July 19, 2022

Finding the Best Governance Structure for Your Democratic Group

Learn from fellow democratic group leaders how to best structure your group governance structure to ensure success in the short and long term.

Read the Video Transcript

- [Moderator] You know, one of the silver linings of COVID is that we get to have great speakers like Shena Scott join us in a way that usually we would do once a year. And now the section leadership head came up with this great idea about having a trifecta of a three part series of the anatomy of a democratic emergency medicine group. Because we realize that all of us are asking the same questions. How do we govern ourselves? How do we reward ourselves? How do we operate our groups? How do we operate our emergency departments? And so we're gonna get some great experts to talk with us, and Shena's gonna be the first one. Before I get started, if everybody could just mute while we're doing the presentation. Shena's gonna talk for probably 20, 25 minutes. And then after that, it's really an opportunity for us to have a discussion. Because there are a lot of great minds. And what I'd love to have happen is, when we get towards the end is for people to ask questions and answer questions. So it'll be a discussion, and Shena can add a lot of her great experience. She's got a wealth of knowledge. While we're doing this, Craig, Chris and I will be monitoring the chat. So if you have some questions that you'd like to be sure that we cover, just throw it in the chat for us. I'd also like to thank Craig Price for all the work that he does for the section. He's our staff liaison. Does a fantastic job. This is not his only job, and he does it incredibly well along with all the other things he does for ACEP, So Craig, thank you so much. And also quick shout out to Jamie Schumacher, our very own democratic group member who is now on the national board of ACEP, and is our board liaison, so Jamie, it's awesome that you're here. I also wanna point out Sergio Hernandez, who's our chair elect. Rob Thomas, I think I saw check in. He's our immediate past chair. Chris Ross is here with us, he's our secretary and newsletter editor. And Dave Hall should be stopping in, he's our counselor. So I really wanna thank all the leadership. I also wanna remind everybody too that we're gonna have those two follow up sessions, one in September, and one in October. So we'll send out those dates. I'm sorry, one in June, one in September. And then in October, we're actually gonna be able to meet in person in Boston at ACEP 21. So the date hasn't been set yet, but once it is out, we'll send that out to everybody, it'll be fantastic to get together. We actually have people jockeying to be sponsors of the section. So that's always a good thing. Now I'd like to just introduce Shena to you. Shena is the founder and CEO of Scott Healthcare Consulting. She's been actively involved in medical group practice administration for nearly 30 years. So apparently she started when she was about six. For the first 22 years of her career, she was the executive director of a mid-sized anesthesia practice in Florida. Eight years ago she led that practice through a merger with five other practices to form Brevard Physician Associates, which is a 300 plus provider group. And it's supporting all the emergency medicine, radiology and anesthesia for the largest integrated delivery system in that county. After five years as that senior non-physician executive, she left the company to form her very own consulting group. And she now spends her time consulting with physician practices and hospitals across the country in many areas of practice improvement. And the ones that we especially care about I think are strategic planning, governance, physician compensation systems, market assessments, mergers, managed care and hospital contracting. She's also the former chair of the MGMA board of directors, and currently serves as one of the two non-physician members of the American Society of the Anesthesiologists Committee on Practice Management. So Shena, so excited for you to be here with us today, and thank you very much, and I'll turn it over to you.

