Models of Governance in Multihospital Systems: Implications for Hospital and System-Level Decision-Making

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Abstract

This study utilizes data from a national survey of 159 multihospital systems in order to describe the types of governance structures currently being utilized, and to compare the policy making process for various types of decisions in systems with different approaches to governance. Survey results indicate that multihospital systems most often use one of three governance models. Fortyone percent of the systems (including 33% of system hospitals) use a parent holding company model in which there is a system-wide corporate governing board and separate governing boards for each member hospital. Twenty-two percent of systems in the sample (but 47% of all system hospitals) utilize what we have termed a modified parent holding company model in which there is one system-wide governing board, but advisory boards are substituted for governing boards at the local hospital level. Twenty-three percent of the sampled systems (including 11% of system hospitals) use a corporate model in which there is one system-wide governing board but no other governing or advisory boards at either the divisional, regional or local hospital levels. A comparison of systems using these three governance approaches found significant variation in terms of system size, ownership and the geographic proximity of member hospitals. In order to examine the relationship between alternative approaches to governance and patterns of decision-making, the three model types were compared with respect to the percentages of systems reporting that local boards, corporate management and/or system-wide corporate boards have responsibility for decision-making in a number of specific issue areas. Study results indicate that, regardless of model type, corporate boards are most likely to have responsibility for decisions regarding the transfer, pledging and sale of assets; the formation of new companies; purchase of assets greater than $100,000; changes in hospital bylaws; and the appointment of local board members. In contrast, corporate management is relatively uninvolved in these issues, again regardless of governance model type. There is substantial variation in the locus of decisionmaking responsibility by governance model type for a variety of other issues, however, including: hospital-level service additions and deletions; operating and capital budgets; medical staff privileges, hospital-level long-range planning; hospital CEO performance evaluation and the appointment of hospital CEOs. In parent holding company models these issues tend to be the perogative of the local governing board; in corporate models the system-wide board is more likely than corporate management to have responsibility for these issues. Systems using a modified holding company approach display a mixed pattern of decision-making responsibilities that seems to resemble a compromise between the parent holding company and the corporate governance structures.

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