HOSPITAL MANAGEMENT AND ADMINISTRATION

Skilled Governing Board members understand their role and the role of the hospital/health system administrator.

The administrator (or superintendent, for a hospital district) is appointed by the Governing Board. In some cases the title used is chief executive officer (CEO), president, executive vice president or executive director. The administrator is directly responsible to the Board for carrying out the hospital’s formally established policies. The CEO is responsible for the hospital’s operations on a day-to-day basis. The CEO directs the hospital staff and establishes a reporting mechanism for information about the hospital and its services. The information is processed and goes to the Board for review and necessary action.

The CEO, Board chair and Board members must develop a good working relationship. This relationship consists of trust, respect, open communication and a commitment to the best interests of the hospital/health system, its patients and community. The Governing Board and the CEO are partners.

To foster positive relations with your CEO:

• Tell the CEO what is expected
• Offer your individual expertise and skills
• Provide community and political contacts to the CEO
• Listen and ask questions
• Give the CEO the authority to do the job
• Recognize the CEO for a particularly good job
• Take your role as a Board member seriously
• Provide your CEO with an employment contract with severance provisions
• Consider incentive pay as a way to motivate your CEO
• Have realistic expectations about what your CEO can and cannot accomplish
• Annually evaluate your CEO
• Take ownership in decisions made by the Governing Board
• Understand that the CEO has rights. A sudden firing can not only destroy the individual, but have a negative effect on employees, medical staff, the organization and the community
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HOSPITAL AND HEALTH SYSTEM ORGANIZATION         Top

Every activity of the hospital/health system falls into one of three major organizational areas: fiscal/administrative, professional and support. Each is important. Small hospitals rely on the administrator to coordinate most of the activities, but in larger hospitals or systems these areas may be the responsibility of assistant or associate administrators.

The fiscal/administrative service area includes the admitting office, medical records, business office, accounting, information management, purchasing, human resources and public relations. Functions within the business office include those of the cashier, credit and collections. Accounting is responsible for budgets, general accounting, payroll, accounts receivable and accounts payable.

In the professional service category is the nursing department, which includes registered nurses, licensed practical nurses, nurses’ aides, surgical technicians, ward clerks, ward aides and orderlies. Headed by the director of nursing services, this department is responsible for all patient-care activities, including operating rooms, labor and delivery rooms and emergency rooms.

Other major professional departments offer ancillary services to patients, such as laboratory, pharmacy, radiology, respiratory therapy and physical therapy. In larger hospitals, these areas are often headed by physicians and provide essential diagnostic and therapeutic services. Skilled nursing units, nursing homes, home health agencies, swing beds, hospices, rehabilitation and emergency medical services are also part of professional services.

The third major area, the support department (sometimes called general or supportive services), provides services to the other two areas and to patients in the hospital. Dietary or food service, engineering, maintenance, housekeeping, laundry, printing or duplicating department, central supply and the hospital storeroom all fall within this category.

SELECTING A CEO         Top

One of the most important responsibilities of the Governing Board is the selection of a qualified administrator.

To properly perform the duties of the position, the administrator must possess the qualifications necessary to manage and direct the complexities of a modern patient care facility. Whether the hospital is a small, rural facility, a large, urban health center or a multihospital health system, many of the demands, issues and problems of management are the same. In the larger hospital environment, the administrator has complex problems associated with the extensive services offered, the number of staff required to provide those services and the financial demands of the large number of patients. A number of associate or assistant administrators are necessary to oversee the various department heads and specialty areas.

The administration of a small hospital involves responsibilities in many areas. The lack of assistance in areas like finance, personnel administration, purchasing, employee relations, public relations and governmental affairs demands that the administrator be knowledgeable in all of them. In addition to the internal responsibilities of small hospital management, increasing external forces require travel to meetings and seminars of all kinds. Liaison with governmental agencies and the participation in the activities of the state hospital association are becoming more critical, but also more time-consuming.

John Witt, in Building a Better Hospital Board, describes leadership as consisting of individual leadership, as demonstrated by the CEO, and group leadership, as demonstrated by the Board. Witt offers eight leadership traits that Boards seek in CEOs, including taking initiative, visualizing the future, helping others learn and grow, articulating values, listening to people, getting things done, delegating properly and following established channels while realizing that informal channels exist.

