The Cake Is A Lie: How DHS Has Rigged The Medicaid Expansion Bids In Favor of HP

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No matter your political bent or your feelings about the Affordable Care Act (Obamacare), the Private Option (Beebecare?), or Medicaid expansion generally, I think we can all agree on one thing: if the state is going to have to pay for software for the expansion, then, at a bare minimum, the process for finding a company to provide that software should be fair so that we can be sure the state is accepting the best possible bid.

Yet…only a few weeks ago, Arkansas Business published a piece called, “HP’s Conway Growth Linked to Medicaid.”  While the premise makes sense on its face, the timing of the article seemed a little strange.  After all, the state of Arkansas has not even decided which company will be responsible for the Medicaid Management Information System (MMIS) infrastructure, but the article talks about the Medicaid expansion and Affordable Care Act without even noting that it is possible that HP might not be the company handling that in the future.  That seems relevant, at least if you assume that the process is not rigged heavily in favor of HP’s getting the contract.

Spoiler alert: the process is rigged heavily in favor of HP.

But I am getting ahead of myself.  Let me back up and start with a different company – Client Network Solutions, Inc (CNSI).

In mid-2012, the Arkansas Office of State Procurement (OSP), on behalf of the Department of Human Services (DHS), contacted a number of potential vendors to help OSP craft a Request for Proposals (RFP).  One of the companies that OSP specifically reached out to was CNSI, because CNSI had bid on similar Medicaid-expansion proposals in 13 states and had been awarded contracts in 9 of those.  Even more importantly, CNSI had a strong track record of doing these infrastructure projects at a lower cost than most other major vendors.

On November 16, 2012, OSP issued RFP No. SP-13-112, seeking bids for the MMIS project.  Five companies submitted bids before the May 7, 2013, deadline – CNSI, HP Enterprise Services, Accenture, Xerox State Healthcare, and CGI Technologies & Solutions.

Part of the bid process required that each company submit at least three letters of recommendation regarding “work of a similar nature to that detailed in this RFP.”  CNSI submitted five – one from the state of Louisiana, one from Utah, one from Michigan, one from Northup Grumman, and one from CSC – all of which were highly supportive of CNSI.

The Louisiana letter in particular stated:

After a rigorous evaluation process that included sixty evaluators on eleven different teams, CNSI was the selected vendor to implement Louisiana’s next generation Medicaid solution and provide fiscal intermediary services. The contract was executed on February, 15, 2012. We feel CNSI’s proven project methodology and Centers for Medicare and Medicaid Services (CMS) certified health care platform is the model MMIS solution available in the country today.

So far, CNSI has shown the commitment to investment in resources, and tenacity needed to implement such a complex system. Most importantly, CNSI has done an excellent job interacting with all the different state stakeholders and external stakeholders such as the incumbent MMIS vendor and the provider community, which is essential to the success for a project of this magnitude.

By any reasonable analysis, CNSI should have skated through the generally pro forma review of recommendations.  Instead, on July 9, 2013, Elizabeth Mentgen of Arkansas OSP sent a letter to CNSI, informing the company that they had been disqualified from consideration for the MMIS project and that OSP would not even look at CNSI’s bid.[foot]Because, hey…if you’re gonna be a bear, be a grizzly, right?[/foot]

According to the letter, the person who authored the letter of recommendation for CNSI from Louisiana (Jerry Phillips, Undersecretary for the Louisiana Dept. of Health & Hospitals) could not be contacted, and the Dept. of Health & Hospitals “would not confirm” Phillips’ recommendation of CNSI.  The letter also stated that CNSI’s Louisiana contract had been “terminated with cause,” which is a pretty dubious statement.  But we’ll come back to that later.

Predictably, CNSI immediately sent a letter to OSP, asking, in effect, “WTF?”

In response, on August 9, 2013, Jane Benton from Arkansas OSP responded by letter, in which she asserted the following in support of the disqualification of CNSI:

  • Jason Stewart, director of the MMIS project in Utah, had given “a less than wholly favorable review” of CNSI.  Specifically, according to Ms. Benton, Utah had noted that “there had already been ‘slippages on deliverables’” under the Utah contract.
  • Louisiana, through the Dept. of Health & Hospital’s general counsel, had noted that the CNSI contract had been terminated with cause.  However, because that was now a matter of litigation, Louisiana could not comment further.
  • Because recommendations are graded pass/fail as a whole, OSP had determined that CNSI had failed the recommendation review and was, accordingly, disqualified.
  • OSP had failed to follow their own rules by not contacting all five of CNSI’s references, as required under the RFP, and OSP had therefore contacted Northup Grumman and the state of Michigan, who both confirmed the positive reviews they’d given to CNSI.
  • Regardless, these positive reviews did not override the determination that CNSI had failed the recommendation portion of the big review, and CNSI was still disqualified.

