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Would there be a conflict of interest or any other compliance issue if the sales representative of a laboratory vendor company -- from which the hospital buys 50% of its lab products -- were to be employed PRN at this facility?

Compliance Monitor, March 25, 2004

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Determining if a potential conflict of interest exists really depends on the facts and circumstances of the arrangements -- viewed in their entirety and individually. There are a host of issues surrounding the arrangement that could give rise to problems. Here are some questions to consider:

1. Is the PRN employment by the lab company in any way conditioned upon remaining an employee of the hospital, or vice-versa?

2. How is the individual compensated by the hospital and by the lab company?

3. How does the hospital pay for its lab products, i.e. does hospital receive any discount as a result of employing the lab product manager as a PRN?

Each arrangement must be based on the fair market value of the services rendered and be negotiated at arm's length. If the individual is considered a "bona fide" employee by both entities, the individual must be fulfilling legitimate duties and responsibilities as an employee of each entity. Other issues could arise with respect to the source of the employee's benefit coverage, payment of employment taxes, etc.

This question was answered by George W. Bodenger, partner at Duane Morris LLP.

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