Nonprofit health system boards are governing larger, more complex enterprises than ever before, but a report published April 27 by The Governance Institute — part of NRC Health — argues that governance capability has not kept pace with that reality.
The report draws on survey data, public health spending figures and field experience to examine the question: Does the current governance model fit the operating reality of modern health systems? The answer, according to the report, is no, and the gap is widening.
Eight takeaways from the report:
1. A shrinking number of boards now oversee a massive share of hospital capacity. The nonprofit and state/local government hospital sector — comprising about 3,900 hospitals — is governed by approximately 1,500 fiduciary boards, with an estimated 22,500 total board seats. Those boards collectively oversee about $900 billion in net patient revenue and roughly 80% of all U.S. hospital admissions. The report notes that concentration changes the character of governance risk: When authority is this concentrated, weak board design and poor decision making travel farther and faster across the system.
2. Board development is front-loaded and then largely abandoned. Most hospitals and health systems invest heavily in formal orientation for new board members — introductory meetings, governance overviews, facility tours, etc. — and then develop things significantly. However, only 32% of boards require continuing education for board service, according to the report. Nearly one-third have not used a board assessment tool in the prior three years, and individual board member evaluations remain rare. The report describes this pattern as treating governance as a charitable, community-service role rather than a built capability.
3. About 70% of boards have no continuing education requirement. Healthcare is among the most regulated, operationally complex industries in the country, with layered financing, third-party payment, shifting demand dynamics, and a mix of public obligations and faith-based missions that introduce decision criteria well beyond financial performance. Even experienced leaders from other sectors require meaningful ramp-up, but that cannot end at orientation, according to the report.
4. Less than 0.01% of hospital patient revenue is invested in board development. In large public companies and financial-services organizations, board service is a compensated, performance-governed role, with directors recruited from national talent pools and supported by formal onboarding, annual evaluation and ongoing education — compensation commonly exceeding $200,000 annually. Nonprofit health system boards, which oversee similarly complex enterprises, remain predominantly volunteer-based with comparatively minimal investment in governance infrastructure.
5. AI is advancing faster than the boards responsible for governing it. The integration of AI into clinical, operational and administrative decision making is creating new governance responsibilities for oversight, validation and accountability. The report flags that in many organizations, these AI capabilities are advancing faster than boards can effectively govern them, adding another layer of complexity to an already strained governance model.
6. Multi-board structures are creating signal failure across health systems. As health systems have grown through mergers and acquisitions, they have assembled cd for enterprise governance. While more systems formally define how authority is allocated between system and local boards, fewer report that those definitions are widely understood and consistently applied. This can lead to duplicative agendas, slower escalation of critical issues and growing confusion within management about where ultimate decision-making authority resides.
7. Financial performance — at the expense of integrated decision making — has become governance’s default language. Under pressure, boards tend to gravitate toward what is most measurable and easiest to defend. The report argues that the principle of “no margin, no mission” becomes distorted when financial performance shifts from enabler to objective. Modern nonprofit healthcare decisions are rarely finance-only; they span quality, workforce, strategy, risk, digital transformation and mission simultaneously. A board that reviews each domain in isolation rather than weighing them together is not equipped for the decisions it now faces, according to the report.
8. Architectural redesign versus incremental improvement. The Governance Institute frames its response around a three-level maturity model: Intentional governance, which focuses on clearly defined roles and authority; integrated governance, which emphasizes cross-domain decision making in a single discussion; and enterprise governance, which ensures authority, decision rights, and accountability are coordinated across multiple boards and geographies.
Click here to access the full report.
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