episode 20: innovators series: working together: tips for ......2020/09/16 · palliative care....

Episode 20: Innovators Series: Working Together: Tips for Ensuring A Compliant

Relationship Between You and Your Hospice Board | September 16, 2020 | huschblackwel l .com

Speaker Statement

Meg Pekarske Hello, welcome to “Hospice Insights: The Law and Beyond,” where we

connect you to what matters in the ever-changing world of hospice and

palliative care. “Working Together: Tips for Ensuring a Compliant

Relationship Between You and Your Hospice Board.”

In this episode, Meg Pekarske is joined by her colleague Stephanie Kaiser

for a rich conversation on what it means for a hospice board to carry out its

fiduciary duties and how this relates to the role and responsibilities of

hospice executives. Through counseling and training boards across the

country, Stephanie has gained unique insights on the interworking of

boards and breaks down what governance looks like in action. Stephanie

debunks common misconceptions on what defines a good board and

provides practical tips on how hospice executives can and should engage

and inform their boards. We also discuss when boards and individual

members can have liability and how to guard against such claims.

Stephanie, welcome to the podcast. We’re so glad that you could join us.

Thanks for making the time.

Stephanie Kaiser Thanks for having me. I appreciate it.

Meg Pekarske And so Stephanie, you and I have worked together on various board issues

and you’ve just been so helpful in navigating what can be challenging

situations. I thought it would be great for our hospice listeners to hear your

perspective on things. When we first met it was pretty fascinating learning

about your background and you have a lot of board experience and you

have gotten it from a lot of different perspectives. So maybe you could

share first with our listeners about what kinds of boards have you worked

Episode 20: Innovators Series:

Working Together: Tips for Ensuring a Compliant

Relationship Between You and Your Hospice Board

September 16, 2020



Speaker Statement

with in the past and in what roles.

Stephanie Kaiser I’ve been practicing law now for 21 years and as part of my job I have

frequently reported to boards at hospital levels, at professional associations

like state bar associations on the professional side. I’ve done it for dental

associations. I’ve done it for smaller companies and corporations and I’ve

also advised a lot of banking boards and financial institution boards.

Mostly the advice that I give is to regulated industries like the hospital type

boards or hospice type boards, persons to whom who have fiduciary duties

and regulatory requirements that frankly ever see a lot of those. But then

also as I mentioned some of the smaller boards as well for some of my

smaller clients. I have to work with them.

Meg Pekarske And before coming to Husch Blackwell, you had worked in-house too,

right?

Stephanie Kaiser Yes, I was in-house for a period of time at post-merger from a couple of

different clients or persons that came together. In that post-merger world,

we had a lot of kind of what were the governance issues we wanted to work

through to make it function as well as it possibly could between two

entities coming together. So I spent a lot of time on the operational side, on

the board side, as well as the executive management side and I was a

member of the executive management during that period of time.

Meg Pekarske Great. I think that this is such a timely discussion because I think, and I

expect a lot of our listeners will be not-for-profit hospices and so their

boards are oftentimes very large and you and I have talked about what’s

that sweet spot in terms of board membership. But I also think it’s timely

because I think that in terms of you talk about regulated industries and

healthcare and hospice in particular is a large area of focus by government

regulators and over probably the last 10 years or less, the federal OIG has

come out with compliance guidance for boards and how boards really need

to be engaged and compliance activities and be informed about what is

going on. So I think it just brings to the forefront this whole concept of

fiduciary duty and what does it mean to carry out that fiduciary duty. But I

think it would be maybe the first place we start here is what does

“fiduciary” duty really mean, like what is encompassed in that sort of big

but small word.

Stephanie Kaiser Fiduciary duties generally speaking, I like to limit to the three key fiduciary

duties that are the common law. This means basically in all states for the

country, you are going to have these common notions of what fiduciary

duties are and so all officers of the company and all directors, and when I

say directors, I mean board members, directors on a board. Sometimes

people have executive members called directors. But when I say directors



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in this context I’m talking about members of a board. So if you take your

members of a board being your directors and you have officers of the

company, they have what’s called fiduciary duties under the common law.

These duties are duties that they are owed because of the positions that

they’re entrusted with at the board level or at the officer or executive level.

And those three duties are care, loyalty and obedience. Generally speaking,

the duty of care is kind of like just what it sounds, it’s the duty to be

careful, to be diligent and to be prudent; to do things that an ordinarily

reasonably prudent person would due under the same or similar

circumstances. So I always like to tell people it’s not magical care. It’s just

like it sounds, being diligent and prudent, acting when you’re supposed to

act, when you are supposed to act in the role that you’re supposed to serve.

The second of the ones that I like to reference is duty of loyalty. Generally

speaking, it seems to be the broadest and most comprehensive fiduciary

duty and for a long time I kind of thought it was kind of against my thought

process to call it the most comprehensive. But I think that over the years as

I’ve worked through it, I think that that is right. And what the duty of

loyalty means is basically put into your companies or your associations,

your non-profits, your boards, putting your company’s interests ahead of

your own personal interests or the interests of any other individual person,

like even a family member or another board member or a particular

employee at the company. It’s putting that collective company’s interests

ahead of everyone else’s and asking what’s in its best interest to do.

There are lots of permutations with that. But the reason why I think that

one uniquely is considered the most comprehensive is because there are

inherent duties within the duty of loyalty that I think get folded in there

which are good faith and fair dealing. So a lot of times if you hear some

people describe fiduciary duties, they may say well it’s really care, loyalty,

obedience and good faith and fair dealing. It’s the fair dealing and good

faith are adjectives that are sort of under the duty of loyalty as you may

figure it today or discuss further today. But it’s making sure you do things

that you honestly believe are in the best interests of the company based

upon the information provided. That’s loyalty.