- [Shena] Thanks Jay, and thanks for that nice introduction. It's certainly a pleasure to be here, and I appreciate the opportunity to speak with you all today. So I'm gonna dive right in because, let me see if I can get my thing working here. There we go. I've got a lot to cover in a short period of time. So I wanna start out with the learning objectives. And first of all, it will be to understand the pros and cons of different types of governance structures. Second, to learn some ways to keep the board focused on strategy. And finally, to identify some common governance mistakes, which hopefully we can have you avoid. So I'm gonna start out with just a little discussion of basic ownership structure, 'cause I know these are some questions that have come up. Should you have different classes of shares or just one? Should there be a cap on the number of shares offered? And I'm gonna answer these in line with what I think the group's focus is, because obviously there are different answers to these questions for different groups, but given that this particular group's focus is on democratic structure, I assume that you are primarily in competition with the corporate medical groups. So the way you're trying to differentiate yourself when you're trying to attract and retain physicians would be to have a very democratic structure. So in keeping with that, I don't think you would wanna have different classes of shares, or by definition, if you put a cap on the number of shares, you're saying at some point somebody's not gonna be able to be an owner. And obviously one of the things that's most attractive about a democratic group is that people have an opportunity to be owners and have an opportunity to participate. So should there be a buy in and buy out? I've seen that done both ways. Some groups will consider the fact that people are working at probably below market salaries for a couple of years while they're on the partnership track to be their buy in. And then they just sort of, that's their work into the accounts receivable. Other groups want there to be some amount of buy in as well. And I think that's really kind of a preference of the group. I've even seen some groups where they'll say they make it an option. If you wanna have an owner share of the accounts receivable on the way out, then you buy in on the way in. If that's not one of your financial objectives, then you don't necessarily have to buy in. But I think it's really that sort of a group philosophy thing, and that particular one I think could be argued either way for a democratic group. Partnership tracks. Again, this is a lot of times dictated by how available jobs are. Mostly what I see now are two to three year tracks. And I think that's a reasonable, I've seen them as long as five years over the course of my long career, and I think that's a long time to expect somebody to wait to become an owner. I think if the market is such that that could be justified, you might be better to go with a shorter track and then have a buy-in associated with it. And then of course there's phase down tracks. And again, this is something that I personally think is a really good idea. Another topic that I speak on fairly frequently is generational differences. And one of the things in trying to recruit younger workers is that you need to ha be able to offer a lot more flexibility in things like your scheduling. But you still have to be able to provide the coverage. So I think it also provides a great opportunity to provide the same flexibility on the back end to people who are further along in their careers and are trying to phase down and may not wanna go from 180 to zero overnight. So I think there's a lot of opportunity there, and being in an independent democratic group, you have the opportunity to structure it in a way that works best for your group. So when you think about typical physician group governance, I'm gonna go through, these are the three most common governance structures that I think you see. The first two, the democracy and the benevolent dictatorship tend to a lot of times start with smaller groups. And in fact, sometimes you see them flip flopping between one and the other, and then at some point the group becomes larger and they move towards something like a constituency board. So what are the pros of a democracy? Well, obviously one pro is that everybody's involved, and everybody has an opportunity to provide their opinion and be a part of every decision. So people have ownership in the decisions. And that can work very well when you have a smaller group, maybe five, seven members, but as the group gets larger, and all of a sudden you have 15, 20 people trying to be involved in every decision, The same thing that is a pro is also the con, that everybody is involved. So it becomes very difficult to schedule meetings. Meetings can take forever, they're often redundant because all of those opinions that need to be heard sometimes are the same, and people tend to say, yeah, I agree with that, or what Bob said. And it just makes it last for a very long time. There can be a lot of second guessing, revisiting decisions, or even analysis paralysis, where it just becomes really hard to even make a decision because everybody's got a slightly different take on what they want to do. It can be very difficult as groups become larger to keep the key business issues confidential. And it can also become very difficult to respond quickly or react nimbly, which you may have to do in certain situations. And it can be frustrating for leaders, and sometimes your best leaders may just opt out and say, this is too difficult and too confusing to try to run this, and so they may get frustrated and step down and not wanna continue in that type of a situation. And outsiders may also get frustrated because of what they see as potentially a lack of clear leadership. So oftentimes what happens is after you've had a very democratic group and you've sat through all those meetings 'til midnight to talk about how much we're spending on postage, you see this other form emerge, which I call the benevolent dictatorship. And that's when you have, sort of one key leader emerges. And usually it's somebody that everybody likes. He or she is a great leader. And the benefit of this is obviously it's highly efficient. It allows for consistent decisions, because they're pretty much being made by one person. You can respond very quickly and nimbly. And outsiders like the hospital generally like this type of structure, because they know who the leader is and they know who to go to and they can reasonably predict what kind of an answer they're gonna get. But internally this kind of a structure can really start to create havoc after a while because it ultimately leads to mistrust. Even the greatest person that is truly benevolent, people start to become mistrustful and they start to feel that the person is really trying to be more of a dictator than what they maybe trying to be. It discourages varying opinions, and because you have only one viewpoint typically being heard, it hampers the best decisions. And other people become totally disengaged. And of course, then it's a huge void when this person steps down. And like I said, you tend to see among smaller groups, sometimes a fluctuation between these first two types where they'll be a democracy for a while, move into this, then move back into a very, very democratic structure. But at some point, when groups become larger, they most typically go to what I would call a constituency board, which is where they come up with an idea and they say, okay, well, we've got 25 owners, we can't have everybody on the board. We're going to come up with a representative body, and we're gonna come up with some way to determine who the representatives are gonna be, Whether it's based on service line, facilities, length of service with the group. Some type of a constituency, and then people are elected to represent that constituency. And obviously it makes it easier to organize meetings because you are dealing with fewer people and it allows for somewhat nimbler responses. But it can also be very difficult to gain consensus with this kind of board, because the focus tends to be on the constituency. So if I was elected to represent constituency X, then I tend to look at things through the glasses of constituency X, and think about that as opposed to the whole. Another thing, 'cause this is often a very popular type of structure during mergers because it allows everybody to sort of have a voice at the board. And the one question that always comes up is should it be a Senate version or a House version? Because everybody's not necessarily the same size. So should larger constituencies have more representatives, or should everybody have the same number? It may not bring forth your best leaders, because when you say, we have to have one representative from facility X, maybe in this particular time, facility X doesn't have a good leader and facility Y has two or three great leaders. So you may end up getting pigeonholed into, you have to have leaders from each one of these places. And because if you only have one governing body, it's very easy to get mired in clinical or management issues at the expense of strategy. And I see this over and over again, where you have boards that are dealing with issues that really are management issues, or what I call clinical governance, which I'll get into a little bit in a minute here. And they're not really conducive to growth because at some point you become big enough that you can't represent all your constituencies. So you have to move to something different. So what is a different model that you can build? And one of the first things I think you have to do when you're thinking about governance is to separate what I call the three types of governance. You have operational governance, which is really your management, your executive team. You have clinical governance, which is what you need to run your day to day clinical things, and then the third tier is your corporate governance, what I call corporate governance, and that's your strategy, and that's really what your board should be. You should separate your corporate and your clinical governance so that you can keep the board focused on...

