July 3, 2005
Investigations Swirl Over Medical School's Finances
By RICHARD PÉREZ-PEÑA, NY TIMES
TRENTON

HOW did things become this bad?

That is the question inevitably raised by the cascading scandals at the University of Medicine and Dentistry of New Jersey. How did this institution - the nation's largest health-care university - come to resemble a feeding trough for political consultants, lobbyists, fund-raisers, former politicians and others who were close to the state's most powerful political figures?

So many questionable deals, of so many types, have been exposed over the last few months and are being investigated by several state and federal agencies that their extent is breathtaking.

It is not just that university officials handed out contracts to politically connected people without any competitive bidding. What is more astonishing is how pervasive the practice was, with more than $700 million in no-bid contracts awarded over five years, and that it appears that some of the contractors did no perceptible work in exchange for their payments.

Some contracts did not specify what work the university expected for its money, and in many cases, the university's board was not even told who was getting the money. Other contracts duplicated work already being done by others, leading to questions about whether they served any purpose except as payoffs.

It is not just that the university hired influential lobbyists and consultants, ostensibly to promote its interests in Trenton - itself a rare step for a public university - but that it hired so many of them. The school, which receives more than $300 million a year from the state, went a step further in strengthening its political ties, giving campaign contributions to many elected officials, a nearly unheard-of practice whose legality has been questioned by some legislators.

It is not just that university posts were handed to people with powerful political connections and potential conflicts of interest - though the extent of that practice was impressive. University officials and politicians alike say that political bosses actually dictated to the university who received what jobs, and who was shoved aside.

Stephen N. Adubato Sr., a Newark power broker and president of the North Ward Educational and Cultural Center, has publicly taken credit for the ouster of Harvey Holzberg as university chairman. Stanley S. Bergen Jr., a former president of the university, and several other people tied to the institution and to state government, say that Mr. Adubato engineered the appointment of Mr. Petillo as chairman and then president - something that Mr. Adubato now vigorously denies. Last November, Mr. Petillo awarded a $95,000 no-bid contract to an organization run by Mr. Adubato.

And amid all these disclosures over the past several months is a federal investigation centering on whether the University Hospital in Newark regularly charged Medicaid for services that the doctors who worked there also billed Medicaid.

So once again, the question is, how did the situation reach this point at the 35-year-old university? How did these practices grow and become commonplace at the university, widely known as UMDNJ, without being stopped or even noticed?

University officials declined to be interviewed for the record. And although a university spokeswoman said that the new president, John J. Petillo, would be willing to talk, he was not available last week.

But lawmakers, watchdog groups and political scientists say the causes boil down to two basic factors: a relative lack of scrutiny at the university, and the unique political structure and culture of New Jersey.

"The UMDNJ scandal exemplifies how business is done in New Jersey, that the culture of corruption pervades every corner of the state," said Harry Pozycki, former chief of Common Cause in New Jersey, and now leader of a parallel group, the Citizens Campaign, dedicated to fighting corruption.

"The political bosses in the state have learned how to manipulate government and contracting, to perpetuate their power," Mr. Pozycki said. "They have elevated the practice of awarding contracts and jobs to political allies and contributors into a science. The end is not money, though they like the money. Money is a means to the end, which is power."

A Culture of Complacency

Critics of that culture say it has bred a degree of complacency among the state's residents, a tendency to accept cronyism and corruption with a sense of almost bemused resignation.

"That's the most disturbing aspect of this, that people believe this is just the way it is, and it's this way everywhere," said Elizabeth A. Mason, president the New Jersey Foundation for Open Government, another watchdog group. "We've had experts come in from other parts of the country, look at New Jersey and say, 'I've never seen anything like it.' "

New Jersey is, after all, the state where two governors, James E. McGreevey and Donald DiFrancesco, and a United States senator, Robert Torricelli, were brought down by scandal in less than four years, where politicians' holding multiple government jobs is not just allowed but assumed, where local political bosses wield a measure of power that their counterparts around the country lost a generation or two ago, and where a seemingly endless parade of state and local officials are investigated, indicted and even imprisoned.

The mechanics of government set New Jersey apart as much as its history. In any state government, the governor is the center of gravity, but it is more true in New Jersey, which has no real counterweight to his power.

