Nonprofit hospital boards need better representation
MMore than half of hospitals in the US are not-for-profit, which means they receive generous tax breaks if they benefit their communities. Many do not fulfill this mission.
Some nonprofits have billed patients who should have qualified for charitable care, accumulating billions of dollars in fees. Some have aggressively collected medical debt through legal action or reporting to credit agencies. Others have exploited poor communities by maintaining a token presence there to qualify for government subsidies that benefit those in need, only to expand in rich communities. At least one institution has explicitly established care pathways that prioritize the elite at the expense of the general public.
At the same time, many hospitals – both non-profit and for-profit – have failed to meet the expectations of their employees. During the pandemic, staff have had to proactively organize essential protective measures – tests, masks and vaccines – while being inundated with patients. Nurses across the country have accused hospitals of putting financial interests ahead of security when they embrace staffing imbalances. All this while many institutions do not pay their employees a living wage.
The multiple failures of nonprofit hospitals to serve their communities and employees raise key questions about corporate governance. When decisions need to be made, who holds leaders accountable for their actions?
The natural answer is their boards. All nonprofit hospitals are required to have a board of directors that helps set strategy, raise funds, and review senior management. The mandate of health care regulators is broad: the US Department of Health and Human Services’ Office of Inspector General has outlined how hospital regulators have an obligation to oversee quality in addition to traditional corporate responsibilities. For this reason, the American Hospital Association (AHA) recommended placing healthcare workers on boards in its 2018 survey of hospital boards.
However, the proportion of hospital directors who are employees has declined in recent years. In the AHA survey, nearly a third of hospital boards did not have a single physician member, while nearly two-thirds did not even have a nurse missing.
Who is actually on the hospital board?
In a study published in the Journal of General Internal Medicine, we and our colleague J. Michael Williams examined the professional backgrounds of board members at 15 of US News & World Report’s top 20 ranked hospitals, all non-profit academic medical centers. These 15 publicly listed the 529 members on their boards. 44 percent came from the financial sector and represented mutual funds, real estate and other companies. Less than 15% were healthcare workers: 13.3% were doctors and 0.9% were nurses.
The optimal makeup of hospital boards is unknown, and what may be right for one hospital may not be right for another. The best hospitals may not be representative of the average non-profit hospital. And we could not assess whether patients were represented on panels, a related and equally important issue.
Despite these limitations, our results give cause for concern. If hospital executives are largely held accountable by finance professionals and business leaders, rather than doctors and patients, might they be more focused on income and expenses than the needs of their communities or employees? While some argue that Marge facilitates mission, the measure of a nonprofit organization is how those priorities are balanced by leaders who ultimately answer to their board.
The lack of frontline workers on the boards of nonprofit hospitals raises questions about whose voices are heard, whose experiences inform decision-making, and most importantly, who is valued. Given the critical roles and viewpoints of nurses, therapists, technicians and other staff, the near-low absenteeism of non-physician workers from the panels is particularly noteworthy.
The composition of the boards can contribute to the gap between rhetoric and reality regarding health equity. In the 2018 AHA survey, 42% of US hospitals had all white board members, and 70% of the board members were male. In part because board members are typically big donors, hospital boards often reflect, rather than respond to, broader inequalities. Many not-for-profit hospitals spend less on charitable causes than for-profit hospitals, although they receive significant tax breaks for providing social services. Prioritizing charitable care for low-income neighborhoods, often communities of color, can result in financial loss, a tension between purpose and gain that boards help navigate. If the plaques were more reflective of the communities their hospitals serve, this tension could be channeled differently.
The fact that we could not find a list of board members for five of the top 20 hospitals shows a possible lack of transparency. Patients, healthcare workers, and community members have few mechanisms to hold nonprofit hospital leaders accountable. They are not elected by the public or elected by shareholders. Many of these hospitals have such significant market power that patients often cannot conduct their business elsewhere as they would in more competitive markets. Failure to publicly disclose the names of board members through accessible websites shields hospitals from public scrutiny and undermines accountability.
The management of the hospital needs to be evaluated urgently. Currently, healthcare workers can encourage nonprofit hospital leaders to diversify their boards across multiple dimensions, including race, gender, and socioeconomic status, and also include a broad spectrum of frontline workers. To drive this forward, organizations like the American Hospital Association could develop an accreditation process to certify bodies that are appropriately representative, including different types of healthcare workers and patients, who match the demographics of their communities.
If voluntary efforts fail, regulation could be considered. The Internal Revenue Service could mandate standardized public reporting on board composition and require boards to meet certain criteria to maintain their tax-exempt status, which is very valuable for nonprofit hospitals. Criteria could be taken from existing models inside and outside the health care system. For example, at government-approved health centers, at least half of the board members must be patients. New rules require Nasdaq-listed companies to disclose data annually on the gender and racial characteristics of their boards of directors and include two “distinct” directors.
New criteria could also shape how board members are selected, leaning on proposed legislation such as the Accountable Capitalism Act, introduced into Congress by Sen. Elizabeth Warren (D-Mass.), requiring 40% of company board seats to be held by employees must be elected.
Taken together, such measures could help reform hospital boards to protect patients and empower frontline workers.
Sanjay Kishore is a Resident Physician with the Equal Justice Initiative and an Assistant Clinical Professor at the University of Alabama at Birmingham. Suhas Gondi is an internal medicine and primary care resident at Brigham and Women’s Hospital in Boston. The views expressed here are her own and do not necessarily represent those of her employers.