Published: January 08, 2008 12:38 am            

ERIE COUNTY: ECMC audit raises concern

An audit of the Erie County Medical Center Corp.’s business practices over the last three years found significant problems with internal controls, concealed advertising expenditures and a host of other violations, according to the Erie County Comptroller’s Office.

The county sold ECMC to the newly-created public benefit corporation in 2004, and since then the corporation’s senior management has overridden controls put in place by the Sale, Purchase and Operation Agreement without documenting its actions, according to information released Monday in the audit.

County Comptroller Mark Poloncarz said over a four-month period the auditors found that ECMC senior management and its legal counsel deliberately engaged in efforts to conceal a payment to a vendor for the purchase of advertising intended to influence the hospital consolidation recommendations of the Berger Commission.

“We have no problem with them purchasing the commercial for $50,000,” Poloncarz said. “What we had an issue with was that they tried to hide the evidence.”

The audit alleges that ECMC President and CEO Michael Young told auditors the goal of senior management’s attempts to conceal the commercial payment was to avoid a possible public disclosure of the expenditure through the New York State Freedom of Information Act. But Tom Quatroche, senior vice president of marketing and planning for ECMC, said that the auditors misunderstood Young’s remarks since regardless of how the payment for the ad was made, it wouldn’t have been disclosable.

“There was a lot of contrition at that time, and there was another group that supported Kaleida that they knew about,” Quatroche said. “We made the payment documented for public relations, so it wasn’t just for general use. As a public benefit corporation, we have one foot in the public sector and one foot in the private sector, and we still have to compete as a hospital.”

The auditors also found that ECMC has consistently violated reporting requirements to Erie County as contained in the SPOA, not providing monthly board and committee meeting minutes, financial data and reports to the County and County Legislature from 2004 until the third quarter of 2007. Quatroche said all of the meetings that the documents are derived from are open and that the failure to submit the documents was an oversight, not an intentional attempt to hide information.

“Those particular reports that they’re talking about are documents the county would have little use for,” he said. “But when they began the audit and brought it to our attention, we agreed to give them the reports. I don’t know if they’ll do anything with them, but they’re getting them.”

Poloncarz said the Giambra administration was just as much to blame for not calling on ECMC to provide that information. Many of the actions listed in the audit as suspicious or improper, including the awarding of a special executive compensation package for senior management, are in that category because of breaches in procedure rather than undesirable results, he said.

Quatroche said that focus on dotting the i’s and crossing the t’s doesn’t focus on the hospital’s productivity and makes the corporation look bad unnecessarily. In addition, the timing of the audit’s release, during the negotiations to consolidate ECMC and the Kaleida Health System, is suspicious and has led hospital representatives to question the comptroller’s motives, he said.

“The audit’s scope isn’t that exhaustive,” Quatroche said. “It was actually completed in December. Our concern is why now? Why is this coming out on the heels of our discussions?”

Poloncarz denied any political motivations, noting that the audit was conducted by impartial civil servants on behalf of county taxpayers.

“This has direct bearing and interest to Erie County taxpayers,” Poloncarz said. “Taxpayers deserve to know how their tax dollars are being spent.”

Contact reporter Daniel Pyeat 693-1000, ext. 158.

        

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