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State officer voids $13 million no-bid Medicaid consulting contract

State Journal Register

Thursday, December 7, 2017  |  Article  |  Doug Fink

Medicaid, Managed Care

A no-bid consulting contract worth nearly $13 million has been voided by the state’s chief procurement officer.

Chief Procurement Officer Ellen Daley said the contract with McKinsey & Company should have been put out to bid rather than simply awarded by the Department of Healthcare and Family Services.

State laws covering the procurement of products and services by state agencies allow no-bid contracts to be awarded to prepare for anticipated lawsuits, enforcement actions or investigations. DHFS cited that exemption when it awarded the contract to McKinsey without getting bids from other companies.

“After much review and discussions with your office, I remain unconvinced this procurement fits within the exemption to the (procurement code) for anticipated litigation,” Daley wrote in a letter to DHFS. “Consequently and pursuant to my authority ... I find it in the best interest of the state to void this contract.”

The contract was for services in connection with the state’s ongoing effort to enroll more Medicaid recipients into managed care programs. Both the Illinois House and Senate are holding hearings about the administration’s decision to award $63 billion in contracts to seven health care vendors to administer the program. The Rauner administration said the state will save about $1 billion over the four-year life of the deal.

DHFS spokesman John Hoffman said the department “is reviewing the impact of this preliminary decision, its potential cost to taxpayers and its impact on fulfilling our mission to provide quality services to our most vulnerable clients in the state.”

Last week, the House Human Services Appropriations Committee held a hearing in Chicago on the McKinsey contract. Committee chairman Rep. Greg Harris, D-Chicago, said he believes the contract should have been put out for competitive bids.

“Is there nobody else in Illinois or America who could have done this work?” Harris said. “My view after listening to testimony is this should have been put out for bid. There are many large consulting firms, many located right here in our state, who do this work. We should have had it competitively bid and gotten the best proposal for the best price.”

Sen. Andy Manar, D-Bunker Hill, said in a statement that cancellation of the McKinsey contract raises other questions about the way the state went about selecting vendors to administer the Medicaid managed care program. He said the process “has been cloaked in secrecy while costs ballooned without explanation.”

Manar chairs one of the Senate committees that will look into the contracts during a hearing this week.

Lawmakers said they were told the annual cost of the Medicaid managed care contracts would be $9 billion to $10 billion a year. That put the total four-year cost of the deal at $36 billion to $40 billion.

However, when the contracts were quietly announced just before Thanksgiving, the four-year cost was $63 billion. DHFS said the program will cover more Medicaid recipients than are now enrolled in managed care, which drove up costs.

Contact Doug Finke: doug.finke@sj-r.com, 788-1527, twitter.com/dougfinkesjr.