An empirical comparison between the board''s strategic role in nonprofit hospitals and in for-profit industrial firms.

As the health care environment becomes more competitive, nonprofit hospitals are under pressure to adopt for-profit business practices. Based on an extensive field study, this research examines the central issue of organizational governance by comparing the strategic roles of nonprofit hospital boards with for-profit industrial boards. The results show that nonprofit hospital boards are generally more involved in the strategic decision process than their for-profit counterparts. If this governance activity is seen as desirable, hospital boards should exercise caution in emulating for-profit board practices.     

The WAMI Rural Hospital Project. Part 4: Improving the financial health of rural hospitals.

Sound financial management has been identified as a critical component of effective hospital administration. Inadequate financial practices are a leading factor in the failure of hospitals. As part of the Rural Hospital Project (RHP), which operated in six rural Northwest communities from 1985 to 1988, detailed and extensive analyses of financial practices were conducted to identify strengths and weaknesses of the hospitals' financial management. In addition, 15 hours of formal education covering a variety of financial topics were presented to project participants. Results of the evaluation demonstrated that the greatest degree of change occurred in the financial management leadership capacity of the hospitals. All five hospitals, which either had no chief financial officer initially or subsequently experienced a turnover in the position, recruited individuals with strong qualifications. Vacancies in the administrator position in three of the four hospitals were filled by individuals with stronger financial management qualifications than their predecessors. Hospital board finance committees were formed in three of the four communities which previously did not have them. The biggest changes in financial practices occurred in the budgeting processes, which by 1989 better reflected the goals and strategies of the hospital's strategic plans. The financial performance of the six hospitals varied considerably over the study period. As a group, the RHP hospitals continued to require substantial nonoperating subsidies to remain solvent, despite improved financial practices. Despite the methodological limitations of this evaluation, we conclude that the intervention improved the capacity of the hospital administrations' financial leadership, as well as that of the governing boards, and led to substantial improvement in selected financial practices at all sites. Rural hospitals continue to operate in a hostile and precarious financial environment that limits their ability to sustain themselves on the basis of operating revenue alone.     

The WAMI Rural Hospital Project. Part 6: Overview and conclusions.

The Rural Hospital Project (RHP) appeared to make a meaningful difference in the six Northwest rural communities that participated in this integrated community development and strategic planning effort. Although the methodological approach used in the evaluation precludes us from attributing observed changes in outcomes solely to the project interventions themselves, several elements of the process appear to be useful in stabilizing or expanding local health care systems. These include: (1) the involvement of outside organizations in fostering community change, (2) a high degree of community commitment and investment in all stages of the process, (3) comprehensive identification of problems in the health care system by outside consultants, (4) the use of periodic meetings of communities confronting similar issues, (5) identification and development of local leadership, (6) enhancing teamwork among local health care providers, and (7) the development of conflict-resolution mechanisms within health care organizations. Future attempts to use this strategy to strengthen rural health care systems can be enhanced by broadening the range of participation in health services planning, enlisting involvement of medical staff throughout the strategic planning cycle, addressing the issue of physician recruitment, and clarifying responsibility for implementation of community plans. Rural communities will predictably need to identify and resolve a set of core issues. To the extent that external organizations such as medical schools can strengthen the ability of rural health professionals and community leaders to identify and address these issues, the quality and viability of rural health care systems will be enhanced.     

Changes in the structure, composition, and activity of hospital governing boards, 1989-1997: evidence from two national surveys.

Hospital governance arrangements affect institutional policymaking and strategic decisions and can vary by such organizational attributes as ownership type/control, size, and system membership. A comparison of two national surveys shows how hospital governing boards changed in response to organizational and environmental pressures between 1989 and 1997. The magnitude and direction of changes in (1) board structure, composition, and selection; (2) CEO-board relations; and (3) board activity, evaluation, and compensation are examined for the population of hospitals and for different categories of hospitals. The findings suggest that hospital boards are engaging in selective rather than wholesale change to meet the simultaneous demands of a competitive market and traditional institutional orientations to community, the disenfranchised, and philanthropic service. Results also suggest parallel increases in collaboration between boards and CEOs and in board scrutiny of CEOs.     

