WellCare loses battle to maintain Iowa Medicaid contract

One of the four companies the Iowa Department of Human Services initially selected to manage care for Medicaid recipients has given up the fight to keep a contract that would have been worth hundreds of millions of dollars. Follow me after the jump for details on the final stages of WellCare’s unsuccessful effort to overturn state officials’ decision to terminate that contract.

In August, Iowa DHS awarded WellCare one of four contracts to manage care for more than half a million Medicaid recipients. The Florida-based company had carried out an effective lobbying strategy, hiring former Iowa House Speaker Chris Rants and former State Representative Renee Schulte to help during the bidding process. Schulte had been working as a consultant for Iowa DHS for two years before signing a contract with WellCare. Both she and Rants communicated with state officials during a “blackout period” that was intended to prevent improper influence while bids were under consideration.

WellCare signed a three-year contract with DHS in October. The same month, court hearings revealed the extent of communications between WellCare representatives and state officials, as well as the company’s failure to disclose in its initial bid that it had agreed to pay $80 million over mismanagement of Medicaid in Florida. Three of the company’s onetime top executives eventually went to prison because of that scheme.

An administrative law judge recommended in November that the state terminate the WellCare contract, because state officials had been unable to “exercise reasoned judgment” about the facts surrounding the company’s $80 million settlement. She found that the improper communications between Rants and Schulte and state officials did not “sufficiently taint the entire process to necessitate reversal of the award of contracts to the remaining successful bidders.”

In December, Department of Administrative Services Director Janet Phipps ruled that WellCare should lose its state contract.

“In this case, the full record now before me shows that WellCare failed to disclose highly relevant information both in its initial response to the (public bid) and in its ‘clarifying’ answer,” Phipps wrote.

Phipps concluded: “In doing so, WellCare not only violated the terms of the (bid) but also deprived the agency decision makers — both the evaluation committee and the director Palmer — of the opportunity to fully exercise their discretion in determining which bid proposals would provide ‘the greatest benefit to the agency.’”

WellCare went to court, and Chelsea Keenan covered the hearing in the case earlier this month.

Lawyers for the Tampa-based company said that information was provided after the state committee in charge of evaluating the managed-care bid applicants asked a clarifying question in regard to false claims litigation. WellCare officials said it provided detailed information about its corporate integrity agreement as well as why it had to pay “substantial” fines.

Robert Highsmith, an Atlanta-based attorney for WellCare, argued that Iowa Department of Human Services Director Charles Palmer acknowledged in a September letter as well as during an October hearing in front of an administrative law judge that he knew about the settlement and chose to not disqualify WellCare from the bid process.

But Highsmith conceded to Polk County District Judge Robert Blink that the company did not disclose the specific dollar amount it paid in fines in the clarifying question, adding that “nowhere in those questions does it say, ‘List a specific amount.’”

Also discussed during Monday’s hearing was whether WellCare violated any rules that should result in disqualification when Christopher Rants, a lobbyist, had conversations with Michael Bousselot — Gov. Terry Branstad’s chief of staff who was his policy director and legal counsel at the time.

WellCare and the state’s disagreement centers around a rule that laid out who the company could and could not be in contact with during the request-for-proposal process. The state contends the communication was inappropriate, while WellCare argued the rule only prohibited the bidders from communicating with Department of Human Services employees.

Polk County District Court Judge Robert Blink ruled on Friday that Iowa DHS and Phipps “acted within the scope of their authority to terminate the contract,” Jason Clayworth reported for the Des Moines Register. The judge found “substantial evidence to conclude that WellCare violated the blackout period and to support disqualification.” In addition, Keenan reported for the Cedar Rapids Gazette,

“The true extent of WellCare’s settlements and the actual details of the (corporate integrity agreements) were not disclosed to (Department of Human Services) until the contested hearing in October 2015,” Blink wrote. “If DHS was unaware of the extent of WellCare’s legal problems until that time, it could not have been fully informed and able to exercise discretion.”

WellCare could have appealed the ruling but has decided to “move forward” and “turn our attention to future growth opportunities” elsewhere.

Approximately 134,000 Iowa Medicaid recipients had been assigned to WellCare before state officials terminated the company’s contract. The Iowa Department of Human Services has said those people “can select or will be automatically reassigned to one of the remaining three” managed care providers by February 17.

On a related note, Keenan reported that Judge Blink’s February 12 ruling denied a request by Meridian Health Plans “to have its bid re-evaluated and the company considered to take WellCare’s vacated spot.” The original request for proposals indicated that Iowa DHS planned to award contracts to two to four managed care providers. The agency decided to move forward with only three companies once WellCare had been excluded. (The remaining managed care providers are Amerigroup Iowa, AmeriHealth Caritas Iowa, and UnitedHealthcare Plan of the River Valley.)

I’m still surprised that well-connected lobbyists working for Iowa Total Care (a subsidiary of Centene) weren’t able to get the state to issue a fourth contract once WellCare was out of the picture. The committee evaluating bids gave Iowa Total Care the fifth-highest score, so after state officials terminated WellCare’s contract, I assumed there would be a full-court press to get Iowa Total Care into that slot.

Last month Judge Blink rejected requests to halt Iowa’s Medicaid privatization, filed by insurance companies that bid unsuccessfully for the state’s business. In that ruling the judge determined, “The interest of providing a stable, consistent Medicaid program for 560,000 Iowans weighs more heavily on the scales than the potential loss of profits of Aetna and WellCare.”

Federal officials delayed the implementation of Medicaid privatization in Iowa until at least March 1. At this writing, it remains unclear whether the state will receive the necessary waivers to switch to managed care at the beginning of next month.

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