Follow the Money…..

MIHSThe recent mental health contract awarded by the state to Maricopa County Integrated Health System or MIHS is raising eyebrows. MIHS, a government funded and owned entity, is on the cusp of receiving a 3-year contract that is potentially worth $3 billion dollars.

Any $3 billion dollar deal should be viewed as suspect by watchdog groups and taxpayers, but what makes this deal special is that MIHS is a government owned, property tax levying entity bidding against private providers.  In fact, MIHS currently collects nearly $60 million dollars in property taxes each year.  MIHS is even allowed to go into debt with revenue bonds that can be paid for through the district’s operating property tax levy without voter approval.

To secure the lucrative contract, MIHS teamed up with Aetna-owned Schaller Anderson, Medicaid provider Mercy Care Plan, Carondelet Health Network and Dignity Health.  Not surprisingly, private providers Magellan Health Services and UnitedHealthcare (both of whom bid on the same contract) have filed formal protests against MIHS and MIHS CEO Betsey Bayless.

MagellanWhy would the state award the largest contract its ever offered to another government entity in what appears to be a clear violation of the Arizona Constitution’s “gift clause?”  When you pull the thread and follow the money trail, it’s hard to not suspect corruption, cronyism, and a healthy dose of conspiracy.

MIHS was created by Proposition 414 in 2003 after voters approved the measure in a special election by a margin of 58% to 42%.  At the time, AZ Republic columnist Robert Robb called the establishment of a property-tax-supported hospital district “unnecessary and unwise.”  Robb even warned voters that “…special tax districts, focused on only a single service with independently elected boards, are bad fiscal policy.  Hard choices are good for taxpayers and make for more efficient government.”

Robb even called the publicity pamphlet and ballot question used to promote the measure “the most blatant case of government propagandizing I’ve seen in over a quarter century of Arizona elections.”  Bold statement for a columnist who typically calls it as he sees it.

The lobbying firm responsible for the passage of the ballot referral legislation at the Capitol also ran the ballot campaign.  Phoenix-based HighGround public affairs is run by consultant Chuck Coughlin, Brewer’s campaign advisor and a man who has been referred to as Arizona’s “shadow governor.”   According to their website:

“Our team was the principal public affairs and lobbying team for the legislation that authorized the creation of the new Maricopa County Hospital District on behalf of Maricopa County.  Following the successful passage of the legislation, HighGround was retained as the principal campaign consultant for the Yes on 414 Committee.”

Fast forward to 2008.  HighGround is once again rewarded for their work and is retained by MIHS with their first lobbying contract.  Today, HighGround works hand-in-hand with Betsey Bayless who was hired as MIHS’ CEO in September 2005.

BaylessIn February 2013, Bayless was given a 33% pay raise, an extra $125,000 per year, bringing her annual taxpayer-funded salary to a whopping $500,000.  This despite a poor rating issued by a national accrediting group, the Joint Commission, which found widespread record-keeping problems and other flaws that posed risks to patients’ safety.  This even despite the fact that Bayless has already announced she’s leaving her position at the end of 2013.  Two of MIHS’ board members even voted against the pay raise, saying they opposed raising the pay of a CEO who is leaving in less than a year and working for a public hospital.

“It really rubs me the wrong way that we’re spending this type of money,” board member Elbert Bicknell said. “Don’t get me wrong. Betsey is a smart … woman, and she’s done a hell of a job from 2005 to now. But a ($125,000) raise in a year when we give our janitors maybe a 1 percent raise or lay off people? It just doesn’t make sense.”  Dissenting board member Sue Gerard commented: “I think having that kind of salary is totally inappropriate.”

Could the pay raise have anything to do with the fact that it was widely speculated that MIHS was going to be awarded the enormous mental health contract?  Was this Betsey’s “swan song” on her way out the door?  Possibly.

But where this story gets really tangled is when one considers the ramifications of the state adopting Governor Brewer’s Medicaid expansion proposal.  Again, the value of the contract could increase an additional $1 billion dollars if the state accepts federal Medicaid dollars.  Who is running the campaign in Arizona for Medicaid expansion?

