Abstract

The Ontario hospital system and, in particular, its management have been lauded for the manner in which they responded to the SARS epidemic that struck Ontario last Spring. Generally, the administrators of Ontario's hospitals - both administrators of hospitals that treated SARS patients and those that did not - are considered to have been quick in responding to the crisis, diligent in implementing applicable protocols, creative and scientifically sound in developing internal procedures where required and dedicated, beyond all conceivable expectations, to the support and safety of their patients and staff.

Dozens of articles and papers have explored the performance of Ontario's hospital system in the face of the SARS epidemic. The purpose of this article is to consider whether the generally stellar conduct of Ontario's senior hospital administrators and boards during the crisis was in keeping with the best principles of good corporate governance.

Many readers will surely ask whether it is reasonable to expect senior hospital administrators to be concerned with matters of governance in a time of crisis. Is it a luxury that can be afforded at that time? On the contrary, we would reply that it is not a luxury at all but rather a necessity, given all that is at stake to a hospital in a time of crisis.

For example, a decision to admit SARS patients to a hospital meant potentially exposing other patients and staff to the life-threatening virus. A decision to cancel elective and other surgical procedures meant potentially putting at risk the health of hundreds of others, threatening the financial stability of the hospital and jeopardizing its ability to meet short-range and potential longrange plans, all matters that are at the heart of corporate governance. While ultimately government directives took away the power of many hospital boards and administrators to make decisions about a number of these matters, we will see in this article that some senior hospital administrators made related decisions before – or without ever – being mandated to do so.

In their four-part series entitled "Issues in the Governance of Canadian Hospitals,"* published in Hospital Quarterly, Mark Hundert, Robert Crawford and Adam Topp described the principles of good corporate governance of hospitals under four headings:

• Effective and Efficient Board Structures and Processes
• Long-Range Planning
• Financial Oversight
• Quality Oversight


The principles set out in their articles were drawn from experiences gained in operational reviews of hospitals across Canada and were summarized in a number of principles that should be followed by hospitals seeking to implement best practices in corporate governance.

This article will consider some of those principles and will assess the extent to which each was followed by senior administrators and boards of four Ontario hospitals, each differently affected by SARS.

The four hospitals that are the subject of this article are:

West Park Healthcare Centre, a 479-bed rehabilitation, complex continuing care and long-term care facility located in northwest Toronto. A former tuberculosis centre, West Park was the first hospital requested by the Ministry of Health and Long-Term Care to admit as patients infected healthcare workers including physicians and nurses from Scarborough Grace Hospital, the epicentre of the SARS outbreak in Ontario.
Sunnybrook and Women's College Health Sciences Centre, a 1,200-bed health sciences centre with sites in central and north Toronto. In addition to treating 94 SARS patients between March and August 2003, Sunnybrook also established the province's only SARS screening clinic at its Women's College site in central Toronto.
Southlake Regional Health Centre, a 300-bed community hospital located in Newmarket, north of Toronto. Over 50 patients presented themselves to Southlake's emergency department for SARS testing. Eight were admitted and treated: six as probable SARS patients; two as suspect patients.
Toronto Rehabilitation Institute, a 500-bed rehabilitation and complex continuing care hospital with five sites located throughout Toronto. Like most Ontario hospitals, Toronto Rehab did not treat any SARS patients but operated in the crisis environment, at one point having over 100 employees in working quarantine due to their exposure to another employee determined to be a probable SARS case.

 

Hospital Planning


Hundert and Crawford speak of the necessity of planning in hospital governance and management. They describe the importance of establishing a Strategic Plan comprising a mission and/or vision statement, a set of core values; a list of communities and health needs to be served; a description of programs and services to be offered; and plans for achieving program and service goals. The Strategic Plan and its components are matters that should primarily be the responsibility of the board, developed with the input and assistance of management. Once it is adopted, management has a responsibility to develop an Operational Plan that translates the board's Strategic Plan into specific tactics and activities to be initiated in the next fiscal year. The Operational Plan should similarly be approved by the board (through its approval of the budget or otherwise) and then left to management to implement, with management's implicit ability to vary it in such minor ways as are necessary without the board's approval. However, major deviations from the implementation of the Operational Plan will require board consultation or approval.

