Does the Hospital Board Need a Doctor? The Influence of Physician Board Participation on Hospital Financial Performance

In this study, the authors attempted to determine if physician board participation enhances or impairs the operational performance of a hospital. Two theories-managerialism and agency theory-are compared to determine if participation on the hospital board by inside (i.e., medical staff) and outside physicians provides informational advantages (managerialism) or poses the threat for opportunism (agency theory). Using hospital operating margin to measure hospital performance for a 4-year period (1985-1988), the findings indicate that boards with inside physician (medical staff) participation had significantly better performance than those without such physician participation. Supportive of the managerialist perspective, the findings strongly suggest that medical staff board participation can enhance operational performance. Implications of physician-hospital relations for future hospital strategies as well as health care reform issues are discussed.