- [Moderator] It appears Shena has gotten frozen in time.

- [Shena] Strategy.

- [Moderator] There we go. Shena, we lost you for just a moment.

- {Shena] Okay, sorry. Okay, so I don't know where you lost me, but I was saying it's good, and then you have a robust clinical structure to manage the day to day clinical things, and we'll talk a little bit about that, and then you have management handling day to day operational things. And in larger groups, you would support this with a committee structure, in smaller groups, you may not need to have as many committees, but certainly in a larger group, you would wanna have a very robust committee structure probably under each one of these legs. So how do you make your board be more strategic? Well, what I like to think about is creating what I call a competency based board, and I really hate that name because it sort of implies that other types of boards are not competency based. But all it's really saying is that you are picking the people who are going to be on the board on the basis of filling certain competencies that the board is determined to need. As opposed to saying, we're gonna pick the people on the board because they represent this constituency. So the first thing you would do in trying to structure that kind of board would be to identify, what are the competencies that the board needs? They need maybe somebody that understands legal things, maybe somebody that understands HR things, somebody that understands finances. And then you also wanna come up with individual competencies that each board member has to possess. And those would be, those would be skills, for example, being a strategic thinker, being a good communicator. Being somebody who it is open to being challenged. Those types of personal qualities, But then also you may wanna come up with, maybe somebody's have to be a shareholder for a certain number of years, or have certain things that the board members would be required to meet on an individual basis, as well as trying to fulfill the competencies needed on the board. And then you identify candidates, you would create a nominating or a governance committee to do that. And then you try to fill the positions who represent as many of those, as many constituencies as possible, but they're not selected on that basis. So if I'm going on the board, maybe, I'm female, I'm older. Maybe I have a certain specialty, maybe I work in a particular facility. So each person can check a lot of boxes without being brought on to be representing those particular things. And it's important when you're doing this to consider all the different types of diversity. Some of the ones I just mentioned. Years of service, different facilities, different specialties, race, gender, in addition to the normal ones. And then select people based upon their skills and their leadership potential and ability to fill these needed competencies. And I know this is a little out there, but you may even wanna think about having outside directors to fill some of your gaps, because at the end of the day, everybody in your organization is an emergency room physician, right? And so even though you have different backgrounds and you may have different viewpoints, your fundamental viewpoint comes as an emergency room physician. And there's been some really interesting publications about board structure and sometimes bringing in somebody with a completely different viewpoint can be very helpful if your board is really charged with strategy and not with the day to day governance. So that's certainly something to think about. And then create a nominating committee to evaluate those candidates and put together a slate and make sure all of those boxes are checked. Keeping the board informed, but fresh. Again, so often I see boards that are so mired in the weeds, that by the time they get to strategy, they really are too tired to even think about it. So if you use a consent agenda, if you have a good committee structure and you have a strong clinical council and you have a good management team, and they all file a report that is prepared for the board in advance, and the board has the opportunity to review this information, so they know what's going on, but they don't have to be in the weeds and making all the decisions about who wants to request this shift off next week, or any number of things that could be managed at the clinical council level. I think it's a good idea to have term limits, so that you could encourage people to roll through. And a rolling succession plan with a chair elect, a chair, and a past chair. Again, so often you end up having the person who is the the lead executive sometimes ends up also leading the board. I think it's helpful if you have a chair and the president be different people, and they have their own dyad that works together. Invest in leadership training for potential leaders and education for the board. We throw people into these roles and don't really teach them about what it means to be, what their fiduciary responsibilities are, and what the various things they're gonna have to be making decisions about. And then of course, make sure everything is transparent and clearly communicated. Ensuring group buy-in. When you have a more centralized model, it requires trust, so transparency is really critical. I think if you can open key portions of the meetings to interested parties then it helps people develop trust. Rotate your board positions as much as possible so that everybody doesn't feel like a closed club that everybody can't be a member of. Communicate, hold regular meetings of a larger group, and then insist on effective meeting strategies, which we're gonna talk about here in a minute. On your clinical council, make sure you empower your clinical council to make the important clinical decisions. If you have one representative from each facility or service line. Again, a large complex group would have a robust subcommittee structure to go with this. And then have the leader of the clinical council be ex officio on the board. But this group can really oversee all things clinical. QA, peer review, physician, discipline, scheduling, potentially recruitment and retention. All the clinical matters could be overseen by this board. And then committees. These are the key ones. You definitely wanna have a finance committee that reports to the board. A nominating or governance committee. If you have a true governance committee, that's an ongoing committee that is not only picking the slate for this election, but they're looking to recruit people, and develop people as board members, or potential board members. Recruiting and retention, again, that could be a subcommittee of the clinical council, compensation could be part of the clinical council and/or finance, and all of this would ultimately report up to the board informationally, but most of the decisions would be made at a different level. Executive committee, which you probably would not need, that could be a dyad of the board chair and the CEO, if you've kept your board to a nice small number. For the best practice executive team, I always say a physician, non-physician dyad is optimal. They have different skill sets and different perspectives, so they bring different values to the team. And I think that you always, when you have different perspectives, you're gonna end up with better decisions. Again, the president, CEO should be an ex officio member of the board. And