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After Maryland hospital system board scandal, Gov. Hogan wants to 'clean house' with new appointments

After allegations of self-dealing rocked the University of Maryland Medical System’s board of directors, Gov. Larry Hogan said he wants to “clean house” and will refuse to reappoint most — if not all — of the current board members.

Hogan soon will be tasked with appointing the majority of the 25-member body, after the Maryland General Assembly passed sweeping legislation to reform the board amid revelations of no-bid contracting practices. The new law requires that a third of the board must resign by July and all members must leave by year’s end.

In an interview with The Baltimore Sun, the Republican governor said he’s not inclined to reappoint anyone now on the board.

“I don’t want to,” Hogan said. “I think we need to clean house. … There’s a bunch of them that want to go back and they keep saying, ’I had nothing to do with that.’ But my preference is to get some fresh blood on there.”

The governor indicated he could potentially make an exception for board members who have not been accused of any improprieties and who also bring experience and expertise to the board.

“There’s an argument that’s being made that you can’t get all brand-new people because then nobody knows anything about the hospital. There are some people who are just caught up in it that really did nothing wrong,” Hogan said. “But my feeling, at this point, is we should put new people on the board.”

The reform legislation — which Hogan signed into law last month after the Sun’s reporting sparked an outcry over the board’s contracting practices, including a $500,000 deal to buy Democratic Baltimore Mayor Catherine Pugh’s self-published “Healthy Holly” books — bars no-bid contracts for board members. It also mandates an audit of contracting practices.

Under the new law, the state Senate must confirm the appointment of new board members. Hogan has 23 appointments to the board, while Senate President Thomas V. Mike Miller and House of Delegates Speaker Adrienne Jones each have one. Miller and Jones are Democrats.

Under the law, no elected official can sit on the board; Hogan must appoint members who reflect the racial diversity of the state, and board members can serve no more than two 5-year terms.

While Hogan appointed many members to the current board, several members predate his tenure. Longstanding members of the board included Pugh (2001-2019) and former state Sen. Francis X. Kelly, who helped lead the legislative effort to privatize and create the hospital network. Kelly has been on the board since its creation in 1984.

Jones said in an interview Monday that she wants to see who Hogan appoints first before nominating someone.

“I’m looking for a person who can add another area of expertise,” Jones said. “In this time of controversy, we need someone who will be the right fit, someone who is a good leader with integrity.”

Jones noted that the news media was likely to subject appointees to intense vetting.

“There is going to be much more scrutiny now than in the past,” she said.

Jake Weissmann, Miller’s chief of staff, said he, too, was waiting to see whom Hogan chooses.

During the legislative session, Miller suggested he might appoint a former prosecutor to the board to try to prevent wrongdoing. He suggested U.S. Deputy Attorney General Rod Rosenstein or former Maryland Attorney General Steve Sachs as good choices.

“Apparently there was no oversight on the audit committee and the audit committee made certain decisions,” Miller said in March. “It would be somebody like Steve Sachs or Rod Rosenstein — somebody that would add stature to the board but at the same time would make certain that something like this doesn’t happen in the future.”

Baltimore Democratic Sen. Jill P. Carter was the sponsor of the Senate version of the legislation. The House version of the legislation was sponsored by the late House Speaker Michael Busch, who sat on the board. Busch said he was never informed of the contracting practices and he called the controversy the largest “scandal” he could recall during his time in office.

The fallout over the board’s deals has been intense. Federal, state and local investigations are underway.

System President and CEO Robert Chrencik — who was paid $4.3 million in total compensation in 2017 — resigned last month. Pugh resigned last week from the office of mayor.

The search for a new CEO is expected to be a lengthy process, and the governor’s office anticipates a new board will be in place before members need to vote on hiring a candidate.

Businessmen John W. Dillon and Robert L. Pevenstein resigned in March from the UMMS board. Four others have taken leaves of absence.

Dillon reported in both 2017 and 2018 that his health care consulting firm, Dillon Consulting, generated more than $150,000 a year through a contract with the system for “capital campaign and strategic planning.” He reported the contract was paying his firm $13,000 a month.

Pevenstein, the founder of technology companies, reported that in 2017 his firms pulled in more than $150,000 through system contracts, including more than $108,000 in pay for himself. In 2018, Pevenstein — who also is a board member at the University of Maryland Board of Regents — reported his son made more than $100,000 from the system.

Kelly took a leave of absence from the UMMS board, and he and two of his sons have taken voluntary leaves from the boards of six affiliated organizations amid the continuing controversy at the hospital network.

From 2010 through June 30, 2018, Kelly & Associates Insurance Group generated about $16 million in revenue from commissions, consulting fees and administrative costs from managing insurance and benefits for the system’s hospitals and medical centers, according to the annual disclosure forms.

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