And the last one I guess of those three is going to obedience. To me this is

obviously very intuitive much like care. It’s obeying, being obedient to the

governing documents of the company. Being obedient to the applicable

regulations and other laws applicable to that particular company or maybe

even just the internal guidance of that company. By guidance, I mean how

policies, procedures, charters, you know things that have been developed

within the company structure that you have to satisfy depending upon what

your role is. So care, loyalty and obedience are the three fiduciary duties



Speaker Statement

that all officers and directors of any company whether it’s two people or

three people and plus. Those are three fiduciary duties owed by those

respective positions.

And if I could add one little caveat. Officer and directors are what the level

is of those two groups that I often talk to my folks or whoever I advise or

whenever I give trainings or what have you. But I like to consider mid-

level management as well as being on the cusp to own those fiduciary

duties. Sometimes by regulation they owe them, by the regulations

themselves that they impose fiduciary like duties depending upon what the

industry is and what information you’re entrusted with. But also depending

upon what the title of the mid-level manager is. If they’re aren’t overseeing

a department, if they have that kind of administrative oversight, that they

can actually determine hiring and firing and making important decisions a

governing unit, I often think that they’re going to be brought into that

fiduciary duty as well even if they don’t quality as an “officer or

executive.”

Meg Pekarske That’s really helpful and I think as you’re talking and I’m thinking of our

executives can be officers of a company because I think that the intention is

probably an overstatement but something that’s going to run through our

conversation is what is the board’s role and what is the executive’s role. So

can you sort of explain a little bit more as both the executives may have

fiduciary duty and how is that the same or different; practically and legally

how is that carried out?

Stephanie Kaiser Sure, so the board, I always like to visualize a company as a triangle. You

know it’s just a triangle. And at the top of that triangle you typically in a

corporation, for example, or non-profit or what have you, you’re going to

have a board. And that board is responsible for creating the policies of the

company. And policies to me without getting too much in the weeds of

this, policies are the things that are developed that given a general scope of

how that company is going to function. And so how it’s going to function

on things such as conflicts of interests. How it’s going to function on its

succession planning. How it’s going to function on its businesses, capital

markets. Whatever it happens to, however it’s going to function on its

giving.

And so you have these kinds of broad-based policies that may be either

legally or regulatory required, or that are needed in order for the board to

tell and set the tone for how the company is going to function. So if you

envision that a board is at the top of the pyramid or at the top of that

triangle, they also are responsible for in addition to formulating policies

and instead it’s strategic in business direction for that company. They’re

also responsible for the hiring and selection and oversight of the CEO or



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Chief Executive Officer. Sometimes people don’t have CEOs. They may

have a president or something like that. But whoever is the upper-most

managing member of that particular company or organization, the board is

generally responsible for overseeing that person.

So now that you’re at the top of the pyramid, you’ve got the board

responsible for setting policy direction on how the company is generally

going to function. And they’re also responsible for the hiring and selection

oversight of the CEO or president in the corporate structure. In those

policies what you should see is 5 or 6 categories without getting again, too

much in the weeds about a more particular policy. Policies will have sort of

like, what is the purpose and objective of this policy? It will then have an

operative parameters section. Below it will have things like what are

exceptions to this policy that the board would find acceptable? It’s going to

have, what are the recording requirements of this policy that may be critical

for part of our discussion today. And then it’s also going to have or should

have, assuming it’s appropriate, it will give authority to management or to

certain persons whether it’s singular or plural. It will give authority for the

management to go out and develop procedures consistent with that policy.

So policies are generally broader-based statements to give some critical

points of reference and some critical must-haves for the company but then

it delegates the responsibility for management generally or the CEO or

some other particular member to develop procedures that will help

implement that policy for the company that’s part of the day-to-day

operations. So going back to the top, you’ve got board at the top because

policy directions, that’s strategic business goals and direction, held at the

top is a common phrase for board members. And then they are responsible

to the CEO. They delegate a lot of the day-to-day or all of the day-to-day to

the CEO. So then you’ve got the next band in that triangle, which is going

to be the executives or your officers, which are typically known as C-suite

or people in that kind of vein which are your Chief Executive Officer,

maybe an Operations Officer, a Financial Officer, people like that are

going to be in that next C-suite. And a CEO in an organizational chart is

typically going to be at top or is at the top of the management

organizational chart and then below the CEO you’re going to have all of

these C-suite or individual officers and directors, directors within the

company who oversee departments and things like that.

So it is board at top triangle, below that next vein you’re going to have the

executives, CEO, operations, also financial officer, HR is in there

sometimes as its own unit or under operations. For example something like

that it may have legal counsel or other kind of members that make higher

units or higher divisions within your company, need to function with



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separate units; need to happen to make that work best.

Meg Pekarske So I hear you say day-to-day operations and so for sort of setting the tone

but in terms of the executive role, even though everyone has the same

fiduciary duties, obviously the executive is carrying out those or living

those so to speak on a daily basis and so I guess and we don’t run into this

at least in the hospice arena all that often is where you have hospice board

members who are getting very, very involved in day-to-day operations.

In my experience most of the time board members are really, I’m going to

meetings, you may have an executive committee meeting of the board or

whatever but I guess how do you see that and what does the

communication – what does good communication between I’m running this

business day-to-day and, I mean getting into some real practical issues as

when do you have an obligation as an executive to contact your board or

board chair and like what rises to that level of when you should notify

versus when you shouldn’t and whatnot? Because I think the executive

perspective it’s like I’m responsible for the day-to-day operations and you

know this is where maybe tension is the right word is I can handle this and

like but when do you have an obligation to tell your board about certain

things and obviously there’s a practical answer here, too.

How do you keep relationships with your board members, but there’s

probably a legal answer, too. So what does that communication look like

since we all have the same duties? And I guess the board’s duties or their

ability to carry them out is sort of somewhat dependent on the executive

telling them information or the board asking for it but sometimes you don’t

know to ask if you are never informed. So explore that dynamic a little bit

and what you see as both good and bad there.

