State Audit Uncovers Questionable Business Practices at California Healthcare System

March 14, 2012 | Strategic Insights for Health System


A California healthcare system has done $21 million in business transactions over the past five years with firms in which its chief executive officer and board members held financial interests, according to an audit by the state that found the organization lacked sufficient safeguards to prevent the violation of conflict of interest laws. Among 11 instances of business transactions between 2006 and 2010 in which board members had reported economic ties, including stocks, salaries and other types of payments, to vendors with which the district did business, the audit identified at least two cases that may have broken the law. The audit also took issue with the organization’s complex supplemental retirement packages. In an environment characterized by the lack of an executive compensation policy and limited transparency in executive compensation matters, the healthcare system’s executives were granted compensation at the upper level of industry practices.

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