It’s time for the executives who run some of Boston’s elite hospitals to be weaned off the cushy money they make moonlighting as board directors for corporate America.
You can understand the appeal of sitting on an outside board. Public companies paid directors a median of $208,000 in cash and stock in 2018, according to the most recent compensation survey by the National Association of Corporate Directors and consultants Pearl Meyer & Partners. Some companies dole out more than $400,000 a year. That’s for 25 days or so of work a year.
It’s good money for nonprofit hospital leaders, who are well compensated but make nowhere near what most corporate chief executives bring home, thanks to the widespread use of stock options and grants at public companies. Yet it’s small change for a big drug company or medical device maker looking for the credibility and connections that comes with having a prestigious hospital honcho among its directors.
But what does the hospital get in return for renting out its reputation along with its chief executive?
Not enough. More on that later.
First, to be clear: I’m not wagging my know-it-all finger only at Dr. Elizabeth Nabel, president of Brigham and Women’s Hospital, who resigned unexpectedly last month from the board of Moderna amid questions about Brigham and Women’s role in the clinical trial of the Cambridge biotech company’s experimental COVID-19 vaccine. Her counterparts at several Boston hospitals are also directors at for-profit companies in one niche or another of the health care market, as are numerous hospital chiefs across the country.
Dr. Sandra Fenwick, CEO of Boston Children’s Hospital, is on the board of Livongo Health, a telehealth company that recently agreed to be acquired by a competitor for $18.5 billion. Mass. General president Dr. Peter Slavin is a director at Amwell, another telehealth company. And Dr. Laurie Glimcher, CEO of Dana-Farber Cancer Institute, sits on three public boards: GlaxoSmithKline, Waters Corp., and Analog Devices, a hire the company announced Tuesday.
Any one of those relationships could cause a problem down the road.
Second: Let’s remember none of these folks has been accused of violating any hospital rules, government strictures, or even industry norms.
But Nabel’s exit from Moderna’s board, and her sale of millions of dollars worth of shares earlier in the year as the stock price soared on the vaccine’s prospects, could be a textbook case on why these side gigs can be hazardous to a hospital’s reputation.
The Moderna vaccine is being tested at Brigham and Women’s — and scores of other sites — in a clinical trial co-led by Brigham’s Dr. Lindsey Baden. Nabel knew weeks before the study was announced July 27 that Baden would be a co-principal investigator; she stepped down from the Moderna board July 30.
“Despite the management plans that have been put in place to ensure the COVID-19 vaccine study is not compromised due to my connection with Moderna, I have come to realize that those who do not know me, or how such trials are conducted, may perceive a conflict of interest,” Nabel said in a statement when she resigned.
People who do know Nabel, 68, and a cardiologist by training, call her a “Girl Scout” and “straight-shooter,” a woman dedicated to science who would never undermine public health or her hospital for money. But with billions of dollars at stake for Moderna, she should have quit the board when it became clear Baden would play a pivotal role in the trial. The appearance of a conflict of interest is, practically speaking, as bad as an actual conflict.
Nabel declined through a spokeswoman to be interviewed or answer written questions for this column.
It’s a shame it went down this way because her bosses — the board of trustees at parent company Mass General Brigham — could have easily spared everyone the agita and embarrassment. Not only did they approve Nabel’s moonlighting, they encouraged it. And they did so even after getting a taste of the problems that paid outside work could cause.
In 2016, a year after Nabel was tapped by the National Football League to be its chief health and medical adviser, a Democratic congressional report said she contacted the National Institutes of Health when the league “improperly attempted to influence” the selection of researchers for a landmark concussion study.
Nabel, who said at the time that she remained neutral during the NIH’s selection process, wasn’t accused of wrongdoing. But the incident raised many eyebrows, and it should have been a yellow flag for trustees that Brigham and Women’s image could be dinged by their president’s outside jobs.
Neither the NFL nor Nabel have disclosed how much she made for her consulting work, which largely wrapped up in 2017. Her third paid extracurricular, a board seat at medical device manufacturer Medtronic, yielded her $385,000 in cash and stock options in the past fiscal year, while she received $487,000 from Moderna.
Between the two boards, that’s nearly $875,000 in one year; at the Brigham, Nabel’s base salary and bonus totaled $1.85 million in 2018, the latest year for which her compensation is public.
So it’s obvious what Nabel and her Boston counterparts — whose base pay and bonus ranged from $1.3 million to more than $2 million — get from their outside board work. But what about their hospitals? Where’s the quo for their quid?
“These interactions allow for the exchange of cutting-edge scientific expertise, support the establishment of research collaborations and foster translation of scientific and clinical innovation into products and services for the benefit of patients and the public,” Brigham and Women’s said in a statement when Nabel left Moderna.
Hospital trustees sincerely believe this biz school blather, and add that it’s good for their CEOs to see how the for-profit business world operates. Academic medicine can be an ivory tower that is out of touch with the nitty-gritty of capitalism, they said.
But I think they place far too high a value on the benefits for hospitals. How much of this could they achieve without exposing their CEOs to potential conflicts of interest? A lot. The corporate suits are getting the better deal than the white coat folks.
There are some institutions that agree. Beth Israel Lahey Health prohibits its president from serving on for-profit boards. And plenty of nonprofit hospital CEOs that would be considered a big catch currently don’t do public board work, including those at Boston Medical Center and UMass Memorial locally, and the Cleveland Clinic, Johns Hopkins Hospital, and New York Presbyterian Hospital.
Beth Israel Lahey’s approach should be formally adopted by all nonprofit health care systems. Such a move would underscore hospital leaders’ dedication to patient care, medical training, and research, and would help shield their reputations — and those of their institutions — from accusations that they care more about money than patients.
It will never happen. The CEOs think it’s good business, they like the dough, and the trustees have their backs.
And that’s a shame, too.