Now…if you are thinking, “wait, that’s three positive, one mediocre, and one vaguely bad recommendation, and CNSI would have been fine if they’d simply submitted letters from Northup Grumman, Michigan, and CSC,” you are paying attention and are (theoretically) correct.

But that’s not the half of it.

In reality, Utah did not give a review that could be classified as anything other than “wholly favorable.”  When CNSI contacted Utah to ask about OSP’s characterization of their conversation with Utah, Utah’s MMIS-project director stated, explicitly, that “OSP had completely misrepresented 1he phone conversation regarding CNSI’s performance” and that “Utah stands by their reference letter and would ‘recommend CNSI to any state.’” Utah also “said they would be happy to speak to any Arkansas official to clarify this reference issue.”

As to the “slippage” referenced in Ms. Benton’s letter, CNSI correctly in response to OSP noted that Xerox – who had not been disqualified – had entered an MMIS contract with the state of New Hampshire in 2005, with a 36-month delivery deadline, and that project had actually taken them over eight years.  CNSI also noted that, based on getting the New Hampshire contract, Xerox had gotten contracts with North Dakota and Alaska in 2005, but both states were waiting for the project to begin due to the “slippage” in New Hampshire.  Xerox had also been awarded MMIS contracts with California and Montana in 2009 based on having received the NH, ND, and AK contracts, but the CA and MT contracts were still waiting for the ND and AK jobs to complete.  Whatever “slippage” OSP might have found in CNSI’s Utah contract paled in comparison to Xerox’s timelines for delivery.

In response, OSP notified Xerox that they had been disqualified from consideration as well.

CNSI then again contacted OSP/DHS and said (paraphrasing), “um, we weren’t suggesting Xerox should be disqualified. We were pointing out that their ‘slippage’ is far, far worse than ours.”

In response, OSP notified Xerox that they were un-disqualified from consideration.

CNSI, however, was still disqualified.  Because…why?  Something about that Louisiana contract being cancelled.

A funny thing about that “terminated with cause” contract in Louisiana, though: the “cause” was Gov. Bobby Jindal’s (over)reaction to a federal investigation into the awarding of the contract itself.

The secretary of the Louisiana Dept. of Health & Hospitals, Bruce Greenstein, had formerly been employed by CNSI, and the contract had been controversial when it was awarded in 2011.  A federal investigation in Maryland looked into the contract negotiations, and that investigation was closed without charges in March 2011.  Subsequently, a federal grand jury in Louisiana sent a subpoena to the state in 2013, seeking information about the contract award.  When that subpoena was received, Jindal used the opportunity to unilaterally cancel the contract.

Point being, the “cause” that the contract was cancelled over had nothing to do with the actual performance of the contract.  Which is why, less than a month before the contract was cancelled, Undersecretary Phillips wrote the glowing recommendation letter for CNSI.

More importantly, CNSI immediately sued the state of Louisiana for breach of contract based on that cancellation, and they have won at every stage of those proceedings.  Most recently, Louisiana sought to delay the suit pending the outcome of the criminal investigation.  The judge refused their request.  Essentially, the sum total of “terminated with cause” is, at this point, that Gov. Jindal (apparently) improperly terminated a contract, despite no evidence that CNSI had acted inappropriately in obtaining the contract or that CNSI had failed to abide by the terms of the contract.

Yeah…that totally seems like a reason to disqualify CNSI from bidding in a different state, despite the fact that most everyone involved generally acknowledges that CNSI’s bid would have come in about $50M below the next-highest bidder.  And despite the fact that CNSI has a track record of saving states millions of dollars compared to what their previous vendor cost.

While I am loath to admit it, here is the surest sign that the disqualification of CNSI was the result of questionable actions: it literally had the effect of bringing me and Sen. Jason Rapert to the same side of an issue.   Given that Sen. Rapert’s district includes Conway, it would have been very easy for him to silently support anything that made it more likely that HP would get the contract.  Instead, Sen. Rapert emailed the powers that be and called them out on what they’d said about Utah’s recommendation of CNSI, writing:

It is very disturbing to see anyone treated unfairly. Why someone at Arkansas State Procurement would say their verbal conversation with Mr. Stewart contradicts his positive view of them which he has now twice put into writing I don’t know. It is puzzling to say the least. Written and signed comments carry greater weight in any situation than hearsay or oral statements. A man has the right to say exactly what he wants to say – but for some reason someone within procurement is denying Jason Stewart that right.

My personal opinion is that CNSI has not been treated fairly. I hope that your department will reconsider this information and make a decision that passes the Rotary Four Way Test-Of the things we think, say or do, ask:

1. Is it the TRUTH?
2. Is it FAIR to all concerned?
3. Will it build GOODWILL and BETTER FRIENDSHIPS?
4. Will it be BENEFICIAL to all concerned?

I don’t think any fair minded individual would objectively say based upon the contradictions I have verified that CNSI has gotten a fair shake.