New Jersey is the only state with no other state official who is independently elected statewide. There is no elected attorney general to investigate and prosecute malfeasance; New Jersey's governor appoints the attorney general, and even the county prosecutors. There is no elected comptroller or auditor to sign the checks and follow the money.

For many years, governors have enjoyed largely quiescent legislative majorities of their own parties. And even when the two branches clash, the governor holds some procedural trump cards, including line-item veto power.

"This is the most powerful chief executive in any state," said David Rebovich, a political science professor at Rider University. If a governor is inclined to abuse his power or allow his friends to do so, Mr. Rebovich said, "there are few political incentives or mechanisms for anyone to uncover stuff like this or put an end to it."

The University of Medicine and Dentistry of New Jersey is a sprawling enterprise, making it difficult for anyone to police. The university encompasses two medical schools, a school of public health, a graduate school of biomedical science, a dental school, a nursing school, a school of osteopathic medicine and a school for other health-related professions. It also includes University Hospital in Newark, a cancer institute and other specialized centers.

The university has an annual budget of $1.6 billion, more than 13,000 employees and 5,000 students, and 40 graduate and 19 undergraduate degree or certificate programs. It has major campuses in Newark and Piscataway/New Brunswick, and others in Camden, Scotch Plains and Stratford.

There once was a monitor, someone whose job it was to watch over the university. New Jersey had a Department of Higher Education, with a board and a chancellor who oversaw the public colleges and universities. That department could have been politicized and weakened just like any other state agency, but historically, it more or less served its intended function.

But a decade ago, Gov. Christie Whitman, seeking to trim government and make it less centrally regulated, eliminated the department and encouraged each school to pursue its own course. "There was a legitimate argument for what she did, but now, it's looking like Jersey desperately needed that control mechanism in place," Mr. Rebovich said.

'Nobody's Hands Are Clean'

As Assemblywoman Loretta Weinberg, chairwoman of the Assembly Health and Human Services Committee, and the Legislature's most vocal critic of the university, put it, "Nobody's hands are clean in all this."

Ms. Weinberg, a Democrat from Bergen County, blamed the Whitman and McGreevey administrations and the university administrators first, adding, "The university board abdicated responsibility, and we in the Legislature weren't closely scrutinizing UMDNJ."

Even by New Jersey standards, she said, abuse of the university's finances "was developed as a high art form."

If people within government are not watching the doings of state agencies closely enough, the same may be true of those outside government.

Since the disclosures began surfacing in March, newspapers have uncovered many new wrinkles, and the newspapers based in New Jersey have pursued the issue with particular intensity.

But the newspapers in New York City and Philadelphia that are read by so many people in New Jersey have focused on the issue only occasionally, and the out-of-state television stations that dominate the state's airwaves have paid even less attention. And there may lie a reason the university long escaped scrutiny for practices that, in some cases, date back at least a decade.

"The biggest newspapers and most of the TV we see aren't based here, and they really don't pay enough attention to New Jersey," Ms. Weinberg said. "The New York media don't cover New Jersey news unless someone shoots someone or there's a tanker truck overturned, delaying the commute into Manhattan."

Several of her colleagues, political scientists and others who follow New Jersey politics made much the same point. Legislators say their constituents often know more about what goes on in Albany or Harrisburg than in Trenton.

New York has another advantage in the robust web of organizations that constantly look over the shoulders of government officials and readily cry foul - groups like the New York Public Interest Research Group, the Citizens Budget Commission, the Independent Budget Office, Common Cause and Citizens Union.

New Jersey has some comparable groups, but they are fewer in number and smaller. Ms. Mason, who heads one such organization, said putting together a private effort to watch over government in New Jersey is a daunting prospect.

"A huge number of people who might be willing to volunteer or contribute, they work in another state, so their time and attention is somewhere else," she said. "And so much of the money and corruption is at the local level, which is so decentralized in New Jersey. There are 566 municipalities, which is a huge number."

Tolerance Has Been Tested

Even the expansive tolerance of New Jersey residents has been tested of late by the disclosures about the university, and the series of scandals that preceded it.

While the Republican candidate for governor, Douglas Forrester, hopes that the anti-corruption tide is strong enough to carry him to office, it remains to be seen whether there is sufficient outrage to force a change in the way politics are practiced in the state.

