State officials outraged by self-dealing contracts between the University of Maryland Medical System and its board members are calling on the health network’s affiliate hospitals to reform their board practices, as well, after a Baltimore Sun investigation revealed similar business ties.
UMMS has endured the wrath of lawmakers upset that the medical system entered into contracts with the companies of nearly a third of its board of directors — particularly because several of them were no-bid deals. The outcry resulted in the resignations of seven board members, including the UMMS CEO and Baltimore’s mayor.
The General Assembly passed a law last month, signed by Gov. Larry Hogan, that forbids single-source deals for the system, requires full board approval of contracts with members’ companies and forces all board members to resign by Jan. 1.
Now, Hogan and state lawmakers want the 10 separate affiliates within UMMS to reassess business ties with their own unpaid board members, totaling millions of dollars, and consider the same sweeping reforms.
“The governor expects that the new UMMS board will introduce tougher ethics standards, and extend those standards to affiliate hospitals,” said Michael Ricci, a spokesman for the Republican governor. “These are nonprofit institutions that were founded for the public good, not for personal enrichment.”
House Minority Leader Nic Kipke said UMMS hospitals need “to get their acts together as it relates to inappropriate contracts” before the next legislative session in January. “If I were in their shoes, I would be scrambling to eliminate anything that looks like self-dealing or single-source contracts.”
Over the past five years, some board members at affiliate hospitals reported business ties with the institutions they govern, according to The Sun’s review of disclosure forms the members filed with Maryland’s Health Services Cost Review Commission. A spokesman for UMMS said some deals were competitively bid but didn’t address others.
The majority of affiliate board members did not report having anything to disclose in recent years. In 2018, of the more than 130 board members at the affiliates, 14 disclosed business dealings as required by state rules.
They include some of the region’s top developers and property owners, a telecommunications executive, insurance administrators and doctors with medical practices. Some UMMS board members also have substantial business with the affiliates.
Whiting-Turner Contracting Co. CEO Timothy J. Regan and St. John’s Properties founder Edward St. John are board members for the University of Maryland Medical Center, the flagship UMMS hospital in Baltimore. In Harford County, well-known businessman Richard P. Streett serves as a board member for the University of Maryland Upper Chesapeake Health system, which oversees Harford Memorial Hospital.
All three — major contributors to various candidates in Maryland — reported that their companies have financial dealings with the medical system.
Regan reported that Whiting-Turner, a national construction company based in Baltimore County, holds “construction contracts of various sizes ... at a number of system hospitals.” He valued the work at over $100,000, but was not required to provide exact figures. UMMS-related projects the company has discussed publicly have been valued in the millions.
Another Whiting-Turner executive, Frank Palmer, serves on the board of the University of Maryland St. Joseph Medical Center in Towson.
St. John and Streett each reported hundreds of thousands of dollars in business dealings with the Upper Chesapeake Health system. The system leases commercial space from their companies.
Several affiliate board members who are doctors — some with high-level positions at UMMS institutions — reported that their practices held contracts with the institutions they oversaw, amounting to hundreds of thousands of dollars.
Michael Schwartzberg, the UMMS spokesman, said that a review of contracts being conducted for the overall hospital system by an independent consulting company is “focused on the system-level board,” but “best practices identified and recommendations made” by Nygren Consulting of California will be shared with UMMS affiliate boards.
Those boards, he said, “have the autonomy to select members based on many factors, including relevant local expertise of the individuals and needs of the respective organizations.”
Schwartzberg said some of the contracts held by affiliate board members predate those members’ board service. He said that others — including Streett’s — are consistent with “fair market value,” a standard for tax-exempt organizations. The IRS presumes such deals are “reasonable” if nonprofits document their valuations and the company’s representatives don’t vote on the transactions.
Schwartzberg said Whiting-Turner had business with the system before Regan joined the UMMC board in 2015, that Palmer joined the St. Joseph board in 2016, and both men recused themselves from board discussions about their firm’s projects. He said Whiting-Turner’s contracts with UMMC were competitively bid, but he did not answer questions about the company’s contracts with other system hospitals.
Schwartzberg said Upper Chesapeake Health’s real estate lease with St. John Properties also predated, and was disclosed at the time of, St. John’s appointment to the UMMC board in 2018. He said the deal was at fair market value but did not say whether it was competitively bid.
The new UMMS-related law requires state auditors to review contracts of UMMS board members. It also bars state and local elected officials from serving as board members, and limits board tenures to 10 years.
The law stops short of mandating reforms at the system’s affiliate hospitals. However, bill sponsor Sen. Jill Carter, a Baltimore Democrat, said the changes should apply to the affiliates.
This week, Kipke, an Anne Arundel County Republican, and other lawmakers said they expect to file legislation to reform the boards of affiliate hospitals if they don’t implement similar reforms.
