Con­flict avoid­ance

Texas Health CEO re­cuses self from deal

Modern Healthcare - - The Week In Healthcare - Vince Gal­loro

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.”

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