Tessa Quinn
The question of whether non-profit hospital board members should be compensated has been a topic of debate for over 30 years. While many board members continue to serve without pay, there has been a recent dramatic uptrend in board compensation, with over 37% of nonprofit hospitals compensating their board members in 2019. The decision to compensate hospital board members is influenced by various factors, including the size of the hospital, the complexity of operations, the desire to attract top talent, and the increasing demands on board members' time and expertise. As the trend towards compensating hospital board members continues, it remains a complex and controversial issue in the healthcare industry.
| Characteristics | Values |
|---|---|
| Number of nonprofit hospitals that pay board members | 37% |
| Average compensation for board members | $50,156 |
| Percentage increase in compensation from 2011 to 2019 | 57% |
| Average lower compensation | Under $5,000 per year |
| Average mid-range compensation | $10,000 to $19,000 per year |
| Average high compensation | Starts at $20,000 and can run into the six figures |
| Percentage of hospitals that paid their board directors in 2019 | 7% |
| Percentage of boards compensating members in 2022 | 27% |
| Percentage of boards compensating members in 2018 | 13% |
| Percentage of boards compensating members in 2014 | 10% |
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What You'll Learn
Non-profit hospital board compensation trends
The issue of compensating non-profit hospital board members is complex and controversial. While it is not a standard practice, there is a growing trend of hospitals providing some form of financial compensation to their board members. This trend is driven by the increasing demands on hospital boards in terms of time commitment, expertise, and responsibilities, as well as the desire to attract top talent with specific skill sets.
In recent years, there has been an exponential growth in the number of non-profit hospital boards offering cash compensation to their members. According to the AHA Triennial Survey, the overall percentage of boards compensating their members more than doubled from 13% in 2018 to 27% in 2022. This trend is expected to continue, with more hospitals recognizing the need to compensate board members for their time and expertise.
The amount of compensation varies greatly, with some board members receiving under $5,000 per year, while others in larger hospitals or with specific expertise may be paid upwards of $20,000 to $50,000 per year. However, there is no standard or average for how much hospitals should pay their board members. Some hospitals may offer lower compensation of under $5,000 per year, while others may provide mid-range compensation of $10,000 to $19,000, or even high compensation of $20,000 and above.
The decision to compensate board members is not taken lightly and is unique to each organization. Hospitals must consider various factors, including the size of the hospital, the relationship between the hospital and its board, the responsibilities and expectations of the board, and the skill set and experience of each member. Public perception is also a consideration, as some may question the motives of paid board members.
While the trend towards compensating non-profit hospital board members is growing, it is important to note that the vast majority of board members continue to serve without pay. Many hospitals still view board positions as volunteer roles and believe that the best leaders are those who are most dedicated to serving the hospital rather than seeking additional compensation.
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Factors influencing payment decisions
The decision to compensate hospital board members is influenced by a variety of factors, and it is not a one-size-fits-all approach. Here are some key considerations for nonprofit hospital boards when deciding whether and how much to pay their board members:
Attracting and Recruiting Top Talent: Nonprofit hospital boards may offer compensation to attract and recruit individuals with specific skill sets and diverse backgrounds. This is especially important as hospital boards compete with for-profit corporations for a limited talent pool. By offering compensation, boards can incentivize highly skilled individuals to commit their time and energy to board service.
Size of the Organization and Community: The size of the hospital and the community it serves can influence payment decisions. Larger hospitals or health systems may have more resources to offer compensation, and they may also have a greater need for specialized expertise on their boards. Smaller communities may have a harder time justifying compensation due to limited resources or a perception that board members are willing to serve without pay.
Complexity and Demands of the Role: The role of a hospital board member is becoming increasingly complex and demanding. Boards are facing higher demands in terms of time commitment, expertise, and responsibilities. Compensation can be a way to recognize and reimburse board members for their extra time and effort, especially as the expectations and responsibilities of board members continue to grow.
State Laws and Cultural Considerations: The decision to compensate board members should consider state laws and cultural norms. Organizations should evaluate whether paying board members is permitted by state law and whether it aligns with the culture and values of the organization. It is important to consider the potential public perception and scrutiny that may come with the decision to compensate board members.
Relationship with the Hospital: The nature of the relationship between the board member and the hospital can influence payment decisions. Some board members may be employees of the hospital, and their compensation as board members may be in addition to their regular salary. The fiduciary nature of the board member's relationship with the hospital should also be considered, as it can impact the perception of integrity and ethics.
Precedent and Competition: Nonprofit hospital boards may consider whether there is a precedent for paying board members in similar organizations in their area. The trend towards compensating board members is slowly growing, and boards may feel pressure to keep up with competitors or attract talented individuals who have the option of joining other paid boards.
While compensation for nonprofit hospital board members is becoming more common, it is important to note that many boards still function effectively with volunteer members. The decision to compensate board members should be carefully considered, weighing the potential benefits against the financial constraints and public perception.
