Why Optum May Be Worse Than CGI
Quotes of the Week: “We did review a number of folks for their skills and capabilities and made the best judgment we could. We are undoubtedly going to get hammered. I don’t care. Our job is to solve this and solve it with the best resources available….” Lawrence Miller, Health Care Reform Chief, discussing hiring Optum to take over Vermont Health Connect’s website work
· State Finally Gets Rid of CGI, But Optum Has Been Sued For a Massive Fraud
· “Into the Frying Pan” by Randy Brock
In an abrupt departure from his unwavering support of CGI, creator of Vermont Health Connect’s bungled website, Governor Shumlin announced on August 4th that he was finally dumping CGI and replacing it with OptumInsight (Optum). After a year of development by CGI, the website still cannot handle changes in circumstances or insurance coverage renewals, which are coming up soon. The amicable split from CGI was in sharp contrast to Shumlin’s earlier assertion that CGI had “underperformed at every turn”. That’s because CGI is not really going away. CGI will still be in the background, hosting the web services needed to run the website, while Optum takes on the website design and testing work. Health Care Reform czar Lawrence Miller says that the testing process “will not be quick; we’ll be running through every scenario to find out what’s broken and fixing it”. He does not anticipate that the system will be fixed in time for the upcoming health plan reenrollment process, which means that once again, Vermonters will have to go through a laborious paper enrollment process.
CGI will be paid $67 million of an $83 million contract. The state will pay CGI another $9.7 million between now and CGI’s exit date of September 20th, for work completed by that date. Performance penalties, which should have been much higher, were limited to $5.1 million by CGI. Vermont has spent over $90 million altogether on Vermont Health Connect. The administration says that 97% was Federal money. That means Vermonters have paid $2.73 million out of the state’s coffers. And Federal money is taxpayers’ money too.
Shumlin’s firing of CGI was long overdue and should have happened six months ago, according to Vermont Lt. Governor Phil Scott. Even Lawrence Miller has shown some frustration, saying, “The big question is, why the hell we didn’t do this months ago – because it takes months…”
In a press conference on August 5th, House and Senate Minority leaders Rep. Don Turner (R-Milton) and Sen. Joe Benning (R-Caledonia) said that that they were blindsided by the switch to CGI. The minority party leadership was not invited to take part in any discussions about the switch, and was not given the courtesy of a heads-up before the announcement was made. There has not been even a pretense of working across the aisle by the Shumlin administration and the Democratic majority, or of being mindful that elected Republican officials have constituents back home who need to be represented too. It’s Democratic with a capitol “D”, and a virtual monopoly.
Rep Turner called for a “real scrubbing” of the leadership team that has been working on Vermont Health Connect to date. Vermonters for Health Care Freedom, along with many Vermonters, has called for Mark Larson, Robin Lunge and Lindsay Tucker to be fired for their incompetence. Other states have fired incompetent exchange officials in their states. In the private sector it happens all the time. There is no doubt that Vermont Health Connect would not be in the mess it is in had the Governor not chosen the wrong people to head it up. Appointing a domestic violence counselor (Larson) and a lawyer (Lunge), neither with any managerial or health systems experience, reflects upon Shumlin’s leadership shortcomings. The Governor won’t fire these people because he made the wrong picks in the first place and can’t admit it. Unfortunately for Vermont, putting this same team in charge of a new vendor is unlikely to yield a different result.
Representative Doug Gage, (R-Rutland City), one of the only two Republicans on the 11-member House Health Care (HHC) committee, believes that CGI should have been fired long ago. “It was irresponsible of the Governor and his administration not to recognize that CGI was incompetent and needed to be fired six months ago, as many states and the Federal government did. CGI was hired outside the normal bidding process, and it is widely known that they failed time and time again”, said Gage.
Rep. Mary Morrissey (R-Bennington), the other HHC Republican said, “At an estimated cost of over $70 million, many resources tapped and the addition of great frustration for many Vermont citizens, families, businesses and healthcare providers, firing CGI is long overdue. I have asked repeatedly since the fall, and as recently as two weeks ago at the House Health Care committee meeting for their dismissal”.
“Today’s announcement appears to be a rearranging of the deck chairs on the Titanic, without solving Vermonters’ problems and without a plan in place to fix the system. It is also concerning that the managers Of the exchange, Larson, Lunge and Tucker are not being held accountable. I’m once again calling for the Governor to make the Vermont Health Exchange voluntary, and to open up the health insurance market in a way that will meet Vermonters’ needs through choice and competition”.
For a second time in a row, the state did not use a competitive bid process in hiring Optum because in Miller’s view, it takes too long. Instead, the state has signed an agreement with Optum and is still negotiating a contract. Miller says he does not know how much Optum will be paid to complete the project. What usually happens to price when there is only one seller?
