Report 2011-113 Recommendation 6 Responses

Report 2011-113: Salinas Valley Memorial Healthcare System: Increased Transparency and Stronger Controls Are Necessary as It Focuses on Improving Its Financial Situation (Release Date: March 2012)

Recommendation #6 To: Salinas Valley Memorial Healthcare System

To ensure that the Health Care System, its board members, medical staff, employees, and consultants are engaged only in appropriate business relationships with respect to their economic interests, the Health Care System should engage an independent investigator to review the Health Care System's business relationships with entities that we identified as being economic interests of its board members and executives to determine whether any of the relationships violate applicable legal prohibitions and take appropriate corrective action if they do.

1-Year Agency Response

The Health Care System engaged a law firm to conduct an independent investigation of its relationships with business entities the state auditor identified as economic interests of the Health Care System's board members and executives. According to a general summary of the law firm's findings, it found that seven of the eleven relationships it examined did not violate any applicable legal prohibitions; for the other four relationships, they either had ceased or the affected employee or official no longer has a financial interest in the entity. Consequently, according to the law firm, no corrective action was required for any of the eleven relationships. The law firm also indicated that actions taken by the Health Care System in response to the state auditor's findings concerning conflicts of interest, along with the law firm's complete report to the Health Care System, will ensure that Health Care System officials and employees are more cognizant of conflict-of-interest issues and will utilize the systems and policies now in place to effectively avoid and address relationships that may raise concerns in this area.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

6-Month Agency Response

The Health Care System engaged a law firm to conduct an independent investigation of its relationships with business entities we identified in our report as economic interests of the Health Care System's board members and executives. According to a general summary of the law firm's findings, it found that seven of the nine relationships it examined did not violate any applicable legal prohibitions; for the other two relationships, one of them had ceased and in the other the affected employee or official no longer has a financial interest in the entity. Consequently, according to the law firm, no corrective action was required for any of the nine relationships. However, the law firm also indicated it detected some issues during its investigation and analysis that raised concerns regarding the manner in which the Health Care System identified and addressed potential conflicts of interest. As a result of these issues, the law firm indicated it is working with the Health Care System to implement systems to address these concerns in order to prevent similar issues in the future. (See 2013-406, p. 83)

California State Auditor's Assessment of 6-Month Status: Partially Implemented

All Recommendations in 2011-113

Agency responses received after June 2013 are posted verbatim.