then again, in a second dag with the board chair to really drive that strategy at the board level. Provide continuing education, but then let them do their job. You put people into leadership roles. The board does not need to micromanage what they're doing. They can implement the decisions that have been made by the clinical council and the board, and be in charge of running the day to day. Always recommend that powers are clearly delineated in writing. I do recommend that it's usually in a, not necessarily, I mean, it should be broadly in your operating agreement, obviously, that the powers are to the board, but then the board can delegate them out in a document that can be available to everybody to see, but can also be updated on a more regular basis. So who's allowed to hire and fire, what are spending limits for various people? What is their ability to deal with disruptive physicians? And it shouldn't conflict with your governing documents, but it doesn't necessarily need to be in your actual operational documents that govern your practice. Effective meeting strategies. Again, agenda and key materials should be distributed ahead of time. In an ideal world, I say, so that there's at least two weekends, 'cause everybody is busy, and if you happen to be on call for one of the weekends, you're not gonna have an opportunity to look at the materials, so ideally it should be out so there's two weekends in there that could be review. Agree to ground rules that everybody's gonna follow. That could be part of a contract that people sign when they go onto a board, or that could just be something you put up at the beginning of the meeting, these are the ground rules. Start and end the meetings on time, don't start over for people who arrive late. Encourage diverse opinions, and then discuss openly and respectfully. And this is one, no sidebars via whisper or text, I feel like that's something that we've all gotten in a bad habit, 'cause people sit in their meetings with their phones. And we don't know if you're talking to your wife about what's gonna be for dinner when you get home, or whether there's, sometimes there's a subculture conversation going on that really makes people not be as engaged in the meeting, and not come forward with their honest opinions. After the meeting, once the decision's made, everybody has to stand behind it. No outside discussions of, you know, I didn't support that, or so and so didn't support it. If you don't like it, you have three choices. Do it anyway, try to get it changed through appropriate channels, or self-select out of the group. There is not a fourth choice to say, I didn't vote for this, and therefore it doesn't apply to me. Because once a decision's made, everybody has to stand behind it. Minutes, make sure you get them out relatively quickly, at least a draft, so the details are fresh in people's mind, even if you don't officially vote on them 'til the next meeting, but make sure everybody signs off on them. Because years later, this is the only reference to the decisions that are made. So it's important that they're accurate, but do remember that they're discoverable, so don't make them all long and wordy, this is not your newsletter. A few governance mistakes to avoid at all costs. Go through these, try to, quickly, number one, not making strategy a priority. So often, like I said, if you have a single governing body that's trying to do everything, and you get to strategy at 10:30 at night after everybody's been at the meeting for three hours, it's never gonna happen. So you've got to make strategy a priority, and I think making a board priority and having this be the key priority for the board is clearly the best way to do it. Ignoring opportunities to expand into new service lines, just sort of being happy where you are, and not thinking ahead with growing the practice and/or with staffing in leadership development. And then failing to consider options to join with other practices and/or practice support organizations. I know I actually met Jay through Embassy. There are those kind of organizations out there that can be supportive for smaller practices. Avoid mistake number two, valuing the individual concerns over the group. I think it's human nature for us to look at things, and doctors are pretty autonomous by nature anyway. But you have to remember that the security of the individuals lies in the strength of the group. And it's very common for us to look at a decision and say, well, but I want, but this would be better for me, and not think about the other 99 times when being better for the group would be better for you. So for example, a classic one is, like if you put a non-compete into your governance documents and people think about, well if I decide to leave, I don't wanna be bound by a non-compete. But you're not thinking about all the other times when somebody else is gonna be leaving and that non-compete could potentially strengthen the group and protect you as an individual. Again, and also you're only as strong as your weakest link. It's hard to take on people when they're having issues, but if you don't, you're potentially putting the whole group at risk. Mistake number three, avoiding difficult conversations. This is always a favorite one because, I always say the reason I've been able to work with physicians for so long is 'cause y'all are such nice people. And you really are very nice people, and you are great to work with, but you don't like to take each other on when somebody's doing something that they shouldn't be doing. And so those conversations tend to get pushed down the road and pushed down the road until something really bad happens. And potentially putting the group at risk, or getting you in trouble with the hospital, or worse, with the government. So these kind of problems, if you don't deal with them directly, and you need to have a strategy for doing that, and people need to be empowered to deal with these problems directly before they become issues that could potentially bring down the group. And then the last one is not investing in leaders. It's really important when you have leaders to make sure that you invest in them. You need to pay them appropriately. It takes a lot of time to be running a group, and to even to sit on a board, if we're gonna ask you to make sure you review this whole big board packet in advance. People need to be paid for their time. It's not reasonable to expect that I'm gonna go in and do a bunch of work and you're gonna do nothing and we're all gonna get the same pay. And you need to invest in their education so that they're prepared to be in these roles and do the best they can for the group. Plan for their succession. That's something that needs to be always on the front burner of, what is the succession plan? Allow them the time that they need to develop key relationships, and then trust them to do their jobs. So in summary, what are the elements of a successful physician practice? If you have a strong, supportive culture of service, nimble, effective governance, strategically focused, manages your own members, don't expect somebody else, the hospital or somebody else to do it for you. Recruits and retains the best staff. Can measure and demonstrate quality and customer satisfaction. Has proactive interactions with the hospital administration and then promotes cost efficiency for all. And with that, and we'll take questions. It's a lot of information quickly.

