The Erlanger Health System Board of Trustees will vote Thursday on whether to amend its bylaws to allow trustees to be employed by or under contract with the hospital under "extenuating circumstances" with a majority vote.
Jesse Neil, a health care attorney with Nashville-based Waller Law, explained the bylaw revisions during a meeting of the board's legal committee Wednesday.
Neil said the board's bylaws contain some "unusual" conflict of interest provisions that prevent trustees or any business entity in which a trustee has a controlling interest from being employed by or contracting with Erlanger until at least two years after the trustee's service is complete, without exceptions.
"In my experience, I think most large organizations - particularly a hospital - often leverage trustees and former trustees in ways, particularly if there's a potential transaction or if there's other kinds of transformative, strategic things underway," Neil, speaking via teleconference, said during the meeting.
The board is exploring changing Erlanger's structure from a governmental entity to an independent nonprofit organization, but that will require support from both the Hamilton County Commission and legislative delegation. Neil, who began representing the Erlanger board in August 2021, is also helping with that process.
One factor repeatedly cited for the move is a desire to operate in private. As a governmental entity, Erlanger is subject to open records and transparency requirements that system officials say put them at a disadvantage against private competitors.
Both the board and Hamilton County Mayor Jim Coppinger have said there are no plans to sell Erlanger or join another hospital system.
Regardless of Erlanger's effort to become a private health system, the proposed bylaw change would give the public hospital board "a narrow lane of flexibility" to grant exemptions to its current conflict of interest provision.
"If the board deems fit, then they can waive this particular provision and allow former trustees to assist and be engaged by the hospital with whatever kind of out-of-the-box challenge or opportunity might have come down the pipe," Neil said.
Trustee Sheila Boyington, vice chair of the board and chair of the legal committee, said during Wednesday's meeting the board doesn't know what type of extenuating circumstance might require such a move, but that Erlanger is entering "uncharted territory" by pursuing a new governance structure and therefore needs to be nimble.
The Erlanger board first revised its bylaws to bar employment of trustees until six months after their tenure in response to former CEO Dennis Pettigrew recommending former Trustee Jermaine Harper for the hospital system's vacant compliance officer position a month after Harper resigned from his trustee role in December 2002.
The board again revised its bylaws on that issue in May 2019, expanding the moratorium to apply to contract work in addition to employment and extending it to 24 months after a trustee leaves office. In current form, the bylaws allow exceptions for physician trustees who practice at the hospital and are appointed to the board, as well as the medical staff chief, who also serves as a trustee.
Those most recent changes were in response to a bill filed in January 2019 by state Sen. Todd Gardenhire, R-Chattanooga, which he said aimed to prevent conflicts of interest between hospital authorities such as Erlanger and their governing bodies.
Erlanger is governed by an 11-member board of trustees who serve without compensation. The Hamilton County mayor appoints six trustees with the county commission's approval, and the local legislative delegation appoints four trustees by a majority vote from the Tennessee General Assembly. The medical chief of staff also serves as a trustee. Trustees are appointed for an initial four-year term and may serve for no more than eight consecutive years.
Gardenhire's bill would have eliminated all financial ties between public hospitals like Erlanger and trustees, including those who are doctors at the hospital, until at least a year after their tenure ended. Gardenhire said he ultimately pulled the bill in order to prevent unintentional harm and give trustees time to address the problem on their own.
Hospital records obtained by the Times Free Press at the time revealed that Erlanger executive management under former CEO Kevin Spiegel held contract discussions with two trustees, including a $425-per-hour payment rate for former Trustee Jack Studer, who at the time was board chair.
Boyington said at the time that the board's legal committee wanted to go a year more than Gardenhire's proposed legislation to demonstrate "good faith" to the delegates and because it was "the right thing to do."
During Wednesday's meeting, Neil said the language of the resolution coming before the full board Thursday would not allow ordinary trustees to start working for the hospital because the conflict of interest provisions remain in place.
"It was narrowly tailored to accomplish what, frankly, the board foresees seeing over the next year in terms of transactions and potential restructuring, and just makes some flexibility available to leadership that wasn't otherwise there," he said.
Boyington said in an emailed statement that the language of the two resolutions coming before the board Thursday won't be made public until after they pass.
The board will consider another resolution Thursday amending the bylaws to make its new Board, Medical Staff and Executive Management Relations Committee permanent. The committee was formed on a temporary basis amid physician backlash over the board's decision to remove Chief of Staff and fellow Trustee Dr. Chris Young from both his chief and board member roles over allegations he shared unspecified confidential information.
During a board meeting last week, board chair Jim Coleman asked the legal committee to revise the bylaws to make the relations committee permanent after Trustee Lemon Williams, chair of the committee, said that working to improve communications between the board, medical staff and management showed "tremendous value and promise."
Coleman also said the board plans to donate $10,000 to the medical staff fund, which Erlanger physicians pay dues to and use to cover various expenses.
In her emailed statement, Boyington said Wednesday's legal committee meeting was called to act on Coleman's request.
"We decided to signal to the community our dedication to this committee by doing a called meeting to get this change made," she said. "Since we were already having a called meeting for this change, we added the second by-law change at the same time."