5 takeaways from University of Maryland Medical System review of 'self-dealing' practices

A review of contracts the University of Maryland Medical System had with a third of the members of its board of directors and their companies revealed more no-bid and self-dealing practices at the hospital network.

The system commissioned and paid for the 41-page report from Nygren Consulting in response to revelations published in The Baltimore Sun, starting in March, about the network’s practices that enriched board members, including former Democratic Mayor Catherine Pugh of Baltimore.

Since the scandal broke, Pugh has resigned as mayor 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 Republican Gov. Larry Hogan signed it into law.

For its report, Nygren reviewed system documents and interviewed about 60 people, including current and former board members, executives and staff. Here are some of the firm’s key findings:

1) Blaming the old boss.

Chrencik was blamed for cutting deals with individual board members without the full board’s approval. In four cases, the board was not properly informed of the deals.

The report said members of UMMS management appeared “to have taken upon their own authority the right to enter into contacts with board members that resulted in personal gain to the director.”

2) Most deals with board members weren’t competitively bid.

Seven of nine of the deals with individual board members were entered into without competitive bids.

“The board was insufficiently informed and, for the most part, had no specific advance knowledge that would have caused the board to consider alternatives that would have forestalled or eliminated perceived and real self-dealing,” the report stated.

3) Who’s doing oversight?

The board member who was in charge of monitoring financial dealings himself had a no-bid deal. Robert Pevenstein, who was chairman of both the audit and finance committees, had several arrangements with the system, including for-profit relationships for the firms Profit Recovery Partners and Optime, as well as a consulting deal. He was paid more than $100,000 a year.

“Most board members stated they had little awareness of Mr. Pevenstein’s multiple financial arrangements either directly with UMMS or with entities that did business with UMMS,” the report states.

4) Staff felt uncomfortable.

In at least two instances, UMMS employees felt pressured to promote the use of software from companies that benefited individual board members financially.

“Staff on whom the pressure was reportedly exerted felt they could not reject [using the products] even though they questioned appropriateness of the director’s influence and the merits of the business transaction.”

5) UMMC rate increase pulled.

As the report was released, the system’s flagship hospital, University of Maryland Medical Center, dropped plans to seek more revenue from patients. It submitted a request in January to state regulators that would have generated about $75 million from patients who sought services at the downtown Baltimore hospital, or a nearly 5% boost in revenue.

The Sun reported this week that the system was earning above-average profits even as the medical center sought the increase.

On Wednesday, the medical center withdrew the application.

More coverage of UMMS self-dealing practices »

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