Cozy relationships between hospital chief executives and healthcare companies they do business with may raise ethical questions
If hospital employees, including pathologists, wonder why their hospital uses a certain company’s products and services it may be because their Chief Executive Officer (CEO) sits on the Board of Directors of the same companies from which the hospital buys products and services. That’s the suggestion in a recent Boston Globe investigative report.
In “Boston’s Hospital Chiefs Moonlight on Corporate Boards at Rates Far Beyond the National Level,” The Boston Globe reported that, in Boston, hospital CEOs at the city’s academic medical centers frequently sit on the boards of healthcare companies with which their hospitals do business. However, because the investigative reporters did not list the healthcare companies which had Boston hospital CEOs as board members, clinical laboratory managers and pathologists cannot determine from the article if their medical laboratories are using products from those same companies.
According to The Globe, five of seven CEOs and Presidents of Boston’s major teaching hospitals also receive compensation for serving as directors of publicly traded companies. And in their roles as corporate board members, hospital CEOs often receive stock in these companies, making the value of their remuneration potentially worth millions of dollars, The Globe reported.
Not Illegal, But Is It Ethical?
The Boston Globe’s investigation noted that such moonlighting, while not unheard of elsewhere in the country, is commonplace in Boston, raising ethical concerns despite conflict-of-interest policies aimed at limiting outside relationships.
“Hospitals in Boston and elsewhere that allow this outside corporate work do so under the terms of conflict-of-interest policies,” The Globe reported. “A Globe review of more than a dozen hospital conflict-of-interest policies across the country found more similarities than differences. Almost all require hospital trustees to approve a hospital chief’s outside board work and consider certain factors, such as the amount of business a company does with the hospital and time required.
“But the policies offer limited evidence about actual practices,” The Globe added. “Trustees typically retain significant discretion over what is permitted or barred, and their deliberations are generally hidden from the public. It is hard to tell if the relative rarity of hospital chiefs in other cities holding outside directorships is because of a lack of interest or opportunity, or is the result of trustees saying no.”
One of the hospital chief executives The Globe’s investigation highlighted was former-Boston Children’s Hospital CEO Sandra Fenwick. While there, The Globe noted, she also held a seat on the board of for-profit telehealth company Teledoc Health, and during her tenure as Children’s CEO, she lobbied Massachusetts legislators for telehealth funding at the start of the COVID-19 pandemic.
Though no laws were broken, some questioned the ethics of such actions. Nevertheless, The Boston Globe wrote that “Debra O’Malley, a spokesperson for Secretary of State William Galvin’s office, said Fenwick’s actions did not appear to violate the law: She is required to disclose in writing to the state that she is a lobbyist for the hospital and the bills she lobbied on, which she did, O’Malley said. That information is publicly available.”
And though The Globe reported that Boston Children’s Hospital had “declined to answer detailed questions about [Fenwick’s] lobbying efforts,” the paper wrote that a hospital spokesperson said, “[Fenwick’s] directorships are publicly disclosed in filings with the Securities and Exchange Commission.”
Fenwick retired from Boston Children’s Hospital in March 2021. The Globe noted that at that time her Teledoc Health stock, which was compensation for her board work, was worth $8.8 million. Additionally, she had been paid $2.7 million annually as CEO of Boston Children’s Hospital.
Avoiding Conflicts of Interest
Bad optics created by a Boston hospital CEO receiving seven-figure compensation for serving on the board of directors of a publicly traded company is not new. In July 2020, former Brigham and Women’s Hospital President Elizabeth Nabel, MD, resigned from the board of biotech company Moderna (NASDAQ:MRNA) “to alleviate any potential concern about the conduct or the outcome of the COVID-19 vaccine trial when Brigham and Women’s Hospital was identified by NIH as one of the clinical sites for the Phase 3 trial,” a Moderna press release states.
On March 1, 2021, Nabel also stepped down as Brigham and Women’s Hospital president. She then rejoined the Moderna board of directors on March 10, 2021, the press release noted.
In a STAT editorial, titled, “Hospital CEOs, Med School Leaders Shouldn’t Sit on For-Profit Health Care Company Boards,” endocrinologist and former Dean of Harvard Medical School Jeffrey Flier, MD, wrote, “As dean, I vigorously supported the value of robust interactions between faculty and industry to advance innovation and human health, and still do. In my current status as a professor of medicine at Harvard, I serve on several for-profit and not-for-profit boards. I learn from this work, and I believe I am making useful contributions as a board member. But I also believe that the considerations governing such relationships should be judged differently for institutional leaders.”
Flier maintains there are multiple reasons why hospital and medical school leaders should not sit on for-profit boards despite the expertise they bring to the table, including:
- The time commitment required,
- The “extraordinary compensation packages” they receive in their full-time jobs,
- The potential for complicated “business intersections,” and
- The risks to an “institution’s reputation for integrity.”
“I recommend that hospital CEOs and academic leaders at the level of Deans and Presidents devote their full attention to their well-compensated day jobs and defer positions on the boards of for-profit companies—and the unavoidable conflicts they raise—to the post-leadership phase of their careers,” Flier wrote.
While cozy relationships between hospital and academic medical center leaders and for-profit healthcare companies may not directly impact hospital pathologists and staff, it is worth staying aware of potential conflicts of interest.
—Andrea Downing Peck