Contributor: Delphine O’Rourke
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The high profile conflict of interest (COI) scandal at the Memorial Sloan Kettering (MSK) Cancer Center is a call to action for healthcare boards and their members to evaluate their organizations’ conflict of interest oversight. The scandal has become synonymous with egregious and ethically troubling relationships between non-profit health systems and pharma companies - even at the highest levels of one of the most prestigious healthcare institutions in the world. Almost nine months after the significant and publically scrutinized COI lapse, the preeminent New York research hospital and institution is still trying to recover from the reputational, leadership, and governance damage.
The shocking story - the millions of dollars the chief medical officer of the Cancer Center and one of the world’s leading breast cancer doctors not only received from pharmaceutical companies, medical device manufacturers, and consultants but failed to disclose - was dramatically revealed by The New York Times and ProPublica in a front-page story that immediately gained traction. Dr. Jose Baselga failed to report his extensive healthcare and pharmaceutical industry relationships and financial arrangements in appearances at scientific conferences and in journal articles. During his tenure, he apparently also served on the boards of Bristol-Myers Squibb, a global manufacturer of drugs to treat cancer, and of Varian Medical Systems, which sells radiation equipment for cancer treatment, and benefitted from those relationships.
In the aftermath of the scandal, Memorial Sloan Kettering engaged outside counsel to perform an extensive independent review of its COI process. Counsel shared the findings with the MSK board in April, including the determination that Memorial Sloan Kettering’s top executives failed to report their financial relationships and the Cancer Center failed to implement protocols to vet its own employees’ relationships with corporations. The lapses were not intentional - they happened because of a lack of attention given to COIs.
After months of being at the center of this national scandal, Memorial Sloan Kettering and its board of directors overhauled its COI policies to give COIs the attention and oversight they require. Healthcare organizations across the country would be smart to do the same.
Unfortunately, in too many institutions the conflict of interest process has become a bureaucratic exercise in paper shuffling, without meaning or protection for either the directors or the boards they serve. Despite elaborate policies and procedures, the COI forms are often included in an initial orientation packet, along with countless other documents, and completed without reference to any of the COI policies or understanding of the critical elements of a conflict of interest analysis.
The new board member, hopefully, completes the given COI form and, even with the best intentions, may not fully appreciate which perceived or actual conflicts are in scope. Such unintentional lack of disclosure could be surmountable, if there was a process to review the disclosures, follow up with the board, and make any corrections. The inherent challenge is that many policies place the burden on the member to identify conflicts, and the organization does not have an obligation to review, confirm, and/or follow up on the disclosed information. That seems to make sense. The board member is in the best position to know their financial and other potentially problematic activity (including those of their family members), the organization has no way of getting the information, and such double-checking would take time that no one has to spare.
There are other dynamics at play. Going back to a board member and suggesting the member may have hidden a conflict can be offensive, met with significant push back, and sour the relationship between the board member the organization. Not-for-profit boards - including boards of health systems, hospitals, and foundations - are significant vehicles for financial and political support, and confronting a significant donor or member with influence is often an unpopular decision.
In the healthcare space, there are the additional dynamics of physicians serving on boards and their potential web of financial arrangements with the health system on whose board the physician is serving, with other competing institutions, with pharmaceutical companies (as was the case with Dr. Baselga) and other vendors. Given the potential political and relational land mines of digging into a board member’s affairs, many institutions have fallen victim to the complacency of collecting the completed COI forms and sticking them in the proverbial binder. The box is checked, and the compliance staff tasked with the dreaded job of maintaining COI forms hopes the board member remembers to include the omitted conflict when it comes time for the annual COI update.
Lack of rigorous COI oversight has unfortunately become the perceived safe and compliant default for COI management in many healthcare organizations. Health system boards have more responsibilities, the industry is more complex, and everyone has less and less time for COI review. But, as the Memorial Sloan Kettering scandal has very publicly shown, complacency is detrimental for everyone involved.
Every director has a duty to avoid conflicts of interest as part of the director’s duty of loyalty to the organization. A board member must never use information gained through a role on the board for personal gain, must always act in the best interests of the organization, and avoid conflicts of interest or the appearance of conflicts. Just like the duties of care and obedience, the duty of loyalty is legally enforceable. Yes, it is. And that is why it is so important that board members understand what gives rise to a conflict of interest and, should they arise, know how to handle them properly. The existence of a conflict of interest is not inherently damning; it is the failure to disclose the potential or real conflicts such that they can be handled to avoid impropriety. The COI process is therefore not a nice-to-have - it is a must-have.
In the past several years, cybersecurity and other hot governance topics have overshadowed the COI process at the board level. The Memorial Sloan Kettering scandal is a harsh reminder of the personal and institutional risk of non-disclosure. Time to take the binder off the shelf.
Board of Directors - make sure your organization does not suffer from COI complacency:
- Perform a confidential review of current COI policies, procedures, and management against current best practices by a disinterested party such as outside legal counsel, auditors, or a task force of stakeholders who were not previously involved with the COI process.
- Share the findings of the review with the members of the board. If the review was conducted at the direction of legal counsel under the attorney-client privilege, consult with counsel regarding how and with whom the findings should be shared.
- Use the review as an opportunity to educate current members and to implement meaningful education for all new board members on your organization’s conflict of interest policies, procedures, and oversight, and guide the board members through their own analysis.
- Update your current COI policies, procedures, and management to ensure that all of your internal and legal requirements are continuously met. COI management is just as dynamic as your members’ financial and professional activity.
- While the board chair will handle the board activity around conflicts of interest, a staff member needs to be responsible as part of their stated job duties to perform the administrative functions around the COI process. Empower the manager of the COI process with authority to respectfully follow up when a board member does not turn in the COI forms, when information appears to be missing, incomplete or inaccurate, or for updates. Provide the manager and the board members with clear guidelines that will be followed in the normal course of business to decrease the feeling that a board member is being targeted.
Board Member - protect yourself from your own conflicts and avoid getting caught up in someone else’s scandal:
Make sure you have complete copies of the organization(s) conflict of interest policies, procedures, and forms.
- Ask for education on COIs if it is not automatically offered to you when you join the board.
- Make sure you fully understand the COI process and that the organization explains how it manages and enforces the process. Ask for examples.
- Make sure you have the name and contact information for the expert within the organization who can answer any questions you may have in the future, including questions about other members’ conflicts.
- Make sure the organization provides the board with an annual conflict of interest report, including confirming that 100% of the board has submitted the form, that the forms were reviewed internally, and that any concerns were fully vetted.
If you serve on a board or if you have a role in governance in your organization – whether public, private, or non-profit – make sure your boards and companies refresh their strategies around transparency this fall and into 2020. Shareholders and the public are demanding and expecting greater transparency in all areas of governance. The series of recent scandals provides an opportunity for boards to differentiate themselves and message their philosophies around conflicts and comprehensive approaches to ensuring transparency.
A razor-edge transparency plan would go beyond the required and traditional conflict of interest requirements and embrace a holistic view of transparency around relationships, financial connections, imputed reputational risk, and ethical and moral implications of relationships, and donations. We are all connected and becoming more so every day. That’s a strength and an opportunity to proactively understand and leverage those connections appropriately. If you don’t, you may wake up to see your company and fellow board members on the front page and main feed of The New York Times.
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