A call for board leadership on quality in hospitals

A national agenda for health care quality is unfolding but there is concern about inadequate progress on improving quality in hospitals. The 2003 Institute of Medicine report calls for transformational leadership in health care organizations to change systems and processes underlying quality. The key question is: Who will provide leadership in hospitals? A natural choice is the board of trustees on account of its legal responsibility for quality and its authority over medical staff and administration. This article describes several barriers to board leadership on quality and suggests strategies by which boards can lead the campaign for quality. Barriers include trustee ignorance, trustee insecurity, board inattention, poor board-physician communication, fragmented information on quality, traditional medical staff structure, lack of professional management of quality, and lack of investment. Strategies for hospital board leadership should include preparing to lead, self-education, visible participation in quality activities, activism, role clarification, increased informal dialogue with physicians, medical staff reform, creation of a quality management department, instituting high-quality standards, and external quality audit. Boards face a historic opportunity to transform hospital quality backed by a strong legal mandate.     

Promoting clinical involvement in hospital quality improvement efforts: the effects of top management, board, and physician leadership.

STUDY QUESTION: An examination of the effects of top management, board, and physician leadership for quality on the extent of clinical involvement in hospital CQI/TQM efforts. DATA SOURCES: A sample of 2,193 acute care community hospitals, created by merging data from a 1989 national survey on hospital governance and a 1993 national survey on hospital quality improvement efforts. STUDY DESIGN: Hypotheses were tested using Heckman's two-stage modeling approach. Four dimensions of clinical involvement in CQI/TQM were examined: physician participation in formal QI training, physician participation in QI teams, clinical departments with formally organized QA/QI project teams, and clinical conditions and procedures for which quality of care data are used by formally organized QA/QI project teams. Leadership measures included CEO involvement in CQI/TQM, board quality monitoring, board activity in quality improvement, active-staff physician involvement in governance, and physician-at-large involvement in governance. Relevant control variables were included in the analysis. PRINCIPAL FINDINGS: Measures of top management leadership for quality and board leadership for quality showed significant, positive relationships with measures of clinical involvement in CQI/TQM. Active-staff physician involvement in governance showed positive, significant relationships with clinical involvement measures, while physician-at-large involvement in governance showed significant, negative relationships. CONCLUSIONS: Study results suggest that leadership from the top promotes clinical involvement in CQI/TQM. Further, results indicate that leadership for quality in healthcare settings may issue from several sources, including managers, boards, and physician leaders.     

Changes in the Structure, Composition, and Activity of Hospital Governing Boards, 1989–1997: Evidence from Two National Surveys

Hospital governance arrangements affect institutional policymaking and strategic decisions and can vary by such organizational attributes as ownership type/control, size, and system membership. A comparison of two national surveys shows how hospital governing boards changed in response to organizational and environmental pressures between 1989 and 1997. The magnitude and direction of changes in (1) board structure, composition, and selection; (2) CEO-board relations; and (3) board activity, evaluation, and compensation are examined for the population of hospitals and for different categories of hospitals. The findings suggest that hospital boards are engaging in selective rather than wholesale change to meet the simultaneous demands of a competitive market and traditional institutional orientations to community, the disenfranchised, and philanthropic service. Results also suggest parallel increases in collaboration between boards and CEOs and in board scrutiny of CEOs.     

Hospitals and medical staffs: the concept of planning takes on new meaning.

Broad trends in health care are redefining medical staff planning. Hospital CEOs are recognizing the critical need to involve their physicians in hospital strategic planning at many levels. Gone are the days when it was sufficient to invite medical staff members to annual planning retreats and add individual physicians to boards; hospitals that thrive in the 1990s will be those that have created strong strategic links with their physicians. At the same time, medical staff development planning is changing in important ways. Recent federal government alerts on fraud and abuse and inurement in physician-recruiting activities are leading hospitals to document community benefit in their recruitment efforts. And hospital executives now realize that changes in the physician market will require them to plan carefully in order to ensure a strong base of primary care and other much-needed physicians. These two trends present CEOs with multilayered challenges. Following are reports on what leading-edge hospitals are doing in both areas.     

The WAMI Rural Hospital Project. Part 2: Changes in the availability and utilization of health services.

A major goal of the Rural Hospital Project (RHP) was to assist communities in defining an optimal scope of hospital and community health services. It was hypothesized that a rational basis for service planning would result in an expansion of locally provided health services, increased local hospital and physician market share, improved hospital workload performance, and higher levels of consumer satisfaction with community-based services. However, given the recent decline in performance of many small rural hospitals in general and in RHP hospitals in particular, at a minimum, stabilization of these troubled facilities could be considered a successful outcome. Data were collected from the six rural communities participating in the RHP both before and after the intervention (1985 and 1989) to assess changes in community scope of health services and utilization patterns. Comparative data were also compiled from peer group hospitals when available. Results generally demonstrated stabilization or expansion in: (1) the range of community and hospital services, (2) the availability of community physicians and visiting specialties, and (3) physician and hospital market share. While findings were mixed for patient days, average daily census, and number of births, substantial increases were documented for the number of surgical procedures, emergency room visits, and x-rays over the study period. RHP hospitals generally outperformed peer group hospitals on market share measures.     

