The University of Maryland Medical System has adopted a new conflict-of-interest policy that bars it from granting sole-source contracts to board members or their businesses, and precludes it from having any business with certain board leaders.
The policy was mandated by a state law passed in the wake of revelations by The Baltimore Sun in March that at least 10 of the hospital network’s 30 board members had contracts with the system, some of which weren’t competitively bid.
“This is another major step forward as we improve board governance, change corporate culture and put UMMS on a strong path forward,” interim CEO John Ashworth said in a statement Friday, when the policy was sent to Gov. Larry Hogan. “We thank the legislators for their work in guiding this policy during the session and helping us focus on providing a sound, long-term foundation for a sustainable, effective board.”
Michael Ricci, a spokesman for Hogan, said the Republican governor’s office “will review the new policy, and follow up with UMMS if we have any questions or concerns that need to be addressed.”
The policy, which goes into effect July 1, applies to the board of UMMS only, as did the legislation.
However, UMMS officials said it will present the policy to the boards of its dozen-plus affiliate networks and hospitals “for review and adoption within 60 days.” The goal is to have the same policy at each institution.
Michael Schwartzberg, an UMMS spokesman, said that “if an affiliate hospital wishes to deviate from this policy, they need to request approval from Corporate Compliance in order to ensure that the intent of this policy is preserved.”
In addition to precluding sole-source contracts for board members, the policy blocks the board’s chair, the chairs of its governance and its audit and compliance committees — and close family members of those three officeholders — from holding any contracts with the system. And it spells out rules for how board members must disclose any conflicts of interest.
It beefs up internal protocols for ensuring board members’ compliance with the rules, and for assessing any contracts held by board members to determine if they are appropriate and if there is an alternative option for the work that doesn’t raise a conflict.
UMMS officials said the policy goes beyond what’s required by the new law, including stricter rules for disclosure and review of potential conflicts and a requirement that board members recuse themselves from discussions and votes pertaining to any such conflict.
The new policy will apply to an almost entirely — if not completely — new board. The new law mandates that all members of the board step down by the end of the year, to be replaced or reappointed by Hogan. The governor has said he is not inclined to reappoint many, if any.
Some are already gone. Following The Sun’s reporting, at least five board members resigned, including chairman Stephen Burch, who is set to step down at the end of the month; and Democrat Catherine Pugh, who also resigned as mayor of Baltimore. UMMS paid Pugh $500,000 for 100,000 copies of her self-published “Healthy Holly” children’s books, a portion of which was paid to her when she was a state senator with influence over legislation favored by the system. She returned $100,000 to UMMS.
Pugh also sold hundreds of thousands of dollars worth of books to entities with business before the city, though she has not produced documentation showing all those books were printed.
The Evening Sun
Under the new policy, Pugh’s deal would not be allowed, as officials have said it was not put out to bid.
Also barred would have been the contracts of the former audit committee chairman, Robert Pevenstein, who also resigned, because of his role as the head of that committee. Pevenstein and his son held multiple contracts with the system under the old rules.
It’s unclear if other contracts held by board members would have been precluded, in part because UMMS hasn’t said which were not competitively bid.
Other board members, including some with contracts worth more than Pugh’s deal, have taken leaves of absence from the board, pending a review of the contracts by Nygren Consulting of California, a contractor UMMS hired.
Beyond the board, UMMS CEO Robert Chrencik also resigned. And Ashworth pledged to Hogan last week that he is going to make “significant changes” to senior staff, pending the expected completion in June of the Nygren report.
The system said Friday that Nygren still was working on its review.
“We know true reform is a process and we remain focused and dedicated,” Ashworth said. “We remain committed to our mission of caring for the people of Maryland and restoring the trust of those we serve.”