Healthcare system boards are smaller than hospital boards, but they offer greater cash compensation for members and are viewed as more effective by chief executive officers, according to a new study.
System boards, which average 13 members, also have fewer physician and minority members than hospital boards, according to the survey conducted for the Governance Institute, a La Jolla, Calif.-based trustee and physician education group.
In a study the institute released last year, hospital boards averaged 18 members (Jan. 17, 1994, p. 34). Dennis Pointer, a professor of health services at San Diego State University, designed and researched both studies.
"For the first time, we have descriptive information on how system boards are structured. They are different from hospital boards," Pointer said. "Because system boards are newer, they can be designed to be more compact and specialized."
Some 65 systems were surveyed by the Governance Institute. Last year's survey included 50 not-for-profit hospitals. Neither survey included investor-owned hospitals or systems.
System CEOs were asked 160 questions regarding board composition, leadership, process, meetings, committees, performance and governance of component organizations.
Pay low or nonexistent.On compensation, 14% of systems offer trustees some form of payment, compared with 4% of hospitals (See chart).
"Systems pay (trustees) just enough to get their attention and to get them to come to meetings," said Charles Ewell, president of the Governance Institute.
Ewell, who maintains he is neutral on trustee compensation, said system boards require trustees to have more business and financial skills than do hospital boards. "The agendas are longer, and the issues more complicated," he said.
For the 14% of systems that pay their trustees, average meeting fees were $250, annual board chair retainers were $2,500, and trustee retainers were $3,000, the survey said. For the 4% of hospitals that pay their trustees, the range was $25 to $50 per meeting.
"Trustee compensation at hospitals is virtually nonexistent," Pointer said.
Ewell said compensating hospital trustees would raise more eyebrows in the community than paying system trustees.
"The majority of hospital trustees feel they have a social mission (to serve on boards)," Ewell said. "With hospitals cutting costs and laying off people, it makes it awkward to pay board members at the hospital level."
Most are effective.
On performance, 83% of the CEOs rated their system boards as effective, very effective or highly effective, compared with 78% of top executives of hospital boards.
Some 10% of system CEOs said their boards were moderately ineffective, and 7% said their boards were very ineffective. Hospital CEOs were more critical of their boards, indicating that 13% were moderately ineffective and 9% were very ineffective.
Interestingly, system trustees spent an average of 23 hours a year on educational activities compared with 16 hours for hospital trustees.
Another reason for the lower effectiveness scores could be that 20% of hospital trustees are absent from any given meeting, compared with 15% of system board members.
"(Hospital trustees) could be motivated because of financial incentive," Ewell said. "I'd like to believe (system boards' greater performance) is because they go to meetings and do more education work."
Ewell said he recommends trustees spend 30 to 35 hours a year on educational activities.
In a section on governance of subsidiary or component organizations, 66% of the hospitals owned or leased by the systems had boards with full fiduciary powers, 25% had advisory boards and fewer than 10% had no boards.
"There is a movement toward consolidated governance with few, if any, boards in the component parts," Pointer said. "We are going from boards to advisory boards to no boards at the component level."
Powers vary.The survey also looked at governance in the systems' health plans, medical group subsidiaries or affiliates and other owned healthcare facilities.
Health plans owned by systems had the highest percentage of boards with full fiduciary powers-81%. Some 17% had advisory boards, and 2% didn't have boards.
Of the systems' medical groups, 56% had full boards, 33% had advisory boards, and 11% had no boards. Of other healthcare facilities, 52% had full boards, 29% had advisory boards, and 19% didn't have boards.
Seventy percent of the systems had at least one owned or affiliated medical group. Fifty-three percent owned a health plan. And 81% had at least one nonacute-care facility, the survey found.
The study found that the most common committees include finance (78% of systems and 93% of hospitals), executive (75% of systems and 79% of hospitals), and planning and strategy (56% of systems and 79% of hospitals).
Nearly half-48%-the systems had compensation committees. Some 65% of hospitals have medical and clinical quality committees.
"The buck still stops at the system level for quality, but they have been delegating that more to hospitals," Ewell said.
As a result, fewer physicians serve on the system board than at the hospital level. System boards average one physician compared with three at the hospital, the survey found.
In addition, 4% of system boards have minority members compared with 7% of hospital boards.
The Governance Institute plans to survey hospitals and systems every two years.
Percentage of hospitals, systems providing compensation,
expense reimbursement and benefits to board members
Categories board board
Cash compensation provided for board service 4% 14%
Travel expense reimbursement for hospital-related business 98% 92.4% Travel expenses reimbursement for spouse/guest when 69% 77.3%
accompanying board member on hospital business
Reimbursement for expenses associated with 29% 39.4%
attending hospital events
Accident insurance when on hospital business 20% 36.4%
Room/service upgrades when board family member 33% 33.3%
is admitted to hospital
Other benefits 16% 13.6%
Note: Of systems that compensate, 56% provide yearly retainers, 78% provide board meeting attendance fees, 44% provide board chain fee, 67% provide community meeting attendance and 22% provide other forms of compensation.
Source: Governance Institute study