What derailed LSU’s lucrative health care software deal? Conflicts of interest, in-house arguing, more

Advocate, The (Baton Rouge, LA)

Aug. 4--An unusual setup for the sale of a computer program -- created by LSU employees and worth an estimated $50 million -- put the daughter of an LSU Board of Supervisors member on both the board of the company contracted to make the sale and the university-affiliated nonprofit issuing the contract.

It was an arrangement LSU President F. King Alexander says he knew nothing about.

Though contracts were signed by Alexander -- and about $1 million was spent by the publicly funded university -- the deal fell apart and LSU lost out on the chance to be the leading supplier of health care software now in great demand at hospitals around the world.

The Louisiana Legislative Auditor -- who was asked in April by Alexander to examine the complicated deal after internal LSU auditors raised questions -- blamed the failure on LSU managers who purposely circumvented the protocols established by the university's Offices of Technology Management. Instead, they created a business structure in which the university would license the software through an affiliated nonprofit that contracted with a private, for-profit firm to handle the sales.

Nobody claims LSU administrators or members of the Board of Supervisors were out to defraud the university system. A dozen principals and participants independently describe a slapdash effort to keep some of the profit for LSU and get around state lawmakers who at the time were taking every available dollar to shore up the state's deficit-riddled operating budget. But in their haste, LSU administrators set up a system that, at the very least, created conflicts of interest and could have violated the state constitution, auditors wrote.

Under LSU's initial setup for the deal, Beverly Haydel, a New Orleans lawyer who is the daughter of LSU Board of Supervisors member James W. Moore Jr., of Monroe, was made a board member of both the nonprofit affiliate, called LaHIT, as well as of the private for-profit company, called HarmonIQ. LaHIT awarded HarmonIQ the contract to sell the cutting-edge software.

Haydel, a health care policy expert, told The Advocate she was unaware of the law that prohibits family members from doing business with the agency where a relative works. Haydel said she was just helping out at the request of LSU administrators, adding that she was not paid for her service on the private company board, transacted no business and quit upon the advice of an LSU administrator before any contract was finalized. Haydel said she did as was requested without asking for elaboration.

Alexander, through the LSU media affairs office, stated he was made aware Haydel was a HarmonIQ director during the audit process. He had asked the legislative auditor to investigate the arrangements in general and agreed with the subsequent recommendations to tighten LSU's procedures to ensure administrators follow intellectual property licensing protocols. The audit, released in June, said the arrangements created "potential conflicts of interest" but didn't specifically name members of the LSU Board who were on LaHIT or Haydel's involvement with HarmonIQ.

Legislative Auditor Daryl Purpera said LSU's contracts with HarmonIQ had been terminated so Haydel was not included in the audit report.

The state's Code of Governmental Ethics forbids family members from contracting with a related public servant's agency, noted Ethics Board Administrator Kathleen Allen. She declined to speak specifically about the HarmonIQ situation but said the law was clear.

LSU supervisor and management involvement on the boards of affiliated nonprofits, like LaHIT, is routine. Moore would have had to recuse himself from any Board of Supervisors vote dealing with LaHIT because his daughter was involved.

But the LSU Board was never asked to vote on the effort, including on the deal's three agreements, which weakened LSU's "ability to make appropriate decisions," according to the auditor. The 16-member board, which is supposed to have final say on LSU transactions, sets policy, approves hiring and authorizes spending for nine institutions, including the flagship Baton Rouge campus and the medical schools in New Orleans and Shreveport.

Purpera said recently that he wanted to look further into LaHIT. One question he'd like answered is why wording that would have given the university a 40 percent equity stake in HarmonIQ, the terms both sides agreed to, wasn't included in the final contract. The signed contract gave LSU 5% of the software's royalties instead of the usual 40-50 percent.

"Nobody seems to know why," Purpera said.

Computer personnel for the LSU Health Care Services Division, which at the time ran all the charity hospitals, put together a program covering all the state facilities. Called CLIQ, the software collected information about health status and treatments for tens of thousands of patients scattered at various hospitals and clinics across the state. Compiling all that data in one place helped physicians identify patients prone to certain illnesses and pursue the best treatments. The data helped the charity hospitals avoid spending about $20 million annually by treating patients before their conditions became acute.

Leading the effort for LSU was Dr. Frank Opelka, M.D., who