Pharmacy management contract given to firm part-owned by board chairman UNIVERSITY OF MARYLAND MEDICAL SYSTEM

February 25, 1993|By Patricia Meisol and Sandy Banisky | Patricia Meisol and Sandy Banisky,Staff Writers

The University of Maryland Medical System awarded a contract to manage its new hospital pharmacy to a company owned in part by Roger C. Lipitz, the chairman of the medical system's board.

Morton I. Rapoport, the system's president and chief executive officer, said yesterday that the contract was competitively bid and that rules governing disclosure of potential conflicts by directors were followed.

Nevertheless, the matter did raise concerns among some board members and was reviewed by the full board last month as required by its disclosure rules, he said. The medical system's policy does not preclude doing business with a company owned by a director.

The contract -- to manage a pharmacy that opened last October -- was awarded six months ago to Hallmark Healthcare, a wholly owned subsidiary of Meridian Health Care Inc., a privately held nursing home company based in Towson. Mr. Lipitz is a director, owner and chairman of the board of Meridian.

Mr. Lipitz said yesterday that he had no involvement in the contract and abstained from even discussing it with Dr. Rapoport. "I excused myself from any involvement or conversation about Meridian's competing for it," Mr. Lipitz said.

At least two directors, Robert C. Embry Jr., president of the Abell Foundation, and former state lawmaker Francis X. Kelly raised objections. As a result, the contract and how it was awarded were reviewed in detail by the full board, Dr. Rapoport said.

Dr. Rapoport said the hospital decided to get back into the pharmacy business if it could be done profitably, a condition that required a management company to help. The hospital received a call from Hallmark asking to bid, he said.

Stephen C. Schrimpff, executive vice president of the medical system, said that 15 companies were contacted about the proposal, and that two offered bids. Hallmark was selected, he ++ said, because it agreed to assume the risk for the pharmacy and to guarantee the hospital a profit. A previous attempt to run a drugstore in the hospital failed, he said.

He said the arrangement works this way:

The hospital gets to keep the first 20 cents of every dollar in revenue to the pharmacy. Hallmark must pay for university employees' salaries and drugs and supplies from the remaining 80 cents. It keeps anything left over. Hallmark's best-case scenario is that it could earn up to $220,000 a year in profit, Mr. Schrimpff said.

According to Mr. Schrimpff, one Hallmark employee manages the pharmacy; all others are hospital employees.

The medical system operates University Hospital but is a private entity. It became private in 1984, in part to cut through red tape posed by state bidding laws and compete more effectively.

However, officials said the system operates under the same or similar disclosure rules followed by state agencies. The board does not normally review contracts.

Hospital board member and Baltimore Del. Howard P. Rawlings said the contract was "a management decision. The executive committee of the board was notified of it."

"There was concern among some of the board members because of the appearance," he said. "There was nothing inappropriate. It was just the question of appearance. There's still the perception that the university medical system is a public institution."

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