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.     

Governance in non-for-profit hospitals: Effects of board members’ remuneration and expertise on CEO compensation

Although hospitals vary in terms of their governance structures, little research has focused on the effectiveness of these governance mechanisms through the study of executive contracting. Using a sample of 80 non-for-profit private hospitals in the Netherlands, I investigate whether differences in governance structures of hospitals are informative for explaining the variations in chief executive pay. After controlling for important economic determinants of CEO compensation in hospitals (i.e., type and size of the hospital, CEO type and job complexity, market conditions and performance attributes), the results suggest that CEOs on average earn more (1) when the hospital's supervisory board members receive more remuneration (a higher absolute as well as an excessive remuneration) and (2) when supervisory board members have a lower level of expertise. The findings suggest that supervisory boards are more effective in controlling agency problems (i.e., aligning CEO pay to economic conditions) when their members have more expertise, but at the same time that the monitoring function is hampered when supervisory board members receive a large (excessive) remuneration.     

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.     

CEO must have authority to coordinate governance, management, medical staff

As hospitals attempt to survive in today's new competitive environment, they will find that the traditional organizational structure does not work. This structure can be characterized as a three-legged stool. Governance, management, and medical staff existed in relative harmony, with each able to attend to its own distinct, separate responsibilities. The medical staff regulated itself, the governing board had no serious difficulties in coping with the institution's finances, and the CEO was concerned solely with the physical plant and hospital personnel. In a riskless economic environment, this three-legged stool could remain stable. In the coming years,however, a hospital will need a clear-cut, identifiable leader if it is to survive. To centralize authority primarily in the CEO's hands will be a difficult step for nonprofit hospitals, particularly those sponsored by religious institutions, because of their tradition of operating much as a charitable social agency rather than a business. But this step must be taken, even to the extent of naming the CEO as chairman of the board, for a leader is required who has the authority to make quick decisions in the competitive marketplace. Timeliness is of strategic importance in such an environment, and governing boards increasingly will find it impossible to make timely decisions on a collective basis. Moreover, CEOs will have to coordinate the activities of management, medical staff, and the governing board. They will need to play a strong role in ensuring that target levels in DRG costs are met, and they will need the authority to mediate in issues in which the hospital's economic interests are pitted against physicians'.(ABSTRACT TRUNCATED AT 250 WORDS)     

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.     

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.     

Better information for the board

Healthcare managers are making quicker, riskier decisions in an increasingly competitive and regulated environment. Questions have been raised regarding the accountability and performance of boards of these organizations, as board members are not always selected based on their competencies to guide such decisions. Adapting mission and strategy and monitoring organizational performance require information that boards get mostly from management. The purpose of this study was to examine the information that boards regularly get to carry out their functions. I obtained board documents from four not-for-profit hospitals and health systems in different boroughs of New York City. At each institution, I conducted one-hour interviews with at least three board members and three top managers. I also attended at least one board or executive committee meeting and one additional meeting, usually of the finance committee. Principal findings were that the boards get too much data, the same data that management gets, and little comparative data on performance of similar benchmarked organizations. Board members and managers are satisfied with the information that board members get and have no plans to improve their system of shaping, or the quality of, information. Key recommendations to boards and managers are: (1) boards must take greater responsibility for identifying the information that they get and how they wish to get it, (2) managers must ensure that measurable objectives are developed, against which organizational performance can be evaluated, (3) boards must get information that is targeted and shaped to better fit board functions, (4) managers must develop information sets for main service lines, (5) boards must get information on the expectations and satisfaction levels of key stakeholders, (6) boards must get better and more focused information on performance of benchmarked institutions, and (7) boards must get less hospital operating data on a monthly basis.     

Hospital governing boards: a study of their effectiveness in relation to organizational performance

This article describes the development and evolution of governing boards and summarizes critical findings from a research study on hospital governing boards. The purpose of the research was to examine factors that measure performance of governing boards and the relationship of governing board effectiveness to the organizational performance of hospitals. Board leaders from 64 nonprofit hospitals across the country were surveyed using the BSAQ tool, which measures board effectiveness in six areas of competency. Board competency scores of this group were compared with those of a previous group, which consisted of more than 300 nonprofit boards, and demonstrated significantly higher scores. A factor analysis conducted to compare the six competency factors between study groups revealed a strong single factor in this study. The factors that measure governing board performance were found to be consolidated into one single factor of collaborative board functioning consistent with emerging governance theory. This may support the concept of the importance of governing boards as collaborative, socially dynamic networks of leaders. The hospital performance was assessed using data from the nationally recognized program, Solucient's 100 Top Hospitals. The results demonstrate that higher performing boards did have better hospital performance in several dimensions, most notably in profitability and lower expenses. Lower expenses were related to higher scores for the BSAQ total score. Hospital profitability was positively correlated with all seven BSAQ scores. A more favorable Solucient ranking was related to hospitals that had a lower BSAQ political score. This was also found in a multiple regression model that predicted a favorable ranking when the BSAQ political score was lower. This may mean that these boards do what needs to be done to maintain excellent performance and do not let politics get in the way of their work. Although governance and its effect on hospital performance is a complex concept to study, this investigation yields findings of interest to leaders in the healthcare field.     

