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University of Maryland hospitals paid $127 million to Whiting-Turner, whose executives sit on their boards

Whiting-Turner Contracting was construction manager for a $160 million renovation of the University of Maryland's Shock Trauma Center in 2013, when late Whiting-Turner CEO Willard Hackerman and current CEO Timothy Regan both served on the medical school’s board of visitors.
Whiting-Turner Contracting was construction manager for a $160 million renovation of the University of Maryland's Shock Trauma Center in 2013, when late Whiting-Turner CEO Willard Hackerman and current CEO Timothy Regan both served on the medical school’s board of visitors. (Amy Davis/ / Baltimore Sun)

The University of Maryland Medical System and affiliated hospitals have paid at least $127 million since 2012 to a construction company led by an executive who has been a board member at the health network’s affiliated medical school and flagship hospital, according to records reviewed by The Baltimore Sun.

The Whiting-Turner Contracting Co. has ranked as the medical system’s top-paid independent contractor in three of the past eight years — primarily for construction projects it managed at the University of Maryland Medical Center and the university’s medical school, according to tax forms that include newly released documents for last year. Whiting-Turner CEO Timothy J. Regan is vice chairman of the medical center’s board.

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The Towson-based firm also was the highest-paid contractor last year at the health system’s St. Joseph Medical Center, which counts another Whiting-Turner executive, Vice President Frank Palmer, as a board member. Neither UMMS nor St. Joseph reported the relationship on their tax forms as nonprofit experts recommend.

UMMS spokesman Michael Schwartzberg said, “The University of Maryland Medical System is confident that we have complied with the reporting and disclosure requirements of the Form 990 and related schedules as outlined by the IRS.”

UMMS has received intense criticism for engaging in business deals with its board members’ companies. In some cases the work was awarded without seeking bids from other possible vendors, although an UMMS spokesman said Whiting-Turner’s contracts were competitively bid. The General Assembly and Gov. Larry Hogan approved a law last month that prohibits no-bid deals with board members, requires approval by the full board of any contracts with members’ companies, and forces all current board members to resign by Jan. 1.

The law does not extend those reforms to UMMS-affiliated institutions such as St. Joseph or the University of Maryland Medical Center, formerly known as University Hospital. But state lawmakers vowed to apply the new rules to all 13 hospitals if they do not act to address insider contracts reported last week by The Baltimore Sun. In 2018, of the roughly 130 board members at UMMS affiliates, 14 reported business dealings with their hospitals that they are required to disclose to state regulators, including the Whiting-Turner executives. The hospitals’ deals with board members have included valuable real estate leases for doctors’ offices, as well as contracts for telecommunications and ambulance service.

“The optics of contracts with board members’ companies are not good, even if they are obtained at fair market value,” said Marc Owens, a consultant to nonprofit boards who served for a decade as director of the tax-exempt division of the IRS.

“It’s very hard for independent board members to say ‘no’ to a colleague,” Owens said. “If multiple board members have contracts, everybody is passing on each other’s contracts. That’s not a good situation.”

The Sun reported in March that nearly a third of the medical system’s 30-member board held contracts with UMMS even while overseeing a tax-exempt health business that generates more than $4 billion in annual revenue.

Those deals have rocked the medical system’s board and its management.

UMMS CEO Robert A. Chrencik, board chairman Stephen A. Burch and five other UMMS directors — including Baltimore Mayor Catherine E. Pugh — resigned after revelations of their business deals with the medical system. Pugh stepped down as mayor after state and federal authorities began investigating her deal to sell 50,000 books to UMMS for $500,000.

In addition, several board members remain on leave while a consultant completes its review of contracts they held with the medical system. State auditors also are digging into the details at the request of the General Assembly. Two of those on leave are former state Sen. Francis X. Kelly and his son, David Kelly. The Kelly family business, Kelly & Associates Insurance Group, holds health insurance contracts with UMMS and with St. Joseph. The older Kelly serves on the boards of both UMMS and St. Joseph, which also counts the younger Kelly as a director.

Regan and Palmer both disclosed to state hospital regulators that Whiting-Turner has contracts with the medical system. Neither responded to requests for comment for this article.

Regan’s disclosure form through June 2019 states that Whiting-Turner has “construction contracts of various sizes performed at a number of system hospitals” valued in total at over $100,000. Palmer reported similar contracts with St. Joseph for 2017.

Regan joined the university medical center board of directors in 2015 after having served on the medical school’s board of visitors since 2009, a position he still holds. Palmer has served on the board of directors for the St. Joseph Medical Center in Towson since 2016.

The St. Joseph Medical Center reported in annual tax forms to the IRS that it had paid Whiting-Turner $8.5 million last year as its top-paid independent contractor, but it did not disclose that Palmer was both a board member and Whiting-Turner executive. The hospital did report its business ties to Kelly’s insurance company, stating that its services were obtained at or below fair market value.

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In its separate tax filing, UMMS reported that Whiting-Turner was its second-highest-paid independent contractor for 2018, when it paid the firm $11.6 million. From 2012 through June 30, 2017, UMMS paid the company at least $108 million for various construction projects — including at the university medical center.

A UMMS spokesman said Regan and Palmer properly reported their jobs to state regulators and have recused themselves from board discussions about their firms’ projects. He said Whiting-Turner’s contracts with the university medical center were competitively bid.

UMMS officials also said the medical school’s board of visitors is a “non-governing, non-fiduciary board serving in an advisory capacity.” Any contracts with the University of Maryland, Baltimore or its medical school “go through the state procurement process.”

Whiting-Turner recently advertised for subcontractors for two projects with St. Joseph Medical Center, including renovations to an MRI suite last year and to suites for surgical procedures this summer. Whiting-Turner also was awarded a $5.2 million project last year to renovate the sixth floor of the medical center’s Midtown Campus on Howard Street, according to a company document.

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Beyond the business disclosed in recent tax filings, Whiting-Turner has had other big construction contracts with University of Maryland institutions. For instance, it was construction manager for the university’s $114 million “BioPark” project on West Baltimore Street.

Whiting-Turner was also the construction manager for the $160 million renovation of the medical center’s Shock Trauma Center Critical Care Tower in 2013. Whiting-Turner’s contract was for $89 million on a project that included $50 million in state funding and $2 million from the federal government. The late Whiting-Turner CEO Willard Hackerman and Regan both served on the medical school’s board of visitors at that time.

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