Law & Governance

Law & Governance November -0001 : 0-0

A Brave New World of Hospital Board Governance

Louise Shap


The Ontario healthcare sector can be described as an intricate system of bureaucratic processes where fragmentation and duplication are endemic to its structure. The sector lacks an overarching vision that articulates a clear direction; roles, responsibilities and accountabilities are not adequately defined or aligned and there are few formal relationships or clearly established expectation levels between the different components of the system.
Over the past decade, various initiatives have been undertaken to create a more integrated and efficient system of healthcare delivery. For example, between 1996 and 2000, the Health Services Restructuring Commission introduced significant reforms into the healthcare sector. In addition, various incentives such as family health networks and alternative funding plans were advanced to encourage providers to work in a more integrated fashion.

A number of "networks" such as the Cardiac Care Network were also established to encourage voluntary alliances between providers at the local or regional level and to improve coordination of service delivery. More recently, there has been a strong emphasis on primary care reform. For example, family health teams have been introduced to provide comprehensive patient-centred primary healthcare, and greater continuity of care.

The emphasis on primary care reform is further reflected in the creation of Local Health Integration Networks (LHINs). LHINs represent a structure for managing health system planning, funding and coordination at a more local level. One of the responsibilities of LHINs will be to establish a strategic health system plan for providers within a specific geographic boundary. These health system plans will create new accountability relationships across the healthcare sector and will require more collaborative planning among providers. Similarly, these relationships will necessitate the development of new methods for dialogue amongst hospital boards and CEOs, as well as clearly defined accountability arrangements between boards and administrators of organizations within a LHIN, as well as between hospitals and LHINs.

The evolution from acute care to primary care reform has been accompanied by a shift from a focus on process to outcomes. In addition, there has been a growing recognition of the need for greater accountability supported by evidence based decision-making, including the use of performance measures and best practices to monitor and evaluate output against expectations.

The need for clearly articulated expectations, measurable outcomes, consequences and incentives for performance has become the "new norm", and consumers have come to expect "evidence" that the healthcare system is both efficient and effective. A prerequisite for evidence based decision-making and continuous quality improvement is the establishment of clearly defined roles, responsibilities and accountabilities. The Commitment to the Future of Medicare Act ("Bill 8") introduced hospital accountability agreements as a tool for clearly identifying roles and responsibilities and developing performance measures to monitor the achievement of specific standards. Accountability agreements reflect the joint responsibility of the Ministry and hospitals for improving the healthcare system and ensuring patients receive high quality, timely care.

Effect On Board Governance

In the context of the changes noted above, hospital boards will have to position themselves to function in a significantly different and continuously evolving environment with multiple lines of accountability and ensuing responsibilities. In a culture of evidence based decision-making and continuous quality improvement, hospital boards will have to be flexible, responsive and innovative in order to evolve in tandem with the healthcare system.

As the mandates of hospitals change, so too will the roles, responsibilities and accountabilities of hospital boards. For example:

  • Hospitals will be required to meet expectations established through accountability agreements with LHINs and to report on their performance to the public and to government.
  • Hospital boards will be responsible for ensuring the provision of quality patient services in measurable cost efficient ways and for overseeing the performance of the organization against defined indicators. In order to do this, board members will have to acquire the knowledge and skills necessary to assist the institution in becoming a "learning organization" where decisions are based on feedback from the outcomes that have been measured.
  • Hospital boards will assume a pivotal role in negotiating the terms of the accountability agreements and will have to become proficient at interpreting the performance measures that will be applied to evaluate their institution's success at meeting the defined goals.
  • Hospital boards will have to be prepared to negotiate accountability agreements that include multiple parties. Section 23(1) (b) of Bill 8 provides the Minister with the power to "propose" that a hospital enter into an accountability agreement with one or more other health resource providers. This will require board members to work in conjunction with boards from other provider institutions.

Further, hospital boards will be required to make decisions in a manner that balances the interests of multiple stakeholders. For example, hospital boards have always had, and will continue to have a fiduciary duty to act in the best interests of the corporation. Hospital boards are also responsible for acting in the best interests of, and are accountable to, the communities that they serve. In addition, under the Public Hospitals Act, hospital boards are accountable to the Ministry. In time it is expected that hospitals will be accountable to LHINs for funding, but will remain accountable to the Ministry for other matters. For example, under Part III of Bill 8, the Minister may impose penalties for the failure of a health service provider to comply with the terms of its accountability agreement. As such, while hospital boards will be accountable to the LHINs for meeting the terms set out in the accountability agreement, they will be accountable to the Ministry for the consequences of non-compliance. In addition, under Section 9 of Bill 8, a health resource provider has a duty to take all reasonable care to ensure that its chief executive officer (CEO) complies with the terms set out in his or her performance agreement and his or her duties under Section 23(9) of Bill 8.

While CEOs have always been accountable to the hospital board, Bill 8 imposes an additional level of accountability between the CEO, the hospital board and the Ministry. This could place the board in the difficult position of being accountable to the Ministry for ensuring that the CEO meets the requirements set out in his or her performance agreement, but lacking the requisite authority to enact the sanctions under Bill 8 (i.e. such authority resides with the Ministry). In other words while the hospital board will be responsible for monitoring the performance of the CEO, and will be accountable to the Ministry for so doing, it may not have the substantive control to ensure that it can meet this legislated requirement.

The specifics of how a regionalized "made in Ontario" model of health sector reform will be structured remains unclear. Nonetheless, what has become unmistakably apparent is that the roles and responsibilities of hospital boards will change, and hospital boards will have to be prepared to adapt to these changes as they evolve.

About the Author(s)

Louise Shap is an associate at Fasken Martineau DuMoulin LLP. She can be reached at


Reprinted with permission.


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