Balancing incentives in the compensation contracts of nonprofit hospital CEOs.

Given the considerable insight into corporate governance achieved through studies of executive compensation in proprietary firms it is surprising that executive contracting in nonprofit organizations remains largely unexplored. In this paper, we use the multitask principal agent model of Holmstr?m and Milgrom [The Journal of Law, Economics and Organization 7 (1991) (Suppl.) 24] to argue that nonprofit hospitals represent an optimal response to information asymmetries between managers and boards. For a board with multidimensional objectives, the agency problem is getting top executives to distribute their efforts across all dimensions of the hospital's mission. The nonprofit form is preferred because the absence of high powered incentives such as share ownership reduces executives' incentives to place undue emphasis on improving financial performance at the expense of important but less observable tasks. Using newly available compensation data we test the model by comparing the conditional distributions of earnings for industrial and nonprofit hospital CEOs in Ontario. Our best estimates are that CEOs in publicly traded firms earn twice as much on average as those in similarly sized nonprofit hospitals but bear roughly eight times the income variance. Estimates of the associated degree of risk aversion are well within conventional bounds and are consistent with the trade-off between insurance and incentives predicted by the theory.     

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.     

The five critical areas for effective governance of not-for-profit hospitals

The pressures on hospitals continue to mount. Voluntary boards increasingly are nervous, making management's tasks all the more difficult. We believe the environment demands a new approach to the process of not-for-profit institutional governance. The volunteer board model has worked very well, but it must be adapted to the changed environment. There must be a direct link between the function of institutional governance and the priorities identified through the strategic planning process. It is our observation that truly effective boards have the following areas clearly in focus within the board and between the board and management: (1) a common working definition of "governance"; (2) a clearly defined mission with specific goals and objectives; (3) a well-planned decision-making process; (4) a board structure tailored to the priorities at hand; and (5) an information, reporting, and communication system that keeps the priorities clearly in focus. This article explores these factors and suggests ways to link the board's work directly to the strategic plan.     

The WAMI Rural Hospital Project. Part 3: Building health care leadership in rural communities.

The WAMI Rural Hospital Project (RHP) intervention combined aspects of community development, strategic planning and organizational development to address the leadership issues in six Northwest rural hospitals. Hospitals and physicians, other community health care providers and local townspeople were involved in this intervention, which was accomplished in three phases. In the first phase, extensive information about organizational effectiveness was collected at each site. Phase two consisted of 30 hours of education for the physician, board, and hospital administrator community representatives covering management, hospital board governance, and scope of service planning. In the third phase, each community worked with a facilitator to complete a strategic plan and to resolve conflicts addressed in the management analyses. The results of the evaluation demonstrated that the greatest change noted among RHP hospitals was improvement in the effectiveness of their governing boards. All boards adopted some or all of the project's model governance plan and had successfully completed considerable portions of their strategic plans by 1989. Teamwork among the management triad (hospital, board, and medical staff) was also substantially improved. Other improvements included the development of marketing plans for the three hospitals that did not initially have them and more effective use of outside consultants. The project had less impact on improving the functioning of the medical chief of staff, although this was not a primary target of the intervention. There was also relatively less community interest in joining regional health care associations. The authors conclude that an intervention program tailored to address specific community needs and clearly identified leadership deficiencies can have a positive effect on rural health care systems.     

Board engagement in quality: findings of a survey of hospital and system leaders

Hospital governing boards assume an important role in improving delivery of quality care in the hospital. More knowledge about the prevalence and impact of particular board activities can help them perform this role more effectively. This study draws from a survey of hospital and system leaders (presidents/chief executive officers [CEOs]) that was conducted in the first six months of 2006 with a total of 562 respondents. The survey contained 27 questions on various aspects of board engagement in quality. More than 80 percent of the responding CEOs indicated that their governing boards establish strategic goals for quality improvement, use quality dashboards to track performance, and follow up on corrective actions related to adverse events. The adoption of other practices was reported less frequently. Only 61 percent of the respondents indicated that their governing boards have a quality committee. The existence of a board quality committee was associated with higher likelihoods of adopting various oversight practices and lower mortality rates for six common medical conditions measured by the Agency for Healthcare Research and Quality's Inpatient Quality Indicators and the State Inpatient Databases. Hospital governing boards appear to be actively engaged in quality oversight, particularly through use of internal data and national benchmarks to monitor the quality performance of their organizations. Having a board quality committee can significantly enhance the board's oversight function. Other potentially useful activities-such as board involvement in setting the agenda for the discussion on quality, inclusion of the quality measures in the CEO's performance evaluation, and improvement of quality literacy of board members-are currently performed infrequently.     

