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H H S Department of Health and Human Services
U.S. Department of Health and Human Services
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What is the best organizational design for a rural health network?

The best organizational design for a rural health network will depend on its membership and activities.  An informal network consists of a casual group of interested parties who convene to discuss an issue of mutual concern.  This organizational design does not have written agreement and its decisions are ad hoc and non-binding.  Informal networks provide participants with the opportunity to built trust, to test various membership combinations, and identify common interests without a large financial investment or complicated governance structure. 

Formal rural health networks take one of two forms: 1) governance by written agreement; or 2) legal incorporation.  A network governed by a written agreement has a loose structure and may be preferred when the agenda for the collaboration is modest.  Also, such an organizational arrangement may be preferred if the network does not have employees and performs most of its responsibilities using in-kind resources.  Under the written agreement, the network can elect officers, adopt operating procedures, form committees, and implement programs. 

Incorporated networks tend to be more permanent than networks governed by a written agreement.  An incorporated network may be operated as either a not-for profit or for-profit entity.  An incorporated entity must also meet legal requirements.  This includes having articles of organization or incorporation that details the purpose of the network, identifies the initial directors, and specifies the location of offices.  The incorporated network must also have an operating agreement or bylaws that define corporate governance structure, including selection of the board of directors and other officers, and governing procedures.  For-profit corporations must also include the basis for any financial distributions to directors or shareholders in the bylaws.

The more complicated the network programs and procedures, the greater the need for a corporate structure.  Moreover, networks that engage in projects with potential medical or financial liabilities should incorporate to minimize the risk of personal liability for its members.  Approximately 70 percent of all rural health networks are currently organized as legal corporations.  Organizational form, however, is fluid.  Thus, a network may change its form to better meet its objectives.


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