FACHE – ACHE Board of Governors (BOG) Exam
2026/2027 Edition – Practice Questions with
Verified Answers & Detailed Rationales
SECTION 1: GOVERNANCE AND ORGANIZATIONAL STRUCTURE
Question 1
What is the primary role of a governing body (Board of Directors) in a healthcare
organization?
A. To manage the day-to-day operations of the hospital
B. To develop the operating plan and monitor departmental performance
C. To set objectives and develop policies to guide the organization in achieving its
mission
D. To recruit members who understand the health services field
Answer: C. To set objectives and develop policies to guide the organization in
achieving its mission
Rationale: The primary role of the governing body is to set the organization's
strategic direction and objectives. Management is responsible for implementation
and day-to-day operations .
Question 2
The duty of loyalty requires that a board member do which of the following?
A. Disclose all of their assets before becoming a board member
B. Belong to as few healthcare organizations as possible
C. Refrain from conflicts of interest
D. Serve out their entire term
Answer: C. Refrain from conflicts of interest
,Rationale: The duty of loyalty requires board members to act in the best interest of
the organization and avoid using confidential information for personal or third-
party gain. This directly prohibits conflicts of interest.
Question 3
The concept of "board independence" means which of the following?
A. Board members should not have any knowledge of healthcare
B. A majority of board members should not have significant financial or personal
ties to the organization
C. Board members must be from outside the local community
D. Board members cannot be compensated for their service
Answer: B. A majority of board members should not have significant financial or
personal ties to the organization
Rationale: Board independence ensures that the board can effectively oversee
management and represent community interests without conflicts of interest. It
requires a majority of members who do not have material financial or personal
ties that could impair objective judgment .
Question 4
Which committee is typically responsible for CEO performance evaluation and
compensation?
A. Finance Committee
B. Executive Committee
C. Governance Committee
D. Compensation or Human Resources Committee
Answer: D. Compensation or Human Resources Committee
Rationale: Most well-structured boards have a separate compensation or human
resources committee responsible for evaluating CEO performance and determining
, compensation. This allows for focused attention on this critical function while
maintaining appropriate checks and balances.
Question 5
Which of the following is the most accurate statement regarding the "business
judgment rule"?
A. It protects board members from liability when they follow the CEO's
recommendations without question.
B. It protects board members from liability when they act in good faith, with
reasonable care, and in the best interest of the organization.
C. It protects board members from liability for any decision, regardless of its
reasonableness.
D. It protects board members from liability when they avoid making difficult
decisions.
Answer: B. It protects board members from liability when they act in good faith,
with reasonable care, and in the best interest of the organization
Rationale: The business judgment rule protects directors from personal liability if
they make informed, good-faith decisions that they reasonably believe are in the
organization's best interest, even if those decisions later prove unsuccessful. It
does not protect self-dealing, bad faith, or gross negligence .
Question 6
Hospitals governed by a board that is also responsible for the operations of a
larger health system are typically called what?
A. Freestanding Hospital Boards
B. System Boards
C. Medical Staff Boards
D. Foundation Boards
Answer: B. System Boards
2026/2027 Edition – Practice Questions with
Verified Answers & Detailed Rationales
SECTION 1: GOVERNANCE AND ORGANIZATIONAL STRUCTURE
Question 1
What is the primary role of a governing body (Board of Directors) in a healthcare
organization?
A. To manage the day-to-day operations of the hospital
B. To develop the operating plan and monitor departmental performance
C. To set objectives and develop policies to guide the organization in achieving its
mission
D. To recruit members who understand the health services field
Answer: C. To set objectives and develop policies to guide the organization in
achieving its mission
Rationale: The primary role of the governing body is to set the organization's
strategic direction and objectives. Management is responsible for implementation
and day-to-day operations .
Question 2
The duty of loyalty requires that a board member do which of the following?
A. Disclose all of their assets before becoming a board member
B. Belong to as few healthcare organizations as possible
C. Refrain from conflicts of interest
D. Serve out their entire term
Answer: C. Refrain from conflicts of interest
,Rationale: The duty of loyalty requires board members to act in the best interest of
the organization and avoid using confidential information for personal or third-
party gain. This directly prohibits conflicts of interest.
Question 3
The concept of "board independence" means which of the following?
A. Board members should not have any knowledge of healthcare
B. A majority of board members should not have significant financial or personal
ties to the organization
C. Board members must be from outside the local community
D. Board members cannot be compensated for their service
Answer: B. A majority of board members should not have significant financial or
personal ties to the organization
Rationale: Board independence ensures that the board can effectively oversee
management and represent community interests without conflicts of interest. It
requires a majority of members who do not have material financial or personal
ties that could impair objective judgment .
Question 4
Which committee is typically responsible for CEO performance evaluation and
compensation?
A. Finance Committee
B. Executive Committee
C. Governance Committee
D. Compensation or Human Resources Committee
Answer: D. Compensation or Human Resources Committee
Rationale: Most well-structured boards have a separate compensation or human
resources committee responsible for evaluating CEO performance and determining
, compensation. This allows for focused attention on this critical function while
maintaining appropriate checks and balances.
Question 5
Which of the following is the most accurate statement regarding the "business
judgment rule"?
A. It protects board members from liability when they follow the CEO's
recommendations without question.
B. It protects board members from liability when they act in good faith, with
reasonable care, and in the best interest of the organization.
C. It protects board members from liability for any decision, regardless of its
reasonableness.
D. It protects board members from liability when they avoid making difficult
decisions.
Answer: B. It protects board members from liability when they act in good faith,
with reasonable care, and in the best interest of the organization
Rationale: The business judgment rule protects directors from personal liability if
they make informed, good-faith decisions that they reasonably believe are in the
organization's best interest, even if those decisions later prove unsuccessful. It
does not protect self-dealing, bad faith, or gross negligence .
Question 6
Hospitals governed by a board that is also responsible for the operations of a
larger health system are typically called what?
A. Freestanding Hospital Boards
B. System Boards
C. Medical Staff Boards
D. Foundation Boards
Answer: B. System Boards
