Losing bidders challenge Iowa’s Medicaid modernization procurement process

DES MOINES - Attorneys representing three private companies seeking to be part of Iowa's Medicaid modernization program Monday argued the state used a 'flawed” and 'biased” bidding process to award contracts to four competitors which should be 'undone” and replaced with a fairer, independent scoring system in making the largest procurement in state history.

However, a lawyer for the state Department of Human Services disputed the allegations made by Aetna Better Health, Iowa Total Care and Meridian Health Care Plan of Iowa in urging administrative law judge Christina Scase to reject their appeals. He said DHS officials should be allowed to proceed with plans to implement its managed care changeover for Iowa's $4.2 billion Medicaid program beginning Jan. 1 as planned.

Iowa Assistant Attorney General Diane Stahle argued the state met its legal obligations in the bidding process that resulted in contracts being awarded to Amerigroup Iowa, Inc.; AmeriHealth Caritas Iowa, Inc.; UnitedHealthcare Plan of the River Valley, Inc.; and WellCare of Iowa, Inc. by structuring a process that did not have to be perfect, just fair and reasonable.

Stahle cautioned that there likely would be 'many attacks” during the week-long hearing, including attempts to take the administrative hearing 'down many rabbit holes” by losing bidders. She said the state would face accusations of being 'haphazard, reckless” and disorganized in a process that she maintained 'was anything but that.”

However, attorneys for the losing bidders made opening statements alleging the process was neither fair nor transparent, was fraught with alleged impropriety that tainted the outcome and used a scoring system that was likened to the way the 'Dancing With the Stars” TV show picks winners.

'The procurement needs to set aside and the proposals need to be rescored,” said Meridian legal counsel Jim King, one of 33 attorneys who were present for Monday's administrative hearing that put Gov. Terry Branstad's plan to in transforming Iowa's Medicaid program into a risk-based system under the legal microscope.

Attorneys laid out challenges to the selection process based on methodology deficiencies, fundamental process flaws that overlooked documented histories of serious misconduct and poor quality in other states by at least one winning bidder that resulted in contractual, civil, and even criminal sanctions for either the organization or their managing personnel.

'If there is a rabbit hole, it is the size of the Grand Canyon,” said Aetna attorney Mark Weinhardt in raising questions over former state Rep. Renee Schulte, R-Cedar Rapids, who worked as an independent contractor for the DHS before terminating her relationship and going to work for WellCare - one of the eventually winning contractors with the state.

Lawyers for the four private companies that have been awarded managed care contracts with the state were on hand to defend their proposals and the state's handling of the bidding process. DHS Director Charles Palmer also testified in support of a process he called 'very thorough and deliberative.”

Scase said she expects the hearing will span the entire week, after which she will make a proposed decision that would go to the director of the state agency. However, since Palmer made the decision to deny the requests for consideration, she believed the administrative procedures act would call for the appointment of an alternate decision-maker by the governor.

Scase said she hoped to be able to complete her report in less than a month after the hearing is concluded, with the possibility that case ultimately could go to judicial review.