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UMMS report says many deals hidden, faults ex-CEO

Stephen Burch, chairman of the board of the University of Maryland Medical System, talks to reporters on Wednesday, March 20, 2019 in Annapolis, Md., after meeting with Gov. Larry Hogan and legislative leaders to discuss concerns about potential conflicts of interest with nearly a third of the system's board. Robert Chrencik, the president and chief executive officer of the system, is standing by Burch. (AP Photo/Brian Witte)

Stephen Burch, chairman of the board of the University of Maryland Medical System, talks to reporters on Wednesday, March 20, 2019 in Annapolis, Md., after meeting with Gov. Larry Hogan and legislative leaders to discuss concerns about potential conflicts of interest with nearly a third of the system’s board. Robert Chrencik, the president and chief executive officer of the system, is standing by Burch. (AP Photo/Brian Witte)

A critical report lays the blame for many of the financial relationships between University of Maryland Medical System and its board members at the feet of former CEO Robert Chrencik, adding that contracts were often hidden from the full board.

Related: Read the full report here

The report revealed fresh details about former Baltimore Mayor Catherine Pugh’s $500,000 “Healthy Holly” book deal with the system and reserved some of its most critical findings for Robert Pevenstein, the former chair of the board committee responsible for reviewing those relationships, who had hundreds of thousands of dollars in deals with the system himself.

The report, conducted by Nygren Consulting for the system, reviewed the dealings of each of the nine board members who had financial relationships with the system.

“Many of these contracts were not competitively bid, were not declared to be necessary by the Board or senior leaders, and, if vetted, were without full transparency to the entire Board,” the review concluded

Some board members, who themselves or through their employers had contracts with UMMS, were found to have done nothing wrong. Following the report, four members who had taken voluntary leaves of absence while the review was underway will be welcomed back to the board, the system announced.

Those members are Francis X. Kelly, August J. Chiasera, Walter A. Tilley, Jr. and James A. Soltesz.

John Ashworth, the system’s interim president and CEO said he accepted the findings of the report.

“Collectively, we are both responsible and accountable for what brought us to this point,” he said in a statement. “This report serves as a roadmap – not only to increase accountability among leaders and establish a more effective Board structure – but to make progress toward real, lasting cultural change. Policies and procedures are not worth the paper they’re written on without an integrity-based culture to enforce them. I am committed to rebuilding that culture and restoring the trust of those that depend on our leadership.”

“No person of authority should benefit personally from a decision he or she makes about the organization they serve,” he added. “All Boards within the System must balance demand for expertise and leadership with conflict-free representation. This is simply not negotiable.”

Healthy Holly

Some of the most prominent contracts that have come under scrutiny since the relationships with board members were first reported in March include deals with former Baltimore Mayor Catherine Pugh for her Healthy Holly children’s books and millions of dollars to the insurance firm of Kelly, a former state senator.

Pugh’s arrangement appeared to have developed with then-CEO Robert Chrencik and was not presented to the board or any committee of the board.

“The CEO agreed to enter into an agreement with Ms. Pugh without the consent of the Board,” the report said.

The review also found that each of the check requests to pay Pugh came from Chrencik’s executive assistant.

Pugh returned $100,000 this year for books that she will not deliver and resigned from the board in March. She resigned as mayor in May.

Kelly’s contracts to provide insurance services to the system and affiliated hospitals were mostly known by board members, the report found. When agreed to in 2012, the contracts were considered to be fair value.

But since 2012, none of the contracts have been rebid. The system is preparing a request for proposal for a new bid of these contracts, but the services will continue into the next fiscal year while that proposal is crafted, the report said.

“While more could have been done to ensure UMMS received initially in 2012, and has continued to receive in subsequent years, a fair market value for the services provided by Kelly Benefit Strategies, effort was made to ensure the price paid was fair in 2012,” the report said. “The review and discussion by the Audit and Compliance Committee in 2012 comports with good governance practices, though a better outcome would have been a decision to make a recommendation to the full Board (rather than deciding in place of the full Board) since the matter involved a contract with a Board member.”

Staff felt pressure

The report reserved some of its most critical words for Robert Pevenstein’s financial relationship with the system. Pevenstein had served as the chair of the Audit and Compliance Committee as well, the committee tasked with reviewing board member contracts with the system. Pevenstein resigned from the system’s board in March.

