Why the lack of a forcing function is a hidden governance problem
Healthcare organizations must use specific tools to enable decisions to be made earlier and increase the range of options.
What does a forcing function look like inside a health system that cannot offer equity and doesn’t have capital markets imposing a clock?
The tension is clear. Mission concerns, vested interests in ever-expanding services and parochial considerations encourage doing more without systemically questioning the efficacy of any of it. Without a counterbalance, expenses rise faster than anticipated, and decision pace slows.
Health systems are structurally predisposed to expand rather than rebalance and to defer rather than decide. The result is a governance architecture that cannot fulfil its fiduciary responsibility on pace, regardless of the quality of leaders inside it.
Late warnings don't help
The obvious objection is that health systems already have forcing functions. They just arrive too late.
Most health systems, if not all, carry debt in the form of bonds, the covenants of which establish minimum ratios of cash flow or earnings to debt to protect the bondholder’s investment. Violating covenants results in financial penalties and, in the extreme, could impose governance and control changes. These clearly motivate system leadership to take decisive action.
However, by the time the covenants are breached, the system has already leaked significant value and has lost much of the optionality it once enjoyed. Choices are narrowed, and those that remain are more ominous – service cancellation, facility closures or massive layoffs. The $50 million opportunity highlighted in Part 1 was available when margins were declining and could have staved off the covenant breach and avoided its ugly consequences.
Credit agency downgrades provide another form of forcing function. Moody’s and S&P regularly re-evaluate systems' creditworthiness. Strong ratings encourage lower borrowing costs; ratings downgrades signal impending or increasing fiscal challenges and boost borrowing costs. As a result, downgrades constrict optionality. By the time the downgrade occurs, system leadership has already sacrificed degrees of freedom to turn around the system’s finances and to maintain services.
These external forcing functions – bond covenants and credit ratings – are real, but they occur too late. They enforce accountability after optionality has narrowed, instead of before when it would be most effective.
Further, ownership is not shared across the leadership and management levels. A department manager does not have a personal stake in the covenant or rating – they do not appear in their paystub or investment portfolio. They do not experience its consequence until asked to lay off staff, curtail a service or close a facility.
This is the core governance design problem. Health systems need internal forcing functions that arrive early and are experienced more broadly and personally across the organization. Health systems require a forcing function. The question is whether they can build one that arrives early enough, and reaches deeply enough into the organization, to change behavior and accelerate the pace of decisions before the window closes.
The objective is not to accelerate the pace of decision making. It is disciplined decision making at a pace that preserves meaningful options. Decisions made too early can be uninformed. Decisions made too late surrender the very choices leaders were trying to preserve.
Internal forcing functions
Building an internal forcing function requires four design elements, each one addressing a specific failure mode that the external forcing mechanism described above cannot reach.
Visibility. The cost of delay must be made explicit and quantified. The health system described in my earlier article was presented with a $50 million opportunity. However, the impact of even a 30- or 60-day delay was never declared. Deferring the decision until the next quarter – an all-too-common occurrence – likely cost the system $12.5 million in costs that would never be recouped. No one made that penalty explicit.
Decision rights. Ownership of the decision must be explicit and understood, with the owner explicitly authorized to bring the decision to closure. Health systems too often leave this part ambiguous, anticipating that consensus will emerge, or they delegate it inappropriately. The decision on the $50 million opportunity should have rested with the CFO. Instead, it was delegated to the “committee” and to a vice president who did not have authority over the full scope. Contrast that with a more effective model in which there is broad information sharing, with many providing input, but a singular decider. Absent that structure, decisions circulate indefinitely through consensus-seeking processes that have no mechanisms for closure.
Consequences. Decisions made on time are more valuable than decisions made late, and they should be rewarded differently. A corollary to this is that no decision is a decision and should have similar consequences. Compensation structures, performance reviews, succession planning or promotions and leadership evaluations must reflect decision pace, not just decision quality. Annual bonuses help but are structurally insufficient, because they are too diluted across competing objectives and too slow, firing once per year rather than when the decisions matter.
