Kansas official rejects appeal by unsuccessful bidders on state’s $4 billion KanCare contract

Kansas budget director Adam Proffitt addresses a joint hearing of Senate and House lawmakers Thursday to reveal the governor's budget plan. (Kansas Reflector screen capture from Kansas Legislature video)

TOPEKA — The Kansas Department of Administration’s procurement director rejected complaints submitted by Aetna Better Health and CareSource Kansas that alleged misconduct in selection of three managed-care companies to operate the state’s $4 billion Medicaid program.

Separate protests by the unsuccessful bidders were denied, meaning decisions by the Kansas Department of Health and Environment to enter into contracts with Sunflower Health Plan, United Healthcare Community Plan and Healthy Blue could go forward. The immediate outcome was Healthy Blue replaced Aetna Better Health.

Both challenges questioned KDHE’s system of scoring applicants for the KanCare contract. They invited scrutiny of Healthy Blue’s corporate lineage to Amerigroup, which had been dropped from the state’s Medicaid program in 2018. Issues were raised about potential conflicts of interest among personnel linked to Healthy Blue, which is affiliated with Blue Cross and Blue Shield of Kansas. From 2021 to 2024, BCBS Kansas hired a handful of people who had worked in the administration of Democratic Gov. Laura Kelly or the Kansas Legislature.

Todd Herman, director of procurement and contracts in the Department of Administration, informed attorneys representing CareSource and Aetna Better Health that their appeal had been denied. Documents that Herman sent to the two failed bidders were comparable in that both concluded KDHE’s process adhered to Kansas law and the outcome was based on objective evaluation of sealed bids that answered to the state’s 450-page request for proposals.

“The state of Kansas followed the negotiated procurement process permitted by state statute,” he said in the explanatory document sent to Aetna Better Care. “The awarding of a contract to United Healthcare, Sunflower and Healthy Blue … is supported by the facts.”

Kelly not involved

Herman said the burden of proof was on the protesting company to demonstrate the procurement process was fatally flawed, and neither complaint satisfied that requirement.

In terms of the Healthy Blue contract award being tainted by BCBS Kansas’ hiring of four people who previously worked in state government, Herman said movement of staff to the private sector didn’t result in favoritism or conflicts of interest.

“The state’s governmental ethics laws are specific to the individual,” Herman said. “They do not require a state contract to be declared invalid or should not be awarded to a specific vendor due to an individual leaving employment with the state of Kansas and going to work for a vendor who becomes a state contractor.”

Herman said the current governor had no part in the KanCare procurement process. He said neither Kelly nor her staff reviewed the sealed bids. He said it was folly for Aetna Better Health to claim Kelly’s political advocacy for expansion of Medicaid eligibility in some way disadvantaged the company.

The letters sent to Aetna Better Health and CareSource listed shortcomings of proposals made by those companies, which included problems with describing ways to improve services to about 450,000 Kansans enrolled in Medicaid.

Adam Proffitt, secretary of the Department of Administration, told a joint House and Senate Medicaid oversight committee the decisions by Herman would be considered the “final agency action” because no other mechanism existed for an administrative appeal.

‘Arbitrary, capricious’

Jane Brown, president and CEO of Aetna Better Health, said it was the company’s position KDHE deployed an “arbitrary and capricious” process to break its scoring tie with Healthy Blue. She said KDHE unfairly fabricated grading criteria after bids from the seven applicants were submitted. She also said the exit of Aetna Better Health from Kansas Medicaid program would be disruptive to about 100,000 Kansans.

Chad Moore, president of CareSource Kansas, said Healthy Blue should have been disqualified early in the bidding process due to “significant conflict of interest concerns” involving BCBS Kansas.

However, Herman’s written reply to CareSource said arguments put forth by the company to challenge the contract decision were “insufficient to warrant the remedies being sought.”

Herman said the new three-year contracts were in the best interests of the state and the implementation process would proceed ahead of the effective data Jan. 1, 2025.

Companies losing an administrative appeal in Kansas may file lawsuits in an attempt to secure a verdict affirming flaws in the KDHE process. In 2018, Amerigroup challenged its ouster from the KanCare program, which lost its spot to Aetna. Amerigroup failed at the administrative and court levels.

Under Republican Gov. Sam Brownback, Kansas privatized the state’s Medicaid program in 2013. The collection of three contractors was shuffled by Republican Gov. Jeff Colyer five years later. As the Kelly administration prepared to issue new contracts for management of the KanCare program, the GOP-led Legislature forbid her from proceeding. The intent was to see if Republican governor candidate Derek Schmidt could defeat Kelly in November 2022 and enable a Republican governor to again pick KanCare contractors.

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