Former Maryland State Senator Francis X. Kelly has resigned from the University of Maryland Medical System board.
Former Maryland State Senator Francis X. Kelly has resigned from the University of Maryland Medical System board. (Ken Koons/Carroll County Times / Carroll County Times)

Former state Sen. Francis X. Kelly resigned Friday from the University of Maryland Medical System Board of Directors — just days after fellow board members had asked him to return — amid continued fallout from the self-dealing scandal that has rocked the hospital network.

In a letter to outgoing board chairman Stephen Burch on Friday, Kelly said he and his sons would be stepping down from various boards connected to the medical system.

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“It has been a tremendous honor for me to have served on the UMMS board for nearly 35 years, under six different governors, and under a number of fantastic chairpersons, like you,” Kelly wrote. “Although I am humbled by your invitation to rejoin the board, I have decided it is time to move on, and allow someone else the fantastic opportunity of serving.”

Kelly, 79, said he and his sons would resign from the boards of six affiliated organizations amid the continuing controversy at the hospital network.

His son David Kelly sat on the board of St. Joseph Medical Center, and his son John Kelly sat on the Mt. Washington Pediatric Hospital board, the University of Maryland Medical Center board, the University of Maryland School of Medicine board and the Institute of Human Virology board.

In a statement, acting UMMS CEO John W. Ashworth thanked the Kellys for the services and said the family was always focused on putting “patients first above all else.”

“The Kelly family has collectively been passionate advocates of, and incredibly generous philanthropic benefactors to, the University of Maryland Medical System for more than three decades,” Ashworth said.

Kelly’s Baltimore County business, Kelly & Associates Insurance Group, has done millions of dollars in business with the hospital network — much of it in recent years under contracts that were not competitively bid. Such deals between UMMS’ volunteer board members and their companies are under intense scrutiny following The Baltimore Sun’s report that nearly a third of the UMMS board of directors — including Kelly — did business with the hospital system.

Nevertheless, the board voted Wednesday to ask four members who took voluntary leave to return, including Kelly.

Board members cited the findings of a review of the contracting practices, which blamed management — not Kelly — for the lack of competitive bids.

“It was a systemic problem at the management level,” Ashworth said Wednesday. “We should have done a better job.”

But news that Kelly could return to the board sparked harsh criticism from some lawmakers and patients’ rights advocates, who argued it would send a bad message and violate the public’s trust.

The 41-page report from Nygren Consulting found Kelly’s contracts had not gone out for bid since at least 2012, though the firm had won a competitive process earlier.

The review concluded the company provided “a fair market value” for its work. However, the report stated, the system would seek bids going forward for those services.

John Kelly, president of Kelly Benefit Strategies, said the Nygren report confirmed the quality of the firm’s work.

“Its comprehensive findings further validate that Kelly & Associates Insurance Group has provided its services at fair market value while achieving cost savings,” he said.

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From 2010 to 2018, the company owned by Kelly, a longtime and influential board member, generated about $16 million in revenue from managing insurance and benefits for UMMS and some of its affiliate hospitals, according to disclosures with the Maryland Health Services Cost Review Commission and estimates by company officials to The Sun.

Kelly grew his insurance brokerage company through his work with the medical system after he led the legislative charge to privatize the hospital network in 1984. The system is now a network of more than 14 academic, community and specialty hospitals that generated $4.4 billion in revenue in 2018.

“Over the last 35 years, the UMMS doctors, nurses and health care providers have saved countless lives. They have worked tirelessly throughout our state and region to enhance the health of millions,” the older Kelly said in a statement. “My family and I will continue to support UMMS and its affiliate institutions as enthusiastically as we always have.”

UMMS board rules prohibited members from serving more than two consecutive five-year terms, but allowed them to continue serving beyond their terms until being replaced. According to state records, Kelly was appointed to a seat reserved for a state senator in 1986, then to a seat reserved for a member of the state university system’s Board of Regents in 2005.

Congressman Dutch Ruppersberger, a Democrat, likened Kelly to the “founding father” of the hospital network.

“He was the George Washington of the system,” Ruppersberger said of Kelly. “He worked through bad times and turned the system around. Frank Kelly is to the hospital system what Cal Ripken is to the Orioles. His intent was to do whatever he could to help the system. It’s kind of a shame this is happening.”

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The Nygren report focused its harshest criticism on deals with four board members that hospital officials described as “personal services” contracts: Former Baltimore Mayor Catherine Pugh, who was paid $500,000 for her self-published children’s books; Robert Pevenstein, a consultant who was paid more than $100,000 a year; John W. Dillon, who was paid $892,000 since 2013 for providing “healthcare consulting services;” and Dr. Scott Rifkin, who runs a health care software company.

Since the scandal broke, Pugh has resigned as mayor amid investigations into her books deals, and UMMS CEO Robert Chrencik and four other top system officials stepped down. Also, the Democratic-controlled Maryland General Assembly passed emergency legislation this spring to reform the board and Gov. Larry Hogan signed it into law.

Kelly represented Baltimore County as a state senator from 1979 to 1991, serving as a conservative Democrat, though he later switched to the Republican party. He has long been a political donor and fundraiser — including for Pugh, a Democrat, and for Hogan, a Republican.

In 2016, during her successful mayoral campaign, Pugh featured Kelly in an online ad in which he argued she was the best candidate to lead Baltimore in part because she can unify the races.

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"There's too much talk of racism going on now," Kelly said in the ad. "I think what we need now is people of all races, religions and colors of skin to work together. The word 'racism' has got to be erased from our vocabulary."

Baltimore Sun reporter Kevin Rector contributed to this article.

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