Stephanie Kaiser So sure. So there’s a lot there to cover and it is a healthy balance and for

well-functioning companies you may not even see the tension like we’ve

said that is there but I also like to say that a board really is at the upper

most pinnacle responsibility but they can’t be there every day. It’s not their

job to be in the office every day. So they really do have to functionally

delegate the day-to-day operations to the CEO which means you should

trust, a board should trust that person and make sure they’ve chosen wisely.

And that they are frankly a lot of their fiduciary duties satisfaction is going

to come through the CEO and that liaison relationship. There should be a

healthy tension between because the CEO is going to be overseeing

management to make sure upper management members/executive and

others below executive level to make sure that they do what they’re

supposed to be doing.

But to answer the bigger question I’m going to go back up to the top. If



Speaker Statement

you have policies in place sometimes they’re legally or regulatory required

and you have to have certain policies in place with certain reporting

requirements that will tell you when management is required to report an

event to the board and when the board is required to act. Sometimes that’s

just set by law and regulations are a part of that law. Other times, again the

board’s put in strategic in-session kind of perspectives of the company.

They will tell management under this policy the board wants you to tell

them whenever x, y or z happens. That’s what these policies help do is tell,

it’s a communication instead of guidance that either the laws require or that

the company must try proving its board it requires. That when certain

events happen this is when these reports have to get made. And other

things just make sense by general operational function like financials.

We all have to do a quarterly financial report so in quarterly events that

happen in the audit world, that need to get satisfied and those things should

be on a calendar for the board and should be reported as systemic and

frankly scheduled in a structured way. So whether it’s by law, internal

guidance by the company by policies that will tell a CEO whether they may

have to know or frankly when it relates to safety or reputational risk. There

are times when a CEO needs to be sensitive to that and know that it’s

appropriate for them not to hold that information but to share that

appropriate information up to the board if it is appropriate. And I don’t

know if this is good time to bring it in but let’s say your board is, let’s say

you have 5 members on a board and let’s say the matter at issue to be

reported is outside of the regularly scheduled meeting, it is not something

that can wait for a minute. But the CEO is – that could threaten the

reputation like a lawsuit that’s going to hit the news in a couple of weeks

and it’s going to be a pretty big deal. If something like that happens you

would expect the CEO to get on the telephone, whether it’s based in policy

or not, and call the board chair to know a part of your question, where’s

that good communication go. And unless the charter, which I haven’t

mentioned that yet, unless the charter’s require, typically your CEOs can

liaison directly with the board chair and then that board chair is going to be

responsible in communicating downwards to the appropriate persons on a

board.

So if you have a 5-person member of a board, let’s say one of them is

involved in a lawsuit, this hypothetical lawsuit, if there’s a board member,

one of the 5 is a hypothetical member of a lawsuit, the board chair is not

going to be communicating to that fifth board member who’s interested

about that lawsuit for their own benefit and frankly and hopefully pursuant

to the guidance of the company on conflicts of different policies. So

generally the board needs to make decisions that would be disinterested

persons on the board and of course getting information from disinterested

persons in management in the right way. So this can go a little weedy but



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generally speaking, the board chair functions through its chair back to the

CEO. If there is an audit-related issue and there’s an audit committee in

place, then it’s an audit matter. Sometimes the reporting goes directly from

the CEO to audit committee chair or for a director of internal audit of the

company to the audit committee chair to make sure that those liaison points

are there.

If you ever find yourself dealing with the structure of oh gosh I had a

circumstance that isn’t set forth in any of our policies or set forth in any of

our guidance, as a member of the executive management you don’t know

who to call, then of course put that down on note that you know should we

have guidance on this issue, but generally you’re going to default to what is

the general corporate governance standard, CEO to board chair or CEO

doesn’t need if there’s a conflict or some other reason the CEO can’t

communicate. So board chair or vice chair to board chair has a conflict. So

that’s generally how it goes, as you kind of go to the top of the uppermost

management side to the top of the uppermost board side. They typically

will liaison in the absence of guidance to the contrary or regulatory

requirement or legal requirement to the contrary.

I mentioned briefly charters and I’ll just touch upon this now. When you

have a committee, whether it’s a board committee or an executive

committee or some other like data privacy committee of the company, you

should also be thinking about a charter. And so a charter will help describe

what the rules of engagement for this committee look like, what is the

scope of their work, what recording requirements do they have. Very

similar to a policy in terms of reasoning. You know how does it function

entirely, what is its leadership structure, who’s to communicate within,

what is its composition of membership look like, and what is within its

scope. And so those are, those also help guide some of those

communications and help describe who communicates when, to whom and

when are you supposed to raise that flag as opposed to just let management

deal with the day-to-day operation.

Meg Pekarske Well and I think in my experience, and this is more of a human nature

thing right is if I’m the CEO it’s like well I haven’t resolved this issue yet

so I don’t want to alert them and then I have no answers and I think, you

know my thought but I’m not a governance expert so to speak as you are

but I mean I think erring on the side of communication, even if an event

just happened and you don’t have all the answers yet, I think sending out

information is probably, even though that can sometimes be human nature,

I’ve seen that sort of end up biting people on the back end because again I

don’t think the board’s going to ask for you to have everything figured out

if this just happened but I think the courtesy of knowing. And again I think

that so much of what’s happening for hospices right now is in the



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compliance and you used the term “audit” and we think of – you’re using

this financial sort of audit and we in hospice in particular have a lot of

program integrity type audits that go on and they can result in very large

dollar figures. Obviously there could also be you know concerns about

fraud and abuse or something like that but I mean those can be very

significant events for a company because the dollar figures that come out

of those audits can be very devastating to an organization and so I think,

and this is going to – we’re going to get into what’s good for training but I

think that the more educated your board is and when you call them with

stuff, they’re not going to freak out and be like oh my god what’s going on.

