Insiders and business directors on hospital boards and strategic change.

Many hospitals are eager to incorporate practices of boards in business organizations. Yet little evidence exists on the desirability of "corporate" board features in hospital settings. We examined the effects of two characteristics of corporate boards--the relative dominance of insiders and of directors with business-related occupations on strategic changes within hospitals. We studied 335 hospitals in California immediately following legislative reforms in 1982. We found that hospital boards with a higher proportion of insiders and business directors made more changes in their mix of services in response to legislative reform. In addition, this relationship held for nonproprietary hospitals but not for proprietary hospitals. Limitations and implications of the results are discussed.