- [Moderator] Shena, thank you so much. That presentation was chock full of pearls. And I bet a lot of other people listening to this talk had the same experience that I did, which was to say, oh yeah, my group's doing that, yep, we're doing that, oh, good, we're doing that too. And then be like, oh, wait a minute. We are not doing this, that, or the other. And I found that to be really useful. People have been putting questions in the chat. So keep doing that. We're gonna just pivot. You can stop sharing for a second Shena.

- [Shena] Sure.

- [Moderator] What I'm gonna do is, Rob Thomas two years ago, spearheaded an idea of surveying the group. And that ended up being really useful to find out, who is it that we're actually talking to? So I'm gonna spend just about probably five minutes talking about who we are and the results of the survey that we just repeated again. I've chosen just a few of these questions, And after this, Craig and Chris are gonna work to ask section members who haven't filled this out yet to get, you have another opportunity to fill it out. So the people who responded, there were 19 groups. And we find that the vast majority of them are seeing a combined total of less than 250,000 patients per year. And put another way, we're actually at much less than 10 ED, emergency departments. So relatively smaller in size. A little bit of urgent care, but really not very much. So it seems like most of our members are actually really focusing on emergency medicine mostly. And then some of the questions that Shena was just touching on. Roughly a quarters of the group are the board of directors. Another quarter manage themselves some other way. And when we look at the number of physicians that are voting members on the board, you can see about 60% of them are seeing five to nine, five to nine members. Some are having more. And I know in the chat, there were some groups that have 20, 30, as many as 200 decision makers in the group. Also a number of the groups took your advice, Shena, and have non physicians that are voting members on the board. It's about 25% of the groups. And then there are term limits for about 70%. So about 30% don't have term limits. And then just slightly more than half are actually paying their board members. That may actually help with the turnover in the position, to not pay them. But I think that you're right. Paying people to do the work that's so important to the group makes a lot of sense. And roughly 40% of the groups do have board committees. I know our group just started doing that as we were getting bigger. And then two last questions. So most of the groups have shares as the unit of ownership. And this was a little surprise to me, and it was great to see, that over 80% of the groups have 75% or more of their physicians as owners or partners or shareholders. So really great stuff. And Rob knows I'm gonna ask him to chime in in a little bit about how a group adjusts to the size change over time, and what his experience with his group was as they tried to figure out a new way to govern themselves. So with that, I'm gonna stop sharing that, and turn to the questions. So the first question was from Chris Ross. So Shena, do you see a role for a standard democracy for a bigger group, 40-ish docs? We've tried a board, but it ended up failing. Chris, do you wanna share a little bit about why it failed, and what you tried?

- [Chris] Yeah, sure. So this was probably, we were probably around 20-ish docs whenever it kind of failed. The way our, I think it's probably because of the way our work kind of goes. So we rotate through five hospitals. Everybody works at all five hospitals. Everybody works night shifts, everybody works day shifts. Nobody gets a differential and you take your part of the schedule at all of the shops. So what ended up happening is if there's issues or any other sort of situation would come up, instead of having somebody reach out to the board members to try to discuss about what should be done it, they would just go to the president or they would go to the director at the individual site, just because we're in such close contact with each other. I think that's probably why it failed. I don't know if maybe the board wasn't empowered to make big decisions too. And I think there were several younger people who wanted equal vote as well, which kind of made it all kind of fade away. So we are still, we're bigger now, we're about 40 plus docs, but I think we're 45 or so. And we're just a standard democracy. And so we are, just like your slide said, our meetings take a long time. And they are redundant. But I think a lot of the younger docs especially get value in having the equal vote whenever it comes to a group decision. So I just wanted to get your take on that and see if this is something you've seen, if this is something that's a, something that could lead into a better board situation or just kinda get your take.

