Simply the appearance of a conflict of interest -- even one that has lain dormant for many years -- can raise questions about the path taken by a physician executive. Consider a recent incident involving a physician and a hospital district near San Francisco.
The case involves Emmanuel Friedman, M.D., a trustee of the Peninsula Health Care District, just south of San Francisco. In 1985, Friedman voted to lease Peninsula to an organization that then merged with nearby Mills Memorial Hospital, eventually leading to the formation of Mills-Peninsula Health Services. Friedman also is a shareholder in 400-physician Mills-Peninsula Medical Group.
Last June, the Peninsula district trustees filed a civil lawsuit in San Mateo County Superior Court to break the lease to Mills-Peninsula. It alleged violations of the state government code as part of the suit, claiming that district employees had personally benefited from the transaction by taking jobs with the organization after the merger.
The suit was thrown out of court five months later, in part because of a 1995 settlement with the San Mateo County district attorney's office that had supposedly addressed potential criminal conflicts of interest involving district employees.
But late last December, the district attorney was back in court filing a motion to void the 1995 settlement and reinstate the civil lawsuit. The district attorney claims Friedman had never disclosed his ownership shares in the medical group.
The 1995 settlement involved an investigation by the district attorney of criminal conflicts of interest; the lawsuit concerned a separate civil matter.
The judge in the civil case decided the criminal investigation superseded the ability to pursue a civil claim, but now the district attorney is arguing that because Friedman's ownership shares had not been disclosed in the original investigation, the judge's decision was irrelevant to Friedman's status.
Friedman, a retired gastroenterologist, has denied a conflict in published reports. He claims the medical group has never contracted directly with the hospital board, and that he has never profited from his stake in the group.
In early February, the San Mateo County Superior Court heard arguments about whether the lawsuit should be reinstated; the court's ruling is pending. The story has generated headlines in several Bay Area newspapers, putting Peninsula in an uncomfortably harsh light.
Potential conflict for physicians is fairly commonplace, say governance experts; concrete ways to handle them aren't as prevalent.
The myriad recent mergers and acquisitions involving hospitals, PPMs and medical groups have put physician executives at risk for conflict-of-interest charges, as the Peninsula case illustrates. The risks are even greater for physician executives who continue to practice medicine or have ties to it.
"Physicians have always had to face one form of conflict of interest or another in the past, such as serving on the staff of one hospital and acting as a trustee on another," says Tom Dolan, president of the American College of Healthcare Executives in Chicago. "But it has become even more complex in recent years, because now a physician may be part of a large multispecialty group that may be able to perform some of the services the hospital can render."
Paul Torrens, M.D., says: "The new ethical challenges for physician executives are extraordinary, because they're right in the middle. Some part of the time they treat patients, another part of the time they work for a company where they have a financial interest. It can get very murky." Torrens is a professor of public health at the University of California, Los Angeles.
Most observers agree that a written policy is at the core of preventing conflicts.
"It's absolutely crucial and mandatory that institutions have them. It's an important part of developing legal protections," says Michael Anthony, Chicago-based partner in the law firm of McDermott, Will & Emery.
No estimates exist as to how many organizations have such legal policies, which in some instances may be included in medical staff bylaws.
In an attempt to weed out potential conflicts on the directorship side, the La Jolla, Calif.-based Governance Institute has developed template documents to address the issue. They include relatively clear declarations as to what constitutes a conflict, including not only having ties to firms that do business with the trustees' own organization, but ties to competitors as well. The documents also state that immediate family members with such ties present a conflict, too. A five-page questionnaire asking about past and present conflicts -- including ones that may have occurred up to five years before joining the board -- also has been developed.
But the UCLA's Torrens and James Orlikoff, a governance consultant in Chicago, observe that few organizations are aggressive with their policies.
"In my experience most organizations tend not to prospect for conflicts of interest, and they tend to have bland and vague policies to deal with them," Orlikoff says. "They tend to leave it up to every board member to declare potential conflicts."
Not only might policies be vague, but they often "lack teeth."
Orlikoff is concerned, for instance, that mere recusal from a vote is not enough to avoid a conflict.
"A trustee with a conflict should not just abstain from the vote. (He or she) should also be barred from discussion to avoid influencing the outcome," he says.
Further, if a physician executive or trustee has an outside business interest and the board solicits bids from competitors, the board should be precluded from accepting bids from connected businesses.
"If they can see how their competitors handle a bidding process, that can put them at a competitive advantage elsewhere," he says.
Orlikoff believes discipline should be carried out immediately if there are infractions of the policy: "It must be made clear there are negative consequences, such as censures or the immediate removal of the board member," he says.
Overall, the feeling is that if there is even the slightest potential for a conflict, a physician executive should err on the side of caution and make complete disclosures.
On the opposite end of the conflict spectrum might be the case of Thomas Frist Jr., M.D., chairman and chief executive officer of what many consider healthcare's most ethically challenged firm: Columbia/HCA Healthcare Corp.
Frist took Columbia's helm last summer in the wake of resignations and organizational shake-ups following initiation of a multi-agency investigation into potential Medicare billing fraud. Frist has held directorships at other organizations, including Vanderbilt University's Board of Trust. He normally recuses himself from any discussions involving business crossovers. At Vanderbilt, he avoided having too much power by removing himself from the running to become president of that board in 1995 because of questions of potential conflict.
Frist resigned from the Vanderbilt Board when he assumed his current position at Columbia. He felt he could no longer insulate himself from conflict because too many Columbia hospitals compete with Vanderbilt's facilities.
Ron Shinkman is a reporter in the Los Angeles bureau of Modern Healthcare, sister publication of Modern Physician.