New study of hospital board members is highly flawed, but still noteworthy

A new study on hospital board composition may serve to spark helpful dialogue on how health care professionals can contribute to organizational leadership, and on the value of greater transparency regarding the members of health care governing boards. However, it is fundamentally a controversial study, given its failure to consider legal requirements, governance principles and economic realities that are critical to establishing board composition of hospitals and health systems-which are amongst the most complex organizations in our society.

The study, “Professional Backgrounds of Board Members at Top‐Ranked US Hospitals”, was published in the February 8 edition of the Journal of General Internal Medicine. Its primary conclusion is that less than fifteen (15) percent of board members at the nation’s top hospitals have a professional background in healthcare, while more than fifty percent have a background in business or finance.

The authors interpret the data as reinforcing concerns that financial success is the dominant priority for major hospitals, and that the interests of clinicians, patients and the community may be shortchanged as a result. They also cite their inability to find a list of directors for five of the twenty leading hospitals as evidence of a possible lack of transparency, impeding public scrutiny.

Their unspoken thesis seems to be that hospitals and health systems should have more board members with health industry experience, such as physicians, or other clinical professionals. The study also seems to suggest that the nation’s leading hospitals and health systems may be overweighted by professionals with financial backgrounds.

No doubt, clinician voices are vitally important to the deliberations any health system board must have. In short, a health system board without a doctor is operating blindly. It is through their hands – and the people whose voices they can carry – that healing happens.

However, an effective health system board benefits from a kaleidoscope of voices, experiences, competencies and perspectives. Financial expertise is just one of many. The task of the board (and especially its leadership) is to balance all the available expertise and wisely elevate the right voice and the right experiences at the right time as it deliberates the right future for the organizations with which it has been entrusted.

That’s in part why leading governance principles recommend that board composition reflect complementary and diverse skill sets, backgrounds and experiences. Professional experience related to the company’s industry is certainly an important factor, but only one subset of a desirably broad-based board. The greater interest in is establishing an overarching culture of diversity of thought.

It’s also important to remember that the presence of too many clinicians on the hospital board can run afoul of laws, tax exemption standards and governing principles designed to promote director independence and protect against conflict of interest.

Concerns that patients and the community might be shortchanged by the lack of physician board membership are offset by both the legal requirements that hospitals operate for nonprofit charitable, scientific and/or educational purposes, and by the increasing incentives for hospitals to implement ESG-related initiatives.

And it should also be noted that many hospitals operate within complex organizational structures with multiple corporations, the boards of which offer additional opportunities for clinician involvement.

Yet apart from all that, the study does serve to prompt meaningful conversation about who provider organizations are, who leads them and who is ultimately accountable for organizational performance. These are factors coming under increased and unfavorably-minded scrutiny by media, politicians and the interests that influence them, including labor and insurers.

Indeed, many health system boards have worked for years behind a translucent screen, some even making the identities of board members difficult if not impossible to find. This kind of analysis should be surprising to no one and is likely the vanguard of much more like it. In this era, board members should be prepared to be publicly known and increasingly accountable for the actions (or inaction) for the health systems they lead.

The hospital/health system must be prepared to not only defend, but to celebrate its board, its diversity and expertise, and the great value it brings to the organization. The composition and engagement of the board should reflect a good story to tell.

That’s a good test, by the way: If, upon considering your board, the first instinct is to defend it (or, even, hide it) it’s time for some soul searching and, maybe, a bit of courage.

Thus this new study offers something of a “forest for the trees” lesson. Don’t get caught up too much in the precise data and conclusion, as they miss the mark pretty widely when compared to objective criteria. Rather, focus on perhaps the unintended message-that who health care systems select for their boards; why they select them and the contributions they offer, can all be terrific, supportive messages to send to the community.

About the Authors:

Michael Peregrine is a partner with McDermott Will & Emery, where he represents clients on corporate governance matters and on the fiduciary implications of organizational leadership. David Jarrard is Chairman, Jarrard Inc. Executive Committee.

The authors’s views do not necessarily represent the views of McDermott Will & Emery, Jarrard Inc. and/or their clients.

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