As I have told you, I don’t personally know anyone at CNSI nor do I have any interest in them being awarded any contract in our state. However, they are owed a fair and impartial assessment of their bids for business just like everyone else. As long as the mishandling of this issue is allowed to stand by your department, I could never vote to review a contract that would be awarded when such unfairness has been allowed to stand. I suggest making it right, or starting over.

I struggle to think of another issue where I could read an email from Jason Rapert and think, “yes, exactly!”[foot]I mean, unless Jason Rapert wrote a resignation email in which he described himself as objectively terrible as a person and a legislator.[/foot]  I certainly can’t think of another issue related to Medicaid expansion where I would have that reaction.  To put it in random, awesome Western terms, I’m Gus McCrae; he’s Jake Spoon.  I’m William Munny; he’s Little Bill Daggett.  You get the point.

Yet…here we are.  If not friends, at least momentary allies[foot]Which, I suppose, makes us more like Gus McCrae and July Johnson, but whatever.[/foot] in response to shady, improper dealings in government contracts.

Which, ultimately, brings us to HP.

As you are no doubt aware, HP announced in 2008 that it would open a facility in Conway, employing 1,200 people.  In the wake of the announcement, Conway Mayor Tab Townsell even offered this hyperbolic absurdity:

You know, chronologists will tell you the 21st century started seven or eight years ago; historians will tell you it’s a moment in time that starts a century. … The 21st century in Conway, Arkansas, and to a degree in Arkansas, starts today.

Except, by July of 2013, HP had to eliminate 500 jobs, because…um…something? As “luck”[foot]And, by “luck,” I mean “easily discoverable shadiness.”[/foot] would have it, however, by mid-December – less than six months after the 500-person layoff – HP was suddenly announcing the addition of 200 jobs to “fill important technical roles in software engineering, business analysis and management in support of HP’s growing government and commercial healthcare business across the United States.”

Now, perhaps you could read HP’s statement as meaning that they were anticipating more healthcare business in other states, and not necessarily that they were assuming that they would get the Arkansas contract.  Maybe.  If you ignore the fact that HP has had the Arkansas Medicaid-processing contract for years, and it is because their current infrastructure is so terribly outdated that Arkansas needs a new setup anyway.  But, even if you ignore that, you’ve still got the Arkansas Business article from mid-January that I mentioned at the start of this piece, which strongly suggests that HP is going to get the MMIS contract.

To figure out which interpretation was more accurate, I reached out to a close friend with has direct ties to the MMIS procurement process.  I emailed her:

So, I’ve found some questionable dealings regarding the Office of Procurement and the software system for the Medicaid expansion.  When I have some free time, I need to run it by you and see if you know anything, because my gut feeling is the system is rigged so that HP will get the contract.

My friend[foot]I apologize for keeping this source anonymous.  I generally hate that, but it is absolutely necessary in this instance.[/foot] replied almost immediately:

I’ll tell you this: From what I’ve heard, the system is rigged so that HP will get the contract.

That’s what I expected, but it raises an obvious question: if you are OSP/DHS and you are rigging the system, why only get rid of CNSI?  The answer is more simple than you would expect: CNSI is the only bidder that you can be absolutely sure will have a bid well below that of HP’s and have a record of success that makes it impossible to ignore their bid.

After all, Xerox has already shown, based on their New Hampshire efforts and the backlog of work that awaits them, that you cannot rely on them to finish a new project within the same time-frame as HP or CNSI could.  CGI Technologies & Solutions is better known as “the company behind the Obamacare website rollout,” which pretty much means you can ignore anything they might propose if you are already inclined to go with a different company.  And Accenture?

On December 7, 2012, the Polk County District Court ruled that the contract award to Accenture must be set aside. Iowa Medicaid Director Jennifer Vermeer announced to staff on January 11 that the department has taken steps to comply with the Court’s ruling in the MMIS matter by issuing a notice to Accenture that terminates the contract in 90 days. The department is currently in the process of winding down the current contract activities.

(Before you ask, no, Accenture[foot]Accenture has also been in the news as the company that stepped in to take over CGI’s role in the Obamacare rollout, making it even less likely that Arkansas, in an effort to differentiate the Private Option from Obamacare, would pick Accenture.[/foot] was not disqualified for having had this contract cancelled, despite it happening around the exact same time they were bidding on the Arkansas MMIS project.  Funny, that.)

Yep, if you wanted to game the system and more or less ensure that HP would get the MMIS contract, the only company that you have to keep out of the competition is CNSI.  But, given that they are a major player in these state-by-state MMIS implementations, you have to let them bid, especially after you practically begged them to help come up with the initial RFP.

So you let them bid, then you find the first hiccup, no matter how small, and use it to boot them from the whole process.  That way, your preferred vendor is almost certain to win, and the only losers are an out-of-state company and anyone who might have faith in the fairness of the procurement process.

Oh, and Arkansas taxpayers.