Monday, September 12, 2011

Lessons from Parkland Hospital

A recent article in the Dallas Morning News (subscriber access required for full story) offers an unsettling reminder of the importance of good board governance of hospitals.  Parkland Memorial Hospital is a county hospital, but its recent public failures surely should be heeded by all hospitals and their boards, including those overseeing nonprofits. 

According to the Dallas Morning News, in an August report issued by the U.S. Centers for Medicare & Medicaid Services (“CMS”), the agency found that Parkland’s patients were in “immediate jeopardy” and cited Parkland for nine federal health-care violations, including failures in infection control and emergency care.  Further, reportedly on Friday, September 9, CMS said that its re-inspection of Parkland revealed continuing safety problems, and that Parkland would forfeit hundreds of millions of dollars in public funding unless it agreed to use outside consultants to improve conditions.  Moreover, the United States Justice Department reportedly has initiated a broad inquiry of Parkland.

What do these findings say about board governance?  The CMS reportedly found that Parkland's board had "failed to ensure that hospital policy was implemented," and that the board was ultimately responsible for patient care and safety.  This finding followed a recent reconstitution of the Parkland board in January, when county commissioners replaced five of the seven board members amid concerns of Parkland’s operations.  The board’s failures reportedly arose not from a refusal to act on information, but from being deprived of important information concerning hospital operations by senior management – long-serving chief executive Dr. Ron Anderson and his underlings.   Says the story:

Board members became increasingly alarmed that Anderson and his staff weren't acknowledging the problems, even in closed meetings. When they sought more information, Anderson warned them against micromanaging the hospital. Board members said he frequently told them in private, "If you don't trust my decisions, you need to replace me."

And, reports the story, that is just what the Parkland board unanimously decided to do.  A related story in the Dallas Morning News clarifies that Anderson will be offered a new position with Parkland, when his current contract expires at the end of the year.

What’s next?  According to a release posted on Parkland’s website, by September 30, Parkland and CMS will enter into a Systems Improvement Agreement to maintain Parkland’s participation in the Medicare and Medicaid programs and to address the problems identified in the recent CMS survey. 

Parkland’s story illustrates the need for nonprofit board members to actively oversee operations.  Although a board is normally entitled to rely on information provided by senior officers, board members must ensure that that they are indeed receiving necessary information, and they must take corrective action when they have reason to believe that they are not adequately informed.  Excessive deference to the decisions of a strong CEO – even one whose longstanding service, great vision, and beloved status has earned him or her widespread respect – is inconsistent with proper discharge of fiduciary duties owed by the governing board.  If the news accounts are accurate, the current board of Parkland, in place for a relatively brief period and forced to take strong action, appears to understand this legal principle.


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