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Hogan, lawmakers outraged over UMMS 'self-dealing' report

Maryland Gov. Larry Hogan and lawmakers reacted Thursday with outrage to the latest revelations of self-dealing at the University of Maryland Medical System, with some people criticizing the system board’s decision to invite four members to return from leaves they took while the scandal was investigated.

The medical system released Wednesday a contractor’s review of the deals it had with a third of the members of its board and their companies. The report revealed more no-bid and self-dealing practices.

“The Nygren report on UMMS impropriety is sobering and infuriating,” said state Sen. Bill Ferguson, a Baltimore Democrat. “Individuals involved on the board and in the executive suites who were complicit must be held personally accountable and liable for the damages wreaked on this important institution.”

The system commissioned 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.

Hogan, a Republican, appointed 11 people Wednesday to the board — a move he said was intended to provide the 13-hospital network with a clean slate.

“Our intention is to do a complete cleaning house of the operation, and restoring confidence and making sure we get all this mess cleaned up,” Hogan told reporters Thursday at an event in Baltimore.

As the report was released, the system’s flagship hospital, University of Maryland Medical Center, withdrew a rate hike request made in January to state regulators that would have generated about $75 million from patients, 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.

Hogan blasted hospital executives Thursday for making the request.

“Talk about being tone deaf,” the governor said in an interview on “The C4 Show” on WBAL-AM. “It’s absolutely ridiculous. At a time where we’re talking about millions of dollars in questionable contracts ... to say we need a rate increase at a time when they had record profits at a nonprofit, it just was absurd. … I think it was a really good idea for them to withdraw the request. It was a dumb idea for them to submit the request.”

Hospital network spokesman Michael Schwartzberg said in a statement Thursday that UMMS “continues to implement positive changes in culture and personnel that will move UMMS forward toward best practices in corporate and board governance, management and operations.”

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 Hogan signed it into law; among other provisions, it requires current board members to resign by the end of the year.

The board voted Wednesday to ask four members who took voluntary leave to return: former Democratic state Sen. Francis Kelly, whose insurance company had deals with the system; August J. Chiasera, an executive with M&T Bank, which had contracts with the system; James A. Soltesz, CEO of a civil engineering firm that had a contract with the system, and Walter A. Tilley Jr., CEO of Home Paramount Pest Control, which had a contract with the system.

State Sen. Jill P. Carter, a Baltimore Democrat who submitted legislation to bar self-dealing practices by the board, said she was troubled by the board inviting Kelly to return.

From 2010 to 2018, the company owned by Kelly, a longtime and influential board member, generated about $16 million in revenue for 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.

The Nygren report found Kelly’s contacts had not gone out for bid since at least 2012, but that the company provided “a fair market value” for its work. However, the report stated, the system would seek bids going forward for those services.

Carter said the board’s vote to ask Kelly to return as a board member “violates the spirit” of the emergency reform law.

“The legislation was intended to put an end to the self-dealing and the lack of competitiveness in the process,” Carter said. “Frank Kelly was among those who benefited from lack of competitive bids. He got the lion’s share of the profits. It’s an insult to the public. It does nothing to restore public trust.”

Kelly did not respond to requests for comment.

The review found Soltesz’s contract with the system was competitively bid and predated his time on the board. M&T Bank’s work with UMMS went through a “vetting and a competitive selection process,” the report stated.

The report focused its harshest criticism on deals with Pugh, who was paid $500,000 for her self-published “Healthy Holly” 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.

Acting CEO John W. Ashworth III said Wednesday he was aware of Dillon’s contract, but not Pugh’s or Pevenstein’s.

He said the UMMS board believed, after reading the Nygren report, that Kelly, Chiasera, Soltesz and Tilley were not to blame for any contracting issues and should return.

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

Anna Palmisano from Marylanders for Patient Rights agreed with Carter than board members who had contracts with the system should not be invited back.

“It's just unbelievable. UMMS doesn't get it, or doesn't want to get it,” Palmisano said.“UMMS claims it wants to build trust with the public and the patients it is supposed to serve. … We need a clean sweep of the UMMS board to regain full public trust and completely eliminate conflict of interest.”

Current board members, who must step down by Dec. 31, can ask Hogan to reappoint them. The governor has said he is not inclined to return any members to the board.

Del. Nic Kipke, an Anne Arundel Republican who is House minority leader, said he’s looking forward to the results of a state audit of UMMS that’s required under the new law. He noted the Nygren review was paid for by the hospital network.

“I can’t assume what Nygren is telling us is completely accurate. It could be intentionally gentle,” Kipke said. “For me to have confidence in the system, I need to see the results of the independent audit.”

Baltimore Sun reporters Meredith Cohn and Pamela Wood contributed to this article.

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