State health contracts had flaws, auditor says

Updated

http://www.chicagotribune.com/business/breaking/ct-officials-attack-over-health-care-contracts,0,2464274.story


State health contracts had flaws, auditor says


BY ANDREW MALONEY

Sun-Times Springfield Bureau

apmaloney@suntimes.com
Last Modified: Mar 8, 2012 02:20AM

SPRINGFIELD — The state awarded $7 billion in health-care contracts for state employees and retirees despite several flaws, including lax oversight and possible conflicts of interest, the state’s top auditor concluded Wednesday.

The report by Auditor General William Holland knocked the state’s Department of Healthcare and Family Services, which was responsible for evaluating proposals from healthcare providers as it tried ditching the state’s long-term health insurer in a move designed to save money.

Citing “serious deficiencies” in the agency’s contracting on its health-care deals, Holland’s audit said, “we are unable to conclude whether the state’s best interests were achieved by the department.” The state agency did not include all relevant information in its bid solicitations and gave a consulting firm called Mercer — which had business relationships with all the firms who made proposals — a “major participation role” in the process, Holland found.

The department violated its own rules by not making evaluation teams meet with each other during the process, Holland said.

Julie Hamos, the department’s director, also signed two different award recommendations, the first of which was changed after meetings with Gov. Pat Quinn’s office. And while the department said its chief procurement officer did not support the initial recommendation, documents did not support that claim.

A $6.6 billion contract to provide insurance for state workers and retirees was awarded to Blue Cross Blue Shield last spring, with an additional $379 million going to HealthLink and PersonalCare for open access plan services. The state’s main provider had previously been Health Alliance, which had done business with the state for about 30 years.

While Health Alliance lost the initial bidding war, the Urbana, Ill.-based insurer filed suit against the state over the long-term contracts and a little over a week ago notched a victory when lawmakers voted to allow the company to bid on a supplemental state contract.

“We’re not surprised by the auditor general’s findings since many were pointed out in our original protest of the procurement,” the company said in a statement.

The agency audited by Holland defended its contracting standards and said any missteps did not “affect the outcome of the procurement process” and that the health-care deals were “executed in a fair and competitive matter.”

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