Board characteristics, governance objectives, and hospital performance: An empirical analysis of German hospitals.

BACKGROUND: There is a growing need for hospital supervisory boards to support hospital management in different areas, including (financial) monitoring, resource provision, stakeholder relationships, and strategic decision-making. Little is currently known about how boards' emphases on these various governance objectives contribute to performance. PURPOSE: Using a dominant logics perspective, this article aims to detect the governance logics that hospital boards emphasize, to determine whether there are distinct clusters of hospitals with the same sets of emphases, and to show how cluster membership relates to board characteristics and financial performance. METHODOLOGY: Using factor analysis, we identify latent classes of governance objectives and use hierarchical cluster analysis to detect distinct clusters with varying emphasis on the classes. We then use multinomial regression to explore the associations between cluster membership and board characteristics (size, gender diversity, and occupational diversity) and examine the associations between clusters and financial performance using OLS regression. RESULTS: Classes of objectives reflecting three governance theories-agency theory, stewardship theory, and stakeholder theory-can be distinguished, and hospitals can be divided into four clusters based on their board's relative emphasis on the classes. Cluster membership is significantly associated with board characteristics. There is also a significant association between cluster membership and hospital financial performance, with two of three groups performing significantly better than the reference group. CONCLUSION: High performance in hospitals can be the result of governance logics, which, compared to simple board characteristics, are associated with better financial outcomes. PRACTICE IMPLICATIONS: Hospitals can influence the emphasis placed on different governance objectives and enhance organizational success by creating boards that are small enough to be effective yet diverse enough to profit from a wide variety of expertise and experience.

Health systems: changes in hospital efficiency and profitability.

This study investigates potential changes in hospital performance after health system entry, while differentiating between hospital technical and cost efficiency and hospital profitability. In the first stage we obtained (bootstrapped) data envelopment analysis (DEA) efficiency scores. Then, genetic matching is used as a novel matching procedure in this context along with a difference-in-difference approach within a panel regression framework. With the genetic matching procedure, independent and health system hospitals are matched along a number of environmental and organizational characteristics. The results show that health system entry increases hospital technical and cost efficiency by between 0.6 and 3.4 % in four alternative post-entry periods, indicating that health system entry has not a transitory but rather a permanent effect on hospital efficiency. Regarding hospital profitability, the results reveal an increase in hospital profitability only 1 year after health system entry, and the estimations suggest that this effect is a transitional phenomenon. Overall, health system entry may serve as an appropriate management instrument for decision makers to increase hospital performance.

Cooperation for a competitive position: The impact of hospital cooperation behavior on organizational performance.

BACKGROUND: Several public policy initiatives, particularly those involving managed care, aim to enhance cooperation between partners in the health care sector because it is expected that such cooperation will reduce costs and generate additional revenue. However, empirical evidence regarding the effects of cooperation on hospital performance is scarce, particularly with respect to creating a comprehensive measure of cooperation behavior. PURPOSE: The aim of this study is to investigate the impact of hospital cooperation behavior on organizational performance. We differentiate between horizontal and vertical cooperation using two alternative measures-cooperation depth and cooperation breadth-and include the interaction effects between both cooperation directions. METHODOLOGY: Data are derived from a survey of German hospitals and combined with objective performance information from annual financial statements. Generalized linear regression models are used. FINDINGS: The study findings provide insight into the nature of hospitals' cooperation behavior. In particular, we show that there are negative synergies between horizontal administrative cooperation behavior and vertical cooperation behavior. Whereas the depth and breadth of horizontal administrative cooperation positively affect financial performance (when there is no vertical cooperation), vertical cooperation positively affects financial performance (when there is no horizontal administrative cooperation) only when cooperation is broad (rather than deep). PRACTICAL IMPLICATIONS: Horizontal cooperation is generally more effective than vertical cooperation at improving financial performance. Hospital managers should consider the negative interaction effect when making decisions about whether to recommend a cooperative relationship in a horizontal or vertical direction. In addition, managers should be aware of the limited financial benefit of cooperation behavior.

The impact of the board's strategy-setting role on board-management relations and hospital performance.

BACKGROUND: The appropriate governance of hospitals largely depends on effective cooperation between governing boards and hospital management. Governing boards play an important role in strategy-setting as part of their support for hospital management. However, in certain situations, this active strategic role may also generate discord within this relationship. PURPOSE: The objective of this study is to investigate the impact of the roles, attributes, and processes of governing boards on hospital performance. We examine the impact of the governing board's strategy-setting role on board-management collaboration quality and on financial performance while also analyzing the interaction effects of board diversity and board activity level. METHODOLOGY: The data are derived from a survey that was sent simultaneously to German hospitals and their associated governing board, combined with objective performance information from annual financial statements and quality reports. We use a structural equation modeling approach to test the model. FINDINGS: The results indicate that different board characteristics have a significant impact on hospital performance (R = .37). The strategy-setting role and board-management collaboration quality have a positive effect on hospital performance, whereas the impact of strategy-setting on collaboration quality is negative. We find that the positive effect of strategy-setting on performance increases with decreasing board diversity. When board members have more homogeneous backgrounds and exhibit higher board activity levels, the negative effect of the strategy-setting on collaboration quality also increases. PRACTICE IMPLICATIONS: Active strategy-setting by a governing board may generally improve hospital performance. Diverse members of governing boards should be involved in strategy-setting for hospitals. However, high board-management collaboration quality may be compromised if managerial autonomy is too highly restricted. Consequently, hospitals should support board-management collaboration about empowered contrasting board roles.