His contract was not reviewed by the committee or the board, according to the report, as well as contracts with companies that Pevenstein had a financial relationship with.

“From a governance perspective, we have a general concern with an arrangement in which a Director is paid a commission for brokering an arrangement with the organization, particularly where there was an apparent inadequate disclosure to the board,” the report said.

The report also found that system staff felt pressured to implement Pevenstein’s system.

John Dillon, who also resigned from the board in March, had an agreement with the system where he was paid for his consulting work, including for fundraising. His work with the system was backed by Chrencik, who the review said approved the agreement without the consent of the full board or the audit committee.

Dr. Scott Rifkin, who resigned from the board last month, had a deal with the system where he provided his software for free the first year and $10,000 in each of the next two years, though an amendment to the agreement from April said the system had no obligation to pay those fees.

But some people interviewed by Nygren worried that Rifkin used his deal with the system as an endorsement to advertise products from his company, Real Time Medical Solutions.

Some staffers also said they felt pressured by Rifkin and then chief improvement officer Keith Persinger to encourage skilled nursing facilities to license the software.

Rifkin’s agreement with the system was not put before the audit committee or the full board.

“Perhaps an even deeper problem is that certain members of the staff reported that they felt compelled to implement the Real Time software and to engage in promoting it to skilled nursing facilities,” the review said.

Wayne Gardner, who remained on the board pending the review, had contracted services for his ambulance company with the system. He recently sold his company to another firm.

The review found that Best Care Ambulance’s contracts were presented to the board for review. It also found that Best Care was the only option for areas covered by the company on the Eastern Shore.

Chiasera, the regional president of M&T Bank, reported hundreds of thousands of dollars in revenue from the bank’s business with the system. The report found that that business was competitively reviewed and that Chiasera recused himself from decision-making and left the room when it was discussed.

Soltesz’s work with the system for design services was agreed to in 2013 and 2014, before he joined the board in 2018. He disclosed the financial relationship once he joined the board.

Tilley’s pest control company received contracts from the system and affiliates, something board members said they were aware of. The initial contract with the system was “well vetted,” the report found. But the contracts have also not been competitively bid since they were first bid in 2011.

The system said Wednesday that it would competitively bid any future business with Chiasera, Kelly, Soltesz and Tilley, the four board members who took voluntary leaves pending the review.

New board members

The system’s release of the Nygren report comes on the same day that Gov. Larry Hogan announced 11 new appointments to the board and the board announced the election of a new chair and vice chair.

“Bipartisan reforms to fix the problems at UMMS were a good first step, but I said that — still — more needed to be done,” Hogan said in a statement. “I pledged that I would appoint new board members who will serve with integrity and accountability, and today, I am delivering on that promise. This is another critical step as UMMS works to restore public trust.”

His appointments include:

  • Elisa Basnight, senior vice president of supply chain for the American Red Cross;
  • Kathleen A. Birrane, part of the insurance sector and the litigation practice group at DLA Piper;
  • Joseph A. Ciotola, Jr., health officer for the Queen Anne’s County Department of Health and medical director for the Queen Anne’s County Department of Emergency Services;
  • Matthew Clark, Hogan’s chief of staff, who will serve as the governor’s designee on the board;
  • Wanda Queen Draper former executive director of the Reginald F. Lewis Museum of Maryland African American History and Culture in Baltimore;
  • Jason Frankl, senior managing director of FTI Consulting Inc.;
  • Glenn T. Harrell retired as Senior Judge of the Court of Appeals of Maryland in 2015;
  • RADM Joyce M. Johnson, DO, MA USPHS (ret.), a physician who served surgeon general in the U.S. Coast Guard,
  • Bonnie Phipps senior vice president and group operating executive for Ascension Health;
  • Joseph T. N. Suarez, director and executive advisor for community partnerships with Booz Allen Hamilton; and
  • John T. Williams, chairman and CEO of Jamison Door Company.

The board also elected James C. “Chip” DiPaula, Jr. chairman of the board of directors and Judge Alexander Williams, Jr. vice chairman of the Board of Directors.

“We regret the actions and poor decisions which have jeopardized confidence in the System, and are committed to adopting best practices for governance, management, and operations to earn the trust of our Maryland stakeholders,” DiPaula said in a statement. “UMMS is a large and diverse system with a noble mission and we look forward to fulfilling our goal of providing world class health care in Maryland.”

 


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