UPMC Mercy expansion: How the ‘community benefits agreement’ between UPMC and the city came to be

One year later, emails and interviews with city and UPMC officials shed light on how the agreement that came as a result of the tension surrounding UPMC Mercy expansion was put together.

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UPMC Mercy Hospital. (Photo by Jay Manning/ PublicSource)

UPMC Mercy Hospital in Uptown. The facility is connected to the neighborhood's new Uptown District Energy Center. (Photo by Jay Manning/ PublicSource)

Last spring, Louis Berry III was feeling mildly optimistic.

As a labor activist and retired housekeeper with the University of Pittsburgh Medical Center [UPMC], he felt for the first time in April 2018 that he and activists might be able to get some concessions from his former employer. In Berry’s mind, he said, the not-for-profit hospital chain and healthcare provider is a behemoth that pays some of its employees too little and causes others to go into medical debt.

Last spring, Berry thought he had reason to be hopeful: UPMC needed city approval to build a state-of-the-art hospital in Pittsburgh’s Uptown neighborhood. Some activists weren’t opposed to the new facility but when the city’s Planning Commission made a recommendation that UPMC work on establishing a community benefits agreement [CBA] with the city, Berry and others saw it as an opportunity to demand and negotiate concessions.

“It was the first time in the history of me [being] on that campaign where they actually needed something from the public,” said Berry, who has been attempting to organize UPMC workers since 2011.

As Pittsburgh’s largest employer, UPMC holds a lot of power and leverage in the city. Email records PublicSource obtained through a Right-to-Know request show that UPMC executives saw demands from activists like Berry as “extortive,” saying they hadn’t changed in years and that the healthcare giant wouldn’t be “wrongfully coerced” by those who opposed the project. So, UPMC didn’t engage with them. Mayor Bill Peduto said UPMC didn’t need to engage.

It’s been almost a year since an agreement was approved and the emails shed light on how the agreement came to be. The emails demonstrate how public officials and one of Pittsburgh’s largest institutions conduct business. The records — a 382-page cache of correspondence from July 1 to Aug. 7, 2018 — show City Councilman R. Daniel Lavelle, UPMC executives and other local leaders negotiating, drafting and reviewing the agreement while residents, workers and activists called on City Council to incorporate their demands.

Pittsburgh City Councilman R. Daniel Lavelle facilitated a discussion at the Duquesne University’s Power Center between community members and UPMC executives on July 16, the evening before the city council hearing. (Photo by Kat Procyk/PublicSource)

UPMC Mercy President Michael Grace (center) speaks at a community forum. Pittsburgh City Councilman R. Daniel Lavelle (left) facilitated a discussion at the Duquesne University’s Power Center between community members and UPMC executives on July 16, 2018, the evening before a City Council hearing. (Photo by Kat Procyk/PublicSource)

These emails also illuminate the tension that exists in the city between developers and corporate players like UPMC and activists who are demanding the government exact nontraditional public benefits from these prominent players. In the end, UPMC agreed to expand medical services at Mercy Hospital for several vulnerable populations, including people struggling with addiction. UPMC also agreed to implement numerous job training, hiring and contracting programs, among other commitments. Activists like Berry said UPMC’s concessions excluded funding for affordable housing in Uptown, better pay for workers and providing walk-in primary care for Uptown residents.

The emails also show UPMC leadership pressuring city officials to move quickly on approving the CBA and greenlighting its project before City Council’s annual August recess. Council approved the project 76 days before an Oct. 15 deadline.

“The game of political speed chess has begun,” W. Thomas McGough, UPMC’s executive vice president and chief legal officer, wrote to other UPMC executives on July 10, 2018. In that same message, McGough said he thought Lavelle, who had met several times with activist groups, would help get UPMC’s plans for the new hospital ushered through City Council.

“[Lavelle] is clearly looking for a way to appease them in the long run while steering our approval through Council in the short run,” McGough wrote to UPMC President and CEO Jeffrey Romoff, Mercy Hospital President Michael Grace and others.

Lavelle said he believes he acted properly and that the negotiations and agreement were fair to all involved. In a recent interview, he said he had multiple conversations with activists as well as Uptown and Hill District residents and took their demands into consideration when working with UPMC. The reason activists were dissatisfied by the end result, he said, was because the final agreement didn’t include a union for workers. According to Lavelle, that was something that couldn’t be accomplished by the agreement, which he insists should not be called a CBA. Lavelle also said Daniel Gilman, Peduto’s chief of staff, wasn’t directly involved in the negotiations and he only had a few conversations with the mayor’s chief of staff about the agreement.

