State Policy: New Jersey Senate Committee Passes Conflict of Interest Restrictions on Hospitals

Last week, the New Jersey Senate Health, Human Services and Senior Citizens Committee approved a bill—S-369—that  will “require New Jersey hospital boards of trustees to adopt a policy regulating conflicts of interest (COI) on the part of hospital board members.

State Senator Loretta Weinberg (D-Bergen), and Senator Robert M. Gordon co-sponsored the proposal. Senator Weinberg emphasized that this “legislation would ensure that the members of these boards are working to enhance the health and quality of life of patients, and not to pad their pockets or pensions.”

The proposed legislation would require hospitals to then post their policies on their web site. Hospital COI policies “would include language requiring disclosure of any perceived or actual conflicts of interest by members, as well as a prohibition on members voting on or discussing any contracts from which they would directly benefit.”

In addition to the disclosure, “the bill would also require hospitals to solicit a minimum of three bids or proposals, when dealing with any contract of $25,000 or more, when the contract concerns an issue that would be perceived as a conflict of interest for any member.”

Senator Gordon also noted that the legislation “would put into practice recommendations of the Commission on Rationalizing Healthcare, which was created to examine and make necessary recommendations to improve the quality and operations of the state’s hospital system.” Mr. Gordon added that the Commission had apparently found “a lack of transparency in state hospital operations and accountability.” As a result, he hopes that this bill will “ensure that hospitals are governed fairly, and that those who govern have the best interests of the hospital and patients as their top priorities.”

Included in the bill is language which states that board members would have to disclose any perceived or actual conflict of interest on the member’s part with respect to any matter pending before the board.” Who would determine what constitutes an actual or perceived COI?  The bill does not define what constitutes a “potential conflict”  we expect that it will probably be New Jersey’s Commissioner of Health and Senior Services, an unelected, not exactly accountable bureaucracy.

After being passed in Committee the legislation will now move to the full Senate for consideration.

While it is certainly important the hospital boards fully disclose their financial relationships to avoid the appearance of or potential for conflict, this bill could have unintended consequences for hospitals in New Jersey.

The cost of running programs, treatments, medical specialty practices, as well as receiving new equipment and funding for hospitals is an extremely complex and difficult process. The relationships that boards build with industry to bring such funding are important to maintain and preserve. If a hospital is required to solicit three bids or proposals, and they cannot obtain such numbers, especially for a new medical device, the patients will have to pay, with their lives.  

The goal of the bill which is to have more transparency and fair contracting policies is a good one.  New Jersey is well known for inside government contracting.  But these rules do have a chilling effect on a hospitals ability to attract experienced talent in working with hospitals, which is a unique enterprise to say the least.

More discussion is needed to take into account how this type of bill could affect funding for hospitals and treatment for patients.