The first light of day hits the top of the University of Maryland Medical Center's Homer Gudelsky Building at Lombard and Greene Streets in this file photo.
The first light of day hits the top of the University of Maryland Medical Center's Homer Gudelsky Building at Lombard and Greene Streets in this file photo. (Jerry Jackson / Baltimore Sun)

As the University of Maryland Medical System faces fallout from a scandal involving lucrative contracts awarded to its board members, including Catherine Pugh, who has since resigned from the board and as Baltimore’s mayor, the system’s flagship hospital has made a move to charge its patients more.

The University of Maryland Medical Center asked state regulators for permission to boost billing by $75 million a year, a nearly 5 percent increase. It’s the largest increase requested by any hospital since the state began capping hospitals’ budgets in recent years under a federally sanctioned program to control health care spending.

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The Baltimore hospital initiated the request before the public learned in March about the contracts with board members, including $500,000 the system agreed to pay for Pugh’s self-published “Healthy Holly” children’s books without a bidding process. But hospital officials said they plan to pursue the increase, and that is bringing more negative attention.

“The timing couldn’t be worse,” said Baltimore Democratic Sen. Jill P. Carter, who introduced sweeping legislation to reform the system’s board, which passed on the last day of the General Assembly session in April. “The optics are bad. They can’t escape questions about their possible misspending having led to their increase in costs. … They are really going to have to show that the increase is legitimate and not based on misspending or waste.”

Anna Palmisano, head of Marylanders for Patient Rights, called the request to increase rates on patients “totally outrageous” in light of the hefty contracts for board members.

“Will these additional state funds actually be used to provide affordable, quality care for all UMMC patients?” she said. “Or, more likely, will the increase be used to pad the already excessive salaries of the UMMC leaders and provide a solid gold parachute for the departing CEO?”

Robert A. Chrencik resigned from his $4.3 million position as CEO April 26 after having been put on leave as the medical system began reviewing the propriety of the contracts. The contracts were for a range of products and services, including Pugh’s books, pest control services and health insurance for system employees. The medical system subsequently hired an outside consultant to assess its contracting procedures, and the state legislature passed the reform legislation for the hospital system board.

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Medical center officials say the increase is unrelated and needed to sustain the top-tier research institution and medical facility that handles complex patient cases and provides a range of services from cancer treatment to transplants that can involve expensive procedures and drug regimens.

A budget increase would mean higher rates across the board at the medical center, increasing costs for patients and their public and private insurers for everything from surgeries to deliveries and emergency room visits.

The $75 million would come on top of an annual boost for all hospitals regulated by the state, about four dozen. It’s not yet clear how much the medical center will get under that process that is currently underway, but it will be more than 1 percent, according to regulators.

“This rate increase is important to the people UMMC cares for and will not only ensure that it can continue to meet the complex needs of its patients but also its ability to act as a safety net provider for the West Baltimore community,” said Lisa Clough, a system spokeswoman. “The attention now placed on the UMMS board does not change UMMC’s unique mission, and the rate increase is necessary to ensure UMMC can continue caring for highly complex patients.”

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The state Health Services Cost Review Commission, which approves hospital rates, reports that the medical center is among the few to make a formal request for a budget increase outside the annual review, and the application is the largest since the state began negotiating specific hospital budgets in 2014.

“We’ve not had one of this magnitude,” said Katie Wunderlich, executive director of the commission. “It’s a very large request. … Others have gone through the formal process and some have had their rates adjusted, but nothing like this.”

The medical center’s annual budget is now about $1.55 billion and represents about 45 percent of the 13-hospital University of Maryland system’s revenue.

Johns Hopkins Hospital is the only hospital in the state with a larger budget than the medical center. About a year and a half ago, Hopkins officials requested a $40 million rate hike that was approved, but the Hopkins system also agreed to make up for rising costs elsewhere in its budget. The medical center might be asked to do the same.

Mixed reviews for Maryland's unique hospital payment system

An independent audit has found that a program to curb health spending in Maryland has saved hundreds of million of dollars in its first three years, but another study found no direct link between the program and any cost savings or reduced hospital use by patients in its pilot years.

Wunderlich said the commission has asked for more information from the medical center before bringing the request to its commissioners, who must vote to approve the increase.

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What they can’t consider are those contracts with board members, which are not regulated by the state agency.

“Does it give me pause? Yes,” Wunderlich said. “I would like to be able to look at as much as I can. But I can’t look at those contracts.

“We don’t have regulatory authority to look at all those contracts; we don’t get into contracts for books or for employee health insurance,” she said. “We look at hospital functioning and rates.”

Amy Goodwin, spokeswoman for the Maryland Hospital Association, said such requests are sometimes necessary and the commission will have to determine whether it’s needed.

“Every hospital in Maryland has the option to formally request a rate — really, global revenue — adjustment beyond the annual update that is set by Maryland’s Health Services Cost Review Commission,” she said. “While infrequent, hospitals may request funds that they believe are needed to deliver the highest-quality health care to their communities. HSCRC reviews each request thoroughly to determine if an increase is justified and, if so, the appropriate amount.”

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