Big questions remain in huge Medicaid procurement

A Franklin County judge earlier this month dismissed a lawsuit over the largest public procurement in Ohio history. But important questions remain about potential corruption and conflicts of interest among key players who had a say in how the contracts were awarded.

It’s unclear whether those questions will be answered.

In April, the Ohio Department of Medicaid announced that it was awarding a set of contracts worth $22 billion to six managed-care companies. A seventh got a $1 billion contract to set up and manage a program for children with complex behavioral needs.

Somehow, all of the contracts but one went to huge, out-of-state companies — several of which have been accused by the state of fraud, price-gouging or other issues.

Questions about the integrity of the procurement process come as the state government is already mired in scandal.

In July 2020, House Speaker Larry Householder, R-Glenford, and four associates were arrested in what federal authorities called a $61 million bribery scheme to pass $1.3 billion in bailouts for the energy interests who financed it. Two of the associates pleaded guilty and a third died by suicide.

As part of the scandal, Gov. Mike DeWine’s appointee to chair the Public Utilities Commission resigned amid revelations that just before he took his seat on the commission, he took $4.3 million from FirstEnergy, the Akron company that was implicated in the bribery scandal.

Now come questions about whether Maureen Corcoran, DeWine’s appointee to run the Medicaid department, had conflicts of interest as she awarded huge contracts earlier this year. Those contracts were awarded without regard to the fact that the state was suing two of the successful companies for fraud as recently as this year, and a third’s conduct as a drug middleman helped spur the sweeping reforms that led to the $23 billion re-procurement.

Still no answers

Corcoran’s agency continues to ignore questions about her holdings in the giant corporations to which she awarded contracts earlier this year. But it appears that she owned at least something of a stake in two of the companies.

Her disclosures to the Ohio Ethics Commission indicate that she owned at least $1,000 worth of stock in UnitedHealth Group from the time she became Medicaid director in early 2019 at least through the end of 2020. The company’s subsidiary, United Healthcare Community Plan of Ohio, was one of six companies to which Corcoran awarded a share of $22 billion in managed-care business over the next five years. 

The selection caused consternation for at least one disappointed bidder because Attorney General Dave Yost is suing another UnitedHealth subsidiary, OptumRx. Yost claims the drug middleman — which is also a big player in Ohio Medicaid — ripped off the Bureau of Worker’s Compensation to the tune of $16 million.

Also causing consternation was that Centene was among the companies that won managed-care contracts. 

Corcoran hasn’t listed stock in the St. Louis-based company in her ethics disclosures. But some questioned why she decided to award it a contract after A.G. Yost in March accused that company and its drug middleman of fraud against the Medicaid department. By June, Centene had  settled with Ohio for $88 million, part of more than $1 billion that it agreed to pay out nationally to settles similar claims.

In addition to UnitedHealth, Corcoran owned at least a nominal amount of stock in CVS Health from early 2019 through the end of 2020. A subsidiary of that company, Aetna Better Health of Ohio, in early April won the $1 billion contract to reshape services for Ohio kids with complex behavioral needs.

The CVS subsidiary won the business even though its drug middleman was the dominant player in 2017 when its drug middleman and UnitedHealth’s OptumRx upcharged the Medicaid department by $224 million for prescription drugs — an amount that the state’s outside analyst said was at least three times the going rate.

Contradictory claims

Corcoran not only has refused to say just how much stock she owns in UnitedHealth and CVS. During a trial earlier this month, she and her lawyers claimed she was unaware that she owned any when she awarded their subsidiaries giant contracts earlier this year.

“The possibility of her owning such stock had not occurred to her,” one filing said. “It is not unusual for someone investing retirement funds to focus on risk and return rather than on individual investments. There is no evidence Director Corcoran had any reason to believe she owned stock in any of the corporate entities to whom contracts were awarded.”

Corcoran made similar denials in a sworn affidavit of her own.

“I did not knowingly have any conflict of interest related to the Medicaid managed-care contracts,” Corcoran said in the affidavit, later adding, “I am not aware of the holdings in my or my husband’s accounts, including but not limited to stocks, bonds, mutual funds, on any particular day or during any particular month.” 

