Pittsburgh health system's hiring, contracting trends imply conflict of interest

In a classic "there's so much smoke, whether there is an actual fire hardly seems to matter" scenario, the University of Pittsburgh Medical Center (UPMC) sent millions of dollars in lucrative jobs and contracts to relatives of top officials and companies associated with board members, and its CEO earned a multimillion-dollar compensation package--all while the $8 billion nonprofit health system closed a popular community hospital and allegedly denied overtime pay to some workers.

Hiring executives' family members and contracting with board members' companies cost UPMC more than $10 million in fiscal year 2009 according to federal tax returns, reports the Pittsburgh Tribune-Review. Roughly $3 million of that total went to salaries and contracts for relatives of CEO Jeffrey Romoff. And three companies related to UPMC board member Anne Lewis received more than $5 million for property development services, building security and building maintenance services, reports the Pittsburgh Post-Gazette.

UPMC has "stringent policies, procedures and oversight in place" to make sure that contracts are "negotiated at arm's length, at fair market value and competitively bid," spokesman Paul Wood tells the Tribune-Review. However, the Pennsylvania Association of Nonprofit Organizations believes that the potential conflicts require "a mechanism in place for the full disclosure and review of all these arrangements," says spokeswoman Patricia Mogan.

These profitable relationships occurred during the same time frame that UPMC decided to close Braddock Hospital, which was losing an average $4.5 million annually. (The community hospital finally shut its doors this January). In addition, a former employee has filed a class-action lawsuit against UPMC claiming that the health system paid regular hourly rates instead of the appropriate overtime pay to her or other service coordinators since 2007.

UPMC released data to show that Romoff himself earned $3.6 million in compensation in 2009, almost 25 percent less than the roughly $4.7 million in cash that tax documents show he earned in 2008. (Current tax filings required 2008 salary data.) In 2008, 19 UPMC executives earned at least $1 million in total compensation, and 49 employees earned $500,000 or more.

To learn more:
- read these Pittsburgh Tribune-Review articles: article 1, article 2, article 3, article 4 or article 5
- read these Pittsburgh Post-Gazette reports: article 1 or article 2
- read this Health Care Renewal blog post

Suggested Articles

Humana filed suit Friday against more than a dozen generic drugmakers alleging the companies engaged in price fixing.

Medicare Advantage open enrollment kicked off last week, and insurers are taking new approaches to marketing a slate of supplemental benefit options. 

Health IT company Cerner announced a definitive agreement to acquire IT consulting and engineering firm AbleVets as a wholly owned subsidiary.