"Risk Management Feature: Springboard", (c) Julie E. Williamson, McKnight's Assisted Living, 10/9/07

A strong, committed long-term care governing board can raise a facility’s risk management policies to new heights.

Long-term care operators, take note. If your appointed governing board isn’t playing a vital role in helping the facility minimize business risks, then your odds for potentially devastating financial and operational slipups – and subsequent lawsuits – are substantially higher than they should be.

Make no mistake: Proactively targeting risks is the only way to stay ahead of potential disaster. Unfortunately, many long-term care providers are failing to make that connection, opting instead to react to issues after they’ve already reared their ugly head.

 

“Governing boards are a valuable resource, but they often aren’t offering enough effective oversight and meaningful guidance,” says Richard Stefanacci, DO, former Centers for Medicare and Medicaid Services policy scholar and founding executive director of the University of the Sciences in Philadelphia’s Health Policy Institute. “Part of the problem is the lack of clearly defined roles of the governing body.”

 

Vague federal regulatory requirements don’t help, either. As one attorney explained, federal rules state that long-term care facilities must have a governing body in place, yet they fail to offer guidance about the roles and responsibilities of such boards.

 

“Then there’s a lack of understanding about who should be part of the governing board and how these individuals can contribute in a meaningful way,” notes Glenn Hendrix, a litigation attorney and partner in the Atlanta law firm Arnall Golden Gregory, LLP. “You may have a group of individuals appointed to the board, but that doesn’t mean they are plugged in to what’s going on in the facility.”

Laying the foundation

 

Despite the lack of clear-cut rules and regulatory requirements, risk management experts contend that long-term care operators who effectively manage risk generally follow a similar recipe when appointing their governing boards and outlining core duties.

 

For starters, such organizations practice due diligence when selecting their governing board. They appoint members from varying backgrounds and disciplines who can bring to the table unique insight and meaningful discussion on key business issues.

 

“Members of the board need to be selected based upon their knowledge, commitment and compatibility with the organization,” explains Ruth Kilduff, managing principal of Integro Insurance Brokers in New York. “There also needs to be a willingness to roll up their sleeves and actually do something, as opposed to just adding the title to a long list of other ones.”

 

Ideally, Kilduff said, a long-term care governing board “who’s who” list should consist of a healthy mix of individuals who understand the regulatory framework in which the provider operates and can address risks from both the financial and clinical side. This helps facilitate the development of more narrowly focused subcommittees that can dig deeper, and more readily address key risk management issues as they arise. Subcommittees may include those related specifically to finance, ethics, real estate, regulatory compliance and quality of care issues, among others.

 

Operators also should be aware that appointing certain board members could actually add to the organization’s risks. For this reason, United Hebrew Geriatric Center, a nonprofit, multi-service senior living campus in New Rochelle, NY, has a strict policy against doing business with board members.

“Having business partners on the board creates a conflict of interest, so we simply don’t do it,” explained UHGC President and CEO Rita Mabli. The organization has several subcommittees. They include a strategic planning committee that is led by a former UHGC attorney and assesses risk associated with new business ventures. There is also a performance improvement committee, led by a physician, that aims to improve quality of care, and an accountant-led finance committee that assesses census, keeps an eye on checks and balances, and stays privy to state budget and reimbursement issues that could impact the organization’s bottom line. There also is a building and grounds committee that is led by a real estate expert.

 

“Board [appointments] are something that should be taken seriously. Our board is effective because there are varying levels of expertise represented – and the members are there to truly contribute to our organization,” Mabli says.

 

Eye on education

 

Governing board members may have a clear understanding of some risk-related issues, particularly those pertaining to their own specialty, but it’s understandable that some risk management concepts may be a bit foreign. For that reason, ongoing education is essential.

 

Governing boards don’t actually perform risk management duties. They ensure that the job is being done prudently, notes Rick Stiffney, president and CEO of Mennonite Health Services Alliance, Goshen, IN. “They need to have the tools to be able to effectively advise and articulate clear expectations related to risk management to the [management team]. This is the only way to amp up their engagement and oversight, and to ensure compliance,” he says.

