Tessa Quinn
Hospitals have boards of directors that are responsible for overseeing nearly every aspect of how a hospital is run. The board of directors plays a key role in making sure the facility provides a strong patient experience by helping it operate as efficiently and safely as possible. The board is responsible for developing and reviewing the hospital's overall mission and strategy, guiding long-term goals and policies, and overseeing the hospital's financial health and sustainability. The size and composition of hospital boards vary, and members typically include local business leaders, lawyers, government leaders, private-sector leaders, physicians, and nurses.
| Characteristics | Values |
|---|---|
| Number of members | Boards typically comprise more than 19 members, including local business leaders, lawyers, government leaders, private-sector leaders, physicians, and nurses. |
| Leadership structure | The structure varies depending on the hospital's size and nature (private, for-profit, or nonprofit). |
| Responsibilities | Developing and reviewing the hospital's mission and strategy, guiding long-term goals and policies, overseeing financial sustainability and quality of care, and managing human resources. |
| Compensation | Board members may or may not be compensated, depending on factors such as hospital size and location. |
| Committees | Common committees include finance, quality and patient safety, governance and nominations, and executive committees. |
| Strategic focus | Boards aim for financial sustainability and quality patient care while adapting to healthcare reforms and value-based care models. |
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What You'll Learn
Board composition and financial performance
Hospital boards of directors are responsible for overseeing nearly every aspect of how a hospital is run. They are sometimes referred to as trustees because they are entrusted with overseeing the hospital's best interests. They are responsible for developing and reviewing the hospital's mission and strategy, as well as guiding its long-term goals and policies. While the board does not get involved in managing the hospital's day-to-day activities, they oversee them and set the job description and expectations for the CEO.
The composition of a hospital board of directors can vary depending on the size and nature of the hospital. Boards typically choose directors from among local business leaders, lawyers, government leaders, private-sector leaders, and physicians and nurses. The number of board members can also vary, with larger boards potentially becoming unwieldy and making it difficult for the board to maintain control. A 2009 survey found that typical nonprofit hospital boards had between 14 and 17 directors, while a study of Taiwanese hospitals from 2006 to 2017 found an average of 12 board members.
The financial performance of a hospital is influenced by the composition of its board of directors. Studies have shown a positive correlation between the proportion of directors with management qualifications and hospital financial performance. Boards with a majority of independent directors that pursue cost-focused strategies tend to perform well. Additionally, boards with directors who have a background in management may have an advantage over those with only medical expertise due to their financial knowledge and cost-control abilities. However, it is essential to balance the number of independent and internal board directors, as well as directors with management experience and medical knowledge.
The board's financial oversight and decision-making processes impact the hospital's financial performance. The treasurer plays a key role in this aspect, overseeing the hospital's financial health and preparing financial records for the board's approval. Committees, such as the finance committee, also play a crucial role in financial management by overseeing budgets, financial reporting, investments, and major expenditures. While the board's primary focus is on financial sustainability and quality of care, they must also navigate the complexities of healthcare reform and regulatory matters.
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Board roles and responsibilities
Hospital boards of directors are responsible for overseeing nearly every aspect of how a hospital is run. They are sometimes referred to as trustees because they are entrusted with overseeing the hospital's best interests. The board guides the long-term goals and policies for the hospital by making strategic plans and decisions. They are responsible for developing and reviewing the hospital's overall mission and strategy.
The board of trustees does not get involved in managing the hospital's day-to-day activities; rather, they oversee them. They set the job description for the CEO, and are responsible for hiring, firing, and monitoring the CEO. The board sets clear goals and expectations for the CEO, in keeping with strategic planning. Trustees assist and support the CEO with input about management policies, procedures, and decisions. The board chair offers the CEO advice about governance matters and garners support for the CEO from the rest of the board.
The board is also responsible for overseeing the hospital's financial health and sustainability, and for making sure that the hospital makes the best use of its resources. This includes overseeing budgets, financial reporting, investments, and major expenditures. The board treasurer is responsible for producing complete and accurate financial reports for board approval and helping the board understand and interpret the CFO's reports.
The board also plays a key role in ensuring the hospital provides a strong patient experience and that patients receive the best possible quality of care. This includes monitoring care quality, patient outcomes, and safety initiatives. The board is also responsible for ensuring the hospital meets its fiduciary duty to shareholders and maintains trust with shareholders on every level.
In addition, the board is responsible for building relationships with the organization's key stakeholders, providing excellent management, and establishing executive compensation. They also approve and periodically review major policies affecting the organization and the operation of the board.
