Medical Staff

Fiduciary failure: Aberration or standard operating procedure?

Medical Staff Affairs Monthly, November 15, 2007

In healthcare, the term "fiduciary" generally conjures up a notion of a hospital board of directors exercising wise financial stewardship of the organization. However, the meaning of fiduciary is much more expansive than this narrow funnel. A fiduciary designates a person who holds something in trust for another. As defined in Black's Law dictionary, a fiduciary is "a person having the duty created by his undertaking to act primarily for another's benefit in matters connected with such undertaking." In such a context, a hospital board has a fiduciary responsibility to act for the overall-not just financial-benefit of the hospital. Likewise, a physician has a fiduciary responsibility to act primarily for the benefit of the patient and not his or her own interests. So what do we make of the following story?

In October 2007, an announcement was made in New Jersey by the U.S. Department of Justice of a $311 million settlement against several medical device manufacturers implicated in a physician kickback scheme. In a news release, Chris Christie, the federal prosecutor in New Jersey, stated that orthopedic device-makers entered into hundreds of consulting deals with physicians that required little to no work. The deals were described as commonplace. The release goes on to state that physicians chose implants based on how much money they could make from the manufacturers instead of what was or might be in the patient's best interest.

Hospitals, caught in the middle, are concerned about whether their medical staff members were involved in illegal consulting arrangements and whether such arrangements affected the price of implants purchased by the hospital. The lack of transparency raises the perception that physician-preference purchasing is motivated by inducement instead of legitimate clinical or technical reasons for the choices. Device manufacturers are concerned about how to pursue their need to work closely with clinicians to develop and create the safest and most effective devices possible.

Although legitimate consulting relationships do and can exist between physicians and device-makers, the lack of transparency of such arrangements casts a pall over the whole matter, making it appear like a sordid affair driven solely by personal financial concerns. In short, it represents a perception, perhaps even a reality, of a fiduciary failure.

The Greeley Company, a division of HCPro, Inc., in Marblehead, MA, teaches the importance of the 5 Ps: If you have a Policy, follow your Policy. In the absence of a Policy, our Policy is to create a Policy. Best practice for this challenge is a clearly articulated conflict-of-interest policy for board members, hospital executives, and medical staff members involved in purchasing decisions. Features of this policy should include disclosure of any involvement with a supplier regardless of the level or kind of remuneration. The policy should articulate whether an individual with such a conflict will be allowed to sit on committees that make purchasing decisions for products they recommend. For example, a physician sitting on a pharmacy and therapeutics committee may make a recommendation to purchase a particular drug. The organization should know whether that physician has any interest in or receives compensation or other benefit from the drug manufacturer. The policy should articulate the process for disclosure, recusal from discussion/vote, and/or nonparticipation in matters concerning the conflict.

One thing is certain: As healthcare becomes more complex and competitive, these conflicts of interest will increase. Because of the ever increasing focus on physician interests and hospital/physician competition, many organizations are not only adopting conflict-of-interest policies but are requiring annual completion by board members, hospital management, and medical staff members who serve on committees in the organization.

The fiduciary failure, as represented in this recent U.S. Department of Justice settlement, needs to remain an aberration and not standard operating procedure. Transparency, disclosure, and clear conflict-of-interest policies are strategies to deal with this challenge. The Greeley Company has long provided practical strategies to many organizations facing these challenges. Let us know if we can be of help. Until next time, be the best that you can be.

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