Government officials in both parties, sensing trouble, have tried to shift blame and burnish their own images. For instance, Acting Gov. Richard J. Codey and the Legislature recently enacted a law banning political contributions by government contractors, a practice known as "pay to play," but it is not clear how much that will placate voters. Reformers point out that the law does not bind local governments, and they continue to insist that the state still needs new restrictions on campaign finance, lobbying and conflicts of interest.

Republicans say that corruption became more widespread than ever under Mr. McGreevey, a Democrat, though Democratic legislators respond by pointing to scandals in the Department of Transportation and elsewhere under Gov. Christie Whitman, a Republican, and to the fact that some of the university's no-bid contracts were issued during her tenure. If the university was less blatantly politicized in her time, Democrats say, it is only because Republicans' attention was on other agencies.

Mr. Petillo was widely seen as the agent of the same Democratic machinery that doled out plum jobs and no-bid contracts when he was appointed president of the university last November, though he now insists he is a reformer, just the person to clean up the mess.

Last month, for instance, The Star-Ledger reported that he revoked his staff's travel credit cards after a review showed that the university's administrators and deans had run up more than $631,000 in travel costs because rules were either violated or ignored.

"I guess we'll find out," Mr. Pozycki said. "Now that there's so much scrutiny on UMDNJ, I don't think it's going away any time soon. So I think some things will have to change."

U.S. subpoenas university in hospital billing probe
Order for UMDNJ data comes amid state inquiry into Medicaid invoices
Friday, June 17, 2005
BY JOSH MARGOLIN, New Jersey Star-Ledger Staff

Federal investigators have issued a subpoena to the University of Medicine and Dentistry of New Jersey seeking numerous internal documents as part of an investigation into Medicare and Medicaid billing at University Hospital in Newark.

The demand for records, issued Wednesday by the U.S. Department of Health and Human Services, coincides with a state investigation into billing practices at the hospital, which is operated by UMDNJ.

"I can confirm that the Office of Inspector General of the federal Department of Health and Human Services did indeed serve a subpoena ... to the university," Donald White, a spokesman for the inspector general in Washington, said yesterday. He declined to elaborate.

The two probes center on questions of whether the hospital, in filing bills with the state and federal governments for outpatient services, overcharged or sought reimbursement for services that had already been paid for by the governments' health-insurance programs, according to current and former university officials.

Medicare provides health care for those over age 65 and for the disabled. Medicaid is a health insurance fund for the poor. Funded jointly by the federal and state governments, Medicaid is operated and administered by the state.

In response to questions about the probes, UMDNJ issued a one- sentence statement yesterday: "The university acknowledges receipt of a subpoena from the Office of the Inspector General in the U.S. Department of Health and Human Services relating to the Medicaid program."

Questions about the reimbursement and billing practices were first raised inside UMDNJ's administration more than two years ago.

"In 2003, a task force was set up to investigate a whole array of illegal billing issues that we uncovered," said Adam Henick, then vice president for ambulatory care and a member of the review panel. "The task force was trying to quantify how bad the exposure was. It was minimally several million dollars."

Henick, who was fired in February and is suing the university for breach of contract, said the panel determined Medicaid had been routinely double-billed and that Medicare accounts received "inappropriate billing."

UMDNJ President John Petillo did not respond to messages seeking comment yesterday.

Petillo confirmed in April, the month he became president, that the hospital had voluntarily reported what he described as "the error."

The state's review of UMDNJ billing practices was disclosed in a report by The Star-Ledger that same month. At that time it was described as only a preliminary inquiry.

Yesterday John Hagerty, a spokesman for the state Division of Criminal Justice, said the inquiry by the Office of Insurance Fraud Prosecutor has become a full- fledged investigation.

The probes come at a time of increased scrutiny over billing practices at hospitals across the country, including some of the nation's most prestigious teaching hospitals.

In New Jersey, Hackensack University Medical Center and the General Hospital Center at Passaic agreed to pay $314,000 and $760,000, respectively, for submitting claims for experimental medical devices not covered by Medicare.

And earlier this year, UMDNJ reached an agreement with the office of U.S. Attorney Christopher Christie to pay $1,407,448 to cover what the government said were false claims submitted from July 1, 1995, through June 30, 1996. According to the government, teaching faculty physicians had claimed they personally provided care, but they could not provide the documentation.

Empowerment Civics: Fighting Corruption