In Spring 2003, all four of the subject hospitals had Strategic and Operational Plans of one sort or another. The Strategic Plan for Sunnybrook and Women's Hospital identified the treatment of acutely ill patients within its community as a key service offering. Southlake's Strategic Plan addressed acute care services for its primary catchment area but also focused on the development and provisions of regional tertiary services. The Strategic Plan for West Park identified the treatment of respiratory patients as a key service offering. But, similarly, all referred to the provision of numerous other specific programs and medical procedures (many of which had to be cancelled because of SARS); all spoke to desired fiscal outcomes; all spoke to the need to ensure the safety of patients and staff. None identified a protocol in the event that meeting one goal meant that another could not be met for a short, intermediate or long period. In the absence of such a hierarchy, should management of the subject hospitals have sought specific direction from their respective boards before admitting SARS patients or taking other steps relating to SARS that would cause other objectives not to be met? None of the management of the subject hospitals did, although all did a thorough job of keeping their boards apprised of their actions.

To be fair, not all of the consequences of treating SARS patients and of cancelling non-emergency procedures were the result of decisions by management of the subject hospitals. While ultimately the government did ask Sunnybrook and Women's to play a leading role in managing SARS in the province, the initial SARS patient admitted there came in the way of most patients – through a physician-to-physician referral. No management decision was involved. Similarly, the first probable case admitted to Southlake came in, without warning, through Southlake's emergency department, one day before the first directive was issued. Again, management was not involved in the decision to admit the patient. (The extent to which Strategic and perational Plans of boards and management can be compromised as a result of admissions to a hospital is a subject worthy of a separate article.)

Furthermore, once the directives were issued by the Ministry of Health, the hospitals to which they were directed were compelled to implement them – even though implementation would, by necessity, have an adverse effect on their Operational Plans and their balance sheets. None of the subject hospitals sought board approval to implement the directives. For two reasons, we agree that board consent was not required. The first reason, which we actually think is the weaker, is that the hospitals were required by law to implement the directives. It could be argued, therefore, that aside from interpretation of the directives, there was no decision to be made by the hospital or its board.

The second reason relates to the fundamental issue of governance: to whom is a hospital or a hospital board accountable? Traditionalists might argue that a hospital and its board are accountable directly to the hospital's members (if it has any) and to the community it serves. In the traditionalists' view, then, a government edict – with or without the force of law – should be referred by management to the board before being implemented.

However, some contemporary writers on governance take a different view. In their view, a hospital and its board are accountable directly to the hospital's primary funder and regulator, the Ministry of Health and, indirectly, to the community. This view, which in some ways equates the government's role to that of a private sector shareholder, is bolstered by the Ministry's ability to replace a hospital's board with a supervisor – similar to the ultimate right of shareholders. These contemporary writers, then, would conclude that there is no reason for management to seek the board's consent to the implementation of the directives: the implementation of an edict issued by the entity to which the hospital is directly accountable is, in and of itself, an exercise of good governance.

But some decisions were consciously made by management. West Park was the first of the subject hospitals asked by the Ministry of Health to set up a separate SARS unit. Dan Coghlan, Vice-President, Corporate and Support Services, and the manager on call on Sunday, March 23, received a telephone call from Marnie Weber, Toronto Regional Director for the Ministry of Health, at 2:00 that afternoon. Scarborough Grace had eight nurses with a then unknown, but apparently contagious, respiratory infection, who needed to be admitted to a hospital for observation – preferably a hospital with a separately ventilated area. West Park had a vacant unit and infectious disease expertise. Could West Park set up that empty unit and admit these nurses that day?

Coghlan immediately called West Park's CEO, Barry Monaghan. "We activated our code orange [external disaster code] and by 5:00 p.m. that Sunday we had the entire senior administration team assembled at the hospital and by 7:30 p.m. the Ruddy Building stocked and ready to receive patients. The first eight patients were admitted by 1:00 a.m. I didn't consult the board chair about taking on these patients – I saw it as part of our mission, although I must say, at that time we weren't entirely sure what we were dealing with." Monaghan did communicate with Michael Ennis, his board chair that day, thus starting a two-month, initially daily and ultimately bi-weekly routine of written reports to the board relating to SARS.

