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Board Governance in Nonprofit Senior Healthcare Communities

Guiding senior healthcare communities toward sustainability in today’s chaotic healthcare environment

The role of a board within a nonprofit organization encompasses three components:

  • Duty of care: exercise diligence and act in good faith
  • Duty of loyalty: avoid self-serving behavior, avoid mismanagement and maintain confidentiality
  • Duty of obedience: remain faithful to the organization’s mission and goals and use donations to fulfill the mission

Because the senior healthcare industry is subject to guidelines from a variety of sources, including Centers for Medicare and Medicaid Services (CMS), the Health Resources and Services Administration, the Food and Drug Administration and the Office of the National Coordinator for Health Information Technology, board governance is even more critical to ensure each community maintains long-term solvency for the residents served.

Nonprofit board roles within a senior healthcare or affordable housing community

Nonprofit senior living communities operate under a mission to serve older adults, often even when a resident outlives his or her personal The board’s role is to ensure compliance, transparency and accountability of the community to residents, families, donors and employees. From hiring the executive director and participating in fundraising to promoting the community’s mission and vision, the board must present a united front. Overseeing financial matters of the community, including sales, donations, asset management, grants and government support requires the highest vigilance to ethical and financial integrity.

Individually, board members should have thorough knowledge of a community’s financial condition to make sound decisions. Each must be able to analyze the operations of the community to oversee operational efficiency. Members must be able to self-evaluate to determine which roles are functioning efficiently versus which areas require improvement. Most importantly, every board member should be willing to remain motivated, stay informed on the community and be willing to adapt to new ideas for the good of the organization.

Board governance and its life cycle as it pertains to a life plan, senior healthcare, affordable housing or continuing care retirement community

Boards are critical to sustain the long-term success of their organization and the residents they serve by providing financial oversight, conducting strategic planning, assuring the organization accomplishes its mission and goals and positioning the organization for success well into the future. The board role will shift depending on the organizational life cycle of the community.

  • Idea/Start-up: When the community is in its earliest phase, the board is in an organizational stage, performing a hands-on role to fill staff positions
  • Growth: The community enters a growth stage, where staff takes on daily activities and the board shifts from an organizational role to a governing/oversight role
  • Maturity: The board maintains a governing role and focuses its efforts on planning, oversight and fundraising
  • Review and Renew/Decline: At this stage, the board leads the process of renewal or dissolution

Why would a board need to lead an organization into renewal or dissolution?
The Affordable Care Act of 2010 translated into the slow death of the cost-based system. Many nonprofit senior healthcare communities have required significant operational changes in order to maintain revenue and capacity. In addition to a shift in care delivery, development of preferred provider networks has led to hospitals buying up or collaborating services to control more of the funds, which impacts skilled nursing payments. New payment structures, bundled payment programs, accountable care organizations and managed Medicare impacts reimbursements.

Today, occupancy no longer is a measure of success. The admission process for care communities is more critical than ever before. How will the patient pay for care? This presents an ethical dilemma for nonprofit communities with a mission to care for those with limited or depleted financial resources or with social accountability to provide benevolent care to maintain 501(c)(3) status.

What happens if a care community can no longer maintain financial solvency? What are the options for a community in crisis?

  1. Close the doors for good. What will happen to the residents?
  2. Prepare for purchase by another entity. What will happen to the staff?
  3. Enter into a short- or long-term agreement with a senior living management services company. Will the community lose its identity?

While the board and leadership consider their options, here are some things a community should NEVER do.

  1. Nothing, believing things will work out over time or with the next presidential administration
  2. Make hasty, poorly informed, knee-jerk reactions
  3. Go back to what worked in 1985

Once the board has accepted what it shouldn’t do, what do members need to do to move forward?

  1. Drop the mindset of business arrogance, realizing that the organization can benefit by working and collaborating with others in the industry
  2. Review and consider your organizational mission to those you serve
  3. Be prepared to change your thinking

Assess the leadership and role of each member. Are they willing to make tough decisions to maintain the mission and vision of the organization? Are they willing to take on new responsibilities, learn new roles and perform honest self-assessment for the good of the organization?

It is important for the board to understand governance and how to do it. The board must work with the community’s lead executive to provide direction. Members need to be humble and willing to embrace change. The financial problems will not go away. It is the role of a nonprofit board to put their own interests aside to figure out how to sustain the mission and long-term success of the community.

The role of the board as a senior living community restructures or enters into a management agreement

Entering into an agreement with a senior living management services can provide the best solution for communities at risk. An experienced partner can help you identify and address challenges that will help you compete in the market.

It begins with honest self-evaluation of what the community does well, and what needs to change in order to move forward. It involves developing a short-term plan to cover immediate financial needs while building a long-term strategy to ensure the success of the community.

As a board member, reframe the mindset around mission and vision as a reason to do something versus doing nothing. When selecting a management partner, do your due diligence. Rethink the role of providers and players in the market. Develop the right relationships to achieve the end goal.

Invite boards of different organizations to meet with each other. Engage with local community care providers and investigate grant funding for projects. Submit proposals to foundations for staffing education and training programs. During this process, the board synergy is critical. Board members must be willing to embrace change and educate themselves in all roles and responsibilities of the community.

With a well-aligned management partner like United Church Homes Management (UCHM), the board will have a strong ally to prepare staff, residents and families for transition and change. UCHM has more than 100 years of experience in senior living, and successfully manages more than 70 nonprofit senior living communities.

With UCHM, the board and leadership collaborate from a position of mutual strength and respect for the organization’s history, local identity and relevance in the market. From strategic planning and finance to compliance and sales, UCHM can help your board and community gain financial stability and increase occupancy while enhancing the lives of your residents.

United Church Homes Management provides senior living management services and expertise for single site or life plan nonprofit communities, for-profit single site or multi-site senior healthcare communities and affordable housing communities. UCHM can help you identify and address challenges to help your senior living community maintain occupancy, deliver high-quality care and remain sustainable well into the future. Call 616.914.3568 or visit uchmanagment.org to learn more.

Sources:

https://www.boardeffect.com/blog/nonprofit-board-duties-responsibilities/

https://www.boardeffect.com/blog/board-member-responsibilities/

https://khn.org/morning-breakout/as-one-of-most-regulated-industries-health-care-cheers-trumps-one-in-two-out-order/

http://www.leadingage.org/magazine/novemberdecember-2012/good-governance-not-profit-boards

https://www.leadingage.org/magazine/september-october-2017/Is-a-Board-Restructuring-in-Your-Future-V7N5

Board Development: Roles and Responsibilities, presented by Christine A. Ameen, Ed.D., Ameen Consulting Associates, LLC. April, 2013.

Nonprofit Board Roles and Responsibilities, presented by Christine A. Ameen, Ed.D., Ameen Consulting Associates, LLC. April, 2013.