitals for inpatient acute-care services based on the quality of care rather than the quantity of services. Financial incentives exist to reward a hospitals high achievement or improvements, further driving hospitals to improve overall quality. As a result, these new measures will play a more significant role in how trustees assess institutional performance and, based on those metrics, determine the design and level of executive compensation programs. As the leadership teams of hospitals and health care systems effectively transform their organizations to succeed in the PPACA era, their boards should establish variable pay arrangements designed to position executive compensation competitively based on that success.

Mission Alignment: Ensuring Your Compensation Philosophy Supports Business Strategies

The compensation committee philosophy should clearly define the organizational mission and priorities that form the basis of its decision-making around pay programs for top managers. As long-standing health care strategies are challenged, trustees must reassess whether the current mission and strategy reflects and clearly articulates whats important to the organization and its constituency going forward. The next step is ensuring the compensation philosophy supports these priorities and defines how success will be measured. The philosophy also should define the level of oversight delegated by the board to the compensation committee to meet its duty to ensure pay programs reinforce the organizations mission and strategies and are administered with transparency and within good governance guidelines. Milestones should be defined for the executive team. The
12
TRUSTEE BULLET IN

Compliance Demands: More Critical Now

As health care boards face more difficulty recruiting executives with new leadership skills and address increased public scrutiny of pay programs, they also must ensure compliance with new regulatory standards for tax-exempt organizations, specifically Section 4958 of the Internal Revenue Code. This section is intended to promote more direct alignment of executive compensation programs with an organizations mission and strategic objectives and ensure there is a sound rationale for executive pay decisions. It encourages more use of comparability analyses and more deliberative decisionmaking processes. The Internal Revenue Service may impose stiff penalty taxes or intermediate sanctions for what are termed excess benefit transactions to disqualified persons. It is critical that nonprofit organizations take advantage of the reasonableness presumption, which is in their favor (i.e., a

summe r 2 0 1 3

c o mp e n s a t i o n

program is assumed to be reasonable and not excessive unless proven otherwise, with the onus of proof falling on the IRS). Conducting a market reasonableness analysis does not in itself constitute a compliance program, as additional disclosure is required. Committee minutes must identify the independent members, document their discussion of the analyses, and document and sign off on their decisions concerning the presumption of reasonableness.

the information provided for officers, directors, trustees, key employees and highest-compensated employees in Part II. This section also can be used to provide a more in-depth view of the committees approach to interpreting the compensation philosophy, peer organization benchmarking and performance expectations. While some organizations worry that focusing on such issues will only heighten scrutiny, the organization can better frame the discussion around pay and benefits by providing a more clear rationale for programs.

Non-Qualified Retirement Plans: Design and Disclosure Considerations

Many nonprofit organizations offer enhanced retirement benefits, additional supplemental executive retirement plans, or non-qualified deferred compensation programs. Unfortunately, SERPs and NQDC plans are a popular target when pay critics scrutinize the compensation arrangements for an outgoing chief executive officer/executive director or other senior members of management. Form 990 plan disclosures often contribute to the problem by implying that benefits actually accrued over a period of time were lump-sum payments provided for a single year of employment. Greater clarity around SERP or NQDC plan disclosures can help prevent unwarranted negative attention by legislators, donors and the media. Organizations are advised to provide an explanation in Part III of Schedule J regarding the values that were established, the accrual period, the annual amount of the accrual (either as a fixed dollar amount or an annual percentage of income), and other details. Additionally, compensation committees should be mindful that IRC Section 457(f ) requires that a deferred compensation program include a significant risk of forfeiture. Because the deferral will be taxed as soon as the benefit is no longer subject to such risk even if it isnt immediately paid out to the executive programs should be carefully designed to ensure participants have the cash needed to pay their tax obligations when they come due.