If they sort of understand like okay yeah but I’ve heard about these audits,

we’re getting one and then they sort of have a grounding in some of the

stuff.

So I think that probably erring on the side of communication and then it’s

maybe a testament of how well you’ve educated your board if their

response isn’t I’m completely freaked out or I had no idea what you’re

talking about but instead like oh okay thanks for letting me know and then

the response isn’t to micromanage but maybe that sets some type of

schedule for when you’re going to reach back out or what the game plan or

whatever but I don’t know what your experience has been Stephanie but

that’s been mine.

Stephanie Kaiser No I agree with everything you just said and that is typically the course.

When I typically experience maybe a board disconnect or on a flow

disconnect between management reporting and board response, it’s because

when I haven’t been trained correctly it is, they haven’t gotten the right

information. But often you know when and what you communicate is

important critically but also how we communicate and I’m going to get

into the means of communications here.

I don’t want to be a lawyer but on this there’s a reason why there’s

privileges and confidences in some studies involved and so for me I always

advise my folks as a general measure unless there’s some regulatory

reason, which I’m not aware of, one of what I’m about to say or legal

reason, otherwise if there was something super sensitive going on just part

about as a CEO, or let’s say someone else in the C-suite learns that I had

not necessarily the CEO, sometimes people want to have, in less mature

versions of management or people who haven’t been trained a lot, they

may so oh gosh I don’t want to work this to the board yet until I know

more information or I don’t want to tell the leader until I have more

information. And then they wait too long. And then sometimes there is the

need to oh my gosh you know chicken little sky is falling I need to alert

everyone immediately and just send out this email blast. There’s no board

involved and now we have a lot of speculation and overly sensitive



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information communicated or disseminated in a way that’s harmful to the

company because you may not know a lot of that personal – could be

incorrect or could be bad information, whatever.

So as a general rule I like to balance instead of a, and I’ll use that

hypothetical that I’ve kind of use a lot in training. Bad things happen on

Friday afternoons at 4:30 and it’s always going to be a holiday weekend so

just keep that in mind. Always have to you know, watch every Friday just

so you can get ready and cross email time. So Friday afternoons are when

bad things are going to happen, it’s always going to happen on a holiday

cause people are leaving for their long weekends. But all that said, it’s

happened to me in my life where I’ve had something reported to me late

afternoon on Friday or there’s an emergency issue late on a Friday but the

information is so loose so I don’t want to call the board chair just yet and

so why don’t we do this, why don’t we gather a little bit more information.

So I kind of make a list, what at a minimum do I need to go out and gather

to get initial concrete information to make my reporting appropriate and

effective but it won’t take very long. And let’s say it’s going to take me a

week to gather the information, and I’m going to go ahead and call the

board chair or suggest that the CEO call the board chair and say look we

just got alerted to this, we have a game plan were putting together, wanted

to alert you before the holiday weekend got under way.

These are our next steps, anticipate hearing from us by this date and time,

if we need you in the meantime we’ll call you. At this point you know no

further reporting is required to other members of management or the board

or it is required and let’s schedule a call at your convenience Mr. Chair or

Ms. Chair, you know early next week. It’s all that control and where

mature boards or mature relationships are the thing, you’re going to say

okay let me know if you need help report back to me as soon as you know

more. And that’s healthy, maybe they’ll ask a few questions that could be

helpful. But that’s an appropriate thing when you don’t know what to do,

just think through okay can I gather enough to make it a little bit more of

an a salient report or given the holiday weekend given it’s 4:37 p.m. you

know, do I go ahead and make that call now and let them know it is highly

preliminary. Just getting the problem what the thing is that you’re dealing

with sometimes you wait and sometimes you don’t. And it really just

depends on the subject matter and any kind of requirements you had

internally. The relationship and the expectation that you have.

As I mentioned earlier sometimes with my entities, a lot of my client

entities are regulated, heavily regulated, so that means that they have a

regulator they had to report to OSHA or something like that. They don’t

want to hear your reason for waiting to tell them what’s going on. You may

have a duty to call them immediately or sooner rather than later even



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before you have all those facts which can be uncomfortable. So you want

to make sure you have someone really equipped to handle that call. And for

me I call it banking my credibility, especially if I have a designated liaison

at OSHA or a designated liaison at a banking regulator or a designated

representative that I deal with, with whoever it is.

I like to establish credibility and give them, I don’t know a lot of

information, here’s what I got, it’s a holiday weekend, I wanted to put this

on your radar we are handling reports with protocol. I will check back in

with you early next week. And depending upon what it is and who the

regulator is and what I might have to report, I have found that goes so far in

helping my client. Not revealing privilege of course or confidences but do

letting him know that you’re aware, you’re on it, you’ve got it assigned at

appropriate members of members for the board. Yes you’ve notified the

right people, yes here’s the next steps you plan on taking and you’ll check

back in as appropriate whether it’s an accident or an incident, a lawsuit, a

PR issue, whatever it happens to be it’s always prudent to gauge the subject

– and I always tell people it was part of care – obedience. When you don’t

know what to do, you know get good counsel, you know get good counsel

and get the rapport and make sure you do the right steps. And part of

critical steps frankly is hopefully good training of your board and of your

management to know how to function best for the circumstances. Just set

expectations on both sides of the fence that are explored in management

and then you can function in accordance with those.

Meg Pekarske So and I think that you know hospice is sort of going through a rebirth or

sort of into the next generation. And so I think that if we’re at Hospice 2.0

or 3.0, I mean I think that our board needs to come along with us. So back

in 1983 when the Medicare hospice benefit was first created, I mean the

people on your boards are you know these really vested community

members or volunteers. I mean oftentimes your medical director was a

volunteer. Maybe all of your people working are volunteers and so that was

the outgrowth of a lot of the hospices that are still very, very vibrant today.

But then how’s your board involved as you’ve involved right.

