Skip to main content icon/video/no-internet
icon backReturn to Entries

Boards of Directors

Within the health care organization, the board of directors is the ultimate authority with legal responsibility for total financial and organizational stewardship. The board has legal control of the organization and is responsible for ensuring the continued existence of the organization. It possesses legal authority to take those actions essential to the governed entity's financial well-being as well as to the quality of service delivered by the organization and through its agents. It is, to paraphrase Harry S. Truman, where the buck stops.

The board is given wide-ranging authority to oversee the affairs of the organization within the laws of the state and federal governments and within the restrictions set by the organization's charter and bylaws. The board is the direct representative of the owners of the organization and is obligated to act in the best interest of the owners as a class. A range of ownership possibilities exist, and these have significant ramifications for the process of board selection. In addition, the board of a health care organization must also be cognizant of the interests of physicians and other professionals, employees, consumers of service, and the broader public.

Types of Boards

Not-for-profit ownership. The traditional hospital organization has been organized as a not-for-profit entity established by a philanthropic individual or association; or alternatively by a religious body. In the first instance, board members are typically nominated and elected from the membership ranks of the establishing organization, or from the broader community served. In recent years a movement toward the election of independent directors on a corporate model has gained in popularity, although it is still unusual. In the case of religious boards, the members are often appointed from the ranks of the vocationally religious or from members of the sponsoring denomination.

For-profit boards. Although investor-owned facilities compose a minority of hospitals in the United States, they constitute the majority of organizations engaged in long-term care, home health services, managed care financial services, and medical group practice. Boards of directors in these settings act as representatives of shareholders or partners as a group. They are empowered to make decisions according to their best judgment while being mindful of trusteeship obligations to the shareholders’ interests. Directors are typically elected by the shareholders or by members of the group.

Public boards. Public organizations provide substantial health services in hospital, public health, and educational sectors throughout the nation. Public boards, often labeled boards of trustees or boards of governors, may be found in organizations directly operated by government. In such instances, members are usually appointed by political bodies, or directly elected in a minority of cases. A growing trend is the conversion for operating purposes of governmental entities to public benefit agencies, with board selection and authority more closely resembling the not-for-profit model.

Board Member Attributes

Board members are typically selected for one or more of three W's: wisdom, work, and wealth. Each of these dimensions mirrors a vital board function.

Wisdom reflects the traditional expectation that members will bring to the board expertise in dealing with complex business and professional problems, especially those that can benefit from community involvement. Board members have been drawn from occupations such as law, accounting, banking, and the health professions. It is customary to consult the board members from a given area of expertise on problems in that realm provided no conflicts of interest between personal interests and fiduciary duty exist.

...

  • Loading...
locked icon

Sign in to access this content

Get a 30 day FREE TRIAL

  • Watch videos from a variety of sources bringing classroom topics to life
  • Read modern, diverse business cases
  • Explore hundreds of books and reference titles

Read next

More like this

Sage Recommends

We found other relevant content for you on other Sage platforms.

close

Have you created a personal profile? Login or create a profile so that you can save clips, playlists and searches

close
close
close Signed In to profile You are signed in as:
close
Logged in Institution Institution