Governing board structure, business strategy, and performance of acute care hospitals: a contingency perspective.

Contingency theory suggests that for a hospital governing board to be effective in taking on a more active role in strategic management, the board needs to be structured to complement the overall strategy of the organization. A survey study was conducted to examine the strategies of acute care hospitals as related to the structural characteristics of their governing boards. After controlling for organizational size and system membership, results indicated a significant relationship between the governing board structure of 109 acute care hospitals and their overall business strategy. Strategy also accounted for more of the variance in board structure than either organization size or system membership. Finally, the greater the match between board structure and hospital strategy, the stronger the hospitals' financial performance.     

The effect of governing board composition on rural hospitals' involvement in provider-sponsored managed care organizations

Rural hospitals are actively pursuing various strategic alternatives to confront the dramatic changes taking place in the delivery, organization, and financing of healthcare. One of these strategic alternatives is involvement in provider-sponsored managed care organizations. Studies have argued that this form of managed care would enhance public trust and might improve the performance of hospitals. The changing healthcare environment has also increased the importance of the competence and composition of hospital boards. This article examines the effect of the governing board's composition on rural hospitals' involvement in provider-sponsored managed care organizations. The study sample consisted of 140 rural hospitals in Iowa and Nebraska whose CEOs responded to a survey conducted by the Center for Health Services Research at the University of Iowa between June and December 1997. The principal finding was that the likelihood of a hospital owning any form of managed care organization increases with the number of community leaders and health professionals on the board. The number of business leaders had no effect on the likelihood of involvement in such an arrangement. Other factors that affected the likelihood of owning a managed care organization were the health status of the population and ownership type. Key recommendations to managers are to (1) revisit the hospital board's composition before actively pursuing a strategic action, (2) examine the compatibility of the type of strategic activity pursued with the background of board members and the interests of the populations they represent, and (3) use the governing board as a resource in determining which new strategic activities to undertake.     

Corporate and philanthropic models of hospital governance: a taxonomic evaluation.

OBJECTIVE. We assess the theoretical integrity and practical utility of the corporate-philanthropic governance typology frequently invoked in debates about the appropriate form of governance for nonprofit hospitals operating in increasingly competitive health care environments. DATA SOURCES. Data were obtained from a 1985 national mailed survey of nonprofit hospitals conducted by the American Hospital Association (AHA) and the Hospital Research and Educational Trust (HRET). STUDY DESIGN. A sample 1,577 nonprofit community hospitals were selected for study. Representativeness was assessed by comparing the sample with the population of non-profit community hospitals on the dimensions of bed size, ownership type, urban-rural location, multihospital system membership, and census region. DATA COLLECTION. Measurement of governance types was based on hospital governance attributes conforming to those cited in the literature as distinguishing corporate from philanthropic models and classified into six central dimensions of governance: (1) size, (2) committee structure and activity, (3) board member selection, (4) board composition, (5) CEO power and influence, and (6) bylaws and activities. PRINCIPAL FINDINGS. Cluster analysis and ANCOVA indicated that hospital board forms adhered only partially to corporate and philanthropic governance models. Further, board forms varied systematically by specific organizational and environmental conditions. Boards exhibiting more corporate governance forms were more likely to be large, privately owned, urban, and operating in competitive markets than were hospitals showing more philanthropic governance forms. CONCLUSIONS. Findings suggest that the corporate-philanthropic governance distinction must be seen as an ideal rather than an actual depiction of hospital governance forms. Implications for health care governance are discussed.     

HCMR interview: Carolyn C. Roberts. Interview by Barbara P. McCool.

Carolyn C. Roberts--researcher, health care administrator, American Hospital Association board member--is a role model for women health care executives. As president of Copley Hospital in Morrisville, Vermont, Carolyn has provided national leadership on health care reform and the management of small and rural hospitals. Her creative and positive approach to life coupled with her sensitivity to serving patients and the community with quality service provides inspiration to many health administrators, physicians, and community leaders. The following interview is a tribute to a dear friend and a great lady.     

