Barry Freedman, president and chief executive officer of Albert Einstein Healthcare Network, Philadelphia, was named to the board of for-profit group purchasing organization Managed Health Care Associates, a company that may compete with Albert Einstein Healthcares GPO, Premier.
The appointment highlights the ethical challenges hospitals face when approving an employees participation on the boards of other healthcare-related companies, according to some healthcare governance experts.
Freedman joined the board of Managed Health Care, a Florham Park, N.J.-based GPO serving long-term-care facilities, specialty pharmacies, physician offices and clinics, in early January.
Neither Albert Einstein Healthcare nor Managed Health Care would comment on whether Freedmans appointment includes stock options, a salary or other forms of compensation.
In addition to the healthcare systems two acute-care hospitalsthe 701-bed Albert Einstein Medical Center, Philadelphia, and 60-bed Einstein at Elkins Parkthe provider also purchases supplies for rehabilitation and restorative-care facilities, physician-practice and outpatient-surgery centers and a behavioral health facility.
Alexis Moore, spokeswoman for Albert Einstein Healthcare, said the provider currently has no plans to change its purchasing arrangement with Premier, and that the hospital sees no conflict of interest in Freedmans Managed Health Care board appointment since the two companies have no business dealings. MHA does not sell or do business with acute-care hospitals like Einstein, Moore said. She declined, however, to comment or speculate about the potential for future business dealings between Albert Einstein Healthcare and Managed Health Care in parallel areas of business such as the providers physician practices and specialty-care facilities.
Richard Steinberg, founder of the Westport, Conn.-based consulting firm Steinberg Governance Advisors and former head of PricewaterhouseCoopers corporate governance program, said how the healthcare provider moves forward with managing Freedmans influence over the purchasing process will determine whether his board appointment creates a conflict of interest. On the face of it, I dont think theres necessarily a problem with the appointment, Steinberg said. The key is if there is any business or contractual negotiation between the GPO and the hospital, then the hospital executive has to recuse himself from the process.
Steinberg acknowledged, however, that the provider could have a perception problem given the attention that lawmakers are paying to corporate governance issues and healthcare group purchasing organizations. Whats more, Albert Einstein Healthcares own conflict-of-interest policy posted on its Web site states that employees should avoid not only actual conflicts but also the appearance of conflicts of interest when dealing with outside organizations. There could be the appearance of conflict, and if that appearance is too great, then it may not be a good idea to accept the appointment, Steinberg said.
But Gregg Wallander, a healthcare governance specialist with the Indianapolis-based law firm Hall Render Killian Heath & Lyman, said hospitals have a good deal of legal wiggle room to address any potential conflicts of interest that could result from an executives appointment to an outside board, and that Freedmans work with Managed Health Care doesnt automatically cause a perception problem for the provider. I think the term conflict of interest is thrown around a lot, but its the (hospital) board that makes the decision and sets the guidelines for an executives recusal during vendor contract negotiation, Wallander said.