Bollywood performers, a Boston boat cruise with an open bar, gifts of cigars and wine — the vendor working on Illinois’s expensive new Medicaid information-technology system entertains public officials in style, according to sources in the Illinois government.
These whistleblowers tell National Review that when Client Network Services, Inc., was seeking the Medicaid contract, it wined and dined state officials, who then circumvented Illinois’s standard procurement procedures in order to outsource the multimillion-dollar contract to
Documents procured by OpenTheBooks.com, a national transparency organization based in Illinois but involved in all 50 states, have raised questions about the close relationship between Illinois state officials and
It looks like pure Chicago politics, but taxpayers both in Illinois and across the United States may end up footing the bill, since the federal government will pay for 90 percent of Illinois’s system upgrade. The Centers for Medicare & Medicaid Services (
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In late August 2012, private- and public-sector workers gathered in Boston from across the United States to attend the Medicaid Enterprise Systems Conference, an annual event focused on the IT systems that support Medicaid.
They found time for fun. According to sources within the Illinois government,
In addition to the boat party,
Another source within the government claims that
That entertaining may have violated the Illinois State Officials and Employee Ethics Act, which forbids officials to accept refreshments or gifts worth more than $75 per person. National Review was not able to confirm which boat company provided the cruise. But Boston Harbor Cruises reports that its fee for boat rental alone for 50 people is $1,000 for three hours; a buffet costs around $80 per person, and an open bar costs an additional $42.67 per person. Other companies offering cruises would not quote a specific price, or had not returned calls.
Illinois HFS responded to an information request by government-accountability blog Edgar County Watchdogs, confirming that at least six state employees, several of whom were positioned to make key decisions regarding the upgrade contract, were on a boat in the Boston harbor with
HFS’s Jakubek says
A whistleblower says that after OpenTheBooks.com and Edgar County Watchdogs broke the story about Illinois officials’ partying in the Boston Harbor, several of those officials removed photos of the event from their Facebook pages and office desks.
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To prevent fraud and abuse, the federal government requires states to send specific data about Medicaid payments and beneficiaries to
States should already have this information on hand in their Medicaid databases, but Illinois’s system, which processes $14 billion in annual payments, (2) was created in 1982 and had continued to run through a series of patchwork fixes, which had become increasingly cumbersome.
About five months before the boat party, Michigan had approached Illinois to discuss the possibility of sharing a Medicaid Management Information System (MMIS), a complex program that stores data about beneficiaries and providers and processes claims and payments. Michigan’s own system had been built by
Illinois would normally go through a highly competitive procurement process to find a vendor for a project such as the MMIS upgrade. That process typically includes soliciting and evaluating multiple bids, vetting possible contractors for compliance with Illinois state law, and negotiating a contract. For a project as big as this one, procurement could take between 18 months and two years, Matt Brown, Illinois’s chief procurement officer, said in an interview with National Review.
But contracts between governments are exempt from the Illinois procurement code,(3) and in December 2012, Illinois signed an intergovernmental agreement to enter formal planning discussions to share Michigan’s Medicaid IT system. (4) Under the agreement, Illinois will write a check to the state of Michigan, and then Michigan will collaborate with
Brown says the intergovernmental agreement was “where a lot of the state’s policies start to be tested: What does it mean to access resources through the state of Michigan? Was that a no-bid contract with the state of Michigan’s contractor? Well, no, because we don’t contract with the state of Michigan’s contractor. We contract with the state of Michigan.” He adds that after reviewing the transaction thoroughly, he “did not find any circumventing of competitive practice,” and that “the state of Michigan and the state of Illinois both have something to gain in this partnership.”
But Adam Andrzejewski, founder of OpentheBooks.com, says via e-mail that “Illinois has now set a precedent to purchase anything it wants without a competitive bid process as long as they can find a state to resell the product or service to Illinois.”
Jakubek says the intergovernmental agreement is “fully consistent with Illinois law. The purpose of the Procurement Code is to enable the state to get the best possible price while ensuring integrity and ethical conduct. We have worked diligently with the state’s Chief Procurement Officer from the beginning to ensure full compliance with Illinois’ procurement laws.”