So a number of our hospices that we work with throughout the country, I

mean they’ve grown dramatically in size and so then you know maybe the

skills you need on your board are different and whatnot. But I think you

know and this is sort of my area of focus is I just think the government

enforcement and scrutiny and all of these audits and whatnot, there’s just,

there’s just different things that boards need to know and so I want to talk a

little bit about what makes a good board member and because we have

people who are tremendous volunteers and do tons and tons of things for

our organization and care deeply about it, and maybe they’ve been

involved for a very long time and I think a lot of our non-profit boards are



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oftentimes very, very large and how do you, you know when we’re talking

about we’re in the next generation, like how do you deal with that and I

think sometimes people think about governance and it’s like this thing that

it's like well it doesn’t really matter.

Governance isn’t a substantive area so you don’t really think about it but,

and this is why I wanted to have this conversation with you today,

Stephanie is – I think we have to care about it because I think that the

government and the same people who are enforcing various regulatory and

payment obligations on us are expecting our boards to function in a certain

way and have certain knowledge and be informed of certain things that if

our board hasn’t gone to the next generation, that there could be challenges

with our ability to demonstrate that we’re really meeting what is expected

of not just again are employees but our boards as well. So I guess in your

experience what I’ve explained and the story of the people who are deeply

ingrained in the mission versus but here we are iterations from that and like

how do you deal with that sort of practically? What’s it – you know who is

a good board member? What should their skills be? How big should your

board be? Can you give me some insights into you know what you see to

be signs of a good board?

Stephanie Kaiser Sure there’s a lot in what you said. I think all of it is right. Great thinking

points in things that companies and boards – when I say “companies,” I

mean their boards. At the top of that time, they should be thinking through.

Talking about what makes a good board member – that can vary depending

upon the company and what the goals are of the company. If the company

doesn’t know what its goals are, say what do we look like today and what

do we want to look like in 3 to 5 years. Typically succession planning and

strategic business planning is going to be looking at a 3- to-5 year optic and

roadmap but it may change over time as part of that 3- to 5-year journey

but it can change. In answering that question I appreciated that who you are

versus where you want to be, how do you get there and how is your report

going to invest and want you to be a resource. And I don’t say this

disparagingly but boards are in charge of running an organization and

policy direction. They really should be qualified for the position and what I

mean by that is it’s not a country club.

It’s not an opportunity to gather all your crones, as awesome as they may

be, it’s not an opportunity for you to get and surround yourself with

persons of like minds. It really is an opportunity to make sure you know

your company, what it does, you know where it wants to go and you’re

going to make sure you get qualified folks or people who are diverse in

their opinions and views and expertise levels and backgrounds and making

sure you satisfy…a lot of times there are regulatory requirements and



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making sure of course you satisfy those legal and regulatory requirements

or a governing document requirements that you may have and a lot of times

even a charter may require that they look a certain way. But assuming you

want to make, you know, that you’ve satisfied that guidance.

You want to make sure you haven’t misqualified folks in those positions to

help challenge you. And it’s healthy and it’s a good idea to have persons

with diverse backgrounds and experience levels who are still qualified

within that realm you’re in because they can challenge you with that

tension, they can challenge you, they can make you think critically. They

can help get to that next level. Like some companies want to have a leader

on board that considers law. Some companies want to make sure that they

have maybe a member of a certain demographic like between 25 and 35

and that has certain skill sets – and that perspective. Sometimes they want

to have someone with a wealth of more experience in an area or who would

maybe have been a previous management member in that area and is

maybe now retired, to bring in sort of that historic perspective and to give

kind of a history of how we got where we are in this industry or this thing

that we’re talking about today.

So it could be all sorts of goods things but what they do need to do is be

aware and so where I’ve often found it kind of interesting is you bring

these people on board whether by election or appointment or what have

you, and you bring these people onto the board but you don’t tell them

what that’s going to look like, what their life on the board is going to look

like. You need to tell them what their fiduciary duties are and to me and a

selection process before they take that seat at the table.

So here’s what care, loyalty and obedience look like. Here’s what it’s

going to require maybe, here’s what it is not. Here’s conflicts of interest.

And sometimes conflicts of interest can be extremely valuable for naming

an appropriate director because if – know everybody on the board,

everyone in management, if this is an issue where every single connection

you had is going to be a connection, the company is going to have to be

recused from everything. You can’t functionally vote because of your

interests. You may be a great consultant to them when they need that

consultant expertise but as a board member it may not be a perfect fit for

you. So making sure your appropriate legal interests and appropriately

qualifying and aware of what your meeting schedule is going to look like,

your training schedule is going to look like, the logistics are there and you

can get to those meetings, you can accurately participate, you have enough

room in your schedule to get a contributing, a successful contributing

member effective and contributing member of that board, it’s critical to

look at your schedules. Do they even have time to take on this commitment

and what’s it going to look like, especially when life happens? It’s not an



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excuse and no one – potential plaintiff or a regulator, no one’s going to

care how busy you are if you weren’t able to take that phone call on the

Friday afternoon. So all of those things come into play.

Sometimes if you don’t know where to start and mapping out a feature of

your company whether you’re to exit and where you want it to go is a good

idea. Once your board is in play student self-assessments of the board,

meaning the board analyzes itself, its own individual performance as well

as the board’s performance as well as the committee’s performance, like on

a discreet or confidential anonymous basis once a year to be tabulated and

summarized and discussed as part of a facilitated discussion. It’s really

healthy because that helps adjust your strategic business plan for the next 3

to 5 years or rolling 3 to 5 years.

The issue of director qualifications. Who needs to be on the board next?

Making sure you have the right term limits, if any, on your board. What

does each term look like? Making sure it’s appropriately long so you can

succeed in that role, make the training investment make sense and all that

but not so long that it becomes sort of an identity for that board member.