But just over a month after she awarded business to the companies’ subsidiaries, she filed a document with the Ethics Commission swearing that she knew she owned stock in the parent companies on Nov. 20, 2020 — the deadline for bidders to file applications — and through the end of the year. Corcoran’s disclosures also show ownership of the stocks each month since 2018, and every year since she signed a statement swearing that the lists of stocks and mutual funds “have been prepared or carefully reviewed by me.”

As with questions about her exact holdings, the Medicaid department didn’t respond to questions about whether Corcoran knew she owned stock in the companies when she signed billion-dollar contracts with their subsidiaries.

Nor could answers be elicited in court. Before she threw out the case, Franklin County Common Pleas Judge Julie M. Lynch forbade such questions. That prompted the plaintiff, Toledo-based Paramount Advantage, not to call Corcoran to testify. 

Judge Lynch also wouldn’t allow evidence that might have shown another possible conflict. 

Mercer, the firm that was paid almost $10 million to facilitate the procurement, hasn’t responded when asked whether any of the corporations bidding for Ohio’s Medicaid billions is a client. Lynch denied a request to place an unredacted list of Mercer clients into evidence.

The case is likely to be appealed.

Questionable claim

Among the questions the Medicaid department has refused to respond to is what Corcoran did to comply with a law intended to prevent conflicts of interest.

The law says it’s potentially a felony and grounds for throwing out contracts if a public official authorizes “any public contract in which the public official, a member of the public official’s family, or any of the public official’s business associates has an interest.”

The law also provides for an affidavit giving an official’s “exact status in connection with the corporation or other organization” receiving a contract.

Corcoran and the Medicaid department for more than a month have refused to answer questions about such an affidavit, but in court one of the department’s lawyers conceded that she hadn’t filed one. He said Corcoran didn’t need to file an affidavit because she disclosed the same information when she complied with a separate law.

The law Corcoran complied with only requires her to file annual disclosures of all the stocks and mutual funds she owned at least $1,000 worth of in the previous year. The law directly relating to conflicts is focused on an official’s exact holdings at the time contracts are negotiated and entered into.

Paul Nick, executive director of the Ohio Ethics Commission, said the fact that an official didn’t file an affidavit isn’t in itself a violation of that law. Rather, by not filing such an affidavit, the official passes up an exemption from the law, Nick said. Then a fact-based analysis must be undertaken to determine whether an illegal conflict of interest has taken place, he said.

The attorney general’s office was asked whether it was investigating the matter.

“We have not been asked to investigate this matter as is required for our involvement,” spokesman Luke Sullivan said in an email. “And the ethical questions you raised should be directed at the Ethics Commission.”

Nick said he couldn’t comment on any specific investigation, if there is one.

One other claim

In court and in court filings, Medicaid’s lawyers mocked the idea that Corcoran could have a conflict by being invested in UnitedHealth and CVS.

By revenue, CVS and UnitedHealth are the nation’s fourth and fifth-largest corporations, respectively. The Medicaid lawyers argued that because several layers of subsidiaries lay between the parent companies in which Corcoran was apparently invested and those with which she signed giant taxpayer contracts, she didn’t have a conflict.

The lawyers filed one motion noting that UnitedHealth Group has more than 1,200 subsidiaries and that as of March “the direct parent of UnitedHealth Community Plan of Ohio Inc. was not UnitedHealth Group Inc., but ‘Three Rivers Holdings Inc.,’ which in turn was not owned by UnitedHealth Group Inc., but by ‘AmeriChoice Corporation.’”

The motion adds, “In other words, Director Corcoran did not have a direct ownership interest in UnitedHealth Community Plan of Ohio Inc., but only in the parent company of the parent company of the parent company of UnitedHealth Community Plan of Ohio Inc.”

That argument could be at odds with the stance of the federal government, which pays for well more than half of Ohio’s $30 billion-a-year Medicaid program. The U.S. Office of Government Ethics issued guidance on the matter last month.

“Generally, a financial interest in a particular matter affecting a subsidiary of a company in which an employee holds an equity-related interest is treated as a particular matter affecting the parent,” it said. “Whether the particular matter that affects the parent will have a direct and predictable effect on the subsidiary will depend on the factual circumstances.”

The U.S. Centers for Medicare and Medicaid Services didn’t respond when asked whether it was investigating.