The effect of directors' professional background on financial and philanthropic performance of nonprofit private hospitals

Zheng Wang, The University of Texas School of Public Health


Nonprofit private hospitals (NPPs) are the majority of the hospitals in the U.S. accounting for over half of the total hospitals. The governance and control of NPPs has significant impact on healthcare industry. Exploring the governance of NPPs may provide a new perspective to understand the problems of hospitals' quality and efficiency, high medical bills and the amount of uncompensated care. Yet very few academic studies have touched upon this subject, which has drawn a lot of attention from the practitioners and the public. The governance structure of NPPs is unique as compared with the other two ownership types of hospitals--- for profit hospitals and government owned hospitals. NPPs carry both the "philanthropic nature" and the "corporate ethos". On one hand, their legal status requires them to serve the community through providing charity care, teaching programs or other philanthropic activities; On the other hand, they seek profit margin in order to maintain their financial viability, fulfill their philanthropic and medical goals, and survive the market competition. These contrasting organizational goals complicate the governance and control of NPPs. Since governance board has the ultimate decision making power over the organization's strategic orientation, and the characteristics of board directors defines the organization, the present study seeks to understand the effect of the governance board of NPPs on their profit seeking or philanthropic orientations. To be more specific, I am answering the following questions: How does directors' professional background affect NPPs' philanthropic and financial performance? What role of market competition plays in this relationship? The study employs the longitudinal data of 215 NPPs in California from 2007 to 2012 obtained from Office of Statewide Health Planning and Development (OHSPD) annual hospital financial reports to conduct the main effects tests. It introduces market competition as interaction term, which is measured by HHI index based on total discharge and total licensed beds. The hypothesis has not been statistically supported. However, the percentage of directors with religious background has been found negatively associated with the financial performance; further, this relationship is weakened by the market competition. The present study has both of theoretical and empirical contributions. It is the first empirical study examining the effect of governance board on the philanthropic and profit seeking nature of NPPs; it builds a theoretical framework that provides the foundation for the future hospital governance studies. Also, it helps the practitioners and policymakers to understand the philanthropic performance of NPPs from the perspective of governance and the role of market competition.

Subject Area

Management|Organizational behavior|Health care management

Recommended Citation

Wang, Zheng, "The effect of directors' professional background on financial and philanthropic performance of nonprofit private hospitals" (2014). Texas Medical Center Dissertations (via ProQuest). AAI3641721.