The effects of corporate restructuring on hospital policymaking.

Hospital corporate restructuring is the segmentation of assets or functions of the hospital into separate corporations. While these functions are almost always legally separated from the hospital, their impact on hospital policymaking may be far more direct. This study examines the effects of corporate restructuring by community hospitals on the structure, composition, and activity of hospital governing boards. In general, we expect that the policymaking function of the hospital will change to adapt to the multicorporate structure implemented under corporate restructuring, as well as the overlapping boards and diversified business responsibilities of the new corporate entity. Specifically, we hypothesize that the hospital board under corporate restructuring will conform more to the "corporate" model found in the business/industrial sector and less to the "philanthropic" model common to most community hospitals to date. Analysis of survey data from 1,037 hospitals undergoing corporate restructuring from 1979-1985 and a comparison group of 1,883 noncorporately restructured hospitals suggests general support for this hypothesis. Implications for health care governance and research are discussed.     

The academic health center and the healthy community.

US medical care reflects the priorities and influence of academic health centers. This paper describes the leadership role assumed by one academic health center, the State University at Buffalo's School of Medicine and Biomedical Sciences and its eight affiliated hospitals, to serve its region by promoting shared governance in educating graduate physicians and in influencing the cost and quality of patient care. Cooperation among hospitals, health insurance payers, the business community, state government, and physicians helped establish priorities to meet community needs and reduce duplication of resources and services; to train more primary care physicians; to introduce shared governance into rural health care delivery; to develop a regional management information system; and to implement health policy. This approach, spearheaded by an academic health center without walls, may serve as a model for other academic health centers as they adapt to health care reform.     

Competition presents opportunity for not-for-profit systems

Though they face similar challenges in adapting to a competitive environment, investor-owned and not-for-profit (NFP) health care systems react differently. The investor-owned strategy reflects a philosophy that regards patient care and economics with equal concern, while NFPs' management decisions are rooted in a tradition of community service. For-profit chains are perceived as more efficient than NFP chains because they respond to marketplace demand. Studies, however, show that while operating expenses are about the same, for-profits charge more per admission. On the other hand, NFP systems, by allowing affiliates to participate in service expansion decisions, are able to maintain lean corporate staffs and thereby minimize administrative and fiscal costs. The NFP organizational structure enforces economic discipline in a way that for-profit chains--where corporate staff alone make service decisions--cannot achieve. The major difference, of course, between for-profits and NFPs is in philosophy, not in management techniques. NFPs should communicate to the public their commitment to serve all patients and remind consumers that their charges are comparable with for-profits'. Developing a capitation plan would provide NFP systems another opportunity to emphasize their service orientation. An effective capitation plan is a means to influence the marketplace toward chain affiliates, since subscribers under the terms of the plan use contract hospitals and physicians. In addition to sufficient capital, such a venture requires expert management. NFP systems will have to offer incentives such as executive stock ownership plans to attract and keep top talent. In the future, management and governing boards must base strategic plans on the public's needs, attitudes, and economic status, not on myths about the competition.     

CEO turnover in rural northwest hospitals

This study examines rates of and reasons for turnover among administrators from 148 rural hospitals in four northwestern states. Data were obtained from a survey of CEOs who left their positions between 1987 and 1990 and from a survey of board members from those same hospitals. During the study period, 85 CEO turnovers occurred at 78 hospitals. High-turnover hospitals were generally smaller than those facilities with fewer turnovers. The annual rate of CEO turnover was 15 percent in 1988 and 16 percent in 1989. The reasons for turnover most often cited by those in their positions for less than four years were due to: seeking a better position elsewhere, an unstable health care system, conflict with hospital board members or with medical staff, and inadequate salary. High levels of self-reported job satisfaction and job performance by turnover CEOs contrasted to the much lower performance evaluations reported by hospital board members. Nearly three out of four board members indicated they would not rehire their departed CEOs. CEOs perceived their professional weaknesses to center on deficiencies in leadership and financial skills as well as problems with physician, hospital board, and community relations.     

Hospital board power.

This paper is about governance of community not-for-profit hospitals. It begins by noting the marked inconsistencies between widely shared views of official hospital board functions and the actual performance of these boards. Several models of organisation power are then reviewed, with comment on their adequacy for hospitals. Then the notion of hospital board power as a convenient fiction is presented. The paper concludes with a discussion of the sufficiency of this arrangement for hospital performance.