Hospital Governance Challenges
ETHICS CASE
Hospital Governance Challenges
Kelly Brown had been a member of the Board of Governors of the Wolfson General Hospital for two years,
and had been asked to consider becoming the Vice-Chair of the Board. She had been a nurse before leaving
to raise her family, and now enjoyed participating on the Board to make the healthcare provided by Wolfson
General (WGH) as good as possible for her community. However, she wasn’t sure she wanted to become
the Vice-Chair because that meant that within a year or so, she would become the Chair, and would be
responsible for all hospital functions, its reputation, and the generation of funds for growth. She realized
that her knowledge of governance matters was limited, and she asked for your assistance in helping her
consider several issues, and her final decision to become the Chair.
Kelly knew that there would be increasing expectations for maintenance of WGH’s reputation, and she
wasn’t sure that the existing governance mechanisms were effective in identifying and assessing
reputational and financial risks, and she doubted she that was personally equipped to play a leading role in
improving a hospital governance system. But no one else on the board who was better equipped wanted to
take the time required.
Kelly realized that she had the advantage of growing up in the community and of knowing many of the
senior doctors and nursing staff. But that was a mixed blessing, because several of her nursing friends had
been confiding in her about questionable medical practices, and rumors about strange purchasing deals and
other “close” relationships.
She had also been reading news stories about scandals at three nearby hospitals that had destroyed the
reputation of the hospitals and of their governors, including the following:
• Fraud, embezzlement and kickback schemes by senior managers of construction projects,
including:
o Bid-rigging and manipulation of bids to favor specific contractors and suppliers
o Inflated prices in exchange for kickbacks
o Work by contractors on manager’s homes
o Provision of jobs for manager’s children, partly funded by hospital overpayments
o Luxury fishing trips
o Luxury trips to Napa, California, and on a Baltic cruise
o Payment for old invoices for which no one remembered the work happening.
• A manager of redevelopment, who was involved in the contractor selection process, failed to
disclose conflicts of interest with contractors, including:
o Two business ventures (bottled water and commercial real estate) with the bid-winning
contractor
o A loan over $100,000 from the contractor to the bottled water company.
• A manager arranged for purchases from companies her husband was involved with without
competing quotations, purchase orders or contracts. In fact, the paper trail for purchases was
frequently created after purchases had been made. Also, her husband sent invoices to the hospital
through pre-existing vendors to avoid procurement policies.
Of course, scandals frequently came to light on the medical practice side of the hospitals as well, and
here the problem of doctors not wishing to criticize or “tell” on colleagues was evident. Doctors who made
mistakes that caused patients a great deal of pain or dysfunction were rarely identified and dismissed, so
that the hospitals involved had to incur serious costs, time wastage, and loss of reputation when the
problems came to light and lawsuits were launched. The doctor’s “cone of silence” was simply not serving
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the best interest of the patients and hospitals involved, and some nurses were negatively influenced against
identifying misdeeds, as well. Moreover, the reticence to identify problem professionals was also evident
in that many of the governors and senor officers of the hospital were doctors or nurses, and many of them
didn’t want to get involved in disciplinary or dismissal processes.
Kelly realized that WGH had a mission statement and code of conduct that called for high levels of
service and integrity, but they hadn’t been updated for over 15 years and, although they had been provided
to new doctors, nurses, or administrative staff when they joined the hospital, there was no significant
discussion or training related to them. When Kelly considered the Board and its subcommittees, she
realized that most Board members were dedicated to providing excellent health care, but lacked extensive
corporate Board expertise, and preferred to leave financial matters and administrative detail to others. In
fact, of the five Board Subcommittees, four (Executive, Medical Advisory, Nursing Advisory, Quality
Committee, Quality of Care) concentrated primarily on health services, and only one focused on financial
matters (Fiscal Advisory), and that one was chaired by the senior administrative executive (CEO) at WGH.
The internal and external auditors also reported to the Board through the Fiscal Advisory Committee.
Although the Medical Advisory and Nursing Advisory Committees reported on questionable medical
practices, Kelly couldn’t remember any similar report on questionable personnel or financial matters. She
wondered if this was because WGH’s personnel and financial functions had been “outsourced” to a shared
operation with two other hospitals. Nor could she remember any organized review and discussion of the
risks WGH was facing, and of plans to reduce those risks.
Not surprisingly, her dear friend, the current Chair of the Board, was pushing Kelly for her answer on
whether she would accept the nomination as Vice-Chair. He had just dealt with a serious crisis and wanted
her answer before he could discuss the details confidentially.
Questions:
Kelly has asked you to give her advice on the following matters:
1. What major governance problems does WGH face? Which problems are the most important and need
to be fixed as soon as possible?
2. What are the most important ethical problems faced by a general hospital? How could these ethical
problems best be managed?
3. Should WGH introduce a crisis management process? If so, what should its objective be? How could
that best be achieved?
4. Why should WGH introduce a protected whistleblower program? Who should administer it, what
factors would make it successful, and how should it report?
5. Are these any other governance issues that Kelly should consider?
6. Should Kelly accept the nomination as Vice-Chair?