Item Description:
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County Board oversight of Hennepin Healthcare System, Inc. - offered by Commissioners Anderson, Conley, Fernando, Greene, Goettel and Lunde
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WHEREAS:
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WHEREAS, Hennepin Healthcare System, Inc. (HHS), is an integrated system of care that serves as a critically important safety net and teaching hospital for residents of Hennepin County and the State of Minnesota; with a nationally recognized Level I Adult and Pediatric Trauma Center; an acute care hospital; a clinic system; an outpatient Clinic & Specialty Center; an Emergency Medical Services fleet; and more; and
WHEREAS, under Minnesota Statutes § 383B.901, HHS is a public corporation, operating as a subsidiary of Hennepin County; and
WHEREAS, under Minnesota Statutes § 383B.908, the Hennepin County Board of Commissioners has reserved powers over HHS, including but not limited to specific controls over HHS’s mission, finances, and governance; and
WHEREAS, the Hennepin County Board seeks to identify and understand current trends and challenges in the health care industry, as well as recent challenges at HHS relating to its budget and the recruitment, retention and wellness of its workforce; and
WHEREAS, the Hennepin County Board seeks a comprehensive strategy to exercise its oversight powers in an effective and efficient manner; to achieve deeper understanding of HHS management, operations, and finances; to timely address the issues and challenges at HHS; and to promote the continued vitality and high quality health care services of HHS.
Resolution:
BE IT RESOLVED, that the Hennepin County Board of Commissioners directs the County Administrator to take any reasonably necessary action to retain an independent financial consultant to perform services included but not limited to review and analysis of historical audited financial statements and ongoing financial reporting and statements, identification and assessment of benchmarks that may be used to review HHS’s financial performance including but not limited to comparison to other health systems, any audit pursuant to Minnesota Statutes § 383B.908 and advice and consultation to the County Board on recommended frequency and content of ongoing financial reporting necessary for County Board oversight; and
BE IT FURTHER RESOLVED, that the Hennepin County Board of Commissioners directs the County Administrator to consult with the HHS Chief Executive Officer and to develop a plan and recommendations for the County Board to exercise oversight powers over HHS in an effective and efficient manner, and to submit such plan and recommendations to the County Board no later than February 1, 2024; and
BE IT FURTHER RESOLVED, that in order to give effect to the above resolving clauses, the Hennepin County Administrator is authorized to identify and engage consultant(s) as needed to review and analyze ongoing operations at HHS and to provide expert advice and recommendations to the County Board and County Administration; and
BE IT FURTHER RESOLVED, that the Chair or Vice Chair of the HHS Board, and the Chief Executive Officer of HHS, shall at the request of the Hennepin County Board Chair, brief the Hennepin County Board of Commissioners on matters concerning Hennepin Healthcare Systems, Inc. as frequently as requested but no less than quarterly, and such briefings shall be noticed as required by the Open Meeting Law, Minnesota Statutes Chapter 13D, and added to the County Board’s 2024 calendar; and
BE IT FURTHER RESOLVED, that the above-referenced briefings of the County Board shall include regular and timely information about HHS’ ongoing financial performance compared to its budget and benchmarks, regular and timely information about significant management and operational decisions at HHS, and such other topics as may be identified by the Chair of the Hennepin County Board in consultation with County Administration; and
BE IT FURTHER RESOLVED, that the Chair of the Hennepin County Board is authorized to prepare and send correspondence to the HHS Board, HHS Committees, and HHS Executive Leadership Team, enclosing a copy of this resolution and notifying the HHS Board, HHS Committees, and HHS Executive Leadership Team of the County Board’s critical oversight role and expectations as a subsidiary corporation of the County.
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Background:
Hennepin Healthcare System, Inc. (HHS), is a public corporation and a subsidiary of the County, which operates the Hennepin County Medical Center (HCMC) and related clinic system. Pursuant to Minnesota law, the County Board has significant reserved powers over HHS - in particular, the authority to approve the HHS budget, to approve the appointment of HHS board members, and to appoint two county commissioners to the HHS board. The County Board also has the statutory authority to resume management of the HCMC upon a two-thirds vote of the County Board, for example by dissolving the corporation, reorganizing the corporation, or removing the entire HHS board. In light of recent concerns and issues regarding the financial condition of HHS; the recruitment, retention and wellness of the HHS workforce; and challenging trends in the health care industry; this board action proposes several concrete steps to enhance and strengthen the County Board’s oversight and control of HHS, in an effort to assess, promote, and manage the long-term financial vitality and effectiveness of HCMC.
As additional historical reference, prior to 2005, HCMC was an operating department of Hennepin County. In this model, the hospital system was directly operated by the Hennepin County Board. Over time, this structure created some unique competitive disadvantages for HCMC, compared to other local health care providers. As a result, around 2002, the County Board developed a strategic plan for HCMC and began to evaluate the hospital governance model. In April 2003 (Resolution 03-4-132R1), the County Board voted to create a fourteen-member HCMC Governance Task Force (Task Force) to evaluate whether a different governance structure could maximize HCMC’s operations and preserve its long-term financial viability while still maintaining its public mission. The Task Force recommended that Hennepin County create a not-for-profit corporation, accelerate capital expenditures, and enter into a formula-based payment arrangement with Hennepin County for uncompensated and undercompensated care.
In June 2004 (Resolution 04-6-293R2), the County Board voted to create a smaller five-member HCMC Governance Transition Committee (Transition Committee) to further explore the Task Force’s recommendations and to provide specific information that would allow the County Board to define, develop, and pursue enabling legislation from the Minnesota Legislature for creation of a new public subsidiary corporation. The Transition Committee recommended that the County ask the Legislature to create a public benefit corporation, Hennepin Healthcare System, Inc., to operate the hospital as a subsidiary of the County, in order to create flexibility while maintaining public accountability. The Transition Committee also recommended that the new entity (HHS) would have a board with special expertise whose sole purpose would be to provide strategic and managerial oversight to the hospital.
In December of 2004 (Resolution 04-12-680 R1), the County Board voted to adopt the report of the Transition Committee, and to authorize county staff to seek legislation to implement the findings of the Transition Committee. In 2005, the Legislature enacted enabling legislation to create HHS as a public corporation and subsidiary of Hennepin County. See 2005 Minn. Laws, ch. 125 (H.F. No. 2187) (enacting Minn. Stat. §§ 383B.901-.928). Effective January 1, 2007, the County exercised its powers to create HHS and to grant it the authority to operate the hospital and deliver health care services.
Over the past 15 years, the County Board has maintained its critical oversight role over HHS, with two county commissioners serving on the HHS Board, and with the County Board exercising its reserved powers to approve the HHS budget, the HHS Board appointees, and more. This board action proposes several steps to enhance and strengthen the County Board’s oversight and control, to preserve HHS as a critical resource for the residents of Hennepin County and the State of Minnesota.
recommendation
Recommendation from County Administrator: No Recommendation