Texas Health CEO recuses self from deal
From the company’s founding, questions were raised about whether it was appropriate for five not-for-profit hospital executives to sit on the board of LHP Hospital Group, an investor-owned company whose strategy was to form hospital joint ventures with not-for-profit providers.
One of those directors, Douglas Hawthorne, president and CEO of Texas Health Resources, Arlington, recently recused himself from all negotiations and discussions regarding a joint venture between LHP and THR to acquire a hospital in Sherman, Texas, LHP and THR said. THR is the majority partner in a joint venture with LHP that acquired 215-bed Wilson N. Jones Medical Center for undisclosed terms other than a $25 million capital commitment over four years (April 19, p. 4).
Hawthorne joined the board of LHP, Plano, Texas, at its founding in January 2008, making him one of five current or former not-for-prof- it system CEOs on the company’s board (Jan. 21, 2008, p. 7). A Modern Healthcare editorial argued that serving on the LHP board was a conflict of interest for these not-forprofit executives and a poor political message for the industry (Feb. 4, 2008, p. 23). In response, Hawthorne wrote in a letter to the editor that there would be no conflict of interest for him because, “Texas Health Resources only has hospitals in a 16-county region of north Texas. (LHP) will not do business in north Texas. In fact, the company is barred from doing so by contractual agreement.” The Jones hospital is in Grayson County, which is adjacent to that 16-county region.
Both THR and LHP said the organizations had an understanding that LHP would not do business in north Texas without THR.
Hawthorne was not available for comment last week, according to THR spokesman Wendell Watson. In an e-mail, Watson said the understanding between THR and LHP was designed to avoid any conflicts of interest for Hawthorne. Nevertheless, Watson wrote, Hawthorne recused himself from all negotiations and discussions regarding the Jones acquisition and joint venture, including board and committee meetings. THR and the Jones hospital had discussions about collaborations starting several years before LHP’s founding, Watson also wrote.
In a statement, Dan Moen, LHP’s CEO, said Hawthorne played no role in the negotiations as an LHP director, either, recusing himself from “board and committee meetings, e-mails, written communications or any other discussions.”
Hawthorne has led Texas Health Resources since it was founded by the merger of the former Harris Methodist Health System and Presbyterian Healthcare System, both based in Dallas, in 1997. Hawthorne had been president and CEO of Presbyterian.
Hawthorne: “(LHP) will not do business in north Texas.”