The University of Maryland Medical System has put CEO Robert Chrencik on temporary leave of absence following reports that nine of the system's 30 board members, including elected public officials, have substantial business deals with the system.
Board Chairman Stephen Burch announced that the board, at an emergency meeting Thursday, also voted to hire an independent firm to review board members' contractual relationships with the system.
The Baltimore Sun first reported the conflicts of interest.
Three board members with business ties have resigned in the past week, while four have taken leaves of absence. Burch said the other members with business relationships will remain on the board while each agreement is reviewed.
John Ashworth, senior vice president of network development, will serve as interim CEO replacing Chrencik, who has been the system's chief executive since 2008 and has worked for UMMS since 1984.
"There is nothing more important than the trust of those that depend upon the board's leadership," Burch said in a written statement. "The board and I are firmly committed to evolving our governance principles and operating with even more transparency."
Lawmakers in Maryland's House of Delegates have introduced legislation to bar UMMS board members from having a financial interest in a business that is negotiating a contract with the system. Democratic House Speaker Michael Busch, who serves on the UMMS board, has said he is "outraged" and will sponsor companion legislation in the senate.
In an e-mail to UMMS administrators last week, Chrencik criticized the House bill and defended his organization's contracting practices.
"The fact is, all of our contracts with board members are legal and fully disclosed, and the business relationships are permissible under state law," he wrote. "UMMS has a consistently enforced conflict of interest policy, and we comply with all financial disclosure requirements required of every hospital in Maryland."
A UMMS spokesman told the Baltimore Sun last week that if the House bill were to pass, board members likely would resign and the board would lose expertise. He said UMMS opposes the legislation.
Among the board members doing business with UMMS was Baltimore Mayor Catherine Pugh, who received $500,000 from the system's purchase of her children's book. She has resigned from the board.
Former state Sen. Francis Kelly reported that his family's insurance firm made $2.8 million in revenue last year from system contracts. He has taken a leave of absence from the board.
John Dillon reported that his healthcare consulting firm received more than $150,000 a year from the system. He has resigned from the board.
Robert Pevenstein, who founded technology companies, reported that his firms received more than $150,000 in 2017 from system contracts. He has resigned.
Some health systems, such as Northwell Health, have a policy of not doing business with companies with which their officers or board members have personal business relationships.
But similar conflicts have come to light at other systems. For instance, in 2016, the University of California Board of Regents tightened its conflict policies after it was reported that UCSF Medical Center CEO Mark Laret was serving on the boards of two companies that sold millions of dollars worth of products to his hospitals and paid him millions in compensation.
The Wall Street Journal reported in 2016 that 46% of more than 2,300 not-for-profit hospitals in 2014 had at least one board member or officer who had private business ties with their hospital.
UMMS, which operates 13 hospitals, 150 care sites, and has 28,000 employees, reported total revenue of $4.6 billion for fiscal 2018, with net income of $217 million, according to the Modern Healthcare financial database.
An earlier version of this story misstated Mark Laret's position. He is the current CEO of UCSF Medical Center.