Selecting a CEO takes time. The Governing Board should develop a

selection process to find the right leader for the hospital/health system.

The Board should identify skills and talents that the hospital/health system needs now and in the future. This examination should include:

• A review of the hospital’s mission
• A review of the hospital’s long-range strategic plan
• An objective evaluation of the reasons why the former CEO left
• An objective evaluation of both the hospital’s and community’s environment

• A determination of the problems the hospital must face today and plans for addressing them
• An assessment of the Governing Board and its present functioning

The steps included in the selection process are:

• Select a search committee
• Develop job specifications
• Recruit candidates
• Screen resumes and develop a list of top candidates
• Develop a rating system
• Arrange and conduct interviews with the top three to five candidates
• Review evaluations and hold follow-up interviews, if needed
• Select a candidate and develop the hospital’s offer
• Present the offer to the candidate and manage negotiations
• After the candidate has accepted the offer, notify other candidates of your selection

The individual characteristics of a CEO will have a significant effect on his or her performance as an administrator. In selecting a CEO, the following individual characteristics should be considered:

• Personal factors - such as character, stability, dependability, initiative, decisiveness, ability to conceptualize and articulate ideas
• Human relations skills - motivation, leadership, sensitivity, communications, team building
• Managerial skills
• Involvement in professional and community activities
• Track record - whether the candidate has turned a profit, helped achieve growth and shown community benefit and support

FINDING A CEO         Top

The Board needs to secure a pool of qualified applicants. Hospitals can place advertisements in professional journals such as Modern Healthcare or Hospitals. Professional associations, such as American College of Healthcare Executives, can be a source of applicants. There are many reputable executive search firms that can assist Boards in locating and screening qualified candidates.

If the Board plans to use a search firm, the American Association of Hospital Consultants or WSHA can give recommendations concerning qualified firms. It is a good idea to seek references from other hospitals that may have used the firms’ services. Informal networks can be a valuable source of candidates. Sometimes, CEOs at nearby hospitals or those recognized as industry leaders can suggest candidates.

THE CEO CONTRACT         Top

It is common practice for Boards to enter into contractual agreements with their CEO. The contract should include length of contract, duties, compensation, benefits, termination and severance provisions. Contracts with severance provisions make it easier for the CEO to deal with politically sensitive issues. The termination provisions in a contract can make it easier for a Board to objectively decide to keep or remove a CEO. A contract is a strong signal to the medical staff and the community that the CEO has the strong support of the Board. A contract can be a powerful factor in recruiting and keeping a superior CEO.

CEO JOB DESCRIPTION         Top

The CEO should have a job description which states the responsibilities, qualifications, performance standards and to whom the CEO is accountable for what. The job description should include the CEO’s role and duties for:

• Board relationships
• Planning
• Integrating services
• Management
• Evaluating partnering options
• Human resources
• Financial management
• Quality of services
• Regulatory compliance
• Physician and provider relations
• Community health status
• Community relations
• Marketing and fundraising

The Board should have policies which state the authority of the CEO. These policies can include limits on the purchase of capital equipment, authority for establishment of salaries for personnel, setting rates, entering into contracts (including those for consultants, accountants, architects and hospital physicians), settlement of legal matters and purchase or sale of properties or equipment. Such policies are helpful in avoiding areas of conflict or misunderstanding between the CEO and the Governing Board.

Examples of Governing Board and Administrator Responsibilities         Top

RESPONSIBILITY	GOVERNING BOARD	ADMINISTRATOR (Or Delegate)
Long-term strategic plan	Approves and helps formulate	Recommends and provides input
Short-term plan	Monitors and provides input	Establishes and carries out
Day-to-day operations	No role	Makes all the management decisions
Budget	Approves	Develops and recommends
Capital Purchases	Approves	Prepares requests
Decisions on building, renovation, leasing, expansion	Makes decisions, assumes responsibility	Recommends and has contractual authority
Supply purchases	Establishes policy	Purchases according to Board Policy and maintains an adequate audit trail
Repairs	Establishes policy	Authorizes repairs up to prearranged amount including amount that can be spent without Board approval
Cleaning and maintenance	No role	Sets up schedule
Fees	Adopts policy as part of budget process	Develops fee schedule
Billing and credit and collections	Adopts policy	Proposes policy and implements
Hiring of staff	No role	Approves all hiring

