Code of Conduct/Ethics
Shore Health System is dedicated to serving the Mid-Shore area by providing
health care services of
exceptional quality in a compassionate and ethical manner. Ethics include
business ethics, as well
as medical ethics. An effective conflicts of interest policy is a key
element of business ethics.
The Joint Commission on the Accreditation of Healthcare Organizations
("JCAHO") requires hospital
boards to adopt a written conflict of interest policy containing guidelines
for the disclosure and resolution
of actual and apparent conflicts of interest. Due to the significant powers
reserved to Shore Health System
in the By-Laws of Dorchester General Hospital and The Memorial Hospital at
Easton, Shore Health
System should also have a conflicts of interest policy which meets the JCAHO
requirements.
Two provisions contained in the IRS regulations for 501(c)(3) organizations
prohibit the use of
not-for-profit assets or revenues for private gain. First, the private
inurement prohibition strictly
prohibits a not-for-profit from engaging in transactions that benefit
individuals such as members
of the governing board, senior officers, major contributors to the entity,
and others who are in a
position to control the entity's assets and revenues. Second, the private
benefit prohibition prohibits a
not-for-profit entity from engaging in activities to such a substantial
extent that they primarily benefit
individuals or private companies rather that the general public. A
tax-exempt entity that violates either
the proscription against private inurement or the limitation on private
benefit risks losing its tax-exempt
status.
If structured improperly, activities and transactions can violate one or
both of the private inurement or private benefit provisions. Joint ventures,
physician recruitment, compensation of employees, and contracts with
physicians and other third parties can violate the private inurement and
private benefit provisions.
The Director of the Internal Revenue Service's Exempt Organizations Division
recently wrote that a "substantial conflicts of interest policy" will be an
important factor in showing that a tax-exempt health care organization is
operating to promote community health, rather than to benefit private
interests. Such conflicts of interest policy should include:
- Interested person's disclosure of financial interests and all
related material facts.
- Procedures for determining if an interested person's financial
interests results in a conflict of interest;
- Procedures for addressing a conflict of interest;
- Adequate recordkeeping procedures;
- Procedures to ensure policy distribution to all directors, principal
officers and members of committees with board-delegated powers; and
- Procedures for applying the policy to any compensation committee.
For these reasons, it is appropriate for Shore Health System to establish a
conflicts of interest policy and to ensure that each of its subsidiaries
establish and maintains an appropriate conflicts of interest policy.
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