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$177 million Medicaid contract approved by Gov. Sandoval, Board of Examiners


By Sean Whaley, Nevada News Bureau: It didn’t take long for Gov. Brian Sandoval to encounter controversy in his new job.

At his first Board of Examiners meeting as governor today, Sandoval had to deal with a vendor dispute over a massive $177 million Medicaid contract.

The board, which also includes Attorney General Catherine Cortez Masto and Secretary of State Ross Miller, approved the contract with HP Enterprise Services after hearing that the second place bidder, ACS State Healthcare, failed to file a timely protest.

The five-year contract is for the fiscal agent for the state’s Medicaid program run by the Department of Health and Human Services. The company will manage the state’s Medicaid information system including the processing of payments to medical providers.

“It’s the monster contract we have,” said Mike Willden, director of the Department of Health and Human Services.

Attorney Josh Hicks, who had previously served as general counsel to Gov. Jim Gibbons, represented ACS at the meeting. He said the size of the contract made posting the bond to file a formal challenge cost-prohibitive. It would have required $245,000 to post the bond, he told the board. The money would not be refundable to the company.

Willden said he believed the contract was properly awarded and that any lengthy delay in approving the agreement could cost the state several million dollars.

Sandoval raised numerous questions about the contract along with Miller, who initially asked for more details on the agreement. Sandoval has previously served on the board as attorney general.

Miller and others had received a four-page letter from ACS detailing the company’s concerns about the award of the contract. The concerns included a belief that there was a scope of work change in the negotiations with HP, and that the final cost was “materially different.”

In the ACS letter, Hicks said in part: “Even more shocking than the protracted negotiation was the revelation that during the negotiation period, approximately $30 million in cost was added to the contract. This was done confidentially, without participation from other vendors and therefore in a noncompetitive fashion, and without any re-scoring of the original proposal.”

Willden said he and other state staff, including representatives from the attorney general’s office, spent the past four days reviewing the award process and found no issues. There were negotiated changes to the contract after HP was selected, but Willden said there were no changes significant enough to warrant restarting the bidding process.

Four firms bid on the contract, he said. HP’s base bid was about $140 million, while ACS’s bid was $179 million. The contract negotiation process with HP resulted in the final $177 million contact.

“Yes there was an increase, in obviously the basic bid price by about $30 million,” Willden said. “I don’t think it is a significant, in my opinion, a change in the scope of work. These are types of things that when we pick a vendor, a contractor, there will be negotiated items.

“I believe due diligence is done and we have a lawfully bid contract,” Willden said.

After the vote, Miller said: “The contractor appears to be bringing much needed value to the state in an essential area of state service. Although some concerns were raised prior to the contract being approved, Director Willden testified today that he is confident that he fully vetted those issues with the Department of Administration and the Attorney General’s office prior to recommending that the contract be approved.”

Nevada’s current contractor, Magellan First Health, is providing Medicaid services in only two states, while HP is working in 22 states, he said.

“So we’re now in the majority club rather than a very minority state,” Willden said.

The conversion to HP is expected to occur by mid-summer, he said.

“This is a very more well planned, thoughtful process, and we hope don’t have the hiccups we had when First Health came on board,” Willden said.

Audio clips:

HHS Director Mike Willden says he believes the contract with HP is proper:

011111Willden3 :17 be negotiated items.”

Willden says HP runs similar systems in 22 states:

011111Willden1 :10 very minority state.”

Willden says this transition should be smoother than the last:

011111Willden2 :09 Health came onboard.”

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