Beyond the backyard: Rethinking how hospitals and health systems build their boards

C-Suite

Article

By Mark Rogers, Managing Director and Head of Board Practice, Robert Half

If one of America's leading health systems announced that it would only recruit physicians from within a 30-mile radius of its headquarters, the decision would be met with disbelief. Likewise, if it insisted that its next Chief Executive Officer had to come from the local community, few would consider that a sound leadership strategy. Healthcare organizations recruit nationally for their executives because they understand a simple truth: the best talent is rarely confined by geography. Yet when it comes to recruiting the people responsible for overseeing those executives, many hospital and health system boards continue to do exactly that.

For decades, nonprofit hospitals and healthcare systems have largely populated their boards with accomplished business leaders from their local communities. These individuals are often highly successful CEOs, attorneys, bankers, entrepreneurs, and civic leaders. They know the market. They support the hospital philanthropically. They understand the community and its needs. These individuals can — and should — continue to have an important place around the boardroom table. But community leadership should not be confused with healthcare expertise.

Hospitals have outgrown the community-board model. They now need boards built for complexity.

As you consider your board model, learn how the Robert Half Board Practice can help organizations navigate growth, governance and change.

Considerations for hospital and health system boards

An industry that demands expertise
What if hospitals recruited directors like corporations?
The compensation myth
Community representation is not enough
A higher standard for hospital governance

An industry that demands expertise

The governance challenges facing today's hospitals bear little resemblance to those of even twenty years ago. Healthcare is one of the largest and most complex sectors of the American economy. U.S. healthcare expenditures reached $5.3 trillion in 2024—approximately $15,500 for every person in the country—and accounted for 18% of U.S. GDP. Hospital expenditures alone exceeded $1.6 trillion.[1] At the same time, health systems are navigating artificial intelligence, cybersecurity, physician shortages, changing reimbursement models, workforce challenges, value-based care, escalating capital costs, consolidation, regulatory scrutiny, and relentless pressure to improve both clinical and financial performance.

Size may vary, but complexity does not. Today's hospitals and health systems operate in an environment defined by regulatory scrutiny, workforce challenges, technological disruption, cybersecurity threats, reimbursement pressures, and relentless demands for both clinical and financial performance. Their boards are responsible for far more than reviewing financial statements and approving strategic plans.

Yet many of these same organizations conduct national searches for CEOs, CFOs, CMOs, and other senior executives while limiting the search for directors to a relatively small geographic area. It is difficult to explain why the body responsible for overseeing management should be recruited from a narrower talent pool than management itself.

Perhaps it is worth asking an uncomfortable question: Has geography become a substitute for expertise?

What if hospitals recruited directors like corporations?

Imagine assembling the ideal board for a multibillion-dollar health system from scratch. Would you intentionally limit your search to executives who happen to live exclusively within the service area? Or would you identify the capabilities the organization needs and then seek the very best people available—regardless of where they live? A large publicly traded corporation would rarely hesitate to recruit nationally for a director with a critical skill set. The objective is to find the individual whose experience best aligns with the organization's strategic priorities and expertise gaps. Hospitals should approach board recruitment with the same discipline.

This does not mean filling the board exclusively with healthcare executives. Some of the most valuable perspectives in a hospital boardroom can come from executives in financial services, technology, consumer businesses, human resources, manufacturing, professional services, and other industries. But a board governing a multibillion-dollar healthcare enterprise should also contain meaningful depth of healthcare expertise. Consider the possibilities:

A recently retired Chief Medical Officer from a comparable health system in another region;

A former CEO of a large integrated delivery network;

A former executive of a major national health insurer who understands reimbursement and payer-provider dynamics;

A nationally respected Chief Nursing Officer who has managed clinical workforces at scale;

A healthcare technology executive who has overseen digital transformation and artificial intelligence;

A healthcare cybersecurity leader who understands the unique vulnerabilities of clinical environments;

A former CMS, FDA, or state healthcare regulator who has spent a career navigating the regulatory environment; or a

Value-based care executive who understands where healthcare delivery is heading rather than simply where it has been.

These individuals have spent decades confronting precisely the issues today's hospital boards are expected to oversee. They understand reimbursement because they negotiated it. They understand patient safety because they were accountable for it. They understand physician alignment because they managed it. They understand quality metrics because they lived with them. That experience cannot always be replicated by even the most accomplished executive whose career has been spent outside healthcare.

The compensation myth

Non-profit hospitals and health systems often cite limitations on director compensation by tax-exempt institutions as a reason for restricting board recruitment to their local service area. Such a position, however, ignores the reality that compensation is not the only reason accomplished executives serve on boards.

There is a substantial pool of current and former healthcare executives who would welcome the opportunity to contribute to a respected hospital or health system. Some are recently retired and want to remain engaged in the industry. Others want to give back to a profession that defined their careers. Still others recognize that nonprofit board service provides meaningful governance experience that can help position them for future service on corporate boards.

Although healthcare institutions should certainly consult with counsel as to applicable federal and state laws and regulations, it is widely understood that tax-exempt organizations can reimburse legitimate, substantiated travel and other business expenses associated with board service under applicable IRS rules.[2]

The obstacle, therefore, is not necessarily compensation. And it certainly is not a lack of qualified candidates. The real obstacle may simply be tradition.

Community representation is not enough

The most predictable response is that hospital boards need to represent their communities. They absolutely do. Hospitals occupy a unique position in American communities. Local directors understand community health needs, philanthropic relationships, civic priorities, major employers, local government, and the history and culture of the institution. Those perspectives are indispensable. This is a false choice. Community representation and industry expertise can—and should — coexist on the same board. The strongest boards intentionally recruit both.

A hospital’s fiduciary body is ultimately responsible for overseeing strategy, financial stewardship, clinical quality, patient safety, enterprise risk, executive succession, cybersecurity, workforce strategy, capital allocation, and increasingly, artificial intelligence. Those responsibilities require capabilities that may—or may not—exist within the hospital's immediate geographic footprint.

A hospital board should therefore begin every recruitment process with a fundamentally different question. Rather than asking, “Who do we know in the community?” it should ask, “What expertise does this board need, and where can we find the very best person who possesses it?” Sometimes the answer will be an accomplished leader who lives 5 miles from the hospital. Other times, it may be someone 1,000 miles away with precisely the experience the board is missing. Geography should not determine who gets considered; the needs of the institution—and the quality of the candidate—should.

A higher standard for hospital governance

Patients deserve directors who understand the complexities of modern healthcare. Employees deserve directors capable of overseeing one of the nation's most challenging workforces. Physicians deserve directors who understand the realities of clinical practice. Bondholders deserve directors capable of overseeing multibillion-dollar enterprises and significant financial risk. And communities deserve boards that recruit with the same rigor and discipline they expect from every other critical leadership decision.

For decades, geography has quietly shaped how many nonprofit hospitals recruit directors. Perhaps it is time for expertise to take its place. The geographic boundaries that define a hospital's patient population should not define the boundaries of its board recruitment.

Because when lives—not quarterly earnings—are at stake, the standard for who sits around the boardroom table should arguably be higher, not lower.

Geography may define a hospital's service area. It should not define the boundaries of its board search.

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Sources

[1] Centers for Medicare & Medicaid Services, National Health Expenditure Data. U.S. healthcare spending reached $5.3 trillion in 2024, representing 18.0% of GDP; hospital expenditures were approximately $1.635 trillion.

[2] Internal Revenue Service, guidance for tax-exempt organizations regarding reimbursement of officers and volunteers for substantiated business expenses under an accountable plan.

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