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Here’s How Pugh and Other Board Members Profited from UMMS Contracts

In vivid and often excruciating detail, an outside review of contracting practices at the University of Maryland Medical System has confirmed that members of the UMMS board were involved in financial deals with the large hospital chain that didn’t follow the system’s own policies.

On Wednesday, the medical system released a report from Nygren Consulting, a Santa Barbara, Calif.-based corporate governance firm it retained amid the uproar that followed the disclosure that former Baltimore mayor Catherine E. Pugh (D), until March an UMMS board member, had a lucrative deal to sell self-published children’s books to the sprawling health care provider.

“Our review revealed multiple occasions where transactions involving UMMS Board members were not fully vetted by the Board of Directors before being executed by management,” the consultants wrote in their report.

“In some cases, these transactions did not appear to have been presented to the Board or an appropriate committee of the Board, despite requirements in existing UMMS policies.”

In releasing the report Wednesday, the leaders of the hospital system said they were embracing the reforms recommended by the management consultant [see related story] and were also implementing structural changes dictated by legislation that passed through the General Assembly and signed into law by Gov. Lawrence J. Hogan Jr. (R).

Nevertheless, the report is a stark condemnation of a system that existed – largely unchecked – for several years. It devotes several pages to each board member’s real or perceived self-dealing.

The report from Nygren Consulting included a summary of the Declarations of Financial Relationships filed by UMMS board members that were presented to the Audit and Compliance Committee in presentations by the Chief Compliance Officer.

What follows is a summary of the accounts in the Nygren Consulting report, focusing on several board members. Many of these arrangements have already been reported in The Baltimore Sun, Baltimore Brew and other media outlets but have not been laid out in such a complete and uniform manner.

Former Baltimore mayor Catherine E. Pugh (D)

Between 2010 and 2018, UMMS agreed to pay a total of $500,000 to purchase Pugh’s “Healthy Holly” series of children’s books, which were supposed to be distributed to Baltimore City Public Schools. Pugh, who resigned from the UMMS board in March and as mayor in early May, sent a check in the amount of $100,000 to UMMS as a refund on the last set of books.

Former UMMS CEO Robert Chrencik “agreed to enter into an agreement with Ms. Pugh without consent of the Board,” the report says. “The Audit and Compliance Committee was apprised of the book arrangements long after the fact as line items in four separate presentations. According to minutes of the Committee’s meetings, neither this nor other financial relationships of Board members was noted as significant. Minutes of various Committee meetings also show that the Committee decided to provide summaries of the disclosures reports to the full Board each year, but it is not clear that such disclosures were discussed in the Board meetings.”

 Robert Pevenstein

Pevenstein, a business consultant and founder of technology companies, earned tens of thousands of dollars in consulting deals with UMMS while serving on the board.

“The agreement for Mr. Pevenstein to provide consulting services to UMMS was made by management…without apparent review by the Audit and Compliance Committee or by the Board,” the consultant report reads. “Similarly, the agreements for [Pevenstein companies] appear to have been made by management without a priori approval or awareness by the Audit and Compliance Committee or the full Board, although Mr. Pevenstein was the Chair of the Audit and Compliance Committee. From a governance perspective, we have a general concern with an arrangement in which a Director is paid a commission for brokering an arrangement with the organization, particularly where there was an apparent inadequate disclosure to the Board.”

John Dillon

Dillon, a Montgomery County-based investment adviser, was paid a $13,000-a-month retainer by UMMS from 2012 to 2019 to help with fundraising by the Shore Health System, assist in strategic planning, and work with hospital system leaders on matters relating to hospital acquisitions and expansion.

“While many interviewees agreed that Mr. Dillon’s fund-raising efforts on behalf of Shore Health System were valuable, they also noted that being paid while serving as a Board member was inappropriate,” the Nygren report states. “Fund raising is an expectation of all volunteer, non-profit directors. Mr. Dillon generally was paid for his effort which, according to Mr. Chrencik, was intensified at his (Mr. Chrencik’s) request. In addition, the CEO signed the agreement without consent of either the Board or the Audit and Compliance Committee.”

Scott Rifkin

Rifkin, a physician, started or was a consultant to medical software companies and nursing care providers that received UMMS contracts. According to the Nygren report, some University of Maryland Medical Center staff “reported feeling pressured by Dr. Rifkin and [a business associate] to encourage skilled nursing facilities to license” his company’s software “in order to participate fully in the UMMC network for post-acute care.”  UMMS also encouraged operators of skilled nursing facilities to subscribe to software.

“This is an example of management entering into agreements with Board members without complete transparency to the Board and without advance Board approval,” the report states. “This does not align with best governance practices.”

Francis X. Kelly

The former state senator and insurance company executive had several lucrative contacts from UMMS and some of its affiliated hospitals to provide health insurance coverage and other benefits – and most of those contracts were awarded without competitive bidding or guarantees that Kelly’s business entities would provide fair market value.

“The current effort underway to conduct an RFP process for benefits administration and benefits brokerage/consultation services reflects good governance and procurement practices,” the report concludes.

Wayne Gardner

Gardner, who owned Best Care Ambulance, received contracts in excess of $100,000 a year from 2012 to 2018 to provide ambulance services, primarily on the Eastern Shore. “While the fact of a sole source arrangement with Mr. Gardner appears initially troubling, it is our understanding that fees paid for Best Care Ambulance services are regulated by the Center for Medicare and Medicaid Services (CMS) and thus the opportunity for fees to be excessive is minimal,” the report finds. “Additionally, it was reported that no alternative services were available for the areas covered by Best Care Ambulance.”

Walter Tilley

Tilley owns a pest control company that received contracts in excess of $100,000 a year for several years. “The initial decision to use Home Paramount Pest Control appears to have been well-vetted, though best governance practice would require that a decision to enter into a contract with a Board member or Board member’s associated entity should be referred to the full Board,” the report says. “It does not appear that subsequent extensions and expansions were competitively bid and do not appear to have been referred to the Audit and Compliance Committee or the full Board.”

August Chiasera

M&T Bank, where Chiasera is a regional president, reported UMMS contracts in excess of $100,000 between 2016 and 2018. But the report concludes “that governance practices relevant to the financial relationship between Mr. Chiasera and UMMS appear to have worked as intended. 3 In the example provided, there was vetting and a competitive selection process. Mr. Chiasera recused himself from the decision-making and exited the room during discussion.”

James Soltesz

Soltesz runs a civil engineering firm that has contracts related to the construction of the Prince George’s County Regional Medical Center now underway. The report finds that “the contracts with Soltesz, Inc. were awarded through a competitive bid process before Mr. Soltesz joined the Board, and he disclosed the financial relationship upon joining the Board.”

In a broader section of the report on UMMS’ financial relationships with board members, the management consultant writes, “With the exception of Mr. Soltesz, who was not a Board member at the time contracts were awarded to his company, all Board member financial relationships reviewed appear to have not received the Board level attention that transactions potentially benefiting Board members should receive…Many of these contracts were not competitively bid, were not declared to be necessary by the Board or senior leaders, and, if vetted, were without full transparency to the entire Board.”

Bruce DePuyt and Danielle E. Gaines contributed to this report.

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Here’s How Pugh and Other Board Members Profited from UMMS Contracts