However, one of the whistleblowers tells National Review that Illinois “did not have to go this route.” It “could have easily procured this the right way and put it out for a bid, but the time frame and the excuse they were looking for was Obamacare’s October deadline,” even though enhanced federal funding would have extended beyond October 1. Jakubek says the upgrade project is “not related to the Oct. 1 launch of the Health Insurance Marketplace and the Affordable Care Act.”
Since the intergovernmental agreement was signed,
Edgar County Watchdogs sent a public-information request about these allegations to HFS, asking for information about gifts given to its employees. “We assume you mean gifts given by
National Review asked Jakubek whether
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National Review’s interviews with whistleblowers also raise questions about the working relationship between Illinois officials and
On January 28, 2013, DePooter e-mailed Sharif Hussein, a senior vice president at
Nicholas Taylor, a partner at Netlogx, tells National Review that the presentation referred to in the e-mails was not confidential.
Hussein later replied to DePooter, copying Karen Parker, the director of the Bureau of Medicaid Financial Management & Administrative Services at the Michigan Department of Community Health. He asked them “to extract the salient points that have already been presented to
On February 22, 2013, James Gorman, the senior technical adviser at the Data and Systems Group for
DePooter promptly forwarded the e-mail to Parker and asked her to discuss it with Hussein, who immediately responded that “our solution is a proven and certified solution, theirs is not yet implemented and it is just a claim they are making that it would be faster and cheaper. We are ready to engage in these discussions at any time.”
“How’s that for a quick response?” Parker wrote to DePooter.
“Chuckle . . . I would expect nothing less! ;),” DePooter replied.
A whistleblower says that more than 3,900 e-mails were traded between
DePooter could not be reached for comment. Jakubek denies that DePooter ever shared information with
“Illinois has an intergovernmental agreement with the state of Michigan and
According to one of the whistleblowers, at least two state employees working on the upgrade have already interviewed for jobs at
Jakubek said HFS was aware of no employees who had interviewed for jobs with
This isn’t the first time questions have been raised about the appropriateness of communications between
Louisiana canceled its contract with
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Shady dealings are only one concern; taxpayer expense is another. In several states where
In 2008, South Dakota gave the company a $62.7 million contract, and the communications director told National Review that was the final amount, although a 2011 local news report had said the system was “expected to cost far in excess of $80 million.” And state representative Susan Wismer (D., Britton), tells National Review the contract with
In 2005, Washington State awarded
And in Michigan, as noted earlier,
And then there is
CIO magazine reported in April 2006 that hundreds of thousands of Medicaid recipients with unpaid bills “were turned away from their doctor’s offices. . . . Several dentists and therapists were forced to close their doors, and some physicians had to take out loans to stay afloat. With the Medicaid program accounting for one-third of the entire state budget, Maine’s finances were in shambles, threatening the state’s financial stability and its credit rating.”
Eventually, Maine was forced to issue more than $500 million in temporary payments, and so problematic was
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National Review asked Jakubek why Illinois is partnering with Michigan to buy a
She responded by e-mail that the partnership met Illinois’s three primary goals: “to save taxpayer money, mitigate risk and reduce the time it will take to modernize Illinois’ 30-year-old antiquated system.” Jakubek added that “based on Michigan’s successful implementation of its MMIS system and the fact that they already have federal certification, the Illinois-Michigan partnership represents the best technological solution at an optimal, cost-effective pricing structure. Illinois and Michigan are utilizing a system already implemented, thereby drastically reducing risk.”
— Jillian Kay Melchior is a Thomas L. Rhodes Fellow for the Franklin Center for Government and Public Integrity.
(1) June 26, 2013 FOIA response to Kirk Allen, Edgar County Watchdogs.
(2) “Comprehensive Technology Plan for Illinois’ Health and Human Services System,” issued July 1, 2011, by the Department of Healthcare and Family Services, the Department of Human Services, and the Office of the Governor.
(3) May 28, 2013 Memorandum From Matt Brown, chief procurement officer, to Julie Hamos, director of the Department of Healthcare and Family Services.
(4) Intergovernmental Agreement between the Illinois Department of Healthcare and Family Services and the Michigan Department of Community Health 2013-62-014.