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Alan Hudson resigned on Wednesday as chairman of eHealth Ontario amid a controversy over lucrative contracts awarded without competitive tenders and nickel-and-dime spending on snacks by consultants, some of whom charged thousands of dollars a day for their services.

Dr. Hudson's departure marks a fall from grace in what many saw as a stellar record. Known as the man who could fix anything in health care, he was Ontario Premier Dalton McGuinty's hand-picked choice to modernize the province's medical records.

"Today I want to acknowledge that our government came up short in the matter of eHealth," Mr. McGuinty said at a news conference on Wednesday. "We should have done more to protect the public."

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The 71-year-old neurosurgeon and former hospital president was renowned for taking on huge health problems and then fixing them, such as reducing the province's wait times for key medical procedures. But he now finds himself leaving the embattled agency under a cloud.

Dr. Hudson has been replaced by Rita Burak, a bureaucrat who most recently served as chairwoman of electricity utility Hydro One.

The government also introduced new rules that ban its ministries and agencies from awarding any contracts to consultants without competitive tenders. Under the existing regime, contracts valued at less than $25,000 can be awarded without tenders.

As well, consultants will no longer be reimbursed for tea bags, donuts and another hospitality items that have been at the centre of the controversy over free-wheeling spending at eHealth Ontario.

Dr. Hudson is the second executive to leave eHealth Ontario in recent days. Sarah Kramer, his protégé and long-time business associate - whom he often described as brilliant - resigned as chief executive officer on June 6.

Under Dr. Hudson's guiding hand, Ms. Kramer was to lead the province's push to create a digital record of every resident's medical history.

The strategy is now in tatters at a time when Ontario already lags well behind other provinces in replacing paper-based medical records with electronic ones. Health care professionals say they fear that the controversy swirling around eHealth Ontario will further set back the McGuinty government's plans to create the digital record keeping system by 2015.

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Dr. Hudson was appointed eHealth Ontario's chairman last September, shortly after the agency was created. A senior government official said Dr. Hudson was the logical choice. He earned the Premier's trust for getting results in reducing the province's wait times for hip and knee replacements and other medical procedures. In a sector that is plagued by gridlock and verbosity but little change, Dr. Hudson seemed to succeed where others failed.

"When you go into public life, you take on the risk of having your motivation improperly assessed," Bob Bell, president and chief executive officer of the University Health Network, the hospital network Dr. Hudson once ran. "I don't feel so much sad as I feel disappointed that the discussion around processes of tendering and processes of appropriating executive pay have turned into a pretty nasty personal attack on the people involved."

Dr. Hudson, he said, had a remarkable track record, creating "positive change." It was not a surprise when he took the post as chairman of eHealth Ontario, trying to create electronic health records for all residents, focusing on three main areas: a diabetes registry, an eHealth portal and electronic medication prescribing, which would eliminate handwritten prescriptions and reduce medication errors.

eHealth Ontario assumed responsibility for creating electronic health records from Smart Systems for Health Agency, its predecessor, and the Ministry of Health itself. Given that the province had already spent $647-million on the initiative with little to show for it, eHealth Ontario took on a formidable job.

In the rush to deliver results quickly, officials at eHealth Ontario bypassed the traditional government procedures for hiring consultants by awarding lucrative contracts without competitive tenders. In the process, the agency became embroiled in controversy for its free-wheeling spending.

Ms. Kramer replaced most of eHealth Ontario's senior executives with consultants shortly after she became CEO last November. In all, seven of nine senior executives either resigned or were fired, including chief financial officer David Robertson and Janice Stephenson, the agency's general counsel. All of them left with hefty severance packages totalling about $1.7-million, according to sources close to the situation. In addition, Ms. Kramer's predecessor, William Albino, was paid severance of $498,000, according to a copy of his severance agreement obtained by The Globe and Mail.

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Courtyard Group, a consulting firm with ties to Dr. Hudson, was awarded three contracts totalling just under $2-million since last October, according to freedom of information documents obtained by The Globe. Dr. Hudson and Michael Guerriere, a managing director at Courtyard, worked together at University Health Network. Dr. Guerriere billed the agency $3,145 a day while temporarily serving as its vice-president of strategy, the documents show.

Peggy Ballem, a physician and former deputy health minister in British Columbia, was paid $30,000 for just 78 hours work last fall, the documents show. Dr. Ballem bowed out last December after she was appointed city manager of Vancouver.

But it was the manner in which many consultants billed taxpayers for small hospitality items that appeared to cause the greatest controversy.

Allaudin Merali, a consultant from Edmonton, billed the public $14.95 for a beverage every day while he stayed at the Fairmont Royal York hotel, even though he was paid $2,750 a day for his consulting services and also received a $75 per diem, the documents show.

Donna Strating, another consultant from Edmonton, charged taxpayers $1.65 for Tim Hortons tea and $3.99 for Choco Bites, the documents show. She was paid $2,700 a day for her consulting work but did not receive a per diem.

In the wake of the controversy, eHealth Ontario has cancelled many of the contracts with consultants, leaving the agency with key executive roles unfilled. Under "executive team" on eHealth Ontario's website, it says, "Sorry, this page of the website is currently being updated and will be online shortly."

Dr. Hudson received an honorary degree from the University of Toronto on June 3rd, 2009. In his convocation speech, he described the concepts of digitization of medical information and communication having been present for at least 45 years but "unbelievably slow to penetrate clinical health care in a systematic fashion."

"We have now reached a tipping point and Ontario has recently sequestrated $2.4-billion to create an Ontario electronic health record," according to a copy of his speech.

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About the Author

Karen Howlett is a national reporter based in Toronto. She returned to the newsroom in 2013 after covering Ontario politics at The Globe’s Queen’s Park bureau for seven years. Prior to that, she worked in the paper’s Vancouver bureau and in The Report on Business, where she covered a variety of beats, including financial services and securities regulation. More

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