Wall Street Journal: Extensive Business Ties of Nonprofit Hospital Trustees Present Potential Conflicts of Interest

August 24, 2016 | Risk Management News

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​Nearly half of the more than 2,300 nonprofit hospitals in the United States had at least one trustee or board member in 2014 who had business ties to the hospital, according to an August 21, 2016, article in the Wall Street Journal. The figure was just 7% at all other U.S. nonprofits, the article said. It is not necessarily improper for a nonprofit hospital to conduct business with members of its board as long as the deals are disclosed and are conducted at market rate, the article said, but the practice does sometimes force administrators to choose between what's best for the hospital and what's best for their business. More than 270 nonprofit hospitals had business arrangements with board members that topped $1 million each. In many cases, the article said, nonprofit hospitals conduct large transactions with medical companies with whom they share a board member. Another example came at a South Dakota hospital, which paid more than $91 million for various projects between 2010 and 2014 to a construction company at which one of its trustees was board chair. A spokesperson for the hospital "declined to say whether the construction company won its contracts or offered the lowest price," and added that the hospital usually awards contracts to the lowest bidder but that it "may consider other factors." The trustee, who is not paid by the hospital, said all conflicts of interest are disclosed at board meetings. Conflicts of interest can also arise from family members of board members. A California health system in 2011 paid $3.8 million to a marketing company owned by the son of its chief operating officer (CEO).

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