“We assume that the message was received. We assume that this will filter down to the affiliate boards,” said Del. Shane Pendergrass, a Howard County Democrat and chairwoman of the House health and government operations committee. “But if we see that it doesn’t, we will obviously see what we need to do.”
Del. Kathy Szeliga, the minority whip who also sits on the health committee, said other hospital systems that operate in Maryland should be reviewing board contracts.
“This issue with the UMMS board is a good thing to shine the light on all of the hospital boards — regardless of whether they are in the UMMS family or under another umbrella,” the Baltimore County Republican said.
The spotlight on UMMS began in March after Carter introduced her bill and The Sun reported that nine board members, including Catherine Pugh, Baltimore’s Democratic mayor, had lucrative contracts with the system. The Sun later reported a 10th board member held a no-cost contract.
Since then, system officials have acknowledged some of those contracts were sole-source contracts — including for Pugh’s self-published “Healthy Holly” books totaling $500,000. But they have not provided details, pending the internal review.
UMMS CEO Robert Chrencik and UMMS board chairman Stephen Burch have since joined Pugh and other board members in resigning. Pugh also stepped down as mayor amid an investigation of her dealings by federal and state authorities. Other board members have taken leaves of absence.
Former state Democratic Sen. Frank Kelly, whose family insurance company holds millions of dollars worth of contracts throughout the system — primarily administering employee insurance plans — took a leave of absence from the UMMS board, and also as chairman of the Shock Trauma board of visitors and board chairman at St. Joseph Medical Center. His sons, David Kelly and John Kelly, also took leave from various boards within the system and at the University of Maryland School of Medicine.
The Kellys have said they welcome the UMMS review. John Kelly said last month that Kelly executives have disclosed the company’s business ties with UMMS, which reported to the IRS that Kelly’s insurance programs are “charged at or below fair market value.”
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 University of Maryland Medical Center’s Midtown Campus, according to a company document.
An executive assistant to Regan said the CEO does not speak to the media, and he could not be reached otherwise.
St. John reported on his state disclosure form that Riverside Corporate Center LLC, a company affiliated with his real estate firm, leases commercial space to Upper Chesapeake Health in Belcamp in Harford County. The value for the lease is listed as more than $100,000.
Representatives for St. John did not return calls seeking comment.
Streett, a Bel Air businessman and developer, serves as treasurer for the Upper Chesapeake Health board. His commercial real estate company has held rental contracts with the system for years.
Streett owns 50 percent of Rock Glenn Commercial LLC, which owns the Swan Creek Village Center in Havre de Grace in Harford County, according to his disclosure forms. Streett and his partner, Robert Hockaday, have rented space in the center for doctors’ offices and patient accounting and marketing offices to Upper Chesapeake Health and Harford Memorial Hospital. The system has paid Streett’s company close to $600,000 for the rental space in each of the past four years, including $614,870 last year, according to his disclosure records filed with state officials.
Streett did not respond to a request for comment.
Schwartzberg, the UMMS spokesman, said the terms of Upper Chesapeake Health’s leases with Rock Glenn Commercial “are at fair market value and benchmarked on a regular basis.” He also said that Hockaday “handled all business dealings” and that “all disclosures and recusal protocols were followed.” He said the contracts came after Streett joined the board.
In addition to their board seats and contracts, Regan, St. John and Streett have contributed tens of thousands of dollars in recent years to political campaigns in Maryland.
The construction and real estate deals are only a portion of the system contracts or financial interests held by UMMS affiliate board members, according to The Sun’s review of disclosures.
In 2016, Republican U.S. Rep. Andy Harris, a board member at St. Joseph Medical Center, reported earning $6,000 for part-time work as an anesthesiologist with Tidewater Anesthesia Associates at University of Maryland Shore Medical Center at Easton. In 2017, he reported earning $5,000 to $10,000. His office did not respond to a request for comment.
Comcast executive Mary E. McLaughlin is a UMMC board member. She reported that the company “provides telecommunication services to various entities within the University of Maryland Medical System.” McLaughlin said her company has “done work with the University of Maryland for years," but referred questions to a media representative who could not be reached for comment. Schwartzberg said McLaughlin joined the UMMC board in April 2018, “when Comcast already had a long-standing business relationship with the hospital.”
UMMS board member August Chiasera is an executive at M&T Bank, which provides treasury management and deposit services for the system, its foundation, UMMC and the Midtown Campus hospital, St. Joseph Medical Center and other UMMS operations. Chiasera, who has taken leave from the UMMS board, has directed questions about the bank’s contracts to UMMS. The bank reported to regulators that its relationship with UMMS generated $4.4 million in interest income and banking fees for the year ending June 30, 2018.