Hospital Executives Paid for Product Advice

Some not-for-profit hospital executives are "paid thousands of dollars" to "advise companies confidentially on how best to sell their drugs, medical devices and financial services to hospitals," the New York Times reports.

For example, the Healthcare Research and Development Institute is a for-profit company owned by about 36 hospital executives and underwritten by about 40 "handpicked" corporate members, all suppliers to hospitals, the Times reports. Although it is unclear exactly how much HRDI executives are paid for their consultations -- in which hospital officials and their spouses receive free "luxury" trips to attend conferences at resorts -- Gary Mecklenburg, HRDI's chair said, it is between "$20,000 [and] $30,000" annually.

Mecklenburg, who also is CEO of Northwestern Memorial Hospital in Chicago, receives $50,000 annually for his consulting services, including $18,000 for serving as HRDI's chair, according to the Times.

Vendors who attend the conferences -- such as Eli Lilly, Johnson & Johnson, Morgan Stanley and Citigroup -- typically pay $40,000 to receive advice from the hospital executives at the conferences, Mecklenburg said. Additional access to hospital executives, such as on-site visits to hospitals, can cost companies over $55,000, the Times reports.

The company used to decline access to its Web site and would not disclose who its members were, "[b]ut that is changing," the Times reports.

According to the Times, HRDI's practices have come under scrutiny recently as Connecticut Attorney General Richard Blumenthal (D) investigates whether HRDI enables certain vendors to purchase access to influential hospital executives urging them to buy their products. Blumenthal said the consulting arrangements fostered by HRDI might lead to hospitals not receiving the best terms, cost or quality in its supply agreements.

To date, he has issued more than 100 subpoenas, mostly to hospital suppliers, related to his inquiry. "At the very least it suggests insider dealings -- an insidious, incestuous, insider system," Blumenthal said.

Mark Leahey, executive director of the Medical Device Manufacturers Association, said, "These conflicts prevent innovative, cost-effective products from entering the market."

However, Mecklenburg -- who is a former chair of the American Hospital Association and who serves on the board for medical device supplier Becton, Dickinson -- said, "I would call this market research," adding that HRDI is working to "improve products and services in health care -- not more complicated than that" (Bogdanich, New York Times, 7/17).