Nonprofit hospitals are failing Americans. Their boards may be a reason why

More than half of U.S. hospitals are nonprofit, meaning they receive generous tax exemptions in exchange for benefiting their communities. Many aren’t fulfilling that mission.

Some nonprofits have billed patients who should have qualified for charity care, racking up billions of dollars in charges. Some have aggressively collected on medical debt through legal action or reports to credit agencies. Others have exploited poor communities by maintaining a token presence there to qualify for federal subsidies that benefit the needy, only to expand in rich communities. At least one institution has explicitly set up care pathways that prioritize the elite at the expense of the general public.

At the same time, many hospitals — both nonprofit and for-profit — have failed to meet their workers’ expectations. Throughout the pandemic, staff members had to proactively organize for key protections — tests, masks, and vaccines — while flooded with patients. Nurses nationwide have accused hospitals of placing financial interests before safety in adopting imbalanced staffing ratios. All this while many institutions fail to pay their employees a living wage.

The multiple failures of nonprofit hospitals to serve their communities and staff raise key questions around governance. When decisions must be made, who holds leaders accountable for their actions?

The natural answer is their boards. All nonprofit hospitals are required to have a governing board to help set strategy, raise funds, and review senior management. The mandate of boards within health care is broad: the U.S. Department of Health and Human Services Office of Inspector General has outlined how, in addition to traditional corporate responsibilities, hospital boards are obliged to oversee quality. It’s for this reason that the American Hospital Association (AHA) recommended in its 2018 survey of hospital boards that health care workers be included on boards.

Yet the percentage of hospital board members who are staff members has declined in recent years. In the AHA survey, almost one-third of hospital boards did not have a single physician member, while almost two-thirds lacked even one nurse.

Who, then, actually sits on hospital boards?

In a study published in the Journal of General Internal Medicine, we and our colleague J. Michael Williams examined the professional backgrounds of the board members at 15 of U.S. News & World Report’s 20 highest-ranked hospitals, all nonprofit academic medical centers. These 15 publicly listed the 529 members on their boards. Forty-four percent came from the financial sector, representing investment funds, real estate, and other entities. Less than 15% were health care workers: 13.3% were physicians and 0.9% were nurses.

The optimal composition of hospital boards is unknown, and what may be right for one hospital may not be right for another. The top-ranked hospitals may not be representative of the average nonprofit hospital. And we could not assess whether patients were represented on boards, a related and equally important question.

Despite these limitations, our findings are cause for concern. If hospital executives are largely held accountable by finance professionals and corporate leaders, instead of by clinicians and patients, might they focus more on revenue and expenses than the needs of their communities or staff? While some argue that margin facilitates mission, the measure of a nonprofit organization is how these priorities are balanced by leaders who ultimately answer to their board.

The lack of frontline employees on nonprofit hospitals’ boards raises questions about whose voices are heard, whose experiences inform decision-making and, above all, who is valued. The near absence of workers other than physicians on boards is particularly notable, given the critical roles and vantage points of nurses, therapists, technicians, and other staff.

The composition of boards may contribute to the gap between rhetoric and reality with respect to health equity. In the AHA’s 2018 survey, 42% of U.S. hospitals had only white board members, and 70% of board members were male. Partly because board members tend to be major donors, hospital boards may often reflect broader inequality rather than respond to it. Many nonprofit hospitals spend less on charity care than for-profit hospitals, even though they receive sizable tax breaks for providing community benefits. Prioritizing charitable care to low-income neighborhoods, often communities of color, may lead to financial losses, a tension between purpose and profit that boards help navigate. If boards better reflected the communities their hospitals serve, this tension may be navigated differently.

That we couldn’t find a list of board members for five of the top 20 hospitals demonstrates a potential lack of transparency. Patients, health care workers, and community members have few mechanisms to hold nonprofit hospital leaders accountable. They are not elected by the public or chosen by shareholders. Many of these hospitals enjoy such significant market power that patients often cannot take their business elsewhere, as they might do in more competitive markets. Failing to publicly disclose the names of board members via accessible webpages shields hospitals from public scrutiny and erodes accountability.

The need to evaluate hospital governance is urgent. For now, health care workers can encourage nonprofit hospital leaders to diversify their boards across multiple dimensions, including race, gender, and socioeconomic status, and also to include a broad range of frontline workers. To help this along, organizations such as the American Hospital Association could develop an accreditation process to certify boards that are adequately representative, including various types of health care workers and patients that match the demographic characteristics of their communities.

If voluntary efforts fail, regulation could be considered. The Internal Revenue Service could mandate standardized public reporting of board composition and require boards to meet certain criteria to maintain their tax-exempt status, which is highly valuable to nonprofit hospitals. Criteria could be borrowed from existing models within and outside health care. Among federally qualified health centers, for instance, at least half of board members must be patients. Due to new rules, Nasdaq-listed corporations must annually disclose data about the board’s gender and racial characteristics and include two “diverse” directors.

New criteria could also stipulate how board members are chosen, borrowing from legislative proposals like the Accountable Capitalism Act introduced into Congress by Sen. Elizabeth Warren (D-Mass.) which requires that 40% of corporate board seats be selected by employees.

Together, such measures could help reform hospital boards to protect patients and empower frontline workers.

Sanjay Kishore is a primary care physician at the Equal Justice Initiative and a clinical assistant professor at the University of Alabama at Birmingham. Suhas Gondi is a resident in internal medicine and primary care at Brigham and Women’s Hospital in Boston. The views expressed here are theirs and do not necessarily represent those of their employers.