Bowtie Confidential 11/10/12

Accountable Care Act and its Effects on the Board of Directors

Most boards have for some time received updates on the Accountable Care Act (ACA) and other significant changes to the healthcare environment. However, there has been an understandable unwillingness to step forward into the ACA realm despite the fact that the organization’s future may hang in the balance.

In June of this year, it became time to take that step and up the education and awareness process to the board concerning ACA and the eventual system transformation. Leadership and the board should know how to react to these new requirements. They should also know the impact on their organization (and the industry). If ACA board education and awareness has not taken place in your healthcare organization, then you’re behind!

The Supreme Court’s decision in June 2012 to support the Accountable Care Act (ACA) further enabled the use of Accountable Care Organizations (ACO) as one of the principal tools for addressing healthcare costs and improving care.

Many hospitals and health systems have begun planning efforts that include communication regarding ACA. This process provides updated briefings for the board on the decisions regarding primary implications and imperatives of the ruling. The briefings are consistent with the board’s responsibilities related to their fiduciary and legal obligations. Executive leadership, general counsel and external strategic advisors are well suited to provide these briefings and information sharing sessions.

Board members do not need to fully understand the legal statutory fundamentals for the decision and/or read the ACA in its entirety. However, they should be familiar with key themes. Although board members will not be required to be subject matter experts in the law of reform — they will need to look to the advice of leadership, executive management, and external consultants. The bottom line is that the board will be expected to have sufficient understanding of ACA that will allow each member to ask the appropriate questions and evaluate the advice of advisors and consultants.

The board should assess the need for focus on the following:

• Information technology. Technology will become an ever-increasing component as the reliance on EMR, data gathering and analysis become key to operations. The ability of the organization’s technology architecture to address new relationships between data and payment will be essential for survival.
• Finance. Understand the impact of the changes brought about by ACA reform. The organization’s responses will affect its financial standing and survival.
• Strategic planning. Both internal and external. Review and assess potential options for relationships and alignment with other organizations and services provided.
• Compliance. Government enforcement of the ACA’s new anti-fraud provisions and its supplemental requirements for maintaining tax-exempt status.
• Human resources. How will the organization address and incorporate ACA’s implications on the organization as a major employer?
• Delivery network. Are all of the necessary provider groups appropriately aligned? This includes hospitals (including referral centers), physicians (primary and specialists), post-acute care providers, etc. In addition, what is the strategy for patient medical home models?

In summary, the ACA ruling establishes a singularly important teaching moment. Attentive management will take the initiative to educate the board frequently and thoroughly on the ACA ruling, its importance to the national and local healthcare environment, and its financial implications to a specific hospital or health system. The awareness and understanding will position the board to respond to the expected and unexpected impacts, the rate of change and the availability of strategic opportunities.

These sessions also provide leadership with the opportunity to remind the board of the organization’s strategic plan and the necessary elements to address these challenges. In this way, your organization can have a board that is more informed and effective in their fiduciary responsibilities.

Rob Drewniak is vice president, strategic and advisory services, for Hayes Management Consulting.