Councilman R. Daniel Lavelle answers questions pertaining to UPMC Mercy and his involvement with the addition of a new hospital on its campus. (Photo by Jay Manning/PublicSource)

“Very early on in this process ... my perspective was, we're not going to get [UPMC’s] tax dollars [so] I need [their] direct dollars going into the community,” he said. “I need [UPMC] to do more to actually help, physically help, save our people.”

UPMC made Grace available for a 30-minute interview for this story. Grace said he thought the agreement between the city and UPMC was fair and would benefit the community.

“I would suggest, and this is my opinion, that if you look at what's in the community benefits commitment arrangement ... they are truly things that benefit this community and the patients that we serve,” he said, citing UPMC Mercy’s commitment to open an addiction clinic as a benefit for the Uptown community. Grace also said he thought the negotiations followed the proper process and shared Peduto’s view that outside groups, including the labor union SEIU Healthcare, shouldn’t have had a role in the process.

“I just have a little bit of difficulty understanding why they feel entitled to have a seat at that table,” he said.

Pittsburgh United Executive Director Jennifer Rafanan Kennedy helped push for an agreement that included the demands Berry cared about. She said some of the emails show UPMC putting the profit it would earn from the new hospital over the residents who live in Uptown and the rest of Pittsburgh. Some of the emails from UPMC’s executives mention Rafanan Kennedy’s organization, Pittsburgh United, and PublicSource showed her those pages.

“The very root of why they run roughshod over our community and why people aren't getting what they need from this so-called charitable institution [is] because [to UPMC] this is a game about profits,” Rafanan Kennedy said. “It's about putting profits over people and from there the rest follows.”

Peduto told PublicSource recently that it was improper for groups like Pittsburgh United to try to “usurp” the negotiations and that the people who live near Mercy got to have a say and supported the project.

“When you have an outside group, no matter what that group is, come in to try to hijack that process, you then take away the voice of the people,” Peduto said. “It is improper to hold neighborhoods hostage to whatever your wants are. You need to be affected by that development in a manner that [has] the most impact — where you live.”

Bill Peduto, mayor of the city of Pittsburgh, was the final speaker at the two year anniversary of the Equitable Development: The Path to an All-In Pittsburgh report on April 11, 2019. Peduto said Pittsburgh "took a major step" on gun violence reflecting on this past week after he signed gun bills into law. (Photo by Kat Procyk/PublicSource)

Pittsburgh Mayor Bill Peduto speaks at an event in May. (Photo by Kat Procyk/PublicSource)

PublicSource sought comment multiple times from Romoff, McGough and the chair of UPMC’s board, G. Nicholas Beckwith, but UPMC spokeswoman Gloria Kreps said they were not available for interviews. In a statement, Kreps said UPMC “actively sought considerable community input” for the agreement, “particularly from Uptown Partners, elected officials, community leaders, and residents of the Uptown community.” Uptown Partners of Pittsburgh is a nonprofit focused on community development.

Kreps also acknowledged that UPMC officials urged city leaders to move quickly on the agreement.

“Like any constituent seeking to develop a major city project, we made no secret of our desire to proceed expeditiously with a plan that would benefit our patients and the community,” Kreps wrote.

By the time City Council voted to approve UPMC’s Vision and Rehabilitation hospital, both Peduto and Allegheny County Executive Rich Fitzgerald declared public support for it. In a statement, Peduto praised UPMC’s plans and participation in the negotiations, saying the project would create “good union jobs,” help revitalize the Uptown neighborhood and provide “world-class and unparalleled vision and therapeutic services” to critically ill patients.

‘An exciting moment’

By April 2018, plans for the new hospital were before the city’s Planning Commission for approval. Those meetings aren’t generally a site of public outcry but that wasn’t the case with UPMC’s Mercy project.

UPMC needed the commission’s approval because it was amending a previously approved development document called an Institutional Master Plan. A master plan, per city law, is a document that allows large institutions, like Carnegie Mellon University and UPMC, to forgo individual approvals for development projects, usually for a 10-year period. UPMC originally planned to build a power plant on Mercy’s campus but announced in 2017 its plans for a $400 million, 410,000-square-foot Vision and Rehabilitation Hospital.

