The Florida Department of Corrections’ attempt to restore normalcy to its troubled prison healthcare system is now tangled in a legal dispute over the agency’s decision to award up to $31 million in fees to a politically well-connected company as part of a $268 million no-bid contract.
The contract between the prison agency and Centurion of Florida was signed Feb. 1 after Corizon Health told FDC Secretary Julie Jones in December that it planned to walk away from its five-year, $1.2 billion contract three years early. The company had complained it had been losing $1 million a month on its contract to provide mental, physical and dental healthcare for 82,000 of the state’s inmates and was under fire from the agency to improve its performance.
Jones determined that the emergency situation did not require the state to seek competitive bids and, rather than a formal bid-seeking process, she asked other healthcare companies to offer proposals to fill the gap in prison healthcare until the agency negotiates a new bid with new companies in 2018.
Three companies submitted proposals — Wexford, the company that serves 18,000 inmates in the South Florida region, Centurion, and Armor.
Two of them “were tens of millions of dollars more expensive than the awarded vendor’s price,” said McKinley Lewis, FDC spokesman.
The department awarded the contract to Centurion, a partnership between MHM Services, a provider of mental healthcare services, and Centene, the company that holds a lucrative Medicaid managed-care contract with the state. The company has contributed $298,000 to legislative campaigns and political committees in 2015 alone, and its chief lobbyist is former House Speaker Dean Cannon.
Under the deal, the state has agreed to spend about $28 million more a year on prison healthcare than it had previously agreed to pay Corizon.
Wexford officials were not happy. After making a public records request for a copy of the Centurion contract, Wexford officials said they discovered the agency had agreed to something they had rarely seen since the advent of cost controls in healthcare pricing became the norm, said Dan Conn, CEO of Wexford Health.
State officials had agreed to pay 100 percent of Centurion’s cost of providing the services plus an administrative fee equal to 13.5 percent of the total costs — or up to $31 million. The contract is capped at $268 million a year for costs and administrative fees over the two years of the contract.
Under this arrangement, the higher the cost of providing services, the more money the company reaps in administrative fees, and the company bears no risk if costs rise. If Centurion wants to end the contract, it must give two months notice, and if it decides to violate any other terms of the deal, it risks a $27 million performance bond.
By contrast, the previous contract with Corizon was an “at-risk” arrangement in which the company was paid a fixed monthly fee and was expected to absorb the risk of costs rising within that.
Conn believes the “cost-plus” contract is a bad deal for the state and had his company been given the opportunity to offer a “cost-plus” bid, he would have made an offer that was much more competitive than the at-risk offer Wexford made.
I like the relationship we have with the secretary and my company will continue to do business with the state. I understand you win some, you lose some, but this was not a fair process.
Dan Conn, CEO of Wexford Health
He said he called Jones and explained to her that he was disappointed at the uneven treatment of the bidders, and that he would have to file a bid protest.
“They kept going back to the argument that this was the most cost-effective bid and I kept saying you don't know that because you didn’t get a cost-plus bid from me,”' he said.
The department rejected the bid protest but Conn told the Herald/Times that he will continue to pursue a legal challenge.
“I like the relationship we have with the secretary and my company will continue to do business with the state,” he said. “I understand you win some, you lose some, but this was not a fair process.”
Lewis disputed the possibility that Centurion, which is also planning to be a bidder in the long-term contract in 2018, would walk away from its contract to avoid losing money on the $268 million cap.
“We fully vetted them and their track record was very good,” he said. “We didn’t hear anything that caused us concern.”
In addition, he said, the agency has required the company to submit its expenses monthly so they can be reviewed and assessed.
“We will know all the business partners they use to provide all their services in Florida,” he said. “If, God forbid, they walk away, we will have those contractors to turn to.”
It would also damage their chances of winning the long-term contract, he said. “If they walk away, the state of Florida has several options.”
Mary Ellen Klas: email@example.com and @MaryEllenKlas