RESPONSIBILITY	GOVERNING BOARD	ADMINISTRATOR (OR DELEGATE)
Staff responsibilities and job assignments	No role	Establishes
Firing of staff	No role	Makes final termination decision
Staff grievances	No role	The grievances stop at the administrator
Personnel policies	Adopts	Recommends and administers
Staff salaries	Approves budget	Approves salaries with recommendations from the supervisory staff
Staff evaluation	Evaluates only the administrator	Evaluates other staff
Board reports	Approves and accepts	Prepares
Medical staff	Approves bylaws, appointments and reappointments	Receives reports and maintains relationship
Quality management	Approves and monitors	Establishes quality plan and implements
Corporate compliance	Approves and monitors	Establishes compliance plan and implements
Advocacy	Knowledge of issues, communication with elected officials	Knowledge of issues, communication with elected officials
Community relations	Keeps community informed	Keeps community informed
Community health status	Approves and collaborates with community	Establishes plan and priorities

CEO PERFORMANCE EVALUATION         Top

CEO performance evaluation is part of the governance of today’s hospital/health system. It should be a formal and ongoing system for assessing the performance of the hospital’s administrator. It is conducted in some form by nearly all hospitals. The Joint Commission on the Accreditation of Healthcare Organizations mandates that this process be carried out in accredited hospitals.

The Evaluation Process

The purposes of the evaluation should be clear and useful to the CEO and Governing Board. The Board and CEO jointly should develop the evaluation process. The purposes of the evaluation include:

• Identifying the CEO’s areas of strength and weaknesses
• Ensuring that the CEO’s personal goals and the hospital/health system goals are compatible
• Measuring the CEO’s performance

The Board should adopt an evaluation policy. The policy needs to include:

• Frequency and time of evaluation. Evaluation is an ongoing process. There should be an understanding that the CEO’s performance will be looked at continually. The CEO’s performance should be formally assessed at least once a year.

• Who will be involved in the evaluation process. The chair, the executive committee, an ad hoc committee or the whole Governing Board can evaluate the CEO. A small committee working with the Board chair in doing the evaluation may be best. Some continuity in the committee composition is good since many evaluation considerations are carried over from year to year. When evaluating a new CEO, some members of the search committee should be included since they know the criteria which were used in selecting the CEO. A procedure should exist for customers, suppliers, peers and community members to give the committee their assessment of the CEO’s performance.

• Assessment criteria and standards for satisfactory performance. These must be established prior to conducting the performance appraisal. They should be determined at the beginning of each year (calendar year, fiscal year or anniversary of employment). The CEO must be included in determining the assessment criteria and should agree to them in writing.

• Procedures for reporting findings. The Board chair should review the evaluation committee’s performance appraisal with the CEO, giving the CEO the opportunity for comments and inclusion of self-assessment data. In those areas where performance has not met the standards, suggestions for improvement should be developed jointly and then reviewed at set future intervals. The Board should receive a report which should include:
• The special or unique strengths the CEO has demonstrated
• The areas in which improvement is indicated
• The management and/or organizational development activities that should be carried out in the future

CEO Evaluation in a Total Quality Management Environment

In evaluating the performance of the hospital CEO in a Total Quality Management Environment, the American College of Healthcare Executives recommends that the CEO be evaluated on service area health status, institutional success and professional role fulfillment.

Service area health status includes the role of the hospital in improving the health of people in the hospital’s service area. Because the CEO is an important leader of the community’s health care delivery system, part of the CEO evaluation should be focused on what the hospital is doing to improve community health, by reducing unnecessary disease, disability and death.

Institutional success represents the core of a CEO’s evaluation. Among the factors to be considered are planning, human resource management, quality health care services, allocation of resources, regulatory compliance, influencing legislation and regulations, promotion of the hospital and leadership.

