Bias, conflict were present in $22 billion Ohio Medicaid contract, bidder says

A Toledo-area health care provider says that it’s received top ratings in the eight years it’s provided managed-care services to the Ohio Medicaid program. It hinted that it was the victim of bias and possible conflicts of interest earlier this year when it missed out on a share of a five-year, $22 billion program meant to reshape the state’s health care program for the poor.

For their part, the state’s lawyers said the provider, Paramount Advantage, scored so poorly in a competitive process that it wasn’t even close. 

Tuesday marked the start of a trial in which Paramount is suing the state to rebid the business. While it’s been a managed-care provider since the program started, Paramount wasn’t one of the six companies picked to provide those services starting next year. 

Paramount has said the process favored plans owned by out-of-state behemoths, three of which will be providing Medicaid managed-care in Ohio for the first time. 

A fourth, Buckeye Health Plan, was awarded a contract even though it agreed in June to pay the state $88 million to settle claims lodged in March by Attorney General Dave Yost that it ripped tens of millions of dollars off of taxpayers.

The trial, which is taking place before Franklin County Common Pleas Judge Julie M. Lynch, has stakes that seem uncommonly high. 

Paramount President Lori Johnston testified that loss of the Medicaid contract could cause more than 600 layoffs — including at Paramount’s parent company, Toledo-based ProMedica.

But if Paramount is successful and the contracts have to be rebid, the impacts would also be great. 

It would at least delay plans to start up a $1 billion program intended to provide a continuum of care for 60,000 Ohio children with complex behavioral needs. And it would delay a major reform to the way Medicaid pays for drugs after years of complaints that under the current system, pharmacy middlemen have been gouging taxpayers.

Those high stakes might explain the urgency of the trial. Originally docketed for next year, the trial was moved up, with more testimony slated for today, Wednesday. The trial is expected to finish next month.

Whatever the outcome, there might be some painful revelations for the Medicaid department.

The Capital Journal reported earlier this month that Medicaid Director Maureen Corcoran won’t say whether she filed an affidavit disclosing how much stock she owned in some of the companies involved in the massive procurement as she gave them contracts worth billions. 

On Tuesday, Paramount attorney Kirsten R. Fraser questioned two of the seven Medicaid officials who evaluated the applications for the department’s managed-care business. 

Both said they had to file documents disclosing whether they have an ownership interest in any of the applicant companies. But when Fraser asked whether Corcoran — the ultimate decision-maker — had made such disclosures, Shaun Bracely and Kendallyn Markman said they had no idea.

Corcoran will likely have to answer herself when she’s called to testify later in the trial.

Fraser also hinted at possible conflicts at the consulting company that managed this year’s procurement, Mercer. She asked Bracely and Markman if they knew whether any Mercer clients were among the companies bidding for billions in Ohio Medicaid business. Both officials said they didn’t.

A big part of Paramount’s case against the state has to do with alleged bias stemming from problems in 2018 and 2019 with a computer algorithm. 

Managed-care providers sign up patients and manage their care among hospitals, doctors, dentists and other care providers. Patients who didn’t choose from the state’s current menu of five managed-care providers are assigned one automatically.

Care providers are paid a set rate each month for each member they have. The idea is to encourage the companies to negotiate good rates from health providers and keep their clients healthy so they can pocket savings.

But Markman, the Medicaid department’s chief of clinical analytics, said a Medicaid investigation confirmed that a glitch in the algorithm was assigning Paramount more than its share of sicker, more-expensive clients.

Johnston, Paramount’s president, said that the problem cost her company $100 million. By May 2019, “the (ProMedica) board said ‘you’ve got to stop the bleeding.'” To slow the losses. Paramount pulled out of two regions of the state and dramatically shrunk its client base — just as Medicaid was gearing up for its big re-procurement.

Medicaid ended up reimbursing Paramount $66 million. But Johnston said that in subordinates’ later dealings with Corcoran, the Medicaid director angrily referred to the payment as a “bailout.” 

Paramount is claiming this as proof of Corcoran’s bias against the company.

But Markman said her agency is grateful when contractors point out such problems because the federal government, which pays for 60% of the program, could pull funding if the agency ignores such problems.

“We want to do things correctly,” she said. “If we don’t, we could lose our federal match.”