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Boards should brainstorm, consult when faced with reduced funding

When it’s time for health boards to make tough financial decisions, it’s crucial to consult broadly and be as creative as possible, Toronto health lawyer Kathy O’Brien tells AdvocateDaily.com.

“With the election of the new Ontario government, I think the majority of those in the public health sector — hospitals, long-term care homes and community agencies — are bracing for a reduction in funding,” says O’Brien, a partner with DDO Health Law.

"The current landscape is that all of those organizations have signed funding agreements with the government requiring them to balance their budgets so they cannot incur a deficit. If that envelope of funding is reduced, those health-care and hospital boards will be looking at some very difficult decisions,” she says.

O’Brien, who frequently works with health boards to guide them through tough decision-making, says there are only a few viable options if funding is reduced.

“The organization can generate additional revenue to make up for a shortfall, create efficiencies or cut expenses, which likely means reducing programs, services or staff,” she says.

Because these decisions can be so challenging, it’s more important than ever to have a skills-based and diverse board, O’Brien says.

“You want to make sure your board members have the financial, legal and government-relations skill sets to meet the legal, contractual and strategic needs of the organization,” she says. “As well, one of the indicia of successful boards is diversity — a mix of genders, cultures and perspectives.”

She says most boards are reluctant to make program cuts or reduce services, so their first instinct is to generate additional revenue, which is not without its pitfalls.

“Health-care organizations that are government-funded are almost always registered charities, so there are Canada Revenue Agency rules. Our firm walks boards through those rules on what a charity can and can’t do to raise money,” O’Brien says. “We also work with their parallel foundations to help with fundraising initiatives.”

One innovative option for organizations can be to create efficiencies by partnering with a similarly situated organization to share costs.

“Sharing a CEO, CFO or senior management team can be a good way to reduce expenses,” she says. “Another option is collaborative governance solutions — maybe there’s a way to transfer services to a similarly situated organization and vice versa.”

If a reduction of services or program cuts are on the table, O’Brien advises boards to consult broadly with stakeholders.

“Make sure to get ideas and recommendations from a range of invested parties, which may include the community. Get as many ideas as possible and then review the repercussions of those cuts and decide which is the least impactful solution,” she says.

When it comes time to justify cuts to services or staff, consulting broadly will also assist a board. O’Brien says she finds that once a board solicits feedback from a range of stakeholders, people take an ownership in the process and are less likely to challenge the ultimate decision because they have been consulted and involved.

Before coming to any tough financial decision, she says boards need to look at all of the possibilities and options.

“We encourage boards to brainstorm. Throw all ideas on the table, consult broadly and see what the solutions are,” O’Brien says. “Ultimately, you have to make a decision and figure out what is the best for the organization in order to allow it to survive.”

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