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Board compensation
Hospital board members may or may not receive compensation, and the amount of compensation varies depending on the hospital's size, location, ownership structure, complexity, and the board member's level of experience. There is no standard or average compensation amount, and it can range from no payment to a modest stipend of under $5,000 per year, with some leaders in larger hospitals receiving up to $10,000-$20,000 per year. Larger hospital networks like Kaiser Permanente may pay their non-employee board directors upwards of $200,000 per year.
Historically, hospital board directors have served without compensation, but recently, a few larger consolidated hospitals have started offering compensation to their board directors. The movement toward compensating hospital boards is causing a national conversation about whether board directors should serve without pay or if compensation will help attract more competent and qualified directors.
The recent dramatic uptrend in board compensation has rendered the question of whether board members should be compensated moot. The overall percentage of boards (hospitals and systems) that compensate their members more than doubled in 2022 compared to 2018, growing from 13% to 27%. The most explosive growth in compensation was found in system boards, with 56% providing some type of compensation to their members.
Compensation can help attract and retain the most qualified individuals and make the position more appealing to those who might not consider joining an unpaid board due to lost income opportunity costs. It can also help secure high-quality care for patients and communities. However, some hospitals may see paying their board as a conflict of interest, while others believe that the best leaders are those who most desire to serve the hospital without additional compensation.
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Board recruitment
Hospital boards of directors are responsible for making a wide range of decisions for a hospital. They are the governing body of the hospital and are responsible for developing and reviewing the hospital's mission and strategy. They guide long-term goals and policies and oversee operations, but do not get involved in managing the hospital's activities.
The size of a hospital board of directors often correlates with the size and services of the hospital. Boards typically choose directors from among local business leaders, lawyers, government leaders, private-sector leaders, physicians, and nurses. The question is not whether doctors and nurses should serve as board directors, but what the proper balance should be. Some studies have shown that boards need to take a deeper-dive perspective on balancing the numbers of independent and internal board directors.
Hospital boards that have a majority of independent directors tend to perform well when the same CEO has held the position for a long period. They also tend to perform well when pursuing cost-focused strategies over innovation. However, there may be situations in which a largely independent board may not be successful.
The board chairperson (chair) leads the board and serves as its primary officer and the main liaison between the board and the CEO. The vice chairperson supports the chairperson and assumes leadership in their absence. The secretary maintains official board records and ensures proper documentation of board activities. The treasurer oversees the hospital's financial affairs, working closely with the CFO. The CEO plays a critical role in board operations, although they are not always a voting board member.
Hospital boards of directors typically form committees to help delegate responsibilities. Common committees include the finance committee, the quality and patient safety committee, the governance and nominations committee, and the executive committee. The governance and nominations committee recruits and nominates new board members.
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Board structure
Hospitals have varying types of leadership structures, depending on their size and whether they are private, for-profit, or nonprofit entities. A hospital board of directors is a group of elected or appointed leaders responsible for overseeing and making decisions about how the hospital is run. The board guides the long-term goals and policies for the hospital by making strategic plans and decisions.
The board of directors is often a large group of individuals, typically composed of local community representatives such as lawyers, business leaders, government and private-sector leaders, physicians, and nurses. A 2009 survey indicated that typical nonprofit hospital boards had between 14 and 17 directors. When hospital boards of directors appoint more than 19 members to the board, it can become difficult for the board to maintain a reasonable sense of control.
Hospital boards of directors are increasingly thinking about the percentage of independent board directors, whether the CEO should hold the board chair position, and the role of clinical professionals on the board. Many hospitals are separating the positions of CEO and board chair to avoid potential conflicts of interest. Studies have shown that boards with a majority of independent directors tend to perform well when the same CEO has held the position for a long period and pursue cost-focused strategies over innovation. However, certain situations may make it doubtful that a largely independent board will be successful. Therefore, a balance between directors with management experience and medical knowledge is beneficial for hospital performance.
To effectively manage the wide range of decisions and responsibilities, hospital boards form committees to help delegate responsibilities. Committees vary depending on the unique needs of each hospital, but common committees include finance, quality and patient safety, governance and nominations, and the executive committee.
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Frequently asked questions
Yes, hospitals have a board of directors. They are responsible for overseeing nearly every aspect of how a hospital is run and making strategic plans and decisions.
The board of directors is responsible for overseeing the hospital's financial health and strategic financial decisions. They also ensure the hospital is managed ethically and at its highest potential. The board guides the long-term goals and policies for the hospital. They are also responsible for hiring and setting compensation for the CEO or executive director.
Hospital boards typically choose directors from among local business leaders, lawyers, government leaders, private-sector leaders, physicians, and nurses. A well-rounded board will represent all levels of hospital operations.