When they start to become their identities, I’m always the chair or I’m

always the, you know the member on this board. Sometimes it becomes

less about loyalty, that loyalty fiduciary duty. It’s more about their

relationship and what they can do for that entity. It is nice to have new

blood on boards to – what it is and what the company’s roles are and what

its roles are. It also is kind of part of what you were talking about, there

were several things about how to be an effective board member. Again

reading the reports management gives to you, being aware of what’s going

on in that industry with that particular organization are critical.

For some industries and for some types of clients there are common

resources that people should be checking out and aware of. So I’m going to

take banking districts since it is pretty well structured in many respects in

other various forms of banks and various forms of financial institutions.

There are a lot of publications so for some clients I will let them know look

if you are in this type of banking industry, you want to sign up to get

reports from this entity or from this organizational leader or this publicist,

whatever it happens to be. And make sure management is giving you some

race of this critical updates going on in that industry on a periodic basis

whether you meet monthly or meet quarterly, you know making sure you

have space in your agenda for updates in the industry, trends in the

industry. What proposed legislation is coming down the pipe that could

impact you? How do you stay ahead of those, that proposed legislation? Do

you want to comment on that proposed legislation? You know why or why

not.



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So I was notifying and making sure your board is aware of trends, making

sure there’s a discussion placed on every board agenda for strategic

business banking, making sure you have appropriate, this goes back to an

earlier question, Meg, that you raised that I didn’t address in this way.

Making sure you have executive session at every single board meeting with

the CEO and without the CEO so that the board has time on its own, of

course to analyze things and thoughtfully objectively and prudently without

influence or independence of teaching that influence of management. And

so I think all of those things come into play and why am I mentioning these

things? Because whether you’re getting paid to be in a board position or

you, it’s an unpaid position, either way you have the same fiduciary duties

we started out with which I know we haven’t gone into in too much depth.

But board members as well as officers can be held personally liable for

certain kinds of actions that may occur. Personal in their individual name

as well as maybe the company depending on what the issue may be.

So one of the ways a board member as well as an executive member can

reduce or insulate or minimize their liability exposure or some acts in

accordance with their governing documents, their policies, if they can show

they have them in place and they act in accordance with them, that checks

some boxes on defenses that they might be able to assert. But even if the

outcome was wrong, even if something bad happened, if they followed up

in proper verified process all the way through, it does help show duty of

care and duty of obedience were in place. Let’s not give up those wins

because we need them and that’s why those policies and procedures are in

place.

The other thing that they want to do is show that they acted on an informed

basis in good faith that whatever action they’re voting on or taking, that it

was honestly made in the best interests of the company based upon certain

stances presented. And if they do that they might have a presumption of

what’s called business judgment rule which is when it’s available and it’s

not normal for all causes of actions, but when it’s available it helps create a

presumption that even if the outcome again was wrong, as long as they

guarantee the process was in place and they made wrong decisions, then

it’s healthy.

The last point of your question I want to echo. There’s a lot of think tank

logic that people say, we have such a board. Everybody always votes

unanimously.

Meg Pekarske [Laughing].

Stephanie Kaiser We all agree and I’m like that’s great you have a lot of like minds. But I’m

going to challenge you a little bit on that. It’s nice, you know, sometimes



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there are no brainers that everyone can agree on and that’s wonderful. But

there are times where it’s not great for everyone to agree. Number one that

means you might need to have a more diverse board to bring some more

critical thoughts, but number two it may mean that a director is not

exercising their independent judgment which is required as a director to do.

It doesn’t mean you have to disagree without being disagreeable. You

should disagree and be agreeable in doing so.

Do it appropriately but you can challenge. And so boards should have

appropriate time for discussion and that may mean people see things

differently and oftentimes when people bring more of their different

viewpoints you come up with the best solutions, all angles carefully

analyzed and appropriately documented in the minutes and if the vote on

that hypothetical 5-member board we were talking about is 3-2 or 4-1,

great. You know, that’s great because that means it wasn’t just that an

abdication. People weren’t just blindly deferring to their board members.

They were thinking for themselves. And that’s exactly what is required and

expected. You should act appropriately and obviously communicate

effectively in a responsible way but you should exercise your own brain

when you’re a board member and make sure you’re informed before you

cast that vote.

So all of those things help make good members and making sure their

effective contributors once they’re on that board.

Meg Pekarske Yeah. Those are really important things and I think we’ve all probably

been on those boards as you know, we’ve all have had good board

experiences and bad as members ourselves. And just where everything’s an

information dump that sometimes you feel like you’re not really

contributing anything. It’s just for me to sign off. And so I think that what

you said is really important to, you know, what is happening at those board

meetings and again, boards are not making day-to-day business decisions

but there are things, and this goes looping back to how do you prove I’m

meeting my fiduciary duty? If we never vote on anything and don’t have

any discussions like here’s your board packet. You reviewed it, right? And

then like I’m hearing all this information and I went to every meeting but I

never had to do anything because I’ve been on those boards and it’s like –

and in addition to it, because as a board member you don’t feel like you’re

making a meaningful contribution. You’re also, you know, are you meeting

your fiduciary duty, really? And like I think this is really hard and

sometimes I think from a root cause standpoint it comes from, in my

experience, some of our clients have really large boards and that can be

hard to manage. And so I think, when we sort of finish up here and talk

about sort of what are like on your top-5 list of things to do, to show you’re

carrying out your fiduciary duty and what, you know, policies and things



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like that. But like there can be roles for people to be on a subcommittee of

a board that’s not a board member themselves cause they think that let’s

just say, you have a board that’s 25 people and you make a decision to cut

this board in half of size. Like, how do you do that? I mean that could be

really controversial. But like there’s many ways that you can involve

community members in your organization in a very meaningful way. And

like you said right sizing to what are the skills and gifts of these folks and

how can they best contribute to the organization. Because I think that when

you’re talking about, you know, training people about their fiduciary duty

and personal liability, I’m sure everyone listening is like I don’t want to,

get into that. I’m going to scare people off. I need people to serve. But I do

think that especially in healthcare which is heavily regulated, the grounding

of some of the compliance-related type things and you want your

compliance officer to be reporting to the board. So when something “bad”