Leo Steven, the CEO of Sunnybrook and Women's, had an equally conscious decision to make when he was asked by the Ministry of Health to set up the Ontario SARS screening centre. He consulted with Nancy Malcolm and her management team at the Women's College Hospital site. While the operation of the centre would obviously pose some risk to staff and volunteers, they clearly saw it within their mission and mandate to provide this necessary service. The operation of the centre was not only agreed to but embraced by the management at the Women's College site. Over 970 patients were assessed at that centre, which was operated by both paid staff and volunteers. Again, although Steven discussed the initiative with Martin Barkin, his board chair, no approval was sought from him or the board more generally.

Mark Rochon, the CEO of Toronto Rehab, also had a decision to make. At 7:00 p.m. on March 27, following a board meeting, he returned to his office to find a Ministry of Health directive issued to acute care providers. This directive –the first of many to be received by Ontario hospitals relating to the actions and procedures they were to take during the crisis – applied only to hospitals with emergency departments. It required those hospitals to cancel all non-emergency surgeries. Toronto Rehab does not have an emergency department and so the directive did not apply to it. But with frequent patient transfers and employees working in other organizations, some of which were acute care, Rochon and his team concluded that their patients and staff were also at risk. Without being directed to do so, Toronto Rehab immediately cancelled all out-patient programs and told all non-essential staff to stay at home. Did Rochon seek board approval of these actions? No. "I clearly saw it to be a matter involving the health and safety of Toronto Rehab's patients and staff and well within my mandate," he said. Like the other hospitals within the subject group, he immediately advised Ron Meredith-Jones, his board chair, of these steps and kept him apprised of their actions throughout the crisis.

 

Structure and Process

In Part I of their four-part series, Hundert and Crawford describe the structure and process of the board, its desired composition and size, the committee structures and processes and the information to be provided to board members; all with a view to permitting boards to achieve their primary function: to make good decisions. Consistent with most contemporary descriptions of good governance, Hundert and Crawford allude to the strategic, policy and big-picture decisions in which boards are to be involved. We can take it as an axiom that boards should not be directly involved in the day-to-day operation of the hospitals that they govern.
The boards of all four subject hospitals appear to have properly understood this role. All four CEOs spoke of the support they received from their board chairs during the crisis, offered of necessity by phone, fax or email, never with any suggestion of interference on their part. Virginia McLaughlin, currently the chair of the Sunnybrook and Women's board, then a vice-chair, reflects on that time with mixed emotions. "The hospital is such a big part of all of our lives. When we knew it was in crisis, that our patients were at risk, and that our staff was working day and night and becoming burned out, we naturally wanted to run in, roll up our sleeves and help out. But we knew we couldn't – that that would only complicate matters. And, of course, we knew that the hospital was in the very capable hands of the leadership we had carefully selected." Mark Rochon agrees. "The board put the management in place here. They charged the management to develop emergency plans. When the emergency arrived, it was management's job to implement the plans. That is what we did. Had the directors not previously paid attention to governance matters (selecting and evaluating leaders, ensuring that those leaders put in place systems, structures and processes to deal with its operations including crises), then governance would have failed prior to the crisis."

 

Financial Oversight

In Part III of the series, Hundert speaks to the need for hospital boards to take a more active role in ensuring the fiscal integrity and long-term solvency of their hospitals. The article chiefly focuses on the steps that should be taken by boards in the approval of annual budgets; the types of information and reports that the boards should regularly receive in order to monitor the financial health of the hospital and management's adherence to approved budgets; and the action that should be taken by the board in response to indications of deterioration in the hospital's financial position. Again, while the article does not say so, it is a wellestablished principle of good governance that management should not knowingly enter into transactions or arrangements that will result in a material deterioration of the hospital's financial situation without the consent of the board.
Of course, none of the budgets prepared by management for the subject hospitals for the 2002–2003 or the 2003–2004 fiscal years (the SARS crisis affected both years) contemplated the significant incidental costs and lost revenue that would result from the cancellation of medical procedures and other steps adopted by the subject hospitals to deal with SARS. In November 2003, Sunnybrook and Women's estimated those costs to be $45 million for that hospital alone. We know from the text above that none of the boards of the subject hospitals was asked ahead of time to approve the steps that would cause these costs to be incurred. However, at least in the case of the two hospitals that were asked to take on special roles and responsibilities relating to the treatment of the SARS patients (West Park and Sunnybrook and Women's), their CEOs sought and received assurances from the Ministry of Health on the direct costs of providing the requested services prior to doing so.

