Best Practices for Hospital Board Compensation

The Internal Revenue Service (“IRS”) continues to focus on tax-exempt hospital board governance and compensation. In light of increased scrutiny, hospitals should adhere to board of directors “best practices,” especially when physicians serve as board members. The following questions should help your organization establish compliant board composition, governance policies and procedures, and compensation:How many board members are considered independent?
The IRS says that a tax-exempt organization with an independent governing body and well-defined governance mitigates opportunities for excess benefit transactions, inurement, and other activities inconsistent with a non-profit’s exempt mission. The Panel of the Nonprofit Sector, as indicated in its Principles for Good Governance and Ethical Practice, recommends that at least two-thirds of a tax-exempt organization’s board be independent.

Has the board adopted the governance policies and procedures recommended by the IRS?
The IRS annually reviews the organization’s Form 990, Return of Organization Exempt from Income Tax, to determine whether the organization has implemented and is currently adhering to policies relating to reasonableness of compensation, conflicts of interest, documentation of governance decisions, and many other governance procedures.
Do physicians participate on the compensation committee?
The board compensation committee should limit (and consider excluding) any physicians that receive compensation from the tax-exempt organization in accordance with specific IRS recommendations. Furthermore, a sub-committee of the board that makes physician compensation recommendations to the full board should be comprised of a majority of independent members or should otherwise disclose that certain members have recused themselves due to conflicts of interest or other independence concerns.Does the board regularly evaluate compliance with the conflicts of interest policy?
The board should regularly assess its compliance with a written conflicts of interest policy. Additionally, board minutes should reflect when conflicted members recuse themselves from discussions and votes.
Is the organization complying with independent reviews of compensation for officers, directors, key employees, and physicians?
An annual independent review of compensation should be conducted for officers, directors, and key employees, including compliance with the rebuttable presumption of reasonableness as it relates to compensation of disqualified persons. By comparison, it is recommended that all physician relationships (whether or not they serve on the board) be reviewed regularly to insure the arrangements are commercially reasonable and fair market value.
For additional information regarding “best practices” for hospital governance, please contact the experts listed below or at PYA, (800) 270-9629.

Recommended Links:

Learn more about PYA’s Valuation Services

Learn more about PYA’s Healthcare Audit & Accounting Services

WE ARE REQUIRED BY IRS CIRCULAR 230 TO INFORM YOU THAT THE FOLLOWING DISCUSSION WAS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED, NOR RELIED UPON, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING ANY PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW. THE ADVICE WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED IN THE DISCUSSION. EACH TAXPAYER SHOULD SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.


Lyle Oelrich

Lyle Oelrich

Principal

Debbie Ernsberger

Debbie Ernsberger

Principal

Related Posts
An article by PYA Principal W. Lyle Oelrich was recently published by Becker’s Hospital Review. “10 Physician Compensation Statistics: How Does Your Organization Measure Up?” provides a list of statistics...
Read More

“10 Physician Compensation Statistics: How Does Your Organization Measure Up?”

Becker’s Hospital Review recently published an article by PYA Consulting Manager Kathryn Culver. The article, “The Conflict Between Post-Acquisition Compensation and the Value of Your Medical Practice,” explores the inverse...
Read More

The Conflict Between Post-Acquisition Compensation and the Value of Your Medical Practice

Businesses are increasingly reliant on technology to achieve organizational objectives. However, with the convenience and efficiency of technology come intensifying risks of data loss and theft. High-profile data breaches top...
Read More

Cybersecurity Framework “SOCs” It to Cyber Threats

Engage. Share. Encourage. The American Healthcare Lawyers Association (AHLA) is hosting AHLA Day April 19, 2018, and these impactful words are setting the tone. AHLA receptions will be held across...
Read More

Join PYA in Celebrating Our Health Lawyer Colleagues During AHLA Day

PYA has released a white paper that discusses the importance of the AICPA’s cybersecurity risk management framework and System and Organization Controls for Cybersecurity in assessing the strength and effectiveness...
Read More

New PYA White Paper: Framework Offers Companies Solution for Cybersecurity Risk

PYA has added 2018 reimbursement updates to a white paper that provides valuation guidance to hospitals considering telemedicine arrangements for providing much-needed healthcare services at lower costs. As patient demand...
Read More

PYA White Paper “An Introduction to Valuing Telemedicine” Gets 2018 Updates

Compliance Today magazine recently published an article, “Regulatory Compliance: Physician Needs Assessments Are an Integral Step,” authored by PYA Principal Tynan O. Kugler. It highlights the critical role physician needs...
Read More

Regulatory Compliance: Physician Needs Assessments Are an Integral Step

Medicare cards are getting a much-needed facelift.  The Centers for Medicare & Medicaid Services has announced its intention to remove Social Security numbers from the cards in an effort to...
Read More
Medicare card scam

New Medicare Cards in the Mail—Don’t Fall Prey to Scammers

PYA has released an updated white paper offering a succinct list of changes and updated instructions for providing and billing Medicare for chronic care management. PYA, a national professional services...
Read More

Updated White Paper Addresses Changes in Providing and Billing Medicare for Chronic Care Management Services

Share This Insight

If you received value from this article, please share it with your network (e.g., Facebook, Twitter, LinkedIn). Icons below for your convenience.

Stay Current

* indicates required
Monthly eNewsletters
See more newsletter and alert options.

PYA Population Health Ascend

PYA Healthcare Blog

PYA Thought Leadership Services

The Healthcare Loop