In Closing: Be Proactive
To meet the unprecedented challenges ahead, a hospital boards compensation committee needs to find new ways to recruit, retain and motivate top talent in a highly competitive marketplace. Innovative incentive arrangements can help in this effort by focusing rewards on keeping people healthy, providing cost-effective programs for patients, and meeting expanded mandates around the disclosure and reasonableness of executive pay. We advise trustees to step back and seek fresh perspectives as they consider more robust, proactive changes that will better ground compensation programs in the strategies and needs of their organizations. v

Buzz Word

Continuum of Care

Continuum of care refers to the full range of services and care provided to patients that encompasses preventative, diagnostic and post-hospitalization treatment. In the past, health care delivery was needs-based, focused on treating an illness, injury or disease. A new approach has taken form with a greater emphasis on prevention. Half of all chronic diseases are linked to such preventable problems as smoking, obesity and physical inactivity. According to the Agency for Healthcare Research and Quality, nearly 4.4 million hospital admissions totaling $30.8 billion in hospital costs could have been prevented. Through this changed approach to care, new professionals are identified in helping with care. This includes social workers, dental hygienists, and fitness instructors and trainers, all of whom are considered to play a role in preventative care as well as recovery support after hospitalization or treatment. As the country shifts toward decreasing the cost of health care and improving the populations overall health, greater focus will be on preventative measures and programs as well as on working to keep patients accountable and healthy after treatment or hospitalization. v
w w w. t h t . o r g

The Need for Transparency: Improving Your Disclosures

Even a well-considered executive pay program is more vulnerable to criticism and misinterpretation absent a clear and effective disclosure of the compensation philosophy and the programs rationale. There are several ways to improve transparency by the organizations various constituencies. First, consider posting the compensation philosophy on the organizations website, possibly with the latest Form 990, its associated schedules, and the annual report or financial report. Schedule J also has a supplemental information section where organizations can further address the questions in Part I or

t e x a s h e a lthcare trustees

13

THT N s e c t ie ow ns h e a d

THT Diversity White Paper Now Available

After 12 months of research and formulation, and with support from Merritt Hawkins, Texas Healthcare Trustees is proud to provide its members with Whos at the Table? THT Trustee Demographic Study and Toolkit. THT surveyed health care board members from around the state and conducted a thought-leader session to create a comprehensive profile of Texas trustees as a whole and compare it to the states changing demographics to learn how diverse hospital boards currently are. Along with the general population, the definition of diversity itself is undergoing a change. It no longer is held to appearances but rather has expanded to include many different characteristics that make individuals unique, such as gender; ethnicity; age; religious affiliation; sexual orientation; disabilities or impairments; educational, professional and socioeconomic backgrounds; and even political affiliations. There are new ways to approach diversity and new factors to consider. With the growing movement toward expanding beyond hospital walls and into the community, understanding and empathizing with those whom your hospital serves will play an important role in the care your organization will be able to provide. Creating a health care board that is representative of the population and diverse in perspectives and backgrounds can increase patient satisfaction, success in strategic planning and successful decisionmaking, according to a recent study.

TrusteeResearch

Whos At the Table? THTs new white paper provides worksheets and activities to THT Trustee Demographic Study and Toolkit complete as a board to evaluate composition and recruitment planning. It also includes an explanation and plan of board recruitment processes to help ensure your board has everything in place to build and strengthen the leadership pipeline and development of current and future trustees.
An analysis of boardroom demographics and strategies on how to better reflect the communities you serve.

To receive a complimentary copy of the new THT resource Whos at the Table? THT Trustee Demographic Study and Toolkit, please email Amy Knitt at aknitt@tht.org. v

THT Provides On-Site Training in Laredo

Doctors Hospital of Laredo hired staff from Texas Healthcare Trustees to provide education during the hospitals board retreat in March 2013. Stacy Cantu, CAE, THT president/chief executive officer, spoke about board roles and responsibilities, and John Hawkins, senior vice president of advocacy and public policy at the Texas Hospital Association, presented an update of the 83rd legislative session. Doctors Hospital of Laredo is a for-profit hospital owned by Universal Health Services.

14

TRUSTEE BULLET IN

summe r 2 0 1 3

trustee profiles

Winfred Parnell, M.D.

Parkland Health & Hospital System, Dallas

Josh Murphee
Stamford Memorial Hospital

Hometown: Lake City, Fla. Occupation: Board-certified physician in obstetrics and gynecology Family: I have been married to my wife, Debra, for more than 35 years. My daughter, Wendy, M.D., completed residency training at Parkland in 2011 and practices obstetrics and gynecology. My son, Winfred, M.D., is pursuing residency training in family medicine. Hobbies: Jogging, traveling and snow skiing.