 

Arranging for and Monitoring the Effectiveness of the Hospital's Management

In the final article in the series, Mark Hundert and Adam Topp describe the importance of monitoring and ensuring the quality of hospital services. They recommend that each board satisfy itself that quality of care within its hospital is being monitored by its medical advisory committee and by hospital management. In the case of a crisis of the nature of SARS, in which so much is directed by senior leadership teams (most often in the form of "central command" or "emergency response" teams), it is important that the role and actions taken by these individuals also be evaluated. In this way, the experiences of management as well as those of clinical staff can be learned from and reflected in updated policies on emergency situations and other day-to-day arrangements. Because the senior leadership team is in part the subject of the study, it is clearly advisable that the review be conducted and a report prepared by the board itself, a committee of the board or an independent third party, not management, or at least not management alone.
All four of the subject hospitals have undertaken an assessment of their operations during the crisis; however, in all four cases the report was prepared by management (in one case – West Park's – with the assistance of an outside consultant). Nonetheless, in all four cases, the boards have been the recipients of the reports produced and have take action on their recommendations.

Dan Carriere, the CEO of Southlake, confirms:
"The report to the Southlake board has resulted in changes being made to the functional plan for the new wing we are building. It also led to a very exciting initiative being undertaken by all hospitals in York to develop a regional infection control centre. We take every opportunity to learn from our experiences and to improve the services we offer to our community." Having identified the failure of the provincial directives to address the circumstances of rehabilitation and complex continuing care hospitals, Toronto Rehab and six other rehab hospitals have agreed to work together to develop their own infection control processes.

 

Conclusion

What can we conclude about the management of these hospitals, which clearly displayed exemplary leadership and communications skills during and after the SARS crisis but did not follow to a T the strictures of good governance during it? Under their direction and leadership, their hospitals deviated significantly from their Operating Plans and wildly from their approved budgets, all with the knowledge but without the express approval of their boards. Under their direction and leadership, Ontario's most serious healthcare crisis in many years was confined to their doors and was not unleashed on the community.
We think we can say, especially in the case of the four subject hospitals, that it all worked out well – or as well as could be expected in the circumstances. The boards of all four subject hospitals had chosen their management well; the CEOs and their board chairs had good, communicative relationships and the governance-level decisions the CEOs made were obviously in line with those that their boards would have made had they been asked.

But in other circumstances, it may not have happened that way.

About the Author

Lynne Golding is a partner at Fasken Martineau DuMoulin LLP and the Chair of its National Health Law Group. She can be reached at lgolding@tor.fasken.com
George Glover is a partner at Fasken Martineau DuMoulin LLP, a member of its National Health Law Group and a former Managing Partner of the firm. He can be reached at gglover@tor.fasken.com

Acknowledgment

*See "Issues in the Governance of Canadian Hospitals, Part I: Structure and Process" by Mark Hundert and Robert Crawford, Hospital Quarterly, Fall 2002; "Issues in the Governance of Canadian Hospitals, Part II: Hospital Planning" by Mark Hundert and Robert Crawford, Hospital Quarterly, Winter 2002/2003; "Issues in the Governance of Canadian Hospitals, Part III: Financial Oversight" by Mark Hundert, Hospital Quarterly, Spring 2003; "Issues in the Governance of Canadian Hospitals, Part IV: Quality of Hospital Care" by Mark Hundert and Adam Topp, Hospital Quarterly, Vol. 6, No. 4, 2003.