Finance theory and hospital cash balances.

Competing financial theories have been offered to understand hospitals' cash holding with scant recent evidence. Using data from a national sample of 608 not-for-profit hospitals, we find support for the trade-off theory which posits targeted cash balances. We do not find support for the financial hierarchy theory which posits a preference for use of cash to pay for capital investments. Findings apply to holdings of cash and marketable securities, but not board-designated funds where no model provided meaningful explanatory power.

Cash holdings of not-for-profit hospitals.

Many not-for-profit (NFP) hospitals hold substantial cash reserves. Using a national sample of 608 NFP hospitals over the period 1996-1999, we related theories of cash holdings to NFP hospitals to develop a conceptual framework for understanding cash holdings. We tested whether these hospitals differentially managed operating and strategic cash with respect to establishing target balances and investigated motivations for holding cash. NFP hospitals actively targeted levels of operating cash, but did not target strategic cash balances. Strategic cash balances were positively related to profitability and growth in assets, but negatively associated with the use of debt.

The internal processes and behavioral dynamics of hospital boards: an exploration of differences between high- and low-performing hospitals.

BACKGROUND: Nonprofit hospital boards are under increasing pressure to improve financial, clinical, and charitable and community benefit performance. Most research on board effectiveness focuses on variables measuring board structure and attributes associated with competing ideal models of board roles. However, the results do not provide clear evidence that one role is superior to another and suggest that in practice boards pursue hybrid roles. Board dynamics and processes have received less attention from researchers, but emerging theoretical frameworks highlight them as key to effective corporate governance. PURPOSE: We explored differences in board processes and behavioral dynamics between financially high- and low-performing hospitals, with the goal of developing a better understanding of the best board practices in nonprofit hospitals. METHODOLOGY/APPROACH: A comparative case study approach allowed for in-depth, qualitative assessments of how the internal workings of boards differ between low- and high-performing facilities. FINDINGS: Boards of hospitals with strong financial performance exhibited behavioral dynamics and internal processes that differed in important ways from those of hospitals with poor financial performance. PRACTICE IMPLICATIONS: Boards need to actively attend to key processes and foster positive group dynamics in decision making to be more effective in governing hospitals.

Hospital board dynamics: the five questions.

High-performing boards communicate clearly and often and aren't afraid to challenge the status quo. How does your board compare?