UPMC's board is a silent but powerful force in fate of region's health care .

UPMC Presbyterian Shadyside, Pittsburgh



Reporting Julian Routh | September 9, 2019


s its feud with rival health insurer Highmark threatened to block thousands of patients from accessing its own facilities, UPMC’s 24 board members — tasked with steering the nonprofit’s vision — remained largely silent and picked up a few powerful detractors along the way.

These are the 24 who, according to nonprofit experts, decide whether President and CEO Jeffrey Romoff remains at the helm, how much he is paid and whether his policies and management style align with the nonprofit’s mission. They are supposed to oversee how the organization adapts to the community’s evolving needs.

But UPMC’s board of directors — made up mostly of philanthropists and high-profile executives from across the region — has faced criticism over its stewardship of the charitable assets behind one of the largest health care nonprofits in the country.

When Pennsylvania Attorney General Josh Shapiro was pursuing a legal remedy to the UPMC-Highmark divorce earlier this year, his office sought to replace all of UPMC’s board members by 2020 for their alleged failure to oversee the organization in keeping with its charitable mission. The state, in its original February court filing, wrote that UPMC’s executives and board “appear to simply prefer the status and perquisites associated with purely commercial pursuits rather than furthering the public’s interests in high-quality, cost-effective and accessible health care.” UPMC denied all claims in court.

Even after the two rivals signed a landmark 10-year agreement in June to give many Highmark members access to UPMC doctors, some local elected officials said the board shouldn’t be off the hook just yet.

“My fear, especially because there’s appearance there’s some finality here, [is that] though there’s been some successes, the board and organization goes back not only to business as usual but perhaps ratchets it up because they’re going to have more power,” Allegheny County Controller Chelsa Wagner said, adding that she still worries about patients’ access to UPMC facilities.

After the June announcement of the agreement ending the near-decadelong contract dispute, the Pittsburgh Post-Gazette asked all 24 board members who were serving on the board while the agreement was reached to participate in an interview about their approaches to serving on the board, their personal backgrounds, their individual roles in the agreement and their perspectives on the board’s future.

Fifteen did not respond, four declined comment outright, and five told the Post-Gazette to contact UPMC spokesman Paul Wood instead. Upon request, Mr. Wood said, “I will not make UPMC board members available for interviews on this subject” and declined to answer why. He also declined to comment on the board’s role in the UPMC-Highmark agreement.

Although UPMC’s board members have been traditionally tight-lipped, their silence over the past few years of the contentious battle between health care systems — even as their board came under direct scrutiny from the state attorney general’s office — struck some as unbecoming of a charitable organization.

“To me, by them not opening their mouths, it’s like Mr. Romoff has a board that he controls, and they do whatever he wants to do,” said state Rep. Tony DeLuca, D-Penn Hills. “That’s not what a board is supposed to do.”

In most nonprofits, boards are tasked with overseeing the integrity of the organization and setting its strategic direction, which is then carried out by the executive staff, according to nonprofit experts. They’re the ones who ensure that nonprofits are faithful stewards of their charitable assets.

“Fundamentally, a nonprofit board’s responsibility is to the mission of the organization,” said David Renz, director of the Midwest Center for Nonprofit Leadership at the University of Missouri-Kansas City. “By virtue of being a nonprofit, that inherently means to the community and the group of constituents or stakeholders that are to be served by that nonprofit organization.”

Because they’re “beholden to the public to ensure that the organization carries out its charitable mission in the best possible way,” nonprofit boards typically choose members from a cross-section of the community, said Dennis Young, founding and current editor of Nonprofit Policy Forum and professor emeritus at Georgia State University.

Of 24 total members on the UPMC board, one-third are appointed by the University of Pittsburgh’s board of trustees. The remaining two-thirds are either elected from the community at large or have been historically involved in leading UPMC’s hospitals. The board is unpaid but sets the salary for Mr. Romoff, who made more than $6.8 million in fiscal year 2018, according to UPMC’s Internal Revenue Service Form 990 filings. Mr. Wood declined to answer how exactly the community and hospital-affiliated members are chosen or elected.

Of the 24, two are employed and compensated by the University of Pittsburgh. Chancellor and CEO Patrick Gallagher made more than $750,000 from the university and its related organizations in Pitt’s 2018 fiscal year, while Dr. Arthur Levine, senior vice chancellor for the health sciences, took home more than $1 million. In the same time frame, as Pitt received more than $200 million from UPMC for research and academic matters, Dr. Levine banked $389,000 from UPMC.

