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System contract process may be nearing end

A months-long saga over a decade-long, $250-$350 million contract may be drawing to a close at the state Department of Health and Human Resources.

The department last week opened bids for a complex computer system to process claims for the state Medicaid program, which insures about 420,000 West Virginians.

The bid has dragged on for more than a year, divided DHHR's senior staff, prompted a legislative audit of the department and will likely cost the department some of its autonomy because of miscues by its own purchasing office.

The system, known as a Medicaid Management Information System, or MMIS, currently processes nearly 18 million claims a year. The state now needs to buy a new one and have a company run it for the next decade.

Molina Medicaid Solutions is the current contract holder and the lowest bidder to build a new system for the state, according to cost proposals made public last week. The California-based company said its total costs of doing the decade-long project would not exceed $249 million, including some optional services the state wants.

Atlanta-based Xerox said it could do the work for $311 million, Texas-based HP Enterprise Services said it could do the work for $317 million and Maryland-based CNSI bid $345 million.

The lowest bidder has an advantage: the lowest bidder automatically gets 30 out of 100 points for having the lowest bid. Other companies get a percent of that 30 points based on how far away they are from the lowest bid.

The other 70 points are the technical scores of the bids, which have not yet been made public.

MMIS contracts are a considerable business proposition for states and for companies. Some have run significantly over budget. 

West Virginia's MMIS bidding process has made headlines for much of the year.

The contract has already been rebid twice. The agency has not given a reason for the first failure. The second bid was scrapped in March after it became tainted by a conflict of interest.

That was after DHHR's purchasing practices drew the attention of Legislative Auditor Aaron Allred in late February.

Allred began asking then-DHHR Secretary Michael Lewis if a private contractor who worked for both the state and a company that had financial stake in the contract might have used his position to try to sway the outcome.

Within weeks, Lewis decided to re-bid the contract and put procedures in place to exclude the private company from potentially benefiting from the contract.

How that was handled created a rift within the department's senior staff. The rift - between DHHR's Office of Purchasing and the department's two top lawyers, deputy secretary for legal affairs Susan Perry and general counsel Jennifer Taylor - soon became serious.

In mid-July, DHHR's new acting Secretary Rocco Fucillo put both lawyers on leave after they questioned a decision to award a separate multi-million dollar marketing contract to the highest bidder.

Now, the two lawyers and a third DHHR official are targets of an internal investigation that has been turned over to Kanawha County prosecutors.

But Taylor and Perry claim they are whistleblowers. In a lawsuit targeting Fucillo and others, the pair said the department's purchasing office has a "track record of errors" that the pair tried to correct or keep the office from making, including the MMIS problems and possible problems with the marketing contract.

The Legislative Auditor's Office eventually recommended DHHR's purchasing office be stripped of its authority to award certain contracts without going through the state Division of Purchasing. But its officials remain at work.

In August, the same legislative audit also worried DHHR has not asked would-be MMIS contractors to put up bonds in case the companies fail to deliver. Instead, the department plans to withhold a portion of payments until it is satisfied the eventual contract winner has done good work. Auditors worry this isn't enough.

Deputy Medicaid Commissioner Ed Dolly has defended the department's decision not to ask for performance bonds, saying withholding money from the eventual contractor will be more effective than having to wait until everything has gone sour to try to collect the bond.

In any event, all the attention is likely to cost DHHR the extra autonomy it has to make purchasing decisions. It is now likely to surrender those powers back to the state's main Division of Purchasing, which handles most state contracts.

It unclear when DHHR expects to announce who will win the MMIS contract.

Contact writer Ry Rivard at ry.rivard@dailymail.com or 304-348-1796. Follow him at www.twitter.com/ryrivard.


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