happens, this is not the first time they’re hearing about this. This is a thing

and like, oh we must be so bad the government’s doing this. And it’s like,

no no. If you’ve educated them well, they understand that hospices all

across the country get these kinds of audits. And just because this is

happening to you, it does not mean that you did anything wrong. This is

like, it’s not that it’s not important – but it’s not as though you’re getting

singled out, so to speak. And so it created that context, I think that’s what

education and training is – it’s creating the context so then they can be,

have that grounding when they’re getting information. And then be able to

ask sort of appropriate questions. And then the worst thing and obviously

my involvement with boards is oftentimes when something very bad has

happened or some type of crisis. If you’re having to educate and do that

context at the time this bad thing is happening, that’s having to do that

education and then navigate, you know, what should be done in this

particular situation. Not only does that become long-winded but I also

think it can be harder to get to where you need to go. And it sort of shows

that maybe – are they really carrying out their fiduciary duty if they never

knew what any of the stuff was? And the first time something bad is

happening, that’s when they’re learning about “oh, you know these

program integrity audits happen.” And so anyway, I just – when you’re

talking, it just made me think of “we desperately want people to serve on

our boards so we don’t want to sort of do this education.” And I’m just

thinking that might be a root cause for maybe why some of this doesn’t get

done on the front end. But you probably have better insights than I do on

that.

Stephanie Kaiser No. I think there’s a lot of information in there, Meg. And you’re right on

all of it. And so right sizing your board is critical, if it needs - I’ll give it a

hypothetical explanation. I was asked to be on a board a long time ago.

Long, long time ago in my career. And when I first, you know, before the

meeting, I said what is our goal and our purpose before I apply for it and I



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approached the board? And what is our mission? What is our direction?

What are we supposed to be voting on? How often do we meet? And I went

through all of these things and you know, it might have been better if I

hadn’t even asked these questions. They said you’re not really going to be

doing anything. I’m like, well no. A board is formed to do something. You

know? I’m being asked – I have to be sure of these things regardless. I

wasn’t being paid. And I said, will there be an agenda? Can I see the

agenda prior to the meeting? Oh, we’ll give it to you at the meeting. I said,

then I can’t prepare. And this had been in place for a really long time and

everyone enjoyed it. It’s kind of a low-key sort of board meeting. And it

was a nice place for people to collaborate. But it wasn’t set up like a board.

It was really kind of interesting. So I kind of learned that freefall is never a

good thing. Keeping people informed. The bigger a board is, the more

likely, in my experience, there’s more people behind the decisions so I

would say with any company, the size can vary. There are books out there

that say you should have this automatic 3 to 5 group. That’s not right. That

3 to 5 may be horribly inadequate to meet the company’s goals, regulatory

requirements, what it needs to function. But you should have a good

functioning board. And sometimes there are so many things for a board to

tackle. You know, it can be information overload. It may be too much for a

board to do. So think of a board in your mind like you would, the company,

the management side. So management has an Org Chart, where you can see

the top, which we were talking about earlier. The board is the same way.

The board leads the top. The board chair helps with that. And then below

the board, you’re going to have these various committees potentially set up

so that they can handle the more specialized issues that the board may need

to deal with. So like for example, I mentioned earlier, audit. So a lot of

regulated entities are required to have an audit committee that helps with

the scope of the audit. It helps make sure that they retain the appropriate

audit persons. Reminding them to go back to their management. And

makes sure it has the right reports on the audit. That they report on a

quarterly basis and that they have the right meetings and retain the right

persons to give that insight and then they report it to the board. So the audit

committee is a specialized service – they have the right people, the right

composition, the right skillsets to function off the audit committee. And

then the audit chair, once the audit committee’s met on the specialized

issue, this set of issues or financials, they report back to the board. So then

the board has to read, let’s say hypothetically a 25-member board has to

read all this audit stuff. It may be hundreds and hundreds of pages every

quarter. It’s now 3 or 4 people or 5 people, you know, digesting it, making

really smart, informed decisions and then reporting that in a 15-minute or a

10-minute report. Spending hours upon hours you know, of the board’s

time but letting them get what the board needs to get from that specialized

review by the audit committee. Same thing for compensation they may

have for the CEO, or governance committee. That kind of chair compliance



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point earlier. There’s often a governance committee to make sure that the

board has the right policy schedule. The board has the right interest

coverages and the company has the right insurance coverages – to make

sure they’ve got the right charters. And so the governance committee most

times will do a pass depending on how the company wants it set up – will

do a pass on a lot of these things, make sure that they satisfy the law, give

it to a lawyer to make sure it’s drafted correctly. And then once all that

stuff is looked at by the committee, then they’ll present consistent with the

charters and make the policies that send those particular issues to the board.

So the board can accomplish a lot by breaking up into committees that can

handle the appropriate size, subject matters for that company so that the

board as a collective can accomplish all the goals but without having to

spend hundreds of hours that no one individual has to make their job. You

know to serve on a board. So choose your committee appointments wisely.

Make sure you have the right committees. Make sure that those committees

get trained. That they get self-assessments too. All of those remain

manageable as long as you kind of know your path forward and what you

need to have your expertise in. So that’s kind of some of the ways that I

think that if you have a lot of board management functionality and then

they are aware of what these things are. They are back to the industry

trend. Each committee can be aware of the industry trends effective that

they, risk committees are incredibly important and there’s lots of really

good published literature on the formation of these – of a risk committee.

And I think almost all companies these days should either have a risk

committee or someone who performs a function like that. To be

responsible for risks. Because risk is prospective looking. Participating

risks coming down the pike and trying to prepare for those in advance.

