A former city purchasing agent approved a price increase – without Board of Estimates approval – that added $3.5 million to the coffers of an ambulance company that provides non-emergency transport for Medicaid clients, Inspector General Isabel Mercedes Cumming noted in a report issued today.
The contract involves a Harford County company that underbid an ambulance contract from longtime provider Transdev.
In 2018, the Board of Estimates approved the five-year, $33 million bid by Hart to Heart Transportation Services on the recommendation of then-Purchasing Agent Erin Sher Smyth. (Her name is not cited in today’s report, but it is found in publicly available records.)
“The deciding factor between the two [companies] was the lower pricing submitted by Hart to Heart,” Smyth told the spending board, according to a transcript of the panel’s June 27, 2018 meeting.
Shortly before the contract went into effect, however, Smyth approved higher rates after the company complained “its initial pricing was no longer financially viable due to a decrease in the projected service volume,” according to today’s report.
This came despite earlier notification to all vendors that no rate increases would be allowed during the initial five-year contract term.
Alerted to the price boost by an anonymous complaint, Cumming’s staff reviewed the invoices that the city Health Department paid to Hart to Heart between early 2019 and May 2022.
They found that the department “paid $3,543,056 more than it would have if the prices had remained fixed for the initial contract term,” the report noted.
Based on the report’s findings, Hart to Heart picked up roughly $600,000 more from May through November.
No Clear Rules
Noting the ambiguity surrounding the powers of the purchasing agent, the IG has called on the law department to establish rules in which price increases for service contracts are to be brought before the Board of Estimates for approval. (Overspending on construction projects is currently presented to the board as EWOs, or Extra Work Orders.)
That recommendation was made nearly a year ago after the IG found that Smyth had approved another board-unauthorized price increase for a health department contract.
A law department attorney, Smyth was assigned to the purchasing office in 2013 and was named chief purchasing agent in 2017 under then-Mayor Catherine Pugh.
Smyth was removed as purchasing agent in February 2020, The Brew reported, after she attempted to add a politically connected towing company to a list of police towing vendors.
She then served in Mayor Jack Young’s office, assigned to the police department, until early 2021 when she left city service – only to return last June as a special hourly consultant to Sheriff John W. Anderson.
After Anderson lost the primary to Sam Cogen, the lame-duck sheriff won BOE approval to double the hours Smyth had worked as his “procurement specialist.”
Anderson’s maneuver netted Smyth $48,000 for roughly three months of part-time work.
Cumming noted today that the law department has not yet developed rules governing non-construction price increases, even though reform of the city’s procurement policies is touted as a key priority of Mayor Brandon Scott.
“The OIG restates its previous recommendation that the city consider supplementing existing contract increase policies by establishing clear and comprehensive guidelines regarding the change order approval process for non-construction contracts and, specifically, when BOE approval for change orders is required,” the report said.
Regarding the Hart to Heart contract, the IG also noted that the company is charging the health department $10,200 a month in software access fees, even though the company’s CEO acknowledged that it pays just $4,355 a month for the software.
The difference – amounting to $5,865 a month or $70,380 a year – is pocketed by the company as “overhead costs,” according to the report.
Cumming described such spending as “blind acceptance” of vendor invoices by the health department’s senior management.
In a brief response to the report, Health Commissioner Letitia Dzirasa wrote:
“The Health Department and Department of Finance, Bureau of Procurement agree with the recommendation for further coordination and protocols outlining the responsibilities between the Bureau of Procurement and City Agencies regarding changes in vendor pricing.”
Erin Smyth did not respond to email and telephone requests seeking comment.
Hart to Heart also has not answered a request for comment.
Prior Fraud Allegations
In 2019, the owners of Hart to Heart, Jason and Terry Skidmore, agreed to pay $1.25 million to settle allegations that their Eastern Shore operations had submitted false claims for medically unnecessary ambulance transport.
First filed as a whistleblower lawsuit, the case was joined by the U.S. Attorney for Maryland, who alleged that the fraud had cost Medicare and other federal programs millions of dollars.
The lawsuit claimed that company paramedics would ask hospital staff to have patients who could walk lie down in bed in order to justify the need for an ambulance to take them home after discharge.
The company made no admission of guilt and, by paying the settlement fee, resolved the case.
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