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Board composition may be the secret to giving your brand the boost it needs

It’s hard to overstate the importance of board composition for a hospital’s operations.

The evidence roundly declares that the people who sit on a board have a powerful impact on hospital performance. Optimal board configuration strengthens a hospital’s finances, its strategic planning, and even its clinical quality.

The most effective boards whole-heartedly carry out their fiduciary duties in fulfilling a hospital’s mission and strategic goals—and increasingly, those goals are oriented around consumerism, which involves patient experience, access/convenience/value, and most importantly, loyalty. This raises the question: how does board composition affect patient loyalty?

It’s a difficult question to study. Data is scarce, and unlike financial performance or outcomes measures, patient loyalty is far from straightforward to track. To probe the issue, The Governance Institute uses NRC Health’s Loyalty Index, which quantifies loyalty by breaking it down into seven constituent elements: Brand Score, Engagement, Need, Access, Motivation, Experience, and NPS.

Consumers rate healthcare facilities on each of these aspects, and the Loyalty Index combines their responses into a single composite number. This equips healthcare leaders with an objective way to evaluate what attracts consumers, and gives them a holistic grasp of an individual’s entire experience with a brand.

In this case, it also enables analysis of how specific trends in board composition are reflected in patient loyalty. Here are two areas to consider.

Age and term limits

Fewer and fewer health organizations are enforcing term limits on their boards. Large health systems, independent hospitals, subsidiary hospitals, and government hospitals have all seen steady declines in term limits since 2011.[1]

Meanwhile, very few boards have implemented age limits. While boards are, in fact, getting younger (the 2017 median age was 58, while 2015’s was 60), just 4.6 percent of hospital boards have age limits. That’s down from 7.6 percent two years ago.1

At first blush, these factors may seem unrelated to patient loyalty for a health-system brand. However, the Loyalty Index reveals some correlations worth noting.

There’s a nearly 8-point Loyalty Index spread between hospitals whose boards have both age and term limits, and hospitals whose boards have neither. Organizations with age- and term-limited boards score an average of 65.55 on the Index, while non-limited boards score just 57.54. (According to NRC Health, the 2017 national average for the Loyalty Index was 59.3, based on 273,972 consumer scores.) The higher the index score, the more likely it is that an organization will experience the benefits of consumer loyalty—so these factors may well be very important.

Of course, the figures don’t reveal why these limits might affect patient loyalty. But it’s possible that boards with age and term restrictions see a higher rate of turnover, which may lead to more adaptability in the face of shifting consumer priorities and trends both inside and outside of healthcare.

Whether that hypothesis holds will be a subject for future study. Regardless, these results should give healthcare boards cause to reflect on their structuring practices.

Physician inclusion and goal-setting

 It’s intuitive that physician presence on hospital boards should benefit clinical performance; it’s also borne out by the evidence. One study even found that the absence of physicians on a hospital board is associated with decreases of 3 to 5 percent in three out of four measures of clinical quality. Also, fewer boards (79.1 percent now, versus 85.6 percent in 2015) feel that they are appropriately involving physicians and other clinicians in governance.

Physician participation in governance, in turn, may affect another measure of board performance: goal-setting. The Governance Institute’s 2017 survey found that more than half—57%—of health organizations rate their boards as ineffective in setting goals for management and physician leaders.

Perhaps it’s not surprising that these measures correlate with patient loyalty. Organizations with boards that include physician leaders and effectively set goals for them score an average of 63.73 on the Loyalty Index. Those that manage neither score just 60.01.

It’s possible that physician inclusion engenders more engagement among an organization’s clinical staff, improving their relations with patients; or that physicians are uniquely able to shape the kind of strategic initiatives that genuinely improve customer experience. However the effect arises, though, it appears that physician involvement can have an appreciable impact on patients’ relationships with a health brand.

 Boards and culture

That point drives at the central objective behind board composition: generating the kind of culture that serves patients best. Selecting board members is about who has a say—whose values become part of the institution. Shouldn’t those values reflect a focus on the patient?

The evidence above suggests that, for better or worse, whoever sits on a hospital’s board directly shapes how the organization performs. It’s worthwhile for every health brand to consider where they fall in the matrices above, and to ask themselves, How might a change impact patient loyalty?

If you’d like more insight into how board members can optimize responses from consumers, please visit The Governance Institute’s website.

[1] “2017 Biennial Survey of Hospitals and Health Systems.” The Governance Institute. Accessed at https://www.governanceinstitute.com/?page=Biennial_Nov2017