 

To make that connection, operators need to be aware that governing board members likely will require a refresher course on risks and liability, and what certain terms related to insurance coverage and liability mean. Kilduff explained that boards also need to understand the organization’s own levels of liability and protection, and be privy to financial risk matters and how clinical indicators – such as falls, elopement and decubitus ulcers – factor in to the risk equation. Providing comparative data is also essential, helping serve as an organizational benchmark, and also as a tool for measuring the facility against other providers. “They need to be able to look at the data and say, ‘This is our liability and protection, and this is where we’re at on the key issues,’” Kilduff says.

 

Unfortunately, management teams aren’t as forthcoming with their governing boards as they should be, says Carol Rolf, Esq., president and managing partner of Rolf & Goffman Co., LPA, in Cleveland.

“Too many management teams simply expect their boards to rubber stamp their decisions, with some actually withholding important information from their boards,” she notes. “Boards need to know when potential financial, regulatory, legal, or media concerns exist and must be given the opportunity to provide input and direction.”

 

Nursing facilities, large and small, should have a working corporate integrity program (CIP) that establishes the mission and values of the organization, and is observed at every level of the organization, including the governing board, Rolf adds. With that in place, the board should then take an active role in independently testing the viability and effectiveness of the CIP on a periodic basis. This can be accomplished with a variety of approaches, such as employee and resident questionnaires, reviews of financial and compliance audits, and so on.

 

“The main thing is that the testing needs to be independent. That is, the reviews should be conducted through consultants who are not employees of the organization or associated with any board members,” explains Rolf.

 

A healthy balance

 

Top-flight long-term care operators also impress upon board members the need for making a somewhat lengthy commitment to the organization. Members’ contributions should be revisited regularly – at least annually, but also on an as-needed basis – to make sure the fit is still right.

“Boards should be composed of people who can bear wise judgment and have enough backbone to stand up for the greater good and challenge policies, when necessary. The best boards have a real passion and concern for their organization, and take their role seriously,” Stiffney notes. “Being on a board is both an honor and an obligation.”

 

Governing bodies must also be aware that their participation bears some risk of its own. Hendrix explained that if oversight is performed negligently, individual members could be held liable.

“It’s already happened,” he says, referring to one case where both the operator and a governing board member who was involved in setting the organization’s budget were held liable for negligence. “Before agreeing to serve on a board, [individuals] should be aware of their responsibilities and their own liability risks.”

 

While governing boards certainly play a key role in helping curb organizations’ business risks, it’s important that operators and their boards don’t let the pendulum of responsibility swing too far in either direction.

 

“I do think that the pendulum definitely needs to swing toward more involvement by governing boards. However, I am concerned that some organizations will allow the pendulum to swing too far,” Rolf explained, adding that the board should have the right to review survey results. It also should be made aware of lawsuits and formal complaints and provide guidance to executive staff – all without micromanaging operations.

 

“The goal should not be to establish a secondary operating arm of for an organization, but rather to allow the board to effectively provide guidance to management and, when appropriate, hold the operator accountable on certain actions.”

 

Liability on the rise

 

At the request of the American Health Care Association, Aon Risk Consultants conducted a 2005 actuarial analysis of the cost of general liability and professional liability claims to the U.S. long-term care industry. What follows are key findings from the analysis, which encompassed 23% of the nation’s beds:

 

-The frequency of claims filed annually doubled between 1996 and 2004, and the average severity tripled over the same time period.

-Twelve of the 16 states analyzed experienced average annual frequency rate increases at or above 10% annually.

-In 2004, eight states had average claim costs at or above $200,000 per claim. Arkansas topped the list in 2004 with an average claim size of $650,000.

-Fourteen of the 16 states analyzed saw double-digit average annual increases in their GL/PL costs over the past decade; the majority of these experienced loss cost trends in excess of 25%.

-The operators represented in the study reported that $3.3 billion in GL/PL claims were incurred from 1993 to 2004.

-Nationwide, operators incur 13.1 claims per year for every 1,000 occupied skilled nursing care beds (more than double the 1996 frequency rate of 6.2 claims per 1,000 beds).

-Almost half of claim costs paid for GL/PL claims are going directly to attorneys, the report claimed.