Assignment: CEO’s Performance

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Assignment: CEO’s Performance

Assignment: CEO’s Performance

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This chapter provides a comprehensive description of the organization of financial management in healthcare organizations.

governIng body The governing body of a healthcare organization is responsible for the proper develop- ment, utilization, and maintenance of all resources in the organizatif this fact, courts continue to stress the importance of the governing body’s duty of responsibility in selecting a competent CEO.

The governing body uses organized committees to monitor the CEO’s performance. Although committee structures vary from organization to organization, an executive com- mittee of the governing body typically monitors all committees and includes the chairs of all the committees as members. The finance committee monitors the CEO’s performance in financial affairs. This committee includes governing body members with a financial interest or occupation. In smaller organizations, the duties of the finance committee also include audit responsibilities; in larger organizations, audit responsibilities may be monitored by an audit committee. Generally, the CEO and/or the chief operating officer (COO) and chief financial officer (CFO) attend finance committee meetings ex officio and also serve as staff support to those committees. Exhibit 2.1 identifies these relationships.

The governing bodies of healthcare organizations with corporate status cannot be held personally liable for either the contracts of the corporation or the negligence of the corporation’s employees or agents (i.e., physicians). However, the governing body can be held collectively liable for a breach of its duty to act as a fiduciary, which means its duty

executive committee

A➤committee➤of➤the➤

governing➤body➤of➤

an➤organization➤that➤

monitors➤all➤the➤other➤

committees.

finance committee

A➤committee➤of➤the➤

governing➤body➤of➤

an➤organization➤that➤

monitors➤the➤CEO’s➤

performance➤in➤

financial➤affairs.

fiduciary

A➤person,➤or➤governing➤

body,➤in➤a➤position➤

of➤great➤trust➤and➤

confidence.➤The➤term➤

is➤typically➤used➤to➤

describe➤the➤duty➤of➤an➤

entity➤to➤be➤loyal➤and➤

responsible.

CRITICAL CONCEPTS The Trustees’ Responsibility

The➤governing➤body➤of➤a➤healthcare➤organization➤is➤responsible➤for➤hiring➤a➤competent➤

CEO.➤Of➤course,➤that➤does➤not➤always➤happen.➤When➤a➤board➤fails➤in➤that➤regard,➤it➤can➤

be➤in➤legal➤trouble.➤In➤Reserve Life Insurance Company v. Salter (1957),➤one➤of➤the➤first➤

cases➤establishing➤this➤duty,➤the➤court➤was➤severe➤in➤its➤finding:➤“Failing➤to➤appreciate➤

their➤duties➤and➤responsibilities➤led➤these➤trustees➤to➤feel,➤according➤to➤their➤testimony,➤

that➤they➤had➤discharged➤their➤duties➤by➤picking➤as➤administrator,➤Salter,➤a➤former➤school➤

teacher,➤apparently➤as➤ignorant➤of➤operating➤a➤hospital➤as➤they➤themselves➤were.”

00_Nowicki (2339) Book.indb 33 5/17/17 10:57 AM

I n t r o d u c t i o n ➤ t o ➤ t h e ➤ F i n a n c i a l ➤ M a n a g e m e n t ➤ o f ➤ H e a l t h c a r e ➤ O r g a n i z a t i o n s3 4

to act as a person in a position of great trust and confidence. The legal duties of a fiduciary include loyalty and responsibility. Loyalty requires fiduciaries to act in the best interests of the healthcare organization and to subordinate their personal interests to those of the organization. Responsibility requires fiduciaries to act with reasonable care, skill, and dili- gence in accomplishing their duties as members of the governing body (Showalter 2017).

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