Got a good governance agreement? Use this 12-point checklist to find out
A governance agreement is a written directive for how a practice’s board of directors is comprised and how it operates. Governance is the way in which an organization polices itself, and a good agreement includes a number of things that allow your practice to do that effectively. Decision-making policies, meeting procedures and board role definitions are a few examples.
Many physicians ask why putting the details in writing is important. “We’re just a small practice, not a hospital,” they tell us. Or, “This isn’t the city; we don’t need to be that formal.” Or “Our physician group is like family.” Although these things may be true, a good governance agreement is essential whether a group has two or 100 physicians, whether its rural or urban, and especially if the culture is “like family.”
In fact, a written agreement may keep those “familial” relationships from breaking. That’s because an effective agreement ensures rules and scope of authority are followed when the organization faces a partner disagreement, financial crisis, legal issue or natural disaster. Without written guidelines, the board can end up making decisions on the fly — creating an environment ripe for missteps, arguments and bitter endings. Adding clarity establishes a set of policies and procedures that hold the group together during the most challenging times.
Several high-priority governance issues are discussed below. Use the 12-point checklist that follows to assess the details of your own agreement. Contact your attorney if you find that your agreement needs a tune-up.
Decision-making is a primary task of the board and cannot be taken lightly. A good governance agreement answers questions such as: How are decisions made? Who is accountable for making sure these are executed? What is the voting process? Are there time limits? What if a partner is a no-show for the vote and hasn’t submitted a proxy? Do certain types of decisions — financial, legal — require a different type of majority, such as a supermajority? If a quorum is required for a vote to be valid, what’s the quorum?
Role of the managing partner
If you don’t have a written job description for the managing partner, put the development of one on the to-do list. Don’t assume everyone has the same understanding of the managing partner’s role, authority and accountability. Spell out the answers to questions such as: What type of business experience or education is required? Is an MBA required?
Other than the board, whom does the managing partner interact with to gain consensus and drive organizational change? Is it an administrator or a cross-functional process team?
What accountability standards are in place? Is the managing partner reviewed annually? By whom? What actions are taken when performance does not meet expectations?
Role of the board member
Similar to the managing partner, set written expectations about conduct and participation for board members, committee members and chairs. A short paragraph and a few specific bullet points will suffice.
The average age of a surgeon in the United States is slightly older than 54 years. Many physicians are beginning to plan their retirement. Your governance agreement should address a variety of issues related to these transitions. For example:
- How will a physician moving toward retirement impact the call schedule?
- How will patients be transferred when Dr. Senior retires? What happens if Dr. Senior changes his or her mind a month before the retirement date?
- What are the financial processes associated with a partner going from full time to part time to retirement?
- Can transitioning or retired partners maintain a board position or a non-clinical role in the practice?
Physicians must have input regarding business office operations, use of technology, compliance activities, recruitment of managerial leaders and allied health professionals, and contract review. A good governance agreement specifies which areas the practice believes require physician collaboration and leadership, and the process for collaborating with the managing partner, managers and staff.
Karen Zupko is president of KarenZupko & Associates Inc., a consulting and education firm that has been helping physicians increase revenue, optimize efficiency, reduce risk and improve the patient experience for more than 30 years. An internationally recognized thought leader and speaker, Karen advises physicians and health care managers about the challenges and trends impacting the practice of medicine. Her pragmatic, action-oriented style inspires people to apply common sense and business rigor to improve profitability, efficiency and patient satisfaction.