Even if they’re not illegal or against any rules, nonprofit hospital leaders’ business relationships can create conflicts of interest that put them in awkward positions, according to The Wall Street Journal.
The WSJ analyzed Internal Revenue Service data and found that of more than 2,300 nonprofit providers, nearly half employed an officer or trustee with business ties to the hospital, whether personally or through a relative. That’s nearly seven times the rate of relationships for nonprofit organizations in general, which is only seven percent, according to the article. The arrangements exceeded $1 million each for more than 270 nonprofit hospitals, and some of the steepest were transactions between companies and hospitals that share board members. Other cases involved hospitals contracting with companies in other sectors, such as construction or advertising, owned by trustees.
For example, Sioux Falls, South Dakota’s Avera McKennan Hospital & University Health Center paid $91.2 million to construction company Journey Group, chaired by trustee David Fleck, between 2010 and 2014, according to the WSJ. Fleck sold his Journey stake in 2012 but declined to comment on whether he was still being paid by the company.
Meanwhile, Nathan Dean, son of Dignity Health CEO Lloyd Dean, owned 51 percent of a company that was paid $3.8 million over two years for marketing and branding services; the contract was renewed in 2014. Lloyd Dean maintained there were no ethical issues at play, telling the WSJ everything stayed within the perimeters of Dignity’s anti-conflict of interest policies.
Such deals aren’t violating any rules or ethical standards as long as they’re public and at market rate, but critics are concerned they may put those involved in positions where they have to choose between the hospital and the company. Watchdogs have expressed similar concerns about the relationship between hospitals and academic leaders, as well as drug companies.
“Just because something is legal doesn’t mean that it’s appropriate,” James Orlikoff, a Chicago-based hospital governance consultant, told the WSJ. “You run the real risk of violating the public trust.”
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