Attempt to block $22 billion Medicaid contracts dismissed

Appeal likely in dispute over managed care business

By: - November 10, 2021 1:00 am

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A judge on Tuesday dismissed an attempt to overturn more than $22 billion worth of managed-care business as the Ohio Department of Medicaid tries to reshape the way it works with 3 million low-income and disabled Ohioans.

However, questions remain about potential conflicts of interest on the part of some involved in awarding the business.

Franklin County Common Pleas Judge Julie M. Lynch dismissed an attempt by Paramount Advantage to stop the process by which the Medicaid department hopes to revamp the way it handles prescription drugs, coordinates care for kids with complex behavioral needs and delivers care to traditional Medicaid recipients. The new system is scheduled to go live next July.

Toledo-based Paramount claimed the procurement process was biased against it — and in favor of some of the country’s biggest corporations. Loss of the business will mean the loss of 600 jobs, the company’s lawyers said.

Judge Lynch said the company’s case didn’t pass legal muster.

“Paramount needed to show that the department of Medicaid abused its discretion” with clear and convincing evidence, Lynch said, later adding that Paramount “failed in every respect to meet that burden.”

In a little more than three days of testimony in late October and this week, Paramount’s attorneys entered evidence that they said showed the Medicaid department was biased against the managed-care company, which has worked with the department for more than 20 years.

For example, the Medicaid evaluators in some instances dinged relatively small Paramount for not working out of state, in contrast to huge bidders such as UnitedHealth, which works in many states.

Paramount also pointed out that while two of the successful bidders have been recently sued by the state on claims of fraud, they weren’t penalized, while Paramount got no credit for not being accused of such conduct.

And on Tuesday, the company called a statistician who testified that when they met, Medicaid evaluators lowered Paramount’s scores much more than any of the other applicants’ and in a way that was unlikely to be random.

But Lynch found the testimony and the other evidence unpersuasive, ruling that Paramount failed to show that the Medicaid department acted against it in a “conscious, intentional” way.

“While Paramount is disappointed with the court’s decision, we will continue to explore our strategic and legal options,” said a statement issued by Paramount after the ruling. “We remain committed to helping to ensure the best outcomes for our quarter of a million Medicaid members and our employees who have consistently provided them with the highest quality of service.”

An appeal of the ruling is likely, Paramount’s attorneys said.

Just before Judge Lynch read her ruling, attorney Kirstin R. Fraser complained of how slowly the Medicaid department turned over documents and other materials Paramount requested.

“We only became aware after the fact of the many conflicts of interest involved in this case,” she said.

Among possible conflicts is if Mercer, the consultant that facilitated the procurement, had clients among the companies that were selected for Medicaid contracts. The Medicaid department eventually turned over a memo addressing the matter, but the names of client companies were redacted.

Lynch on Tuesday declined to admit an unredacted version of the memo into evidence.

Another possible conflict is that Medicaid Director Maureen Corcoran seems to own stock in two of the parent companies that won business as part of the massive procurement. 

Corcoran reported owning at least $1,000 worth of each company’s stock last year as part of her regular ethics disclosure. But Medicaid lawyers conceded that Corcoran hadn’t filed an affidavit disclosing exactly how much stock she owned as she contracted with the companies.

Such a disclosure appears to be required by law. But in a court filing, Medicaid attorneys claimed that Corcoran didn’t have a conflict of interest because her investments were with parent corporations UnitedHealth Group and CVS Health, not their Ohio subsidiaries with which the Medicaid department is doing billions worth of business.

Corcoran was expected to testify about such matters, but Judge Lynch so sharply limited what Paramount’s lawyers could ask the Medicaid director that Corcoran ultimately never took the stand.

Foreshadowing issues that could be raised on appeal, Paramount attorney Shawn J. Organ listed some of the things he’d have asked Corcoran had he been allowed. Among them were questions about Corcoran’s stock holdings in managed-care companies, whether she communicated with any bidders during the procurement process and why she decided to restart contract negotiations with Buckeye Health Plan, which had just paid Ohio $88 million to settle claims of fraud.

It’s unclear whether any of these issues will matter legally, but they will likely come up before the Tenth District Court of Appeals.

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Marty Schladen
Marty Schladen

Marty Schladen has been a reporter for decades, working in Indiana, Texas and other places before returning to his native Ohio to work at The Columbus Dispatch in 2017. He's won state and national journalism awards for investigations into utility regulation, public corruption, the environment, prescription drug spending and other matters.

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