Louis Berry III poses for a portrait in his Braddock home. Berry is a former employee of UPMC. (Photo by Kat Procyk/PublicSource)

According to Planning Commission meeting minutes, more than 20 residents and activists opposed the project and criticized UPMC, in part for paying its workers what they considered to be low wages. Berry, for example, retired from UPMC in 2017 making $13.25 an hour. Those who spoke “just expected it to die there,” according to Lisa Frank, a vice president with SEIU Healthcare, the union that’s been attempting to unionize UPMC employees since 2011. At the time, SEIU Healthcare and the local SEIU chapter took different approaches to the new hospital and the agreement. SEIU Healthcare helped lead the call for a CBA while SEIU 32BJ didn’t take a position on the issue.

But Planning Commission members surprised Frank, Rafanan Kennedy and others who attended the hearing by unanimously recommending that UPMC pursue a CBA with community members as it built its new hospital.

“And that was an exciting moment where people were able to sort of coalesce around this idea of like, ‘Yeah, these demands that we have are actually about a community benefits agreement,’” Rafanan Kennedy said.

In general, however, Supreme Court cases dealing with exactions suggest that local governments must tread lightly when asking for concessions from landowners and developers. If concessions are part of city law before a developer applies for a certain project, they can be legal, said Duquesne University law professor Joseph Sabino Mistick. Generally, he said, concessions must both relate to the development and be proportional to its size. But concessions can also be legal if they’re part of a political, rather than legal, deal, meaning the government and developers work together on a deal rather than the government withholding approval until a developer makes concessions.

If a government creates concessions ahead of time, he said, “they can probably comfortably realize some exactions.” But, he warned, “If they try to play it fast and loose…then they run afoul of the law.”

Lavelle added that the Planning Commission doesn’t have the power to mandate CBAs and that such agreements can take years to negotiate. He considers what he negotiated an attachment to UPMC’s master plan legislation. Pittsburgh to date has only had two CBAs successfully negotiated.

Negotiations begin

The Planning Commission’s mandate set off two parallel tracks of negotiations. In one group was UPMC and Lavelle, who negotiated and drafted the agreement along with several others, including University of Pittsburgh Chancellor, Patrick Gallagher, who reviewed the agreement that would eventually be passed into law. Emails also show Gilman discussing the agreement with UPMC executives.

Email records show Lavelle negotiated privately with UPMC executives to win several concessions including job opportunities for residents and expanded addiction services. In the end, UPMC agreed to build a specialty clinic for addiction treatment at Mercy; expand the number of beds available for treating people experiencing homelessness; host several job fairs; and build green space into the hospital’s designs. Prior to the vote last year, an activist questioned Lavelle's relationship to UPMC, saying the vote was a conflict of interest for Lavelle because his wife, Rachel Riley-Lavelle, is on the board of UPMC Mercy. Lavelle disagreed, saying there was "no conflict of interest" for him because his wife sat on Mercy's board, not UPMC's main board, and she had to sign a conflict of interest form every year.

In the other camp was a coalition of patients, current and former UPMC workers like Berry, as well as organizations like SEIU Healthcare and Pittsburgh United. That group held several community meetings and drafted a list of demands and concessions they wanted to see in the agreement between the city and UPMC, including residents being able to access the hospital at in-network rates and funding for affordable housing.

The group also demanded that UPMC pay an inflation-adjusted $15 per hour minimum wage for all workers on the UPMC Mercy campus; allow workers at Mercy to unionize; establish a primary care walk-in clinic at UPMC Mercy; expand addiction treatment at UPMC Mercy; host job fairs so Uptown and Hill District residents can apply to work at the new hospital; and provide opportunities for career advancement to entry-level workers.

Members of that group complained that two community meetings UPMC held didn’t meet the Planning Commission’s mandate for “community engagement.” After the complaints, McGough called them a “a motley assortment of activist groups” whose “demands hadn't changed in years and had nothing to do with the Mercy Vision project."

Negotiations started in earnest on July 3, 2018. In a call with Lavelle, McGough and others “outlined for [Lavelle] what we were prepared to do regarding community benefits,” according to an email McGough sent to Gilman that day. Lavelle was good with UPMC’s proposals, McGough wrote. Later that month, Lavelle would reveal that the actual wording of the agreement was written by UPMC and himself and that UPMC board member Greg Spencer and the development-focused public-private organization Innovate PGH gave input, too.

“I believe everything proposed is fair and reasonable,” he wrote to McGough in that email.

