Another disappointed bidder sued — and won — over Corcoran’s actions

A company that was passed over for a piece of the biggest set of contracts ever let by the state of Ohio hinted in court Wednesday that Ohio Medicaid Director Maureen Corcoran might have acted improperly.

Kirsten R. Fraser, an attorney for managed-care provider Paramount Advantage, asked a Medicaid official if Corcoran or one of her subordinates communicated with any of the bidders on the mammoth contracts during the “blackout period.” That’s when the rules say there should be no communication between bidders and the officials evaluating them.

The Medicaid official, Deputy Director Patrick Beatty, said he knew of no such communications. 

It’s possible, of course, that Fraser was just fishing. But it’s a fact that when Corcoran was a senior official at another state agency, her communications with a bidder on a major managed-care contract were deemed so improper that a federal judge threw out the contract and appointed a special monitor.

Asked about Wednesday’s exchange, Medicaid spokeswoman Lisa Lawless said in an email, “The (Ohio Department of Medicaid) staff comments at trial speak for themselves. We don’t have further comment.”

Paramount, a subsidiary of Toledo-based ProMedica, is suing the Medicaid department on claims that it was the victim of a biased process when it wasn’t picked in April to be one of six companies to manage care for Ohio Medicaid clients under a five-year, $22 billion deal. 

Despite its long service to the program, Paramount said, the Medicaid department tilted the process against it and in favor of giant, out-of-state corporations. 

During testimony, it was revealed that evaluators viewed it as a weakness that Paramount operates only in Ohio. Also, none of the Medicaid officials who testified could say whether Mercer, the consultant that facilitated the procurement, numbered any of the successful bidders among its clients.

Successful bidders include Centene, a company that Attorney General Dave Yost in March accused of ripping off Ohio taxpayers to the tune of tens of millions of dollars. Centene is paying $88 million — and $1 billion more to other states — to settle such claims.

Also hired as part of the sweeping overhaul were companies owned by UnitedHealth Group and CVS Health, whose pharmacy middlemen have been accused of gouging Ohio taxpayers for years. A lawsuit by Yost against UnitedHealth’s OptumRx continues.

For their part, Medicaid officials over two days of testimony last week have said they’re undertaking a fundamental overhaul of the state’s Medicaid managed-care program, which they said has performed poorly compared to other states. The officials said Paramount’s proposal was inadequate because it was mired in past ways of doing things.

Paramount scored far worse than the successful companies in the officials’ evaluation of the proposals.

As she questioned Ohio Medicaid officials, Fraser highlighted the fact that they disclosed whether they owned stock in companies interested in the procurement, while Corcoran, who had the final decision, apparently has not.

Disclosures made under a separate, less-stringent law indicate that as recently as last year, Corcoran owned stock in three corporations that got billion-dollar contracts as part of this year’s procurements. But Corcoran won’t say whether she filed affidavits disclosing her holdings when she signed the contracts — even though such affidavits appear to be required by law.

This isn’t Corcoran’s first legal tussle over a high-profile government contract.

In late 1996, when she was assistant director of the Ohio Department of Mental health, her agency and the Ohio Department of Alcohol and Drug Addictive Services issued a request for proposals. They were looking for a private company that would sign up a network of outside behavioral-service providers, transfer services offered by government agencies to those providers and then see that they got paid.

The process would have been analogous to what Medicaid managed-care companies like Paramount do: sign up networks of providers like doctors and hospitals, sign up clients, coordinate their care and reconcile providers’ claims.

Among the companies submitting proposals in 1996 for the mental health work were Value Behavioral Health and Ohio Behavioral Health Partnership.

The request for proposals capped potential profits at $1.5 million, which Value Behavioral Health’s proposal did. Despite submitting a proposal that envisioned maximum profits of $5.4 million — or nearly four times the cap — Ohio Behavioral Health was awarded the business.

In court testimony, Corcoran’s boss, Department of Mental Health Director Michael Hogan, testified that he favored Ohio Behavioral Partnership despite its non-compliance with the bidding requirements. But during the process of writing the final contract, other state workers flagged the discrepancy.

Less than two hours after Ohio Behavioral Partnership was notified that it won the contract, Corcoran, who Hogan placed in charge of the process, and others called the company’s president, Ronald I. Dozoretz. 

“Corcoran told (Ohio Behavioral Health’s) President, Dr. Dozoretz, that the company’s administrative costs were too high,” U.S. District Judge Edmund A Sargus Jr. wrote in a 1997 ruling on the case. “Corcoran told Dozoretz that the administrative costs could not exceed $.95 (per-member-per-month), representing the precise amount bid by the plaintiff. The $.95 (per-member-per-month) amount for administrative costs also represented a $3,864,000 reduction in the amount previously submitted by (Ohio Behavioral Health) in its proposal.”

The next day, Dozoretz faxed Corcoran a revised rate schedule making its maximum profit the same as that proposed by Value Behavioral Health, the company that sued because it didn’t get the business.

“No bidder other than (Ohio Behavioral Health) was requested, or given the opportunity, to change its bid in response to a request from the state agencies,” Sargus wrote. “Only after receiving the two revisions from (Ohio Behavioral Health) did the defendants then cause the unsuccessful bidders to be notified at approximately 4:00 p.m. on February 4, 1997, that they had not been selected.”

The state’s lawyers tried to argue that Corcoran’s call was OK. Ohio Behavioral Health had already been selected, so the state was free to negotiate the contract on whatever terms it liked.

Sargus didn’t buy it. He said that argument negated the entire purpose of competitive procurement.

“In this case, the process was anything but ‘free and open,'” the judge wrote. “The State set up specific requirements to be met by all bidders. Prior to its selection as the successful vendor, (Ohio Behavioral Health) failed to meet a critical element of those requirements. Only after (Ohio Behavioral Health) was selected did it submit a proposal meeting all of the essential requirements of the State’s own standards.”

Sargus threw out the contract, and he was so concerned with the state’s conduct that he appointed a special monitor to oversee any future request for proposals.

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This story is provided by Ohio Capital Journal, a part of States Newsroom, a national 501 (c)(3) nonprofit. See the original story here.