- [Shena] Well I've seen it. I don't think it's, I mean, I hear what you're saying that people like to have that involvement, but I feel like one of the biggest downfalls of that type of a structure is there's nobody who can make a decision quickly. And as you grow and I'm surprised that you're dealing with five hospitals and you're not having difficulty with getting your decisions made quickly enough when you have that kind of a structure. So I would think probably the reason that it failed was that it wasn't properly set up or properly empowered. And I mean, I would think that maybe if, you might want to think about kind of polling your group to find out. I mean, I guess if everybody's happy with it, there's no reason to change it. But I mean, I'm just saying, I wouldn't think it's sustainable for the long term, particularly if you wanna think about any kind of growth or anything like that. So you might be better to try to get your group thinking about a way to, a way to streamline it before it becomes a necessity. Because, I would think if everybody wants to be involved in the decision making, having everybody involved in the decision making of how to make it work with a smaller board would be better than, oh my gosh, we got a problem, we gotta do something fast, and then all of a sudden you get... You know, your president's having to step out and make decisions on their own. Yeah, I would just think it would be something that you would need to educate and try to get people to participate in the decision to move towards something else. Does that make sense?

- [Moderator] Yep. So Tom Gutwein. I hope I'm pronouncing that right, Tom, and not hammering it. He had actually an interesting point in the chat, Tom, you wanna relay your findings?

- [Tom] Yeah, so we have about, we're very similar to Chris's group. I know Chris and Indy. we have about 30 board members that are owners, and then we have another 30 docs that are non-owners. We have about 40 mid levels, but we had, on our board, we had an executive committee, or we called it an advisory committee. And with that advisory committee was made up of seven elected members. So different ages. Had been with our group different amounts of time. And then after about two years, some things came up and discussions had occurred, and then the other members on the board felt that they didn't trust what was being talked about at the advisory committee meeting, and so they, basically, we disbanded our advisory board.

- [Moderator] Interesting. And then James Antinori, if I'm reading your chat message right, you've got a group of 200 people that are all in a board, and it seems to work well?

- [James] No, we don't have 200 folks on the board. We have about 200 providers in our group. The board is about 10 people who represent just about everyone in the organization. The way we do it is, each, we have divisions. Each division covers either one, two, or three facilities. And each division sends one member to the board. But if that division covers three facilities, they get three votes. If you have one facility, you get one vote. That way, it doesn't seem to be a disproportionate representation. We have a board meeting once a month. Almost everything is decided on consensus. We do have subcommittees. We have sort of professional business administration that works for us, that does the day to day chores and management. And we try to keep as much autonomy at the local level, at the division level as possible. Every division gets to determine their own schedule. They get to determine if they give a night differential or a weekend differential. Everybody pays the same percentage of their collections to the organization to run the company, which is only about 5%, which we feel is a reasonable amount. And then they get to divide the rest of their revenue, really, however they wish, although everyone basically divides it based on number of hours. We have a two year partnership track. Everyone is, unless there's a very difficult circumstance, just about everybody that starts on the partnership track becomes a partner, and all partners are equal partners. And that's kind of a nutshell of what we do. And we've been doing it for about 20 years now, and it's worked for us. We started smaller and kind of had growing pains as we got bigger, but again, we've seemed to make it work.

- [Shena] And I would say that's a classic constituency model, which is very, very common. And I think that's a good way to get, I saw somebody put the comment in the chat, I mean, I do think another way you can keep people involved is to have them involved on committees. So that in Chris's situation where he's talking about, everybody wants to be involved. Everybody could potentially be involved in something, but everybody doesn't have to be involved in everything all the time. And if you set up a structure where they rotate through. You might have been the one telling me this Jay, the other day, that they had a situation where all of their new people have to rotate through each one of the committees, which, I mean, I think if your group size is such that that would work out for you, that's a great way to make sure everybody understands everything that's going on in the organization without having to have all 40 people involved in every decision each time. That takes care of that mistrust piece, I think, when people understand. People tend to become mistrustful if they either aren't properly informed or don't fully understand.

- [Moderator] Yep. Great points. And then Rob Thomas, I know that your group recently looked at a need for governance change. Can you talk a little bit about the need and also the process that you went through?