Audit looks backwards. What happened in the past. Indubitably we address

that correctly and then what do we need to adjust going forward? And so

audit and risk by this nice schematic relationship, being retrospective and

prospective and making sure that you’ve got risks covered on both sides of

the fence in that regard and did you do everything you said you were going

to do to be functioned correctly by the board. And did management do

what it was supposed to do? So frankly, a lot of these audits and reports

and things like that that are needed for compliance reviews are critical for

boards and management to have to make sure that everyone is functioning

in the right space that they should function in. Are we getting all the right

data we should be getting? But a lot of that too, every charter should have

the opportunity for that particular committee to retain professionals or to

retain advisors. To connect with advisors – to make sure they’re getting the

right inputs. And not every committee may need a lawyer. Not every

committee may need a consultant. But when they do they should have the

right resources they need to function correctly to advise. Then again, all

companies are different. The needs of the company board are going to be

different. You know, a two-person company is not going to have all the



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needs for all of these things but they will have to have their own equivalent

of these things as opposed to a 20,000-person company with the board

commensurate with the size and risk of that company and what it’s goals

are. So all that to say, look at your company. Look at its size. Look at its

risk areas. Look at what it needs to be regulatory and practically functional

to accomplish its mission and purpose. Does it have the right people in the

right spots? And in breaking up all of the things that need to be

accomplished, through committees and through persons being assigned to

the right spots with the right term limits, all of this help contribute to really

good, healthy function of that company, the board at the management level.

Meg Pekarske Yeah. There’s so much there and I think we’ll do a poll because we’re

going to try out these LinkedIn polls when we post this on LinkedIn to see

if we, there would be interest in doing another sort of podcast series on

this. Because I just really think that hospices are in a new stage of their

lives and I think these questions are needed to probably to be front and

center. And so I think they’re really worthy of exploration because I feel I

could ask you like 10 follow-up questions on this but you’ll have to take

that back to your day job. I think this is incredibly helpful. And I think that

what you said about substantive experts and consultants, I mean that’s

something that the federal OIG has identified and will include lengths to –

the OIG has released a couple of reports about their expectations and the

goal of boards for healthcare companies. But they talk about the boards, in

like – for example, are they in compliance, they might need substantive

experts to get them up to speed about the issues at hand. And those things

are good things to do and again, why does this matter? Because I think

ultimately as you said, you know this is something no one likes to talk

about but from what I’ve heard in talking to various insurers, I mean, there

does seem to be a rise of claims against board members and boards. And

are you really carrying out your fiduciary duty and so if you ever had to

prove that up, what were the dots you would try to connect to demonstrate

that you’re meeting that and so . . . I’m sure people always think lawyers,

you know, we’re all in the weeds and all these policies and procedures and

blah, blah, blah are they just pieces of paper? But I mean I think that they

are really sort of the living, breathing testament of you coming back full

circle here to meeting your fiduciary obligations. Like what would you

provide to demonstrate that? Because it’s not just like oh we had 10 board

meetings this year. Like that’s not going to cut like they met their fiduciary

duty. And so, what are the things that you could say if you had to prove

that up and maybe we end there in brief, like if you serve your top 5 list of,

if you were listing to this podcast as an executive, what are the 5 things I’d

want to go look at and see? Would that be like – what does our charter look

like? Or what was the last time that was looked at? Like what are some of

the things that would be on your short list as a takeaway from this podcast?



Speaker Statement

Stephanie Kaiser Sure. I will say it this way. And so whenever I have to spend time when

companies get in trouble, I go in and I do an investigation or review to find

out what’s happening and how we got there. The first few things that I

thought when you asked that question just now - my immediate thought

when you asked that question is, you know, what does the board’s schedule

look like? What is the list of policies? Can I grab their minutes from the

last three years’ worth of their board meetings? And that doesn’t take very

long for someone like me to look at. And what does their training schedule

look like? And in what required reports did they have and did they have

this and what did their charters look like? So when I grab those things and

plus make sure that the organizational part is 5 1/2 or 6, that’s where I’m

going to start. Those are your cores. So you’ve got your work chart and in

your charters you’ve got your policies. You’ve got procedures. You’ve got

your minutes and your training and board schedules. Those things are key

places to start because those will evidence, not just window dressing,

because I don’t like to do anything for window dressing. I’ve never draft

anything for a client just so he had it because frankly it’s an exhibit against

them if they don’t comply with it. You want to draft something that

matches your client’s needs – that satisfies the law for their mission or their

purpose and gets them to the next level. To have like you said, a testament.

I was thinking the word “playbook” when you say it. If you’ve got at least

these things to start with, you’re starting out a leg ahead. If you don’t have

those things, then maybe that might show like a big hiccup or why you

might not be working with maximum efficiency or effectiveness as a board

or as a company. If you get those things in place, they will help you know

how to best function. They will reduce the hiccups in your balance – in

your book. Life happens at 4:37 at Friday afternoon. If you have these

things in place, they don’t have to disrupt your business operation -- will

let you function as best you can with the good times and the bad.

Meg Pekarske Yeah. No. That’s super helpful and as I said – started this, rich

conversation and you’re just a wealth of knowledge and so I really

appreciate you taking the time to share your wisdom with our listeners.

And it’s always fun to talk to you and hear your war stories, so to speak.

I’ll have to take you out for a drink to – that’s not for our podcast but again

I really appreciate your time and this has been a really interesting

conversation and again, I think our listeners will really appreciate it as

well. So, thank you.

Stephanie Kaiser Thanks for the opportunity. I hope it’s helpful.

Meg Pekarske Well, that is it for today’s episode of “Hospice Insights: The Law and

Beyond.” Thank you for joining the conversation. To subscribe to our

podcasts, visit our website at huschblackwell.com or sign up wherever you



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take your podcasts. Until next time, may the wind be at your back.

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episode 20: innovators series: working together: tips for ......2020/09/16 · palliative care....

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