Governance Renewal for Health Care Systems: Managing the Transition to Operating Company Models

Many multihospital health care systems today are attempting to operate as integrated enterprises, yet they remain governed through legacy structures and processes. Built through decades of mergers, these systems often function as confederations of legacy entities, with fragmented boards, overlapping authority, unclear accountability and governance processes that have not evolved alongside scale, complexity, and risk. The result is delayed decision-making, diluted accountability, limited ability to deploy resources, manage risk or execute strategy at the enterprise level. This briefing for boards and leadership examines why governance renewal has become imperative as systems transition from holding-company models to true operating company models and outlines practical governance solutions for renewing governance to meet health system imperatives. Key takeaways:

1. Governance renewal enables system operational success. Many systems have achieved scale but remain governed as confederations. As systems pursue operating-company performance, governance must evolve from coordinating components to directing and operating the enterprise as a single entity.
2. Integration requires trade-offs that governance facilitates. Governance enables the difficult choices that integration demands across the enterprise. Without it, parochial tensions predictably block variation reduction, program rationalization and strategic capital deployment. High-performing systems clarify parent-board authority over enterprise strategy and decision rights, while preserving local boards only where they add distinct value.
3. Anticipate AI. The deployment of AI introduces clinical, ethical, regulatory, and reputational risk and therefore requires explicit board-level oversight within enterprise risk and quality frameworks.
4. Design governance as an operating system. The discipline includes enterprise scorecards, authority matrices, standardized processes and materials, and clear escalation norms that make decisions faster and oversight focused to better move the enterprise forward.
5. Renew Board Membership in addition to structure. Recruit for enterprise strategy, finance, digital capabilities, and risk management, and invest in board education to strengthen competencies.
6. Stage the renewal—and manage it as change. Deliberate sequencing from alignment through phased transition and continuous attention to board process is what makes governance reform durable, as measured by sustained behavior change and operational impact.

Read the full report .