Texas lawmakers rebuke state health officials for contract flap — again

April 19--State lawmakers on Wednesday rebuked Texas Health and Human Services Commission officials for bungling millions of dollars in contracts, a problem revealed this month.

Lawmakers called the contracting problems a systemic failure of the agency, which has struggled for years to follow proper procurement processes. Officials inaccurately scored an estimated $600 million worth of contracts in recent months.

Hours before Health and Human Services Commissioner Charles Smith testified before the Texas House Appropriations Committee, agency officials said Chief Operating Officer Heather Griffith Peterson resigned, effective Wednesday.

Peterson, who oversaw the agency's procurement process, joins three other staff members who have left the agency recently. Michael Parks, associate commissioner of procurement operations, and two of his aides were fired.

The latest errors have led to the cancellation of managed care contracts to serve low-income children, delays in launching a new database to track birth and death statistics statewide and intervention by a disappointed Gov. Greg Abbott, who dispatched one of his aides, former state Sen. Tommy Williams, to correct the problems.

"I'm sitting before you because we failed. We let you down. We let the governor down. We let taxpayers down. We let our vendors down. We let our fellow professionals down," Smith told the committee during Wednesday's hearing. "Everyone deserves better."

Some lawmakers said Smith's apology was too late.

"We can't keep coming back to this trough and not have resolutions to these types of issue. You're the guy in charge. The buck stops here, right?" said Rep. Jay Dean, R-Longview.

Bungled contracts

Earlier this month, agency officials canceled five managed care contracts worth $580 million after they discovered staff members had evaluated interested vendors with a tool that contained errors. The contractors were to provide health care for low-income children in rural parts of the state and in Hidalgo County in the Children's Health Insurance Program. The managed care organizations would have provided services between Sept. 1, 2018, to Dec. 31, 2019. The agency will extend contracts of existing vendors so CHIP patients won't experience an interruption in services, according to the agency.

On Monday, the State Auditor's Office released a report highlighting a series of problems with how the agency awarded a $17.5 million contract in 2016 to develop and maintain a database to track birth and death statistics across state. Auditing officials said the agency inaccurately scored the five interested vendors and used the wrong information to award the bid to Genesis Systems Inc. If the agency had accurately scored the bidders, Genesis would have still earned the contract, the audit said. Improper approval process also led to a delay of the launch date of the database by a year to Jan. 1, 2019, and increased the cost of the contract by more than $1 million.

Among steps Smith said he was taking to address contracting issues is to temporarily hire a quality control team to double-check the scoring work of the agency as well as to internally audit the agency's procurement process. The state auditor's office and the inspector general are also doing reviews.

Rep. Sarah Davis, R-West University, told Smith on Wednesday that the agency has known of contracting problems for at least the last 18 months but officials have done nothing to address them.

Rep. Mary González, D-Clint, said she was concerned that contracting errors might lead to companies not wanting to do business with the state, which would ultimately hurt people the agency is supposed to serve.

Smith said the procurement department responsible for the scoring issues has vacancies, but Rep. John Zerwas, R-Richmond, the appropriations committee chairman, said adding staff won't change the systemic problems that he said are plaguing the agency's procurement problems.

"We're trying to do things the same old way. I'm not sure that's really the answer," he said.

Outsourcing

The agency handles about 108,000 contracts worth $60 billion, a figure that has grown over the last several years as the agency, under direction from the Legislature, has transitioned much of its health care services to private managed care organizations. Such organizations receive about $30 billion in state money each year, promising to improve health care delivery at a lower price than the state could do it.

Rep. Richard Peña Raymond, D-Laredo, came to Smith's defense, saying the latest contracting flap shouldn't be compared with the 21CT contracting scandal that he said involved unethical practices by agency officials.

Problems with the 21CT deal revolved around a $20 million contract between the agency's inspector general's office and Austin data analytics firm 21CT to detect Medicaid fraud. A $90 million contract extension with the company was canceled in December 2014 after an American-Statesman investigation revealed an array of problems, including the lack of a traditional bidding process, little oversight and a possible conflict of interest.

"We have created the largest state agency in the country and when you make something this big and you have $30 billion in contracts going out, there are going to be some mistakes. There are going to be human errors. And I don't think it's fair ... (to) compare it to 21CT debacle," Raymond said.

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