Qualitative analysis of organizational innovations in Spanish public hospitals

OBJECTIVE: To determine the opinion of chief executive officers (CEOs) and physicians in public hospitals concerning new managerial trends. METHODS: We performed a qualitative study designed to determine the opinion of CEOs and physicians on the organizational innovations that affect more than one level of health management intervention. In-depth semi-structured interviews were conducted to identify behavior, experiences, opinions, knowledge and other personal and institutional aspects related to the study's aim. Focus groups (two study groups and one control group) were also used. Interaction between groups was used to obtain different types of information on the development of ideas, operational capacity, and the degree of consensus and disagreement on the subjects discussed. RESULTS: Comparison between the control and the study groups revealed that the new management trends added value in the following areas: economy of contracts, delegation, administrative decentralization, incentives, risk avoidance, process re-engineering, heath care continuity, competitiveness, leadership, information systems and client centeredness. CONCLUSIONS: Physicians are showing increased interest in organizational innovations while CEOs are ambivalent about their changing role and respective responsibilities. There is evidence of resistance to change. There is no single institutional model; institutional design depends on internal factors (cohesion and leadership) and external factors (environment, size and technology). The incipient development of innovations reveals the need for changes in the style and characteristics of management structure (composition, functions, responsibilities).     

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.     

Is chief executive officer turnover good for the hospital?

This study examined the general characteristics of chief executive officers (CEOs) and their hospitals and the perceived impact of CEO turnover on various organizational activities. A mail-based survey included 156 hospital CEOs in 6 states in the West South Central, West North Central, and Mountain regions. Neither hospital and CEO characteristics nor the impact on various organizational activities and performance indicators was significantly different among the 6 states compared. Overall, CEOs reported relatively short tenures, frequent promotion from within the organization to CEO level, and common involuntary departure of their predecessors. Respondents overwhelmingly reported a positive impact of leadership change on financial performance, employee morale, and organizational culture.     

Rural hospitals' viability and strategic responses

In 1989 the Catholic Health Association, in conjunction with the University of Iowa Center for Health Services Research, surveyed chief executive officers (CEOs) of rural hospitals regarding their hospital's viability and strategic behaviors and orientations. An extensive questionnaire was sent to the CEOs of all Catholic, all other religious not-for-profit, and all investor-owned rural hospitals, as well as to a 50 percent random sample of government and other not-for-profit rural hospitals. CEOs on average perceived that their hospital's viability relative to that of other rural hospitals was higher in 1989 than it had been in 1987. Ninety-four percent of hospitals whose CEOs perceived an increase in viability had been medium- or low-viability hospitals two years earlier. Thus, despite reports of deteriorating conditions for rural hospitals, rural hospital CEOs appeared to be relatively optimistic regarding their institution's viability. Changes in strategic direction accompanied these perceived increases in viability. The predominant strategic orientation adopted by rural hospitals in 1987 was that of the defender, but many hospitals that used this approach switched to the analyzer orientation by 1989. Significant shifts also occurred toward the reactor orientation from the analyzer and defender orientations. A greater percentage of hospitals with a perceived increase in viability between 1987 and 1989 altered their organizational role. The most common change for these hospitals was from limited care to basic care.     

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.     

Organizational characteristics associated with hospital CEO turnover

Using a Probit regression model, this study examines organizational factors contributing to hospital chief executive officer (CEO) turnover. The study concludes that some organizational environments are more conducive to turnover. Hospitals that are smaller, are on the West Coast, are investor owned, are church related, offer many services, have high service usage, and larger hospitals with female CEOs are more likely to experience turnover.     

Origins of authority: the organization of medical care in Sweden

Earlier research by Gardell and Gustafsson indicates a general discrepancy between perceived needs and organizational structure in Swedish somatic hospitals; the work organization directs the work process as if cure and medical treatment were the only appropriate goals in almost all kinds of health care settings. The standard organizational model for general hospitals, here named "the acute care model"--which is a merger of medical and administrative hierarchies--forces great segments of the staff into a work content that is neither appropriate for patients' needs nor satisfying for the personnel. The present study is a historical-sociological discourse in which the structural antecedents of the acute care model are traced. It gives an exposé of the main stages in the formation of the Swedish health care system from the middle ages to the present. In 1864 a regulation of the hospital boards was issued. This meant the definite consolidation of the acute care model and was in line with earlier developments, which were characterized by an incremental interorganizational activity demarcation that divided the core of institutional care into three branches: somatic hospitals, mental hospitals, and homes for the elderly. The driving forces in the formation of the total health care system are shown to be closely related to premedical and extramedical factors, such as military needs, mercantilism, and the emergence of the middle class.