• Planning is the process and result of working with the Board in meeting community health needs.
• Human resources management makes certain the hospital objectives are carried out by selecting, developing, motivating and evaluating personnel.
• The provision of quality health services involves establishing and carrying out policies and monitoring patient care activities to ensure their acceptable delivery.
• Resource allocation considers the cost effective use of financial, physical and human resources to produce quality services.
• Regulatory compliance ensures compliance with regulations governing hospitals and standards governing accreditation.
• Influencing legislation and regulations determines if the CEO, in coordination with the Board, works with legislators, regulatory agencies and trade agencies. This ensures that the health of the community is promoted and unreasonable burdens are not placed on the hospital.
• Promotion and marketing encourages the appropriate utilization of hospital services with effective communication and public relations programs.
• Leadership deals with the CEO’s vision of the hospital’s future and ability to communicate this vision.

The final area of the evaluation process is that of professional role fulfillment. This concerns itself with the CEO’s own professional development and continuing education, involvement with trade and professional groups and comportment. Evaluators should ensure that the CEO has attended meaningful continuing education. Many Boards use the credentialing program of the American College of Healthcare Executives as evidence that their CEO is developing and maintaining competence.

For hospitals that have adopted the total quality management concepts of W. Edwards Deming, these five principles should be part of the CEO’s evaluation:

• Skills in allocating resources and creating a hospital-wide culture that is dedicated to continuously improving patient care
• Ability to strengthen middle management decision making
• Ability as mentors to advocate for continuous quality improvement
• Ability to monitor the environment, including the use of the concept of benchmarking. Benchmarking involves comparing current activities and performance with the best of other organizations and using these comparisons as a basis for improving the hospital’s current practices
• Willingness to modify the reward system

TERMINATION         Top

Terminations are sometimes necessary. It is important to recognize that in today’s job market, the terminated CEO may go as long as one year without finding comparable employment. It is important that severance pay and outplacement assistance be offered so that the transition can be as smooth as possible. Outplacement and a settlement will allow the CEO time to reevaluate circumstances and make logical plans to rebuild a career.

SUMMARY         Top

The CEO is the leader in the community’s health care delivery system. Given this major task, it is important that the CEO and the Board are clear on the responsibilities, duties and functions that accompany this role.

REFERENCES         Top

American College of Healthcare Executives, Evaluating the Performance of the Hospital CEO in a Total Quality Management Environment, Chicago, IL: American Hospital Association, 1993.

American College of Healthcare Executives, Contracts for Healthcare Executives, Chicago, IL: Foundation of the American College of Healthcare Executives, 1995.

American Hospital Association, The Guide to Governance for Hospital Trustees, Chicago, IL, 1990.

Bader, Barry, "Cultivating Mutual Accountability Between the Board and CEO," No. 3, American Hospital Association’s Center for Health Care Leadership, Chicago, IL. 1997.

Bader, Barry, Five Keys to Building an Excellent Governing Board, Rockville, MD: Bader and Associates, Inc., 1991.

Hospital Trustees of New York State, The Trustees Handbook, Albany, NY, September, 1988.

Hospital Trustees of New York State, CEO Evaluation & Compensation, Albany, NY, 1994.

Hospital Trustee Association of Pennsylvania, HTA Trustee Folios, Harrisburg, PA.

Joint Commission on Accreditation of Healthcare Organizations, 1996 Accreditation Manual for Hospitals, Vol. 1, Standards, Oakbrook Terrace, IL, 1996.

Nason, John, Board Assessment of the Chief Executive: A Responsibility Essential to Good Governance, Washington, DC: National Center for Nonprofit Boards, March, 1992.

Orlikoff, James and Mary Totten. "CEO Evaluation and Compensation," Trustee Workbook, January, 1996.

Tennessee Hospital Association, Health Care Governance, Nashville, TN.

Umbdenstock, Richard, So You’re on the Hospital Board! Fourth Edition, Chicago, IL: American Hospital Association, 1992.

Umbdenstock, Richard and Winifred M. Hageman, Critical Readings for Hospital Trustees, Chicago, IL: American Hospital Publishing, Inc., 1991.

Witt, John, Building a Better Hospital Board, Ann Arbor, MI: Health Administration Press, 1987.