So after a year of misery and $67 million later, the state has signed an agreement with CGI waiving all rights to sue the company for any failures or any breaches of the system – and has agreed that neither party will assume fault for disastrous performance of Vermont Health Connect. In other words, the administration has struck a deal with a private contractor to withhold the details its greatest known management failure. Translation: State: CGI has us by the cojones. We can’t hold them accountable, sue them, or even blame them lest we hurt their feelings and they leave us. What a sweet deal for CGI. What a sour deal for Vermonters.
House Health Care chair Mike Fisher (D-Ripton) says he’s relieved to hear of the hiring of Optum. As a Shumlin apologist, Fisher says it’s hard to determine who is responsible for the failures of the exchange – the contractors or the administration. Really? Not if you think about it for about one second.
Meanwhile, let’s take a closer look at Optum.
INTO THE FRYING PAN… By Randy Brock
It’s far too early to celebrate the Shulman Administration’s belated firing of CGI, the contractor responsible for flubbing Vermont’s dysfunctional healthcare exchange.
That’s because CGI’s designated successor, hired under yet another no-bid contract, is a company whose dubious origins raise even greater concerns.
The company is OptumInsight, a subsidiary of insurance giant UnitedHealth Group. Optum, was awarded a $5.6 million no-bid contract to clean up some of the mess left by CGI in the wake of the Vermont Health Connect meltdown. Now, reportedly, the state is in the final process of negotiating another multimillion dollar contract with Optum to complete the work left undone by CGI.
The problem is the Optum may not be exactly what it seems. That’s because just three years ago, the company wasn’t named Optum at all. Until its name change in June 2011, Optum was called Ingenix Inc. Ingenix’s claim to fame came from being charged by New York State Attorney General (and now Governor) Andrew Cuomo with a massive fraud.
According to the attorney general, Ingenix engaged in “a scheme to defraud consumers” by systematically causing insurers using its databases to overbill the nation’s patients by hundreds of millions of dollars for more than a decade. The databases in question were used by insurance companies to calculate the local “usual and customary charges” that insurers would pay.
What’s particularly significant is that the attorney general alleged that this was not an error, but
a Deliberate scheme designed, in a system ripe with conflicts of interest, to benefit, among
others, Ingenix’s corporate parent, UnitedHealth.
According to the attorney general, the scheme allegedly worked like this: “Insurers knew most
simple Doctor visits cost $200, but claimed to their members the typical rate was only $77. The
insurers then applied the contractual reimbursement rate of 80%, covering only $62 for a $200
bill, and leaving the patient to cover the $138 balance.”
By relying on Ingenix’s data, most major insurance companies, including UnitedHealth, CIGNA
and Aetna as well as the Federal employees’ insurance system and TRICARE serving military
families, reimbursed patients less than they were due, leaving consumers across the country
with hundreds of millions of dollars in higher out-of-pocket expense. In Vermont, in addition to
CIGNA, MVP used Ingenix’s data. It is unclear if Blue Cross was involved.
A 2009 investigation by the US Senate Committee on Commerce, Science and Transportation
reached the same conclusion as Cuomo. "This is outrageous at any time, but especially as
families all throughout our country are doing everything they can to make ends meet in this
economy -- this is despicable," committee chair Senator Jay Rockefeller (D, WV) said in a
written statement.
Ingenix settled the New York fraud charges by agreeing to pay $50 million to have its database
replaced by one set up and run by a new independent data provider. Ingenix neither admitted
nor denied that it engaged in fraud.
In addition to the New York State investigation, numerous suits against the company and
against insurers who used its data were filed all over the country. In 2009, in what was
reported by the American Medical Association as the largest monetary settlement ever made over payments by a single insurer, UnitedHealth Group paid $350 million to customers and medical providers to settle the Ingenix litigation.
The Optum story is eerily reminiscent of CGI’s history, which involved the acquisition of a
company that had a massive $474.5 million dollar judgment for botching a Mississippi
government contract and then paid $5 million to settle litigation from the Federal Thrift
Investment Board.
It was also the subject of a US Senate inquiry into four years of delays and cost overruns. CGI’s federal subsidiary was accused in a 2011 whistleblower suit of initiating a scheme to defraud the U.S. Department of Housing and Urban Development. CGI denied the allegation and the suit is still pending.
All of this begs the question: Did the Shumlin Administration know about Optum’s troubled
background and, despite it, allow Vermont to enter into a multi-million dollar no-bid contract
with a company that paid hundreds of millions of dollars to settle accusations of a massive
fraud? Or worse, were officials completely unaware of the company’s troubled history at all?
Either way, with the Ingenix successor, OptumInsight, charged with “fixing” the dysfunctional
Vermont Health Connect website, consumers may want to grab a bottle of aspirin and then
scrutinize every health insurance bill they get with a calculator close at hand.
Randy Brock is a principal at Rockledge Risk Advisors LLC. He is a former Vermont State Auditor and State Senator and was the 2012 Republican nominee for Governor. He is also a Certified Fraud Examiner.
As bad as it was, CGI did not deliberately defraud health care consumers the way Optum/Ingenix did in New York State. Shumlin’s quick deal with Optum/Ingenix smacks of desperation, and now Vermont is in bed with a known fraudster.
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