When Evolent Health was just a fledgling technology firm, MedStar Health swooped in to be its first customer. Even today, the not-for-profit health system relies on Evolent's population health management system and health plan management services.
Meanwhile, MedStar's CEO, Kenneth Samet, has served as a director for Evolent since 2015. Last year, the gig paid him total compensation worth $177,500. He also owns more than 12,000 shares in the company.
The CEOs of not-for-profit health systems routinely serve as directors for outside companies, including publicly traded ones, and their latest Securities and Exchange Commission proxy filings show they're well compensated for doing so. It's also not uncommon for those health systems to simultaneously do business with those companies. Opinions on the practice run the gamut, but governance experts say such relationships can be managed by having detailed policies on conflicts of interest that are regularly reviewed.
“It's not that there are not conflicts of interest,” said David McMillan, managing principal of strategy and integration with the healthcare consulting firm PYA. “It's that we manage the conflicts of interest.”
But not everyone thinks that's possible. Northwell Health has a goal of not doing business with companies it has relationships with, said Greg Radinsky, Northwell's chief compliance officer. The SEC filings show Northwell CEO Michael Dowling was compensated $134,410 serving as a director for BankUnited. He also owns 5,000 shares of the company's stock.
Northwell does not do business with BankUnited.
“There's lots of shades of gray to look at, and we tend to take a conservative approach overall,” Radinsky said.
Some take that even further. Jeffrey Romoff, CEO of UPMC, has had a long-standing practice of not serving on outside boards to avoid even the appearance of conflicts of interest, a spokesman wrote in an email. Romoff did not comment for this article.
In MedStar’s case, a spokeswoman said Samet does not participate in business decisions pertaining to Evolent. The health system has conflicts of interest and ethics policies that determine how all of its associates, including Samet, interact with outside companies.
Drug giant Merck & Co. effectively paid Mayo Clinic $234,167 for CEO Dr. John Noseworthy's work serving on its board. Even though Mayo buys Merck's products and receives research funding from the company, Mayo's chief legal officer shrugged off any notion that the relationship influences purchasing or research decisions.
“The reality at Mayo Clinic is our researchers, pharmacists, physicians and businesspeople are making decisions based on what they think is best for our patients and for Mayo Clinic,” said Josh Murphy, “and what relationships our CEO has with other external entities is not factoring into that analysis.”
Health system executives' outside roles have taken the spotlight since September, when Memorial Sloan Kettering Cancer Center's chief medical officer resigned following reports that he failed to disclose several millions of dollars in payments he received from drug and healthcare companies in dozens of his research articles. In early October, Sloan Kettering's CEO resigned from the boards of Merck and Charles River Laboratories, from which he received roughly $600,000 in cash and stock compensation last year. The research institute also launched a new conflict-of-interest task force.