If you guessed Chuck Coughlin and HighGround, you’re correct.  Serving as Coughlin’s wingman is Peter Burns, a former Brewer budget advisor.  Perhaps that explains the governor’s complete flip-flop on this issue from less than a year ago.  The Wall Street Journal went as far as to describe the governor’s flip-flop as a “political 540°” and “a case study in the political pressure and fiscal gimmicks designed to get states to succumb.”

The New York Times sums up the magnitude of political forces and financial incentives behind this coordinated effort:

Recently, 40 lobbyists, representing at least 110 groups pushing for the expansion, among them hospitals, health care associations and business organizations, huddled in the executive wing of the State Capitol to update the governor’s advisers on their progress and hone strategies.

The Wall Street Journal goes further, discussing how “Ms. Brewer was nonetheless besieged by health-industry lobbying, especially from hospitals that want more government money and the insurers that administer Medicaid.”

There is something wrong with the State of Arizona climbing into bed with private business to give away billions of dollars in public funds.  When those decisions are tied to the largest health contract the state has ever awarded and possibly the biggest expansion of federal government our state has ever seen, tax-paying citizens are owed an explanation and deserve transparency.

Aside from the arguments of whether accepting federal Medicaid dollars related to the full implementation of Obamacare is good or bad policy, the one thing that is clear is that the consultants, lobbyists, and hospital administrators pushing the plan stand to make millions of dollars in profits.

Money makes people do strange things, indeed.

Government Contract Rigged for MIHS?

CASH

Magellan Health Services filed a “formal protest and a lawsuit” against Maricopa Integrated Health Services or MIHS. Magellan had managed a contract that included serving Maricopa County’s poor since 2007. Magellan’s complaint alleges numerous irregularities:

In its protest, Magellan alleges that Mercy Maricopa has “serious conflicts of interest” because Mercy Maricopa intends to both manage the system and provide services, which is prohibited by the contract and by state law. Magellan also claims that Mercy Maricopa should have been ineligible to bid on the contract but that state procurement officials improperly amended the request for proposals “to permit the winning bidder to qualify as an eligible bidder.”

Magellan Arizona CEO Richard Clarke told The Arizona Republic that there were “serious irregularities in the bidding process,” such as the state twice amending the proposal request “at the last moment” to allow bidders to subcontract services, which benefited the Mercy Maricopa proposal.

Magellan also claims that the bids were improperly scored and that “there was an overall bias in favor of the winning bidder.”

For example, Clarke said, both organizations proposed eliminating the separate provider network for children’s treatment and using the administrative savings for direct services. Mercy Maricopa earned points for that portion of its proposal, but Magellan did not, he said. “There are a number of errors like that where it’s really clear to us that the two entities were judged very differently,” he said.

Magellan’s complaint targets not only MIHS but Betsey Bayless, MIHS’ CEO. Bayless has previously been under scrutiny for receiving a $125,000 taxpayer funded pay raise earlier this year, bringing her annual salary to $500,000 – in taxpayer money.  Bayless was viewed by many as a spoiler in the 2002 governor’s race between Matt Salmon and Governor Napolitano. Napolitano won by less than 10,000 votes and in return, Bayless was appointed as director of the Department of Administration. Bayless’ appointment would serve as a launching pad to her lucrative position at MIHS, a position which many view is beyond her qualifications.

The Arizona Republic also states an interesting fact about the state contract:

The contract, worth $2 billion to $3 billion, depending on whether the state expands Medicaid, is the states first for integrated health care, which blends physical- and mental-health treatment.

The difference between $2 billion and $3 billion is staggering. The Arizona Republic understates the amount and ignores the underlying possible nefarious motive for the changing of state law, bidding processes, and why MIHS would want the contract.  To put this into context, the difference between $2 billion and $3 billion is the difference between, say, Jerry Jones and Steven Spielberg.

Another key factor easily glossed over by the Arizona Republic is that MIHS receives nearly $60 million dollars in property taxes each year.  So, you essentially have a taxpayer-subsidized government entity bidding against private providers for the largest behavioral health contract the state has ever offered.  Does that seem fair?

The legal challenge by Magellan will hopefully shed light on the seemingly back door deal and reveal what really took place in the bidding process. When $3 billion in taxpayer dollars is at stake, the people deserve complete transparency on state contracts.