Government & Politics

Fight over $70M Kansas prison health care contract turns bitter amid ethics concerns

The Tennessee company sharply criticized for providing substandard medical care to Kansas’s 10,000 prison inmates now finds itself at the center of fresh controversy over the future of its $70 million-plus annual contract.

Corizon Health alleges that the Kansas Department of Corrections put the massive prison health care contract up for bid in a way that eases the path for a competitor who employs the former head of the corrections system.

At the same time, a top official in Gov. Laura Kelly’s administration said a Corizon executive made political threats against the current leader of the Department of Corrections over the contract. Emails describe a September phone call where the executive said he would do “whatever it takes” to keep the contract, which is set to expire in June 2020.

The dispute, which spilled into public view on Tuesday, threatens to derail the bidding process.

Roger Werholtz, who served as corrections secretary from January until June, decided this spring to grant the company only a one-year, rather than two-year, contract extension amid concerns over its performance. His successor, Jeff Zmuda, then put the contract out for bid this fall.

Werholtz, who was appointed by Kelly, only served in an interim capacity. But both before his time as secretary and after, he’s worked as a consultant for VitalCore – a Topeka company that provides prison health care and is a potential competitor for the Kansas contract.

Corizon has questioned allowing VitalCore to bid given Werholtz’s past role. The company also objects to changes in the requirements for quality assurance that it says opens the door to VitalCore to bid.

Corizon CEO James Hyman in an interview called the situation “problematic.”

“To me, it taints the process,” Hyman said.

Zmuda told lawmakers on Tuesday that the standards for the contract had been changed. He said the Department of Corrections wanted to attract more bidders and looked at what other states had done.

“I believe we changed the standards, but I don’t believe we lowered them,” Zmuda said.

Zmuda made the remarks during his Senate confirmation hearing. Senators voted unanimously to advance his nomination to the full Senate.

Kelly’s administration says that in a September call with Zmuda, a Corizon executive suggested that the Democratic governor would face political consequences if the company lost the contract. Kelly chief of staff Will Lawrence emailed Hyman on Oct. 25 to complain about the call.

Lawrence wrote that Mike Murphy, senior vice president for state corrections, raised concerns in the call about VitalCore’s ability to bid on the contract. Lawrence quoted Murphy as telling Zmuda “this whole thing stinks.”

“Unfortunately, Mr. Murphy apparently did not stop there,” Lawrence wrote. “He then went on to state that this contract is big business for Corizon and that he will do ‘whatever it takes’ to keep this contract.’”

Murphy said allowing the contract to be put out for bid would be a “political headache” for the Kelly administration, according to Lawrence. And, Lawrence said, he reminded Zmuda that his confirmation was currently pending before the Senate.

Lawrence wrote that Murphy’s statements were “completely unacceptable.”

“It is beyond the pale that anyone, but particularly an executive level employee of a company doing business with Kansas, would make what appear to be thinly veiled political threats,” Lawrence wrote.

Hyman replied minutes later, promising the company would investigate. He added that “I regret that we are in this situation.”

Hyman said Tuesday that the way Lawrence described the call was not the way Murphy intended his remarks.

“I’m not sure if it’s exactly what Mr. Murphy said, but it was certainly not the intent and may have been misconstrued,” Hyman said.

Hyman added that he met with Zmuda after the call and that the secretary did not raise Murphy’s call with him.

Kelly’s office is trying determine whether Werholtz’s position at VitalCore should prohibit the company from bidding. The same day Lawrence emailed Hyman, he requested the Kansas Department of Administration investigate the possible conflict “out of an abundance of caution.”

Kansas law outlines a process that allows the state secretary of administration to decide whether to prohibit the company from bidding after consulting with the Department of Corrections and Attorney General Derek Schmidt.

VitalCore CEO Viola Riggin on Tuesday dismissed the idea that Werholtz’s role represents a conflict.

“We are confident that we are on solid ground and that there are absolutely no legal or ethical issues that would prevent VitalCore from bidding on the KDOC contract,” Riggin said in an email.

In an interview, Werholtz said his past and current work for VitalCore had no influence on his decision to grant only a one-year extension to Corizon. He said during his time as secretary he severed all financial relationship with VitalCore.

Werholtz emphasized that he knows what the ethics rules require and that he was careful not to violate any requirements. He added that when he was secretary his responsibility was to make decisions in the best interest of the state, the department and offenders and that he did so.

Werholtz said he “did absolutely nothing on the health care contract that would create any kind of advantage for VitalCore or any other company.”

The health care contract was “problematic” before he became secretary, Werholtz said.

Concerns with the care provided by Corizon have been well documented. The Star previously analyzed Corizon performance documents from July 2015 through December 2018 and found that almost a third of the time the company fell short of contract requirements for treating inmates who said they were sick.

Asked about the company’s performance, Hyman said there are “certainly things we think we can do better.” He declined to say whether the company would consider legal action related to how the bid process has unfolded.

But he said he respects Kelly’s approach to “integrity through the procurement process.” Since taking office, Kelly has sought to make state contracts more competitive and has promised to cut down on no-bid contracts.

“One of the reasons why we’ve raised these issues with Secretary Zmuda is that we’ve felt this process was not consistent with that drive for integrity,” Hyman said.

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Jonathan Shorman covers Kansas politics and the Legislature for The Wichita Eagle and The Kansas City Star. He’s been covering politics for six years, first in Missouri and now in Kansas. He holds a journalism degree from the University of Kansas.