McKee administration rescinds award of $15B Medicaid contract after protests

PROVIDENCE, R.I. (WPRI) — Not so fast.

Senior officials in the McKee administration are taking back a previously awarded Medicaid contract worth $15 billion after two losing insurance companies argued the selection process was “fatally flawed.”

Following those complaints, Department of Administration Director Jonathan Womer — who also serves as head of purchasing — ordered the R.I. Executive Office of Health and Human Services to rescind and reevaluate the contract initially awarded to UnitedHealthcare and Neighborhood Health Plan in July.

Womer said he didn’t want the entire bidding process, which had already happened last year , to be tossed out. But he indicated he agrees with the losing insurers that there were some issues with how their proposals were considered, and directed EOHHS to reevaluate all proposals submitted for the contract.

“The lack of articulated, comparable factors influencing each bidder’s score makes it extremely difficult, if not impossible, to determine whether the scoring was arbitrary and/or capricious,” Womer wrote in an internal memo Nancy McIntyre, the state’s purchasing agent. “Thus, the evaluation memo is deemed insufficient.”

UnitedHealthcare and Neighborhood had been awarded the contract to manage most of the state’s Medicaid program, which provides health coverage to nearly a third of Rhode Islanders. The five-year contract — worth more than the state’s entire annual budget — is funded mostly by federal money. Insurers earn a profit as part of their administrative fee.

The decision to unwind the contract — first reported by the Rhode Island Current — comes after Blue Cross & Blue Shield and Tufts Health Plan, a subsidiary of Point32Health, filed lengthy protests regarding how the state awarded the deal .

According to the evaluation team, both insurers didn’t even meet the technical proposal score required for solicitation, evoking sharp criticism from company executives.

Blue Cross accused state officials of giving UnitedHealthcare and Neighborhood illogically high scores in multiple areas of their bids, even though the insurer alleged its rivals failed to comply with certain procurement laws or submit required documentation in some instances.

“[The state’s] decision to simply ignore these deficiencies and to instead reward these bidders with contracts they were not lawfully eligible to receive was clearly erroneous, arbitrary, capricious, and contrary to the governing laws,” wrote a group of attorneys representing Blue Cross in their bid protest.

The reevaluation process will delay the original start date of the new contract, which was slated for July 1. A new start date has net yet been set.

In a statement this week, Blue Cross spokesperson Rich Salit said the insurer is “appreciative of the decision by the R.I. Department of Administration to reevaluate the bids.”

“We are looking forward to the outcome of this review,” he added.

Point32Health spokesperson Kathleen Makela said, “We are pleased to hear about the decision to reevaluate the Medicaid bid. We remain strongly committed to Rhode Island and to meeting the unique and diverse health needs of all Rhode Islanders.”

Womer agreed with some of the issues raised by the losing companies and disagreed in other areas. He rejected claims that the evaluation team was biased because a member had past ties to one of the winning companies, UnitedHealthcare.

“The [member] in question was not employed by UHC, but rather was previously employed by UnitedHealthcare Insurance Company, an affiliate,” Womer wrote. “The employment was with respect to a dental contract. Simply being a former employee of an affiliate does not automatically create a conflict of interest and, in fact, illustrates that this person has necessary experience with insurance-related matters.”

Given the issues, however, Womer ordered he awarded contracts to be rescinded. He told EOHHS to reassemble the evaluation team to “take a second look.” He also outlined how the bids should be evaluated and said his purchasing division would review the re-evaluation and the process would “proceed with [the division’s] discretion.”

Insurance giants fighting over state Medicaid contracts is common across the country, as local media reports show similar disputes currently happening in other states, including Arizona, Kansas and Florida.

The contracts are highly lucrative. And for insurers bidding to hold onto contracts they currently maintain, getting rejected can mean losing entire lines of business.

Tufts currently has a small share of the state’s Medicaid contract, totaling about 15,000 members. If rejected, the insurer stands to lose its entire Rhode Island Medicaid business when the new contract begins next year.

There is currently no date set for when the reevaluation is due, according DOA spokesperson Karen Greco.

EOHHS spokesperson Kerri White highlighted that the ongoing contract process does not affect current Medicaid members coverage, adding that they still expect coverage to improve when the deal is finally made.

“No one will go without care or be unable to go to the doctor as this matter is ongoing,” she said. “Many of these contract improvements will positively impact Medicaid members’ care, bring greater parity between medical and behavioral healthcare, reduce unnecessary prior authorizations, and focus on health equity.”

Eli Sherman ( esherman@wpri.com ) is a Target 12 investigative reporter for 12 News. Connect with him on Twitter and on Facebook .

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