A CEO reshapes a board for a new 'gestalt'.

• Author: VERGARA, GAIL HAMITY

As health care organizations merge, how can they build a board that supports the new mission?

THE CLIMATE of consolidation continues to transform every major industry, and health care is of course no exception. As they undergo major changes, how can health care organizations ensure that they not only create the hoped-for synergies and cost savings but also enhance their ability to serve their client population?

Ed Howe, CEO of Milwaukee-based Aurora Healthcare, firmly believes that the structure of the board will, to a great extent, determine whether or not the newly configured organization will be successful in achieving its mission.

No stranger to the brave new world of mergers and consolidations, Howe has for the past 15 years presided over what was originally St. Luke's Medical Center of Milwaukee, and is now a vast, integrated health care system that comprises some 14 hospitals, Visiting Nurse Service of Wisconsin, Family Services of Milwaukee, 80 retail pharmacies, and a 500-physician medical group. Having experienced firsthand the revolution in health care delivery, Howe has some keen insights into the critical importance of the governance structure in setting changing health care organizations on the right path.

When Howe was recruited to St. Luke's in the mid-1980s, the hospital was Wisconsin's largest. That period was a difficult one for the hospital and the entire region in the middle of the nation's depressed Rust Belt. Given economic constraints, the population to be served, and the changing face of health care overall, St. Luke's began to reshape its philosophy and resulting structure from a single hospital to an integrated health care system.

As the various organizations merged into one entity, no money changed hands as in traditional mergers in the corporate world -- "board seats and participation in the governance process were the coins that made these things happen," observes Howe. But as what became known as Aurora Healthcare became larger and larger, Howe became increasingly concerned about making the transition from its hospital roots to a mammoth health care system. Would the board be up to the more complex and sophisticated task of guiding the new "gestalt" or would it operate as if Aurora were merely a series of individual organizations that had been pasted together?

Too large a board

There was also the question of board size: Mergers can and do create unwieldy boards. Ineffective board structure, Howe believes, is often the culprit when financial crises arise that threaten the stability and future of newly merged non-profits. "When the board is too large," he says, "the executive committee often becomes the de facto board, taking over the job of the entire board, and that's not a healthy thing." The cause of Howe's concern is not difficult to fathom: The number of directors on Aurora's board, when it was at its largest, was in the high 40s.

The introduction of an outside director provided a much-needed opportunity to step back and assess what sort of board Aurora would need going forward if it were to truly operate as a cohesive organization and achieve the goals it had set for itself and serve its far-flung and varied client population. Dick Culbertson, a health care specialist on the faculty of Tulane University, was clearly the right director at the right time, enabling Aurora's board to access a critical outside perspective that had until then been sorely lacking. Soon after joining the board, Culbertson headed a board task force on governance which was charged with studying the structure and operations of the board and making recommendations.

The task force did its homework thoughtfully and carefully -- about two years from start to finish -- all part of the plan according to CEO Howe. While he knew that major changes would be called for, he also sensed that change would be resisted if others in the organization sensed that a rapid transformation was being imposed on them.

Respect for the process

The governance task force pondered key questions related to the form a reconstituted board should follow to accomplish the enlarged organization's objectives. What kind of board would all of Aurora -- as opposed to individual organizations -- need to provide strategic and policy direction?

"We spent a lot of time getting and...