Corporate and philanthropic models of hospital governance: a taxonomic evaluation

Health Services Research, August, 1993 by Bryan J. Weiner, Jeffrey A. Alexander

Increasing market pressures and regulatory changes have presented hospitals with important strategic challenges in the areas of cost control and resource acquisition (Delbecq and Gill 1988; Shortell 1989). As a result, an increasing number of hospitals face the threat of financial insolvency and closure (Muller and McNeil 1986; Moscovice 1989). Given the formal and legal responsibility of hospital governance to maintain organizational viability and effectiveness, many health care experts contend that hospital boards are being compelled to adopt a more active, critical role in strategy formulation, environmental adaptation, and internal control of hospital management (Barrett and Windham 1984; Alexander, Morlock, and Gifford 1988; Delbecq and Gill 1988; Shortell 1989).

Despite general agreement on the necessity of a more central role for governance, considerable question remains about the form of hospital governance most appropriate for such enhanced board functioning. Two contrasting models of governance dominate this debate: the "philanthropic," volunteer board model traditionally associated with hospitals, or the "corporate" model typically found in the commercial sector. Some health care experts have argued that the philanthropic model, with its emphasis on asset preservation and constituent representation, has worked well and thus needs only minor modifications to become adaptive to the current environmental conditions facing hospitals (Umbdenstock, Hageman, and Amundson 1990; Griffith 1988). Others, however, have broadly questioned the capacity of the traditional, voluntary board model to meet the new strategic challenges posed by a competitive health care environment (Barrett and Windham 1984; Delbecq and Gill 1988; Shorter 1989). These critics view the philanthropic model as anachronistic and recommend the full or partial adoption of the corporate model of governance, with its emphasis on streamlined decision making and strategy development (Kovner 1990; Delbecq and Gill 1988; Shortell 1989).

To date, the debate about the appropriate form of hospital governance has been conjectural and prescriptive, rather than empirical. However, without an understanding of the forms of governance that are actually used by hospitals, the theoretical integrity and practical utility of the corporate-philanthropic governance distinction cannot be assessed. In this study, we propose to attend to this gap in the literature by addressing the following research questions: (1) what are the dominant forms of hospital governance? (2) to what extent do these dominant forms conform to the theoretical archetypes -- corporate or philanthropic? and (3) are certain forms of governance more or less prevalent among hospitals operating under particular organizational and environmental conditions?

THEORETICAL FRAMEWORK AND HYPOTHESES

The contrast between the corporate and philanthropic models of governance has been presented in several recent writings in the health care literature (Alexander, Morlock, and Gifford 1988; Delbecq and Gill 1988; Fennell and Alexander 1989; Shortell 1989; Kovner 1990). Table 1 summarizes the dimensions along which corporate and philanthropic boards are commonly assumed to differ.

While the corporate-philanthropic governance distinction appears to have gained acceptance in the health care literature, only limited empirical support of these models exists. The first aim of this study, therefore, is to develop an empirically based taxonomy of hospital governance forms in order to assess the theoretical integrity of this governance distinction.

A multivariate, taxonomic approach is dictated by several considerations. First, embedded in the corporate-philanthropic governance distinction is the assumption that the composition, structures, and activities of governing boards cohere into integrated patterns or configurations. This holistic, integrated conception of governance cannot be adequately captured by examining a single feature or dimension of governance (Barrett and Windham 1984), or even by examining multiple governance characteristics independently (Pfeffer 1973; Alexander, Morlock, and Gifford 1988). Second, organizational features are interrelated in complex and integral ways. Organizations may be driven toward a common configuration to achieve internal harmony among its elements of strategy, structure, and context. For hospital governing boards, therefore, a "fit" may exist among various critical dimensions of board structure, composition, and activity as well as between such board configurations and the organizational or environmental context in which the board operates. Finally, the literature on population ecology indicates that over an extended time period, the environment selects out poorly adapted organizational forms. Specifically, only a limited number of possible strategies and structures are feasible in any one type of environment (Hannan and Freeman 1977; McKelvey 1981). To the extent that boards will perform a more central function in hospital viability and survival, an assessment of the number and type of different forms or configurations of governance will provide researchers and hospitals with information on the likely competitors for environmental fitness.