A governance agreement is the foundation for how a practice's board of directors is comprised, which in turn dictates how a practice functions and thrives. Unfortunately, most practice governance agreements lack detail that give the board authority and power to navigate disagreements or legal matters; steer through financial, economic or natural crises; and ensure the practice's long-term stability and profitability.Regardless of your practice's size or specialty, here are seven things to consdier adding or revising in your governance agreement.
7 things to include in your practice’s governance agreement
1. Board structure
Outline the minimum - and maximum - number of board members, the title of who heads the board and the term of that role. Also include detail about committees. For instance, are there marketing, finance or operations committees?
We find that for a group of eight or more physicians, an executive committee that includes the practice administrator is vital to managing the organization.
2. Qualifications for physician leaders and committee chairs
Can any warm body fill a leadership role? We advise against this, just as we would advise against hiring a manager or staff member who does not have qualifications that match the job requirements. If the managing partner must serve on a committee, state that.
If the finance or marketing committee chair needs to have an MBA or a minimum number of years experience participating in practice business, state that, too.
3. Responsibilities and succession plans for the managing partner
The managing partner is critical to a well-governed practice. Typically, the managing partner is accountable to an executive who oversees selection, succession planning and performance. To ensure expectations are clear, develop a written job description for the managing partner. Establish an office term of no less than three years, as it takes time for new leaders to become successful.
We also advise performance evaluations of the managing partner. The governance agreement should detail the evaluation process, participants and frequency.
4. Board meeting frequency and requirements
An effective agreement specifies how often the board meets, agenda requirements, meeting minutes and the importance of starting on time. Some groups have instituted fines for physicians who continuously arrive late. If your group asks for input to the agenda, specify distribution timing and submission deadlines.
The agreement should also include guidelines for non-board member input and a process to submit agenda items. Some large groups encourage new or employed physician attendance. If you do, determine whther non-board members may ask questions or only observe.
5. Rules about decision-making and voting procedures
Decision-making is a cornerstone task of the board. A good agreement answers the following questions:
- How are decisions made and upheld?
- What is the voting process?
- Do votes pass with a simple majority?
If a quorum (a minimum number of board members present) is required in order for a vote to be valid, specify the number.
6. Expectations for transitioning physicians
The average age of a surgeon in the U.S. is more than 54 years old, and many physicians are beginning to plan their retirement. Your governance agreement should address a variety of issues related to these transitions, including:
- How will a physician moving toward retirement impact the call schedule?
- How will patients be transferred when Dr. Senior retires?
- What are the financial processes associated with a partner going from full time to part time to retirement?
- Can transitioning partners maintain a board position or a non-clinical role in the practice?
7. Departmental oversight
We believe physicians must have input on business office operations, technology usage, compliance activities, contract review and recruitment of managers and allied health professionals. A good governance agreement specifies which areas require physician collaboration and leadership, and the process for collaborating with the managing partner, managers and staff.
One final note:
Our firm frequently advises practices to include an addendum to the governance agreement entitled The Physician Rights and Responsibilities. This agreement spells out the practice’s expectations around physician participation in coding, operations and management as well as the managing partner’s treatment of colleagues, staff and patients. It also provides the physician with a list of items he/she can expect from the practice, such as trust and respect from staff, a voice in practice administration and the receipt of business and financial reports.