This does not mean personal consequence is unavailable to nonprofit health systems, only that it must be deliberately designed rather than assumed. Two levers exist, and effective governance uses both.
The first is financial. A portion of leadership compensation can be explicitly tied to decision latency and governance backlog, not folded into a vague “leadership’ criterion but named and measured with the same specificity as a quality or safety metric. What matters is not how large the payment is, but that the cadence matches the decision cycle.
The second is reputational. The Red Flag mechanism discussed below depends on this lever directly. Surfacing a concern early creates career risk in most organizations, while staying silent carries none. Effective governance inverts that calculus by protecting early, incomplete signals and treating chronic silence as a performance issue. This is a personal consequence that should be explicit in compensation, bonus and promotion decisions.
Cadence. Decision timelines must be explicit and enforced. Tension in a rope strengthens it; looseness negates its utility. Governance mechanisms must name accountability for hitting deadlines. Especially in today’s environment, the cadence must match the tempo the environment demands, not what is comfortable or what fits in overscheduled calendars.
Four practical tools
Four practical tools translate these design requirements into governance mechanisms that leadership and data teams can build and apply.
Decision windows. Time-bound intervals within which a choice can still alter outcomes. After the window closes, the market decides instead of leadership; optionality diminishes. Using the example from Part 1, the decision window is effectively immediate – every day delay costs the organization margin that can never be recovered. Practically, the decision window should be set at a level in which the loss is material. In this instance, a delay of only seven days carries a foregone opportunity of nearly $1 million. Making this decision window visible creates the necessary urgency often lacking in current health system management practices.
Mission-margin map. Every program, service and initiative should be placed on a two-axis grid of mission and financial impact. Mission must be understood critically, not used loosely in defense of pet programs. Specifying impact using measures such as severity of need - the degree to which the community lacks viable alternatives, replaceability - whether equivalent care exists elsewhere, at scale and without loss of access or quality, and consequence of absence - what would predictably happen — to patients, to the community, to the system’s credibility—if the service disappeared.
Financial impact must encompass margin, resources consumed and time. An initial mapping would likely highlight that under dispassionate scrutiny too many activities deemed mission-critical do not measure on the mission scale. Furthermore, too few programs carry the burden of funding these well-intentioned activities.
Explicit decision rights. This defines who decides, who advises and who is informed at every level. Making these rights explicit removes the ambiguity that enables decisions to circulate endlessly through committee structures. At the onset of any program or service evaluation, the singular decider, and those that should provide input vs. those to be informed, should be specified. In concert with the pre-defined decision window, this ensures that decision pace accelerates.
Red flag mechanism. One of the hidden challenges in many organizations is the lack of support for raising early but uncertain concern. In organizations with strong accountability measures, the problem intensifies. Early warnings, when details are unclear, are often penalized. In effective organizations, early signals must be honored, even if the warning ultimately proves incorrect. Late warnings, even if true, must be penalized. Late truth does the organization no good; the signals must be surfaced early so that leadership can act in a timely manner.
None of these mechanisms work in isolation. Decision windows create urgency. Decision rights create accountability. The mission-margin map creates disciplined tradeoffs. Red flags surface emerging threats before options disappear. Together, they create an operating system for governing time.
Health data professionals are natural architects of these four tools – not passive observers but active contributors to it. The mission-margin map requires the integration of mission impact data and financial contribution measures that are rarely combined – if captured at all in the case of mission impact. Decision windows require determination and reporting of time-based intervals in which decisions must occur to avoid loss of optionality. Decision rights frameworks align neatly with data managers’ RACI (responsibility, accountability, consultation, information) construct. The red flag mechanism benefits from early alert triggers that data managers should design into each implementation plan.
Every organization governs people, money, quality and risk. Few explicitly govern time. However, time is the only asset that cannot be replenished. Once decision windows close, optionality disappears permanently.
The timing of governance
Part 3 of the series shifts the discussion from design to implementation – the specific questions that need to be asked, the measures to be adopted, and what success looks like when the forcing function is working.
Mark A. Van Sumeren is a Fellow of the American College of Health Data Management and the author of Strategic Leadership When Time Is the Constraint.