‘Can we pull that off?’

The clash between the two camps came into sharp relief on July 17, 2018. City Council members had delayed a vote on UPMC’s plans until a public hearing could be held on the matter. At that hearing, more than 100 activists, residents and others called on City Council to negotiate a strong CBA with UPMC before approving its plans. Many said it was an opportunity to hold the hospital system accountable.

The testimony rankled UPMC leaders. Two days after the hearing, Beckwith wrote an email to Gilman, lobbying him to get UPMC’s agreement with the city passed through council before the August recess. The board chair called the public hearing “raucous” and the public’s comments a “nearly endless display of virtually unrestrained vitriol directed towards UPMC.”

“The allegations against UPMC for all imaginable forms of corporate malfeasance, abuse of community and employees and generally unrepentant behavior were categorically without foundation and presented solely for extortive purposes,” Beckwith wrote. “UPMC is not going to be extorted or wrongfully coerced. Attempts to derail or delay hurt everyone.”

From there, between July 19 and 23, 2018, negotiations between UPMC and city officials got heated. In one email, McGough described Beckwith and Romoff as “at a boiling point” and that they wouldn’t “take a postponement well.”

“Can we pull that off?” McGough wrote to Gilman on July 22, 2018.

Underlying the pressure for a strong agreement and city leaders’ negotiations with UPMC was a distant possibility that UPMC would close Mercy Hospital. Without the new Vision and Rehabilitation Hospital on its campus, Peduto said recently he believed Mercy might have “died on the vine over the course of several years.”

Lavelle shared that sentiment. “It was a very real concern of mine that I was not going to allow for that to happen,” he said recently.

On July 23, 2018, Gilman, McGough and UPMC’s Vice President of Governmental Affairs, Bob Kennedy, who is also Gilman's father-in-law, met at fl.2 at the Fairmont hotel in Downtown at 7 p.m. The next day, Peduto spoke with Romoff by phone. (Kennedy is Gilman's father-in-law.) The emails don’t describe the discussions — and Peduto said he couldn’t recall specifics from the conversation — but a letter sent to Peduto after the call implied that UPMC was not willing to make any further concessions.

“Our selection of the UPMC Mercy campus for the proposed Vision Institute, a facility that could be located almost anywhere within UPMC's footprint, was made in large part to assure the future of that vital community asset,” McGough wrote in the letter to the mayor.

Peduto released a statement the following day in support of UPMC’s project. Allegheny County Executive Rich Fitzgerald followed suit on July 26, 2018.

Lavelle, UPMC and others promptly finished editing the agreement’s language that UPMC would commit to. Several emails between Lavelle and Gallagher show the Pitt chancellor giving some final feedback, saying the agreement was “impactful - both visionary, and concrete.” Gallagher, who also serves on the UPMC Board of Directors,  wrote that the agreement would help place the hospital project “in the context of the "anchor'' for a new innovation district or corridor that will run through the Hill District.” Minutes after Gallagher offered his input, Lavelle emailed Gilman two words: “Let’s move.”

On July 30, 2018, the general public had the opportunity to see the language for the first time. About 24 hours before council members took a final vote on Lavelle’s legislation, Daniel Wood, Lavelle’s chief of staff, sent out a press release with the agreement language. That bothered City Councilwoman Deborah Gross, who, along with Councilwoman Darlene Harris, would vote against UPMC’s plans and the agreement.

“It’s been a matter of hours that we’ve had these bullet points in front of us ... The public deserves an explanation for this particular timeline,” Gross said at the time. Looking back at it now, she said: “I think we could have done a better job including more public conversation.”

UPMC’s plans and the agreement Lavelle helped negotiate was approved by City Council 7-2. “Is it perfect? Absolutely not. But am I ultimately proud of what came of it? Yes. Have we made progress on it? Yes,” Lavelle said recently. Currently, the hospital is under construction, while activists like Berry continue to look for ways to gain leverage without having a seat at the negotiating table.

Editor's note, July 10, 2019: This story has been updated to clarify additional connections Lavelle and Gilman have to UPMC. Lavelle's wife sits on the board of UPMC Mercy and Gilman's father-in-law is Bob Kennedy.

J. Dale Shoemaker is PublicSource's government and data reporter. You can reach him at 412-515-0060 or by email at dale@publicsource.org. You can follow him on Twitter at @JDale_Shoemaker

Matt Maielli fact-checked this story.

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