- [Rob] Yeah. We went through about a six month process. The need was generated by a feeling that our group was... We went from, so a little bit of background. About five, six years ago, we had maybe 100 physicians, now we have 220, We had five ERs, now we have 11, plus three freestanding sites. So we've grown pretty dramatically in the last five to six years. And historically we had had a 15 member board representing five hospitals and 100 people. We then kind of contracted that even before we expanded our size. But once we did kind of balloon up to 230 physicians, those five physicians, it was felt that they weren't, it wasn't representative enough. So what we ended up doing was, we didn't know about Shena yet, but great presentation, very much appreciated. We used Gallagher, a guy who was local in Minnesota. He was able to actually be on site with masks and social distancing, so it's one of the reasons we chose him, but basically we came up with three different tiers. And one is, now we have a nine person board. And it's very clear to the entire group what decisions sit there, what go there. At that same level, we've got board committees, and that includes finance and audit committees, there's someone, there's a group of about eight physicians who are just burying deep in our financial performance. We've got a compensation committee, So everybody in leadership, in management, and all clinicians know exactly who gets paid and how. We've got compliance, because we just don't wanna trip over some regulatory wire and destroy the group. So we got people who are just paying attention to all those things, but that's all kind of at the board level. And then we have a shareholder level where each site that we have gets to gets to elect, democratically, who they want to represent them. And then we have a lower level, which is what we call a council level. And we have for every 10 people in the group, you kind of list them A through Z based on how long they've been with the organization. For every 10 people, they elect a representative to deal with site specific issues. So we kind of have this very high level, with associated governance committees. Then we have the representative model where you're just sort of talking about issues that then can go to the board, and they're kind of sorting through which issues have to go to the board. Which is a larger group, it's about 15, 16 people. And then we've got these zone councils that have anywhere from eight to 10 people solving site specific issues. And that's what we landed at. It's not that much different than our original smaller version, we just sort of expanded it. But to date, we're finding that people have more say. They feel more involved. They feel like it's very democratic. And yet we can make good decisions. There are a list of decisions that would have to go to a full shareholdership. But I think people are trusting this new decision making model. But it's pretty early, so, we'll see. Any questions on that? There's no way we could get, I don't think we could get 230 physicians in my group to agree on anything. So we have to have this.

- [Tom] That sounds good. Good job. Very good.

- [Moderator] It sounds like you ended up with an end result that works really well. Is your opinion that the group actually enjoyed and grew in the process of those six months of having these conversations?

- [Rob] I think so. What we ended up doing was we created what we called a governance task force. And so these are people who are not necessarily in the governance structure, and they're just sort of general clinicians. They're not in leadership, they're just... So we took our existing board and then we had elections to get people on this governance, people who really wanted to kind of collect all the angst and collect any concerns and collect the positives and the negatives and begin to filter those through with the consultant. And I think those people really enjoyed it. And we were reporting back almost on a weekly basis to the general partnership. So they kind of knew what the cadence was, they knew what the gates were, and they knew, and eventually, we just executed on it. And so even just the act of going through it with the governance task group of elected members was a really, it was a very trust building phenomena, which was great. And it landed us in a great spot.

- [Moderator] Yeah, that's great. 'Cause it seems like it'd be awfully tempting

- [Sheena] It's great to have that as-

- [Moderator] for the board to come up with their own governance model, and then try to impose it on the rest of the group.

- [Sheena] I was gonna say, it's great to have people who are not in governance involved in that kind of thing, because they A, have a different perspective, and B, to Jay's point, they tend to engender that trust.

- [Rob] And one of the great things about it was that almost to a T, people agreed that a representative model was important. Because even in that governance task group, they knew that the opinions are highly disparate. And they just knew that they would have to just corral the group to be able to be effective. Because we do have, we have some ambition to continue to grow.

- [Moderator] So Bob McNamara had a good question. As we all try to figure this out, it's a learning process, and especially the groups that are just starting out. I'm trying to find your question, Bob. Actually, do you wanna ask it? 'Cause I can't find where it was in the chat, Bob.

- [Bob] Just whether there's resources like draft partnership agreements, draft agreements with the hospital, policies and procedures. These are things that people that wanna start new groups scrounge around for, or spend a lot of legal time with. It'd be a good resource for, probably not people here in established groups, but certainly for if we're gonna try to promote the model, good to have. I don't know if the anesthesia groups have these on their websites.

- [Moderator] I'm sorry, was that last part a question, Bob? Do the anesthesia sites have that?

- [Bob] Shena's background is anesthesia, from what I understand. I mean, is this something that the ASA offers?

- [Shena] Not necessarily templates, but they do have some materials that would be available, but I don't know that they necessarily would have templates, because those kind of things are so individual. I know they have a couple of attorneys that they've worked with that have written sort of what to include in your compliance plan, or what to include in your corporate documents. But ultimately you have to get an attorney to do it anyway.

- [Moderator] And if you're willing, Shena, for us to be able to post your presentation, I think that's a great blueprint for people to start with, or the ideas. The other thing, Bob, that I know was really helpful for my group when we started was the Emergency Medicine Practice Committee came up with a white paper about forming a democratic group practice. Now this was back in 2001, I think. So we've just started the process of reaching out to that committee to see if they're interested in partnering with us or handing off that project to us, in order to kind of update that white paper, because it's so useful to have any kind of blueprint as we're starting out. And I see that Brandon Faza was just mentioning that they're just starting out, and agree, it's very labor intensive. I wanna turn to Sergio for a second. Talk about a group that's not just starting out. And would probably govern themselves easier if they ever had only 200 members. Sergio's with Vituity, and how many physicians and owners?

