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Questions Your Governance Agreement Should Answer

July 31, 2019

An effective governance agreement is a directive for how a practice group’s Board of Directors is comprised and operates, and the level of authority it and its members have. It’s essentially a blueprint for the way a practice polices itself.

Effective agreements include policies, rules, cultural norms, and accountability standards and can support a practice through a partner disagreement, financial crisis, legal issue, or natural disaster.

Review yours and make sure it answers these questions.

1. What is the structure of the Board?

How many people are on it? Who heads it? Outline the minimum and the maximum number of board members, the title of who heads the board, and the term of that role. Provide details about your committee structure too. Is there a formal marketing committee, finance committee, or operations committee? If so, include this in the agreement. We find that groups of eight or more physicians can benefit from an executive committee – which includes the practice administrator in addition to a small number of physician board members.

2. What are the responsibilities of the managing partner?

The managing partner role is essential in a well-governed practice. To ensure expectations are clear, develop a written, managing partner job description. And establish a term of no fewer than three years; success of any new leader takes time. Business-savvy groups compensate this role to indicate its importance and encourage physician commitment.

We are also proponents of managing partner performance evaluations, so include a timeline for when these are held, as well as who participates, and the process. In larger groups, the managing partner is typically accountable to an executive committee, which also oversees the role’s selection, succession planning, and performance.

3. What are the qualification requirements for physician leaders and committee chairs?

These positions are essential for overseeing the organization’s strategy, growth, and profitability. Just as you wouldn’t hire a manager or staff person whose qualifications don’t match the needs of the position, don’t fill these board roles with physicians who lack the proper skills and knowledge. For instance, if the managing partner must have served on a committee before assuming the role, 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.

4. How often does the Board meet and what are the requirements for meetings?

Specify meeting frequency (monthly is the most common), structural requirements for the agenda and meeting minutes, and the process and deadlines for physicians who wish to get an item onto the next meeting agenda. We also believe it’s important the governance agreement stress the value of starting meetings on time, and recommend that groups institute a fine for chronically late physicians.

5. What’s the process for non-Board members to suggest an agenda item?

Some large groups encourage new or employed physicians to attend board meetings, to encourage transparency and an understanding of the group’s business affairs. If yours is one of them, clarify the guidelines for these non-Board members. Are they there to observe only, or may non-board members ask questions? What is the process for them to submit an item for the agenda?

6. What are the protocols for decision-making and voting?

A good agreement answers questions such as: How are decisions made and upheld? What is the voting process? Is a supermajority (a large majority vote) required in order to pass certain decisions such as the approval of a merger or capital investment? And if a quorum (a minimum number of board members present) is required in order for a vote to be valid, specify the number.

7. What are the expectations for physicians transitioning out of practice?

Having these in writing saves the group from ambiguity when senior physicians move toward retirement. For example: How will a physician moving toward retirement impact the call schedule? How will patients be transferred when the physician fully 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? Is there a place on the board for retired partners? Spelling out the answers to all of these questions makes the transition planning process go much more smoothly.

8. What are your group’s “rights and responsibilities” for all physicians?

Our firm advises an addendum to the governance agreement called physician rights and responsibilities. This addendum spells out the group’s expectations around physician participation in coding and documentation, business operations, and personnel management – as well as his/her 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.