Hometown: Stamford Occupation: Certified insurance counselor Family: Carri is my wife of 11 years, and we have a 20-monthold baby boy named Jaxton. Hobbies: Playing with the blessing that is Jaxton Murphree is my No. 1 hobby.

As a Board Member
Most Satisfying: When we are able to make changes that positively impact the health of patients entrusted to our care. Most Challenging: I have learned that true change is often incremental change, and it simply takes time to implement sustainable change. Biggest Surprise: The unique opportunity we have as board members to collaborate and find policy solutions that strike a responsible and responsive balance between the fiscal constraints of the hospital and the pressing health needs of the community we serve. Proudest Moment: When the policies I have helped shape are attributable to improved patient experience and patient outcome. Valuable Lesson: Systems reforms are rapidly changing health care delivery and the practice of medicine. In this way, health care systems are becoming more interdependent of different industries. Understanding how the health care industry works in tandem with the other industries helps build and sustain a community. But in all of this, we have to keep the patients at the center of our work.

As a Board Member
Most Satisfying: Knowing that I am helping keep one of our communitys biggest assets open for business. Most Challenging: Learning how hospital business is conducted because it doesnt operate like any other business you learn about in school. Biggest Surprise: Finding out just how important Medicare and Medicaid are to the survival of our hospital. Proudest Moment: My family took on the project of renovating the outdated chapel in the hospital, and the first time I witnessed the employees gathering in the new room to pray was a very proud moment. Valuable Lesson: Attitude is contagious!

About Me
My Life: It is sort of interesting that I am on the Stamford Memorial Hospital Board of Trustees because I was born in that hospital. Except for a few years in Lubbock, I have lived in Stamford my whole life. After college I came home to run the family insurance business and married a girl that I went to daycare with. We have a 20-month-old baby boy that is a huge blessing (and handful). Lone Star History: All I have is Lone Star history, and I am proud of that. Childhood Ambition: When I was a kid, I wanted to be everything from a preacher to an attorney. The funny thing is that some days I feel like I have turned into both of those things. My Favorite Person: My son, Jaxton, has changed my life more than any other person I have known and in more ways than I ever thought possible. Watching that little miracle grow up every day is a huge blessing. Best City in Texas: Stamford but Fredericksburg is a pretty close second. v

About Me
My Life: I grew up on a farm in Lake City, Fla. Our home environment gave me a strong sense of my potential, a solid work ethic and a moral compass. Lone Star History: I came to Dallas more than 30 years ago to complete residency, and I found my home among the people of Dallas. Childhood Ambition: From an early age, I knew I wanted to become a doctor. This decision was definitely shaped by my childhood experience with asthma. I spent a great deal of time visiting one of the few doctors in town who would attend to African-American patients. My Favorite Person: My favorite person is my father, Donald Parnell, who taught me the value of hard work, the need for a solid education, integrity and the blessing of being able to forgive. Best City in Texas: I enjoy many Texas cities, but Dallas is by far the best. Dallas is where I started my professional career, it is where my children were reared, and it is home. v

w w w. t h t . o r g

t e x a s h e a lthcare trustees

15

Upcoming Webinars
Texas Healthcare Trustees
1108 Lavaca, Suite 700 Austin, TX 78701 www.tht.org
wednesday

24 14 18
Sept. aug.

july

Leveraging Philanthropy to Raise More Money: 5 Roles for CEOs Board Succession: Building a Board Candidate Pipeline Board Ethics: Preparing for New Challenges

STANDARD US POSTAGE AUSTIN TX PERMIT NO 1802 Address Service Requested

PAID

wednesday

wednesday

Good Partners
Arent Hard to Find.
You Just Have to Know Where to Look.

For more than four decades, HealthSHARE has partnered with the best companies in the marketplace to bring Texas hospitals quality products and services at unmatched pricing. We understand the complex and rapidly changing forces that impact efficient, quality hospital operations. We also have a great understanding of what hospitals are asking for. Only the very best business solutions earn the coveted THA endorsement. You can be confident that the companies bearing the THA-endorsed company logo have been fully vetted and scrutinized in every aspect. Turn to our suite of THA-endorsed partners for proven solutions. Thats a brand you can trust.
TRUSTED PARTNERS. Proven Solutions.

www.healthshare-tha.com

1108 Lavaca, Suite 700 Austin, TX 78701 512/465-1000 www.healthshare-tha.com