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Impact of compensation on charitable care
Paying board members in non-profit hospitals is becoming an increasingly common practice. In the early 2000s, Allina was one of the first hospital boards to start paying board directors compensation for their service. They cited the complexity of running a large hospital program and the challenging nature of the healthcare sector as reasons for needing top board talent. While Allina is not alone in compensating hospital board directors, it is still in the minority. According to an analysis by Modern Healthcare, only 7% of hospitals paid their board directors in 2019.
The compensation for board members in non-profit hospitals has been linked to a decrease in charitable care. From 2011 to 2019, the average charity care-to-expense ratio for nonprofit hospitals that paid board members decreased from 2.5% to 1.6%. On average, a $10,000 increase in average board member compensation was linked with a nearly $70,000 decrease in annual provided charity care. This suggests that as non-profit hospitals spend more on compensating their board members, they have less money to allocate to charitable care.
However, it is important to note that the relationship between board member compensation and charitable care is complex. While some studies have found a negative correlation between the two, it is challenging to make causal inferences due to the lack of data and the variety of factors that can impact charitable care. Additionally, the definition of "charitable care" and the methods for measuring it can vary, making it difficult to compare data across different hospitals and studies.
The impact of compensation on charitable care in non-profit hospitals has implications for patients, particularly those who are uninsured or underinsured. Medical debt is a significant issue in the United States, with about four in ten adults (41%) owing an estimated $195 billion or more in total. As non-profit hospitals allocate more funds towards board member compensation, there may be less financial assistance available for patients who cannot afford the full cost of healthcare services.
To address the issue of medical debt and the affordability of care, policymakers have explored options to strengthen the regulation of hospital charity care programs. Federal, state, and local governments provide funding and tax benefits to support hospital charity care initiatives. However, there is a debate about whether hospitals, particularly non-profit hospitals, should be required to meet minimum community benefit thresholds. Establishing explicit thresholds is controversial, as there is no conclusive evidence that it leads to increased community benefit investments.
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Volunteer boards vs paid boards
The debate around compensating non-profit hospital board members has been ongoing for the past 30 years. While the majority of board members continue to serve without pay, there has been a recent dramatic uptrend in board compensation, with the overall percentage of boards compensating their members more than doubling in 2022 compared to 2018, from 13% to 27%. This trend is most prevalent in larger, more complex health systems, and the number of hospitals paying their board members is slowly but steadily increasing.
Volunteer Boards vs. Paid Boards
There are several advantages and disadvantages to both volunteer and paid boards. Volunteer boards are often seen as having more integrity, ethics, and purity of purpose than paid boards. The notion that a board is "pure" because it is not compensated has been challenged by recent cases of uncompensated boards tolerating conflicts of interest among their members. However, paying board members can also lead to public scrutiny and questions about the motives of board members.
Volunteer boards may struggle to attract top talent and highly skilled individuals who are able to commit the necessary time and energy to board service. Paid boards, on the other hand, may be more attractive to individuals with specific and uncommon skill sets, as they can offer compensation for their time and expertise. This can be especially true for larger hospitals or health systems that can offer higher compensation rates.
The decision to compensate board members is not a one-size-fits-all model and depends on various factors, including the size of the hospital, the relationship between the hospital and its board, the responsibilities and expectations of the board, and the skill set and leadership experience of the members.
While there is no standard for how much hospitals pay their board members, compensation can range from under $5,000 per year for smaller communities to upwards of $200,000 per year for large corporations. Hospitals that compensate their board members typically do so as a token of appreciation for the extra time and effort put into the organization, and it is not necessarily an indication of increased responsibilities.
Ultimately, the decision to compensate board members is a cultural one that is unique to each organization and should be made with careful consideration.
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Board member responsibilities
With the increasing complexity of the healthcare sector, board members are under greater demands in terms of time commitment, expertise, and responsibilities. The role is often a voluntary one, with many hospitals operating as non-profit organisations. However, there is a growing trend for hospitals to compensate board members for their time and expertise. This is not a standard practice, and compensation varies widely. Some hospitals see paying their board as a conflict of interest, while others believe it helps attract the best talent and ensures the highest quality of care for patients.
There are several factors that play a role in determining whether board members are paid. These include the size of the hospital, the relationship between the hospital and its board, the responsibilities and expectations of the board, and the skillset and experience of each member.
The decision to compensate board members is a complex and challenging issue that is still controversial. While some argue that volunteer boards have more integrity and ethics, others point out that the notion of a "pure" board has been damaged by recent cases of uncompensated boards tolerating conflicts of interest.
Ultimately, the decision to compensate board members is unique to each organisation and should be made with careful consideration. As the role of hospital boards becomes more demanding, the trend towards compensation is likely to continue, with the potential to become a national standard.
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