As the healthcare industry consolidates, realigns, and struggles to better steward limited resources, hospital and medical school leaders across the country are striving to optimize existing strategic partnerships and develop new ones. The potential benefits of such relationships are tremendously attractive – a productive strategic affiliation creates opportunities for hospitals/health systems and their medical school/university partners to gain access to competencies and resources that enable them to expand their individual and collective enterprises in ways that would not be possible independently.
These partnerships are often codified in an affiliation agreement, which typically covers an array of topics:
● Faculty physician practice.
Depending on the strategic interests of the participants, affiliation agreements may focus more heavily on certain topics – such as GME or research – over others. Invariably, they define financial arrangements, funds flow amounts, and the related terms and fiscal processes agreed to by the parties.
But there are other matters that affiliation agreements are silent on; surprisingly, governance is one of them. Indeed, it is not uncommon for participating entities to devote little attention to the governance construct of the affiliation – a framework for board-level direction setting that can determine how strategy might be collaboratively determined and pursued.
Affiliation agreements that don’t address governance arguably create significant strategic and other risks for the participants. For example, clinical-academic affiliations are likely to be challenged over time by dynamic circumstances and events that could not have been foreseen when the affiliation agreement was executed, such as:
● Competitive physician recruitments/programmatic opportunities.
● Emergence of new clinical/academic partners and/or competitors.
● Disputes arising from unintentional clash of strategies or initiatives.
● Redundant or incompatible investments and/or financial plans.
While the specific challenges to the affiliation may not be predictable, it is essential to have a governance model that is grounded in trust and fosters meaningful communication to address such circumstances when they do arise.
More mature and contemporary affiliation agreements establish well-conceived governance constructs that enhance the participants’ relationship, provide a framework for addressing inevitable disputes, promote cooperative planning processes, and thereby foster and convey strategic benefit. Accordingly, the design of an effective governance model for a hospital/medical school affiliation is fundamental to realizing the potential of the partnership and ensuring its longevity.
A wide variety of possible governance arrangements exist for hospital/medical school affiliation, ranging from management councils to joint board committees to reciprocal board appointments. Each is often reflective of unique organizational characteristics, imperatives of the participants, and external factors such as state laws and regulations.
It is only through an effective affiliation governance model that the strategic importance of elevating the status and success of each partner becomes a mutual, paramount concern. This can be the difference between overcoming a challenge within the context of the affiliation and abandoning the partnership altogether.
For a closer look at affiliation governance paradigms, read the Executive Briefing available on our Web site.