- [Sergio] We have about 2000 physicians, about 1000 advanced providers. We've been having a board structure now for plus 25 years, probably going on 30. So it is a well established governance process with a completely separate operational structure and management. We have a nine person physician board. Originally was purely emergency physicians. And just in speaking of some of the recent challenges. It was in challenging the board to diversify itself. The first was, Vituity began as CEP America. Because the vast majority of our... Well, CEP and then went to CEP America, the vast majority of our contracts were in California. And as we started to expand kind of nationwide, we saw a problem with diversity in that a lot of the emergency physicians out of California didn't feel represented on our board. So we did carve out a board position within those nine to a first spot that's non California EM position. And then as we expanded into other specialties, then they also didn't feel represented. So we have a position on our board that's for a non-EM specialty. So there's always active talks to create diversity in our board. And we do have all those various board committees, we've been doing it for quite some time.

- [Moderator] And Shena, you mentioned about the idea of having some outside directors. Does anyone else also use an outside director? I know my group doesn't. Rob? How's that been?

- [Rob] It's been great. Particularly, you can take different competency based people, so you can go and look for a board member, bring them on for their specific competency, and then actually, we've been able to take those and have them chair some committees. So for example, a sort of a financial wizard, who's a CEO of a startup company, he's the chair of our finance and audit committee. Not because he's going to take this in some direction, it's just that he can really talk. He can talk about those numbers in a really easy way for our physicians to follow, and he can run that meeting, just boom, boom, boom, boom. So that's been really useful for us.

- [Moderator] Great. Well Shena, the chat room is bursting with compliments for your presentation. And thanks everyone for the conversation. We've got just a few more minutes. Are there other questions that people have?

- [Tom] I got a quick question first, oh, sorry. I have a question for Sergio. Do you have term limits on your board, and is everyone in your group a shareholder or owner?

- [Sergio] Yeah, so we have three year term limits, but you can run as many times as you want. So you can continue, I guess you could be a board member forever if you get voted in. But you have to run every three years. And everybody in Vituity when you start is a partner, but there's different levels of partners, level one through five. And so that has a different power in terms of your vote for members of the board, and in terms of your year end bonus. But it's a straightforward partnership track, basically takes five years to get there.

- [Tom] Okay. Thanks.

- [Sergio] Yeah.

- [Moderator] Rob, you wanna ask her? Go ahead, Shena.

- [Rob] Yeah, I was just, you kind of mentioned term limits for boards, keeping things fresh. I'm curious if you also see in the organizations you consult with. Do you see that same term limit translate over to the management, executive, or leadership team? Or is that separate?

- [Shena] Well, I think it depends if the, not usually for the non-physician staff. For the physician staff, yes. It tends to be longer though. I think you have longer terms for the, I think you want more stability, probably, in your management team. And because your board is charged with strategy, so to have them changing over to have the fresh ideas coming in, I think is good. And your key management person is probably going to be an ex officio member of the board. So they're kind of like, I liken it to my, my husband was a civilian who worked in the Air Force. And he would say, every year we have a new general, every two years, there's a new general that comes through. But then the staff stayed more... Not stagnant, but more stable, So that they're implementing the thing. So the short answer is, yes, I think you want turnover in that too, but I think it's less important, and I think if you are gonna have, you would want longer terms than what you would have with your governance.

- [Rob] I recently did a poll using EMBC, the Emergency Medicine Business Coalition. I think I got 12 responses about management term limits. And there was only one group that had term limits. The other 10 or 11 did not. So they would basically, but there were elections and things like that, so people could fall out. But they weren't forced out. For management.

- [Shena] So actually what Sergio was describing isn't really a term limit. Those are terms. Term limit means you can only do two terms or three terms, and then you have to take at least one term off, just to sort of force that opening. And that's usually what I would recommend is maybe two three year terms. So that's six years. And then maybe you have to take one term off, and then you can take, and then you can come back on. And if you have them staggered, obviously, 'cause you don't want everybody going off at the same time. So...

- [Moderator] There was some questions about making the recording available and we'll talk afterwards with Shena to see if that's okay and also to make sure it's okay with ACEP as far as that goes, because clearly, incredibly useful information, Shena. I wanna thank you very much. There was one last question from Tom that I think we can cover in the winding down two minutes. You were talking about the compensation committee. When all the physicians are shareholders, what do you recommend is the ideal composition for a compensation committee?

- [Shena] Well, that's one where you probably do wanna make sure you've got a lot of diverse interests that are represented, and you wanna have younger shareholders as well as people who've been around and have more experience and also your different facilities or divisions, if you have a number of different facilities and divisions, you'd wanna have all those represented. And any of these committees, I think as long as they are transparent, and that things are being communicated well, and there's an opportunity to have oversight. That's always, compensation, particularly. Used to say that's the fastest way to lose your job as an administrator is to try to change the compensation plan. So it's probably the same thing is true for a compensation committee that, I think they have to be very careful what they're doing, and make sure they're getting lots of input. So I would say it needs to be a very diverse representation.

- [Moderator] Great. Well, everyone, thank you so much for joining us for an hour. Shena, this was fantastic. And watch for a couple things. So Chris and Craig are working on sending out that survey. If you're a member of the section, you'll be able to get the results of the survey. And the more people that respond, the better. And then also watch out for more information about the dates and times for our next two installments of this Anatomy of an EM Democratic Group, coming to us in June and September. Thanks everybody. Have a great night.

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