The burgeoning size and vast business relationships of many nonprofit hospitals create potential conflicts of interest and pose unique challenges for the institutions' leaders in combating appearances of impropriety, writes The Wall Street Journal.
A Journal analysis of more than 2,300 medical centers' Internal Revenue Service filings found that in 2014, 46 percent had at least one trustee or administrator who had ties to companies that did business with the institution. Only 7 percent of other types of nonprofits had similar arrangements. The deals could lead to criticism and erode public trust, experts say, especially when they involved very large transactions.
One of the largest such deals involved Avera McKennan Hospital & University Health Center in Sioux Falls, S.D., which paid $91.2 million in contracts from 2010 to 2014 to the Journey Group, a construction company whose chairman, David Fleck, is a hospital trustee. A spokeswoman for Avera declined to state whether the contracts were competitively bid or represented the lowest price offered for the work. She said the hospital’s conflict of interest polices are in line with federal and state law and that the Journey deals have not generated any complaints.
Other nonprofit hospitals say it can be hard to avoid such deals given the extent of big nonprofit hospitals' business requirements and the need to tap local business leaders in seeking out hte most qualified trustees.