Boards must demonstrate adequate governance

February 1, 2011

Government agencies will seek to hold not only companies, but also their officers and directors, accountable for lapses in compliance

Managed care organizations must make a concerted effort to establish robust governance practices. Indeed, "good governance" has become critical as a performance driver in government contracts.

HIGHER EXPECTATIONS

What is unique for the boards governing these organizations is the apparent fervor with which the government is pursuing alleged fraudulent acts and efforts by government officials to hold individuals-including individual officers and directors-accountable for breaches in compliance programs. Adopting broader trends in governance and compliance resulting from the accounting and finance scandals of the last decade, regulators now demand that boards have a working knowledge of the regulatory scheme and compliance programs under which their companies operate.

As such, governance and compliance programs must be tailored to meet the needs of individual companies. No one set of policies and procedures will apply to every managed care organization or healthcare business.

While the mechanics of governance and compliance programs will differ, standards of ethics and compliance are fundamental to any governance strategy. Effective programs will have several elements in common, including: a comprehensive framework that integrates all corporate compliance programs into a single system accountable to the board of directors; a single point of accountability for compliance with a clear reporting relationship to the board; and a curriculum that ensures board members are knowledgeable about the company regulations and applicable compliance programs.

Over the coming years, managed care organizations also have the opportunity to capture new business as the nation moves closer to a fully insured population. Boards must ensure their companies are positioned strategically by developing, implementing and overseeing governance structures that demonstrate quality, transparency and efficiency and meet the specifications included in government contracts. Managed care boards and officers should be prepared: As the number of covered lives increases in our health system, so will the expectation of boards of directors and officers.

This column is written for informational purposes only and should not be construed as legal advice.

Summer Martin is a partner at McKenna Long & Aldridge LLP.

Anthony Balloon is a partner in the Corporate Practice at McKenna Long & Aldridge LLP.