The effect of governing board composition on rural hospitals' involvement in provider-sponsored managed care...

Rural hospitals are actively pursuing various strategic alternatives to confront the dramatic changes taking place in the delivery, organization, and financing of healthcare. One of these strategic alternatives is involvement in provider-sponsored managed care organizations. Studies have argued that this form of managed care would enhance public trust and might improve the performance of hospitals. The changing healthcare environment has also increased the importance of the competence and composition of hospital boards. This article examines the effect of the governing board's composition on rural hospitals' involvement in provider-sponsored managed care organizations. The study sample consisted of 140 rural hospitals in Iowa and Nebraska whose CEOs responded to a survey conducted by the Center for Health Services Research at the University of Iowa between June and December 1997. The principal finding was that the likelihood of a hospital owning any form of managed care organization increases with the number of community leaders and health professionals on the board. The number of business leaders had no effect on the likelihood of involvement in such an arrangement. Other factors that affected the likelihood of owning a managed care organization were the health status of the population and ownership type. Key recommendations to managers are to (1) revisit the hospital board's composition before actively pursuing a strategic action, (2) examine the compatibility of the type of strategic activity pursued with the background of board members and the interests of the populations they represent, and (3) use the governing board as a resource in determining which new strategic activities to undertake.