After revelations in recent months of gross ethical lapses by board members at the University of Maryland Medical System (UMMS), eliciting strong condemnation by the governor and legislative leaders, the system has instituted a new conflict-of-interest policy that doesn’t go far enough in eliminating potential corruption.
This policy, effective July 1, is to be adopted at each of UMMS’ more than dozen affiliates, including Shore Medical Center in Easton and its components in Chestertown and Cambridge. I believe that ethical urgency demands immediate adoption.
According to May 31, 2019 issue of The Baltimore Sun, the new policy forbids sole source (single bid) contracts to board members or their businesses. In addition, the policy blocks the board’s chair, the chairs of the governance and its audit and compliance committees, as well as close family members of those three leaders, from having any contracts with the system. The policy specifies rules for how board members must disclose conflicts of interest.
Had I the authority to write a policy, I would have forbidden any contracts involving board members and their families. I’m keenly aware that such a restriction would constrict business options. I also realize that the new policy provides a process for determining if contracts held by board members are appropriate, and whether there are other options that preclude a potential conflict.
Why do I feel so strongly?
The culture of self-dealing by UMMS board members went on too long. Board members’ companies were enriched by their volunteer service in the form of lucrative, sole-source contracts. When this mess materialized in the media, the lid blew off; nine members were cited repeatedly in news reports, including John Dillon, former chairman of the board of Shore Medical Center and an UMMS board member.
Trust is transitory. Once shredded, it is tough to restore. Service on a non-profit has no financial rewards; no benefit should be expected, except a sense of service.
Conflict of interest is clear indeed; if in doubt, don’t. If necessary, a board member should resign if personal or professional interest is preeminent. Why risk your reputation, as did nine members of the UMMS board who either resigned or were forced to do so? Why would anyone, if retention of personal integrity were not important enough to inform consideration of a questionable action, tempt media coverage and public criticism?
Sole-source contracts are inherently anti-competitive. In state government, single-bid contracts must be justified; familiarity between the procurement agency and a vendor is insufficient to justify a contract award.
UMMS, though independent, receives millions of public dollars. It should protect the public trust—even if the process takes longer and seems bureaucratic.
I mentioned that the new policy specifically bars the audit committee chair and close family members from holding any contracts with the system. The now-resigned chair, Robert Pevenstein, and his son had several contracts with the system under the old rules.
While I suspect that former board members’ businesses may have performed competently in their contracts with UMMS, I believe the perception—or “optics”—generates mistrust and criticism. Rightly so. In the investment world, it might be characterized as insider trading.
As noted in other columns, I have served on several non-profit boards since retiring more than eight years ago. They too must operate without a scintilla of conflict of interest in awarding contracts and making daily decisions. The case can be made that donors expect their contributions to be spent wisely and ethically.
In terms of a hospital, trust in an institution translates into trust in its medical care. Without the latter, the former cannot function effectively.
UMMS interim CEO John Ashworth is working feverishly to change the culture. Leaders of the 13 affiliates must do the same.
Columnist Howard Freedlander retired in 2011 as Deputy State Treasurer of the State of Maryland. Previously, he was the executive officer of the Maryland National Guard. He also served as community editor for Chesapeake Publishing, lastly at the Queen Anne’s Record-Observer. In retirement, Howard serves on the boards of several non-profits on the Eastern Shore, Annapolis and Philadelphia.
Excellent commentary.
Profoundly wise observation: Trust is transitory. Once shredded, it is tough to restore.
I strongly agree, a board has a fiduciary responsibility to use its resources wisely. Any contracts with family members of board members is suspect, whether it is “No Bid” or not. Those who do not award a contract by a board member relative do so at their own peril. If the board member wishes to have a relative be awarded a contract, the board member has the option to resign. This isn’t a hard decision, it should be obvious to everyone.
I agree entirely with all of Howard’s commentary, and commend him for taking this on.
And while on the subject of accolades, I believe we all should thank Dr. Eva Smorzaniuk who, very early on in the process, had the courage to raise publicly the conflict issue regarding a local “pillar of the community.”