UVM Health Network Board Accountability – Facing Facts

Photo courtesy UVM Medical Center

Vermont’s VTHC911 coalition is exploring the drivers behind Vermont’s soaring healthcare costs. Newsletters to date have focused on the high operating costs of the University of Vermont Medical Center (UVMMC) compared to other academic medical centers in our region and across the country. National data shows that non-patient care labor costs are among the highest in the country including the costs of labor for administration and management. Our key question today is why the governing boards of UVMMC, and the University of Vermont Health Network (UVMHN), allow this to happen. How did we get to the point where our nonprofit academic medical center stands out as one of the most expensive and least cost-effective centers in the nation?

Contrary to some assumptions, The University of Vermont Health Network (UVMHN) isn’t a hospital. Chartered as a nonprofit, it’s a business acquisition, aggregation, and integration network of six nonprofit hospitals in Vermont and New York and two home health agencies.

Nonprofits by statute are driven by mission not by profitability, although maintaining a positive fund balance through earnings and philanthropy are critical to their survival.

A review of the slate of UVMHN trustees indicates a mix of current and retired medical professionals as well as some engaged community leaders. Of the 21 trustees, five are compensated by the healthcare institutions they represent, creating possible conflicts-of-interest, so conflict-management is critical when it comes to voting on issues that impact the trustee’s own healthcare facility.

In general, it’s unusual for highly compensated employees to serve on the boards that oversee their operations. Two common exceptions are hospitals and universities, where the knowledge and experience of doctors, researchers, and professors may be needed to better inform institutional decision-making. These individuals — like a president if they serve on the board — are subject to rigorous conflict oversight and must abstain if the discussion and vote relates to their authority or compensation.

And as a former chair of Fletcher Allen Healthcare, I’d like to see more community advocates on UVMHN’s board, especially those representing the interests of ones who are underserved in the system, such as advocates for expanded mental health and substance abuse disorder treatment and Vermonters without shelter or adequate nutrition, both of which are known to be “moral determinants of health.”

UVMHN’s stated mission is, “The University of Vermont Health Network improves the lives of our patients by delivering outstanding care cost-effectively, as close to patients’ homes as possible.” This alludes to geographic access but ignores timely access — a well-documented and ongoing failure — as is their failure to deliver “cost-effective” access.

In what publicly-available reporting do the trustees of UVMHN hold their current leadership accountable for delivery on its mission, which by all national measures related to cost and access is among the worst in the country?

And what explains, in spite of a recent “quality” downgrade by Medicare for excess readmissions and an unacceptable rate of hospital-acquired infections (infrastructure hygiene), the UVMHN board’s decision to award its President a $480,000 performance bonus and lesser performance bonuses to the rest of management — some $3M in all? How much of the clinical care that Dr. Eappen chose to cut could have been supported by these bonuses awarded for negative performance?

Meanwhile the governing boards of the six nonprofit hospitals in Vermont and New York owned by UVMHN apparently have no clearly-articulated governing authority. Their budgets and various network reports are simply handed to them for approval. Inexplicably, Dr. Eappen, the President of UVMHN, also serves on the boards of all the owned Vermont hospitals.

I’ve spoken personally with two board members of the UVMHN-owned hospitals, and they say they have no idea what their actual role is as it relates to matters of board governance. Each assumes their role is “advisory.” This is not accountable governance. Under both state and federal statutes, trustees have specific legal, financial, and reporting responsibilities with which they must stay current.

Nonprofit governance, in fact, is remarkably elegant in its simplicity, but if trustees don’t understand and exercise their responsibilities, they undermine their own organization – an all-too-common situation that negatively impacts Vermont healthcare.

A fundamental board responsibility is to search for, hire, remunerate, and annually review the performance of the ED (and dismiss them if need be). The board must also engage in preemptive succession planning.

Management accountability is articulated in the ED’s job description and signed off on by both parties. An accurate job description is the key document to which the president is held accountable.

Strategic and operating plans originate from management and are presented to the board for discussion, amendment, and approval. These plans then become the basis for accountability and the president’s annual performance review.

Core board responsibilities are to oversee and ensure:

• Delivery on mission: by ensuring that strategic and current-year operating plans are fulfilled.
• Ethical and legal integrity: review and approve published employee guidelines especially with regard to equal opportunity, diversity, and conditions that can lead to “moral injury.”
• Financial integrity: monitor balance sheet trends and strength, approve annual budget, and periodically review reports of performance against budget.
• An annual 360˚performance review of the president that includes anonymous feedback from staff, trustees, stakeholders, and the community. This is measured against an annual performance self-assessment submitted by the ED.

Although most nonprofit failures are traceable to bad governance, in my experience the single most common board failure results from not having conducted a thorough and honest performance evaluation of their president.

When an organization founders, blame usually falls on the leader, but they are chosen, overseen, and remunerated by the board. So when a nonprofit fails, look to the board for an explanation. Trustees are both accountable and liable. By all measures of mission — quality, access, and affordability –UVMHN is failing abysmally, and we are the losers. Do trustees see this?

The vitality of our healthcare systems is intrinsic to all our wellbeing. And it’s imperative that we have a commonly shared understanding of accountability and governance.

• Bill Schubart, former Board Chair Fletcher Allen Healthcare and Board member of VHC911.org