The UPMC board’s remaining 22 members are not employed by UPMC or Pitt, but seven have disclosed conflicts of interest or intraboard business relationships on UPMC’s tax filings. Such relationships are not illegal but must be disclosed in order to prevent conflicts of interest from impacting charitable pursuits.

Howard Hanna Mortgage, Paragon Foods and Welders Supply Co. — of which board members Howard Hanna, Elaine Bellin and Mark Raimy are executives, respectively — purchase health insurance from UPMC.

Ms. Bellin’s food distributor, Paragon, was paid $3.64 million by UPMC in fiscal year 2018 for “wholesale food distribution,” as it reportedly provides food for UPMC Children’s Hospital of Pittsburgh’s cafeteria.

Howard Hanna’s subsidiary, Relocation Services, which is chaired by Mr. Hanna, too, was reimbursed by UPMC for employee relocation expenses totaling nearly $2 million from 2015 to 2018, according to tax filings.

Board Chairman Nicholas Beckwith and fellow board member Mark Laskow are in a business relationship together. Richard Hamilton and W. Duff McCrady are, too. A family member of board member Robert Montler is employed by UPMC Altoona Hospital, making approximately $242,000 in fiscal year 2018.

Although it wasn’t disclosed on the filings, Mr. Beckwith and his wife, Dorothy, are directors and co-founders of The Beckwith Institute. According to its webpage, the research fund is fully funded by UPMC and works to “systematically improve outcomes, reduce costs, maximize efficiency, and enhance the patient experience throughout the UPMC system.”

UPMC requires the board to comply with its own conflict-of-interest policies, including that each transaction is “negotiated at arm’s length and based upon fair value” and that interested parties abstain from related decision-making. Members are required to complete annual questionnaires, which are used to identify possible individual and institutional conflicts of interest.

“If a potential conflict is identified regarding a specific UPMC activity, the Corporate Compliance Department, with the assistance of the Legal Department, helps to develop a written plan designed to prevent the conflict from influencing decisions related to that activity,” UPMC’s policy reads.

Nonprofits typically like to stack their boards with “strong and powerful” members because of their fundraising prowess, Mr. Renz said — but it’s not just about engaging with the powerful. Another responsibility is representing the organization in the community and helping it connect with “key constituents and stakeholders,” he asserted.

To this end, UPMC falls short, said Ms. Wagner — which is problematic for a group of 24 that is responsible for “the life-and-death health outcomes of our population” and for stewarding “a massive amount of subsidies of taxpayer dollars,” she said.

“I don’t see, in terms of board composition, the holistic community representation,” Ms. Wagner told the Pittsburgh Post-Gazette in July. “You have a lot of different business associations, but I don’t see a board composition that’s at least inclusive, if not representative of the fact that this is an organization organized as a charity under Pennsylvania law that should be doing a number of different things.”

Ms. Wagner expressed concerns — as have others — about the relationship between the board and UPMC executives, particularly Mr. Romoff.

It’s a relationship that should, ideally, be a partnership, nonprofit experts say. But it is the board’s job ultimately “to hold the CEO accountable for the performance it believes is essential to the effectiveness or the success of the organization,” Mr. Renz said.

Mr. Wood declined to detail the board’s specific set of powers and responsibilities, among a series of other questions. He referred the Post-Gazette to UPMC’s website and to two pages from the nonprofit’s May 30 bond offering, which provided basic information about the board, including that its directors serve three-year terms and are limited to three consecutive terms, with certain exceptions.

Ms. Wagner said it’s not often that the community hears from the governance of UPMC. With that in mind, she tried to speak up at a meeting of its UPMC Presbyterian Shadyside board in May, flanked by a few hundred hospital network employees and Service Employees International Union activists. Mr. Beckwith, who chairs that board, too, told them to take it up with the “governing folks,” she recalled.

Unlike those on city councils or government boards, nonprofit board members aren’t typically encouraged to speak out publicly, according to experts. If they have disagreements, their obligation is to express them internally.

“It is, in fact, an ethical obligation of a board member not to speak on behalf of the board unless the board delegates the responsibility or authority of doing so to them,” Mr. Renz said.

Although the attorney general’s office has indicated it will continue to monitor nonprofits moving forward, Ms. Wagner said she supports making changes to the UPMC board, and said it isn’t OK to turn a blind eye now.