Medicaid contractor investigations, suit slow going

Late in March 2013, news broke of a federal grand jury investigation into the award of a lucrative Louisiana Medicaid contract. In short order, Gov. Bobby Jindal’s administration canceled the contract and the state health chief who signed the pact resigned.

A year later, there have been no indictments from the federal grand jury or a special state grand jury.

A lawsuit filed by Client Network Services Inc. against the Jindal administration for wrongful contract termination is plodding along in state court, delayed by the state balking at turning over records and access to potential witnesses, contending it would interfere with the criminal probe.

Meanwhile, the administration has not sought new proposals for the Medicaid claims processing contract that was scrapped last year over allegations of improprieties, including insider knowledge. Molina Medicaid Solutions, the contractor CNSI was to replace, continues to do the work. The company didn’t make the cut in the competition when CNSI won the award.

“Our sense of urgency isn’t what it was previously,” state Department of Health and Hospitals Secretary Kathy Kliebert said.

Kliebert said the state is reassessing what its contract needs in light of ongoing changes in the state’s Medicaid health insurance program for the poor. The federal Centers for Medicare and Medicaid Services “did not want us to build a system that might be obsolete,” she said.

From the beginning, controversy surrounded the 2012 award of the nearly $200 million multiyear contract — the largest in state government. Former state health chief Bruce Greenstein had been a CNSI vice president from 1995 to 1996. Greenstein denied any role in selection of the firm.

But CNSI’s competitors for the contract alleged the firm had low-balled its price. The competitors filed challenges with Jindal’s Division of Administration, but they lost those appeals.

CNSI, of Maryland, said its price was good, but added to the contract as the firm started work. The state health agency said it was new work, therefore not part of the original contract.

Then, a federal grand jury subpoena surfaced in late March 2013. The subpoena sought records related to the contract award, including all documents submitted by the four competitors. The federal probe has since gone silent.

“None of our people have been asked to testify before the grand jury,” said Baton Rouge attorney Michael McKay, who is representing CNSI in civil proceedings. “I don’t think there’s any federal front anymore.”

Attorney General Buddy Caldwell’s office impaneled a special state grand jury in late May 2013 to hear evidence in its 18-month-long criminal probe into the contract award. The state probe only came to light after word of the federal investigation.

“Because of grand jury secrecy, all I can say is the investigation is ongoing,” Assistant Attorney General David Caldwell said.

Caldwell has talked about the “complexity” of the case and the need to protect the integrity of the criminal investigation from attempts to thwart it by CNSI.

The Jindal administration canceled the CNSI contract after consulting with the Attorney General’s Office.

The cancellation letter cited a Louisiana law that states: “… if the person awarded the contract has acted fraudulently or in bad faith, the contract shall be declared null and void.”

Later, the administration detailed reasons why, including improper communication between Greenstein and company executives and employees.

In early May 2013, CNSI went to court claiming the state had no basis for the firing. CNSI President Adnan Ahmed claimed the contract cancellation would cost state taxpayers nearly $100 million over the next several years.

Lawsuit progress has been delayed as the Attorney General’s Office refused to provide records sought by CNSI.

Judge Tim Kelley, of the 19th Judicial District Court in Baton Rouge, deemed most of the records public and an appeals court panel recently agreed. The governor’s Division of Administration and the state Department of Health and Hospitals are in the process of sending to CNSI attorneys reams of documents, McKay said.

“We are glad to see the thing finally moving forward. It’s been pretty frustrating,” McKay said.

McKay said attorneys are trying to schedule depositions — testimony under oath — in preparation for trial and filing discovery responses.

So far, only former DHH Secretary Bruce Greenstein has been deposed, testimony the Attorney General’s Office tried to prevent, alleging it could interfere with the criminal probe.

Greenstein’s attorney, John McLindon, said his client wanted to testify “so he can tell the story and clear his name, so he can get a job.”

The daylong interview session occurred in the fall.

McLindon said Greenstein, who has returned to Seattle, where he previously worked for Microsoft Corp., did not want to comment.

His LinkedIn page lists his most recent job as secretary of DHH.

“Obviously, it’s unusual for the criminal side to be involved in any way in the civil side. But early on, because of confidentiality of information and certain witnesses that needed to be protected, our concern was that they could be taking a civil deposition to find out what we are doing in the criminal case,” Caldwell said. “We have to be vigilant about the depositions asking questions that are out of bounds.”

McKay said three other depositions are being scheduled. The state wants to put CNSI lobbyist Alton Ashy under oath, while CNSI has interviews set with former CNSI employee Steve Smith, who was project manager here and a Bank of America representative.

The only issue pending in the Louisiana 1st Circuit Court of Appeal is the state’s attempt to delay the lawsuit because CNSI did not go through the administrative appeals process when its contract was canceled. Judge Kelley said the administrative appeal would have been useless given the Division of Administration’s position when the firm was fired.