CONFLICTS OF INTEREST ON THE BOARD OF DIRECTORS OF NON-PROFIT HOSPITALS: THEORY AND EVIDENCE

ABSTRACT**: Non‐profit hospitals are overseen by a board of directors that is charged with representing the interests of the communities they serve. Theoretically, society is interested in maximizing both the quality and quantity of medical services available to it through the hospital. But other groups may also want to use the hospital to maximize their own wealth. This paper examines the effect of increasing the proportion of physicians on the board of directors. We show theoretically and empirically that with even one physician on the board, society's optimal quality/quantity vector is compromised.