Salem officials sit on Lewis-Gale board
Roanoke Times & World News, Apr 4, 2010 | by Sarah Bruyn Jones
For at least a decade Lewis-Gale Medical Center has relied on the advice of Salem city officials in making decisions related to its hospital.
And Salem, with an estimated population of 25,400, has also relied on the strong relationship it has developed with its largest taxpayer and non-government employer. Lewis-Gale -- owned by for- profit HCA, which bills itself as the nation's leading provider of health care services -- contributes roughly $1.9 million in annual revenue to the city from business license fees, personal property taxes and real estate taxes. Lewis-Gale employs about 1,500 people, slightly fewer than the Salem Veterans Affairs Medical Center.
Most directly, the Salem-based Lewis-Gale hospital has solicited advice by appointing city officials to its board of trustees. Currently two officials sit on the Lewis-Gale advisory board. They are City Manager Kevin Boggess and Melinda Payne, director of the department of planning and development.
"They are going to understand the needs of the community and they can provide valuable advice and direction on the needs of the community," said Nancy May, spokeswoman for Lewis-Gale.
Payne has served on the board for about three years, while Boggess was just recently appointed. Boggess' city manager predecessor, Forest Jones, is a former board member.
Some ethicists question the arrangement.
"It seems to me that there is at least the potential for a conflict of interest to exist," said Rich Wokutch, a professor at Virginia Tech's Pamplin College of Business who specializes in business ethics.
After all, a city official could have to work with competitors of the hospital, or something beneficial to the hospital might not be in the best interest of the city.
Boggess, prior to joining the board, stood up at a public hearing to support Lewis-Gale's efforts to prevent Carilion Clinic from bringing a mobile imaging unit to Salem. More recently another competitor of Lewis-Gale has worked with the city in planning to develop an outpatient surgery center and medical offices on the former Elizabeth Campus.
"We're a free market," Boggess said when asked about the proposed Elizabeth Campus development. "And competition is good and the city of Salem has an interest in seeing that property developed."
Both Boggess and Payne said their first commitment is to the city government and their paid jobs. Lewis-Gale board members are not paid.
"Our positions are we are going to do what's in the best interest of the city. Always," Payne said. "That's what we have to do."
Boggess also emphasized that much of the advice he is asked to give focuses on internal hospital policy and personnel issues.
Wokutch said at the very least people in the position of Payne or Boggess should recuse themselves from decisions where even the appearance of a conflict of interest might exist. Both said they would do exactly that. Additionally, May said the board bylaws require every trustee to sign a statement listing all conflicts of interest.
"The trustee also agrees not to participate in any vote or deliberations on the matter," May said.
While the arrangement may raise some eyebrows among ethicists who discourage cozy relationships between government and business, one expert in hospital board structure said this situation is unique and harmless.
Typically James Orlikoff said he would vehemently oppose any hospital that appointed a government official to its board. But that's mostly in the case of nonprofit hospitals. For instance, Roanoke-based Carilion Clinic is a nonprofit and does not have any government officials on its board of directors, which has a governing instead of an advisory role.
Orlikoff, who is president of a Chicago-based consulting firm that specializes in hospital governance, said that for-profit hospitals that are part of the national HCA Inc. chain, such as Lewis-Gale, have an entirely different governance structure that makes the question of conflict moot. In short, the hospital's trustees really don't have any power and can make only recommendations, which may or may not be adhered to by management.
"The real power rests with the corporate board of HCA, not the hospital advisory board," Orlikoff said. "The bottom line is it doesn't matter what the board says, HCA is going to do what it wants to do to make a profit."
Remember the side-by-side comparison between Lewis-Gale and Winchester Medical Center? If not, then follow this link on the post from November 9, 2009: