Critical Condition

Charges of Medicare fraud, office break-ins, political patronage, and criminal probes have the University of Medicine and Dentistry of New Jersey on life support.

No matter where you live in the Garden State, it’s likely that your physician, surgeon, dentist, or nurse has a diploma or certificate hanging on the wall from the University of Medicine and Dentistry of New Jersey. UMDNJ is the Garden State’s premier health sciences institution, a respected (if second-tier) institution most recently touted for its Center for Biodefense. Yet this year allegations of political corruption and mismanagement have swirled through the corridors of the Newark-based school. Starting in March, a hemorrhage of news leaks and a special legislative inquiry have accused university officials of engaging in political patronage, mismanaging a $1.6 billion annual budget, awarding nearly $700 million in no-bid contracts, and double-billing Medicaid by as much as $20 million. The school is also under fire for hiring high-priced lobbyists and politically connected lawyers and for paying salaries and bonuses that critics assail as outrageous. Over the summer a string of at least ten almost comical burglaries and break-ins were reported at the Stanley S. Bergen Jr. Administration Building in Newark.

A publicly funded institution founded in 1970, UMDNJ trains physicians at New Jersey Medical School in Newark, Robert Wood Johnson Medical School in New Brunswick, Piscataway, and Camden, and at the New Jersey School of Osteopathic Medicine in Stratford. Widely hailed for its advances in trauma medicine, UMDNJ is suffering its own worst trauma. “This is not just about no-bid contracts,” says Dr. Steven Simring, a member of the psychiatry faculty at New Jersey Medical School and one of the university’s most vocal critics. “It’s no-bid, no-show, no-work political payouts.”

While accreditation boards review the university’s credentials, criminal investigations continue by the FBI, the U.S. Attorney for New Jersey, the state Attorney General, and the state Commission of Investigation. U.S. Attorney Christopher Christie has subpoenaed thousands of pages of financial and personnel records. Susan Preston, UMDNJ’s director of communications, says the university is cooperating with investigators.

In Trenton, UMDNJ’s troubles have stirred bipartisan angst. Lawmakers have called for greater accountability of the board of trustees, some of whom are affiliated with private firms doing millions of dollars of business with the university. In June Democrat Loretta Weinberg of Teaneck, chairwoman of the state Assembly’s Health and Human Services Committee, convened a special hearing on the most serious charges. “UMDNJ is a huge bureaucracy that appears to be growing without a full-time attempt at accountability at every level,” Weinberg says. “It didn’t pass the smell test. Some of it has been run very secretively over the years, and we in the Legislature let it get that way.” In a letter to Attorney General Peter Harvey, Assemblyman Kevin J. O’Toole, the deputy Republican leader from Wayne, asked Harvey to step up his investigation because of “revelations that have sullied the reputation of a vital educational institution, endangered its accreditation and viability, and further damaged the already badly battered image of New Jersey.”

That image was not helped by a public spat over performance bonuses that arose in September between university president John J. Petillo and Sonia Delgado, the interim chairwoman of the board of trustees. Delgado, a former aide to acting governor Richard Codey, wanted to suspend $3.2 million in bonuses due to be paid to 200 university executives and managers. The largest bonus, $187,000, was due to Petillo, who offered to return the money to offset the cost of charity care for indigent patients at UMDNJ-run University Hospital in Newark. Nonetheless, Petillo opposed any delay of the bonuses, saying that UMDNJ had an obligation to its employees. By a 5–4 vote, the board tabled Delgado’s proposal.

Petillo has been criticized for being neither a physician nor a scientist—he holds a PhD. in counseling and personnel services—and for having long been embedded in the state’s Democratic machinery. A former monsignor and chancellor of Seton Hall University, Petillo resigned from the priesthood in 1990 and married a year later. He became president and CEO of Blue Cross and Blue Shield of New Jersey and also led the nonprofit Newark Alliance, which works to advance the economic development of Petillo’s hometown. Appointed chairman of the UMDNJ board in 2003 by Governor James E. McGreevey, Petillo became interim president in June 2004. Five months later, following a $350,000 nationwide search, the board of trustees named him president. In April the university celebrated his inauguration with a $200,000 gala at the New Jersey Performing Arts Center in Newark.

“I want to be the reformer,” Petillo has said, and throughout the crisis he’s enjoyed the support of acting governor Codey, his old friend and fellow West Orange resident. He’s also sought the help of some of New Jersey most well-connected figures, including über-lobbyist Harold Hodes. A stalwart in the Statehouse since the 1970s—he was Governor Brendan Byrne’s chief of staff—Hodes today heads Public Strategies Impact, one of Trenton’s leading lobbying firms. “Hodes and others have helped Petillo become savvy,” O’Toole says. Hodes is also an unpaid advisor to the governor. Although UMDNJ maintains its own government affairs staff, last fiscal year the university paid Public Strategies and nine other lobbying firms in New Jersey and Washington a total of $618,000.

The news flowing out of UMDNJ has been a matter of great concern within New Jersey’s medical community. “It’s a disappointment to us to hear that the university has been getting a questionable reputation at a time when it should be an excellent one,” says Dr. Eileen M. Moynihan, president of the 8,000-member Medical Society of New Jersey. “One of the things we’d like to see is for UMDNJ to succeed and become a real player in the academic world. I don’t think of our state as being part of the gold standard in medical education, and those of us in the profession are too often seeing doctors and patients leaving New Jersey for New York or Philadelphia. It would be less likely if there were a stronger UMDNJ.”

The university received some noteworthy laurels recently for developing protocols for microbial bio-terrorist attacks and for its nationally recognized Cancer Institute of New Jersey at Robert Wood Johnson University Hospital in New Brunswick. Still, a survey of medical schools published in September by U.S. News & World Report ranked Robert Wood Johnson 59th in a field of 125 medical schools; New Jersey Medical School was not ranked.

Last spring the American Council of Graduate Medical Education denied New Jersey Medical School accreditation for heart and lung surgery, prompting the school to cancel a five-year contract with Columbia University. The council also put on probation New Jersey Medical School’s allergy and immunology and plastic surgery programs, as well as a diagnostic radiology program run by Robert Wood Johnson Medical School.

Much of the university’s perceived deficiencies were identified three years ago by a commission appointed by McGreevey and led by chairman Dr. Roy P. Vagelos of Bedminster, the former CEO of Merck & Co. The commission found that UMDNJ’s central administration was top-heavy and largely out of touch with its outlying campuses and faculty. It concluded that UMDNJ had missed the mark of national excellence, in part by failing to attract the best faculty and the largest grants and by expanding its programs without developing excellence in existing ones. The commission also determined that while the nation’s leading medical schools had nationally known physicians, scientists, and industry leaders serving on their boards of trustees, UMDNJ did not.

The public scrutiny of UMDNJ began in March, when Christie announced that he had reached a settlement with UMDNJ and University Physician Associates of New Jersey, a group of faculty doctors who also practice privately in offices across Bergen Street from the university’s administration building. Under the settlement, the doctors agreed to pay $1.4 million to settle allegations that they overcharged Medicare in the year starting July 1, 1995. A statement released by Christie’s office said that the claims were wrongfully submitted “for services to Medicare patients, personally provided by teaching faculty physicians employed by UMDNJ or University Physician Associates.” Christie’s statement alleged that neither UMDNJ nor the physicians had the required documentation for the Medicare claims, which were discovered during a nationwide review by the U.S. Department of Health and Human Services, which administers the Medicare program. The statement also said that UMDNJ and University Physician Associates denied the allegations.

Christie hasn’t been the only one giving the university fits. Adam Henick, the former vice president of ambulatory care at University Hospital, says he confronted UMDNJ officials about what he claimed was the rampant double-billing of Medicaid by University Hospital and University Physicians Associates about six months after he was hired in July 2002. Over a ten-year period ending in 2004, Henick claims, the university overcharged Medicaid by as much as $2 million a year—a total of $10 million to $20 million.

Henick says that he made a series of unsuccessful attempts to persuade the university’s legal and financial offices to stop the practice. But he says that the only interruption in the double-billing came when officials recognized it was wrong and sought a strategy to fix it. According to Henick, a solution was never found. “They stopped double-billing for three months and then started again,” he says. Last December Henick took his allegations to the federal Office of Inspector General in Washington. He claims his complaints ultimately led to his firing last February.

According to Petillo, UMDNJ officials found some cases of double-billing in 2004. He described them as “accounting errors” and said they were “self-reported to Trenton.” (The state channels Medicaid funds to hospitals and doctors.)

Simring gives a different version of the alleged double-billing. He asserts that the billings were for the doctor portion of Medicaid bills generated by University Hospital and University Physician Associates. The double-billing, he says, resulted from a feud between the hospital and University Physician Associates—whose doctors treated and followed up for the cases in question—in which each fought for the right to bill Medicaid. “And as they’re having these discussions about who should stop their billing, they didn’t consider that the federal government was being screwed in the meantime and that you and I were being screwed as taxpayers,” he says.

Simring has also questioned university salaries. He says that chairpersons at many medical schools serve for a few years and receive annual bonuses of $10,000 to $20,000. At UMDNJ, he says, chairpersons typically earn $325,000—“and serve endlessly.” Simring worries that the university’s largesse has drained potential resources for other areas of spending. “There isn’t enough money for research, faculty salaries have not kept up with other universities,” he says, “and we’re rapidly losing the most talented teachers, clinicians, and researchers.”

As president, Petillo earns $600,000 a year, with perks that include a Lincoln Navigator and a driver. He lives in the 420-acre gated West Orange community of Llewellyn Park with his wife, Sabina, a Bloomfield internist, and their nine-year-old daughter. In an interview in his fifteenth-story office, less than a mile from St. Francis Xavier parish in North Newark, where he grew up, Petillo, sporting his signature bow tie, acknowledges that his job is “like being in a fishbowl, and with sharks circling every once in a while.”

Petillo believes that the university is taking its lumps for past wrongdoings. He emphasizes that many of the no-bid contracts, usually for $100,000 or less, were allowed under state regulations. Under a series of reforms he proposed earlier in the year, the trustees must first approve lobbyists who do business with the university, and the university’s Web site will post the names of vendors and contractors approved by the trustees. In addition, UMDNJ ended its practice of making political donations.

Not trusting the job of reform to the university, Assemblyman O’Toole says he’s trying to gain support for a two-bill package that seeks a major overhaul that would replace the current eleven-member board of trustees with a five-person “nonpolitical board.” O’Toole wants to see a full-time chief financial officer and an investigation by “more than just one lawyer—at least a six-month, top-to-bottom review by forensic accountants and lawyers.”

One trustee whose tenure would be challenged by O’Toole’s reforms is Christopher J. Paladino, president of the New Brunswick Development Corporation, or Devco. The not-for-profit company, the developer of the university’s $89 million, fourteen-story student dormitory and mall, recently completed the development of the $73 million Child Health Institute of New Jersey at Robert Wood Johnson Medical School. Paladino says that Devco has overseen building projects for three administrations over twelve years. University trustees approved the most recent contract with Devco a month after Paladino joined the board in May 2004.

Delgado, a trustee since 2003, works for Princeton Public Affairs Group, a lobbying firm whose clients include Robert Wood Johnson University Hospital in New Brunswick, a principal teaching hospital affiliated with UMDNJ, and St. Mary’s Hospital in Hoboken, which the university is negotiating to purchase. Delgado denies any conflicts in her position—she says she has not voted on or even seen documents related to the St. Mary’s transaction—and says she’s confident that board members with potential conflicts recuse themselves from decisions whenever appropriate.

One directive that may be giving Petillo some inspiration for reform is Executive Order 41, which applies to UMDNJ. Signed by Codey as the assorted scandals gathered steam in June, the order may be one of the strongest ethics mandates the Garden State has ever seen. The order, for example, will require trustees of UMDNJ and other public bodies to file annual financial disclosure statements. Sean Darcy, a Codey spokesman, says the governor “recognizes the need for some significant changes at UMDNJ,” but believes that Petillo is doing a good job of “implementing the necessary reforms and getting things back on track.” To get things back on track, Petillo and all university executives who fall under the order’s provisions must undergo mandatory ethics training by the state, including lessons on ethics law and policy, contracts and bidding, record-keeping, and conflicts of interest. They have until January 1 to comply, as the clock of public opinion ticks away.

Leo Carney wrote about New Jersey’s malpractice insurance crisis in the September issue.

Article from November, 2005 Issue.

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