Missouri Medicaid faces lawsuit from Molina Healthcare

A lawsuit challenging how Missouri awarded more than $1.1 billion in Medicaid contracts is scheduled to be heard in court this week amid allegations of political favoritism, and now the issue could become the focus of a legislative inquiry.

At issue is why the state effectively fired California-based Molina Healthcare — a company that has held the contract with the state for 16 years — and replaced it with Centene Corp., which has not held a Medicaid contract in Missouri since it withdrew from the market in 2006.

Centene also has been a major donor to Democratic Gov. Jay Nixon, giving rise to concerns that the company benefited from a close relationship with the executive branch.

Rep. Jay Barnes, a Jefferson City Republican who chairs the House Government Oversight and Accountability Committee, said he’s considering holding a hearing to look into how the contracts to manage health care for Medicaid beneficiaries across the state were handed out.

“There are serious questions about the process, and I think my committee members want to hear answers,” Barnes said, adding that he hasn’t yet decided whether it’s appropriate for lawmakers to get involved while a lawsuit is pending.

Scott Holste, the governor’s press secretary, referred questions to Wanda Seeney, spokeswoman for the Office of Administration, the state agency that handles purchasing and contracts for the state. Its commissioner is appointed by the governor.

Seeney released a statement that the state conducted a competitive bid process that awarded points “based on quality; the method of performance; organizational experience; and most importantly, access to care.” She declined further comment, citing the lawsuit.

In a statement, Centene officials defended the process, saying the company had “the same information as all of the bidders and complied with all requirements” issued by the state.

About 430,000 Medicaid patients are currently enrolled in the state’s managed care program, which mostly covers children and pregnant women in 54 counties in Missouri. Of the more than $1.1 billion spent on the contract, roughly $700 million is federal money.

Five companies currently hold managed care contracts in Missouri. The state decided to cap the number this year to only three: Centene; Missouri Care Inc., a subsidiary of Aetna Inc.; and Health Care USA, a subsidiary of Coventry Healthcare Inc.

Missouri Care and Health Care USA already hold contracts. Centene is the only new provider to win a contract. Two other companies in addition to Molina lost the contract.

Molina alleges in its suit that the state violated Missouri’s competitive bidding laws and changed its rules to favor certain bidders. The state is trying to “artificially limit competition” among managed care plans by capping the number of companies given contracts, and is doing so without following the proper procedure for rule changes, Molina says.

The lawsuit asks a Cole County judge to delay an open enrollment period slated to begin April 19. A hearing is scheduled for Friday.

Molina also questioned how they scored so poorly in relation to access to care, yet were beat out for the contract by Centene — which currently has no network of doctors and hospitals in the state.

“More shocking than the results (of the bidding process) was the fact that Molina’s existing network and proud record of quality and performance had been adjudged inferior to plans with no network and no relevant Missouri experience,” Molina said in a letter to the Office of Administration. “Such results, so completely out of step with history and present practice, are necessarily suspect and merit a close review.”

Molina’s legal filings and letters to the Office of Administration implied that Centene was given preferential treatment in the bidding process.

In the last two years, records show that Centene, based in the St. Louis suburb of Clayton, has donated $50,000 to Nixon’s campaign. The company donated about $25,000 to Democratic Attorney General Chris Koster, $19,000 to Republican Auditor Tom Schweich, and several thousand dollars more to various legislative and statewide candidates.

Centene also donated $175,000 to the Democratic Governors Association, according to the nonpartisan Center for Responsive Politics. Last week, the Governors Association gave Nixon’s re-election campaign $500,000.

In addition to political contributions, in 2010 the company hired about a dozen lobbyists in Jefferson City, including attorney Chuck Hatfield, who for 10 years was Nixon’s chief of staff when he was attorney general.

According to the Missouri Ethics Commission, Hatfield terminated his lobbying agreement with Centene in January. However, he is the company’s attorney in Molina’s lawsuit against the state.

Hatfield said Tuesday that even though Centene hired his firm, he has done “zero” lobbying for the company.

He characterized Molina’s lawsuit as “sour grapes” from a company that lost out on a lucrative contract. Molina had no problem with the state capping the number of companies that would provide managed care, Hatfield argued, until they were not offered a contract.

Molina’s complaint that Centene has no network currently in place is “nonsensical,” Hatfield said, since denying a contract on that basis would mean no new company could ever win a contract in the future.

“The bidding process was fair and the evaluations were done above board,” he said. “Molina has every right to file a lawsuit if they feel the process wasn’t fair. But that doesn’t make them right.”

While Centene is just now re-entering Missouri’s market, it is a Fortune 500 company that currently handles Medicaid managed care contracts in 14 states. According to state officials who evaluated the bid on the managed care contract, Centene ranked at the top or near the top of every category.

The company last held a managed care contract with Missouri six years ago.

Centene also is a finalist for a portion of the Medicaid reform contract in Kansas, which begins in 2013. The company’s wholly owned Kansas subsidiary, Sunflower State Health Plan Inc., is competing with four other firms for part of the contract with KanCare, an outgrowth of the state’s new Medicaid overhaul.

Gov. Sam Brownback’s administration is expected to award contracts to three of the five bidders sometime later this year. Kansas spends roughly $2.8 billion on Medicaid services to residents who qualify.

Meanwhile in Missouri, Barnes said if his committee does decide to look into the matter, it would also focus on how limiting the number of contracts awarded would impact access to care for Medicaid recipients.

“You should want as much choice as possible,” Barnes said. “If there is a reason why they limited the number of contracts, I’m open to hearing that reasoning.”

Corinne Walentik, professor of pediatrics at Saint Louis University, said one reason might be to improve the quality of the entire system. Walentik chairs the MO HealthNet Oversight Committee, an advisory board for Missouri’s Medicaid system.

She said she was not involved in the awarding of any managed care contracts and has not spoken with anyone about the contract process. However, she said having too many plans could result in poorer service, since companies need a large pool of enrollees to spread the risk and ensure a larger network.

Under the current contract, Health Care USA has nearly 60 percent of enrollees. Molina has about 19 percent, followed by Missouri Care at 16 percent.

“If you let too many plans in, none of them will be able to get enough enrollees to do a good job,” Walentik said. “You can’t have 10 public transportation companies in the same city. You’d have too many empty buses. It wouldn’t work. You need a critical mass to make it work. It’s the same thing with managed care.”

In addition to the Missouri contract, Molina also learned this week it lost a managed care contract in Ohio. Centene also lost a bid for the same contract.