Close connections

Some of Lifespan's board members do business with the hospital network
By STEVEN STYCOS  |  February 11, 2009

Health-care's big moneyman in New England: Lifespan CEO George Vecchione's compensation is tops in the region. By Steven Stycos.
A handful of members of Lifespan's board of directors have business ties with the hospital network valued at hundreds of thousands of dollars. These board members include Lifespan chairman Alfred Verrecchia, former House Majority Leader George Caruolo, and FM Global Insurance CEO Shivan Subramaniam.

Verrecchia says Lifespan policies prevent any conflicts of interest, but health-care reform advocates say the relationships demonstrate the need for more public oversight of the billion dollar nonprofit corporation that employs 10,000 Rhode Islanders.

Johnston-based FM Global, according to Lifespan's 2007 federal income tax return, received $855,444 in payments from Lifespan for providing property and business interruption insurance. In 2007, the insurance company paid Subramaniam $1.3 million in salary and bonuses, according to the company's filing with the state Department of Business Regulation.

In addition, Verrecchia, the retired CEO of Pawtucket-based Hasbro, received $111,000 in deferred compensation for sitting on the insurer's board. FM Global won the Lifespan contract, says Jane Bruno, Lifespan's vice president for marketing and communications, in a competitive bidding process.

"I don't participate in any decision in the insurance with Lifespan," says Verrecchia, adding that neither does Subramaniam. Lifespan board members complete conflict of interest statements every year, he says, that he and Lifespan's Governance Committee review. A summary of the statements is then given to the 17-member Lifespan board.

Given Rhode Island's small size and Lifespan's reach, Verrecchia says, "It would be impossible not to have any potential conflicts."

"What we do, and most nonprofits do, is make sure people, I mean people in responsible positions, are aware of these relationships and they're above board," he adds.

Karen Malcolm, executive director of Ocean State Action, a labor-backed health care reform group, believes that isn't good enough. "Those board members aren't representing the public," she says. "This behavior is absolutely questionable."

Lifespan's hospitals are charitable assets that belong to Rhode Island's citizens, Malcolm says, and they receive a majority of their funding from government insurance programs. Consequently, she argues, they should be more accountable to the public. As a condition to receiving a state license, she adds, Lifespan hospitals should have some board members appointed by the director of the Rhode Island Department of Health.

Other Lifespan board members also have financial relationships with the four-hospital network. Caruolo, who served as House majority leader from 1993 to 1998 and authored the state's Hospital Conversion Act, received $65,000 in 2007, and $59,583 in 2006 for "independent consulting services," according to Lifespan's tax returns.

Although he is not a registered lobbyist, Caruolo advises Lifespan lobbyist Mark Montella on legislation and federal and state regulations, Verrecchia explains.

Another board member, V. Duncan Johnson, is a partner in Edwards Angell Palmer & Dodge, a law firm that billed Lifespan $462,334 for legal services in 2007.

Finally, board member Dr. Michael Ehrlich is president of University Orthopedics, which was paid $191,005 in 2007 by Lifespan's Rhode Island Hospital for physician services. In keeping with Lifespan's conflict of interest policy, Verrecchia says, Johnson has no involvement with Lifespan's legal dealings, and Ehrlich does not participate on the Finance or Compensation committees.

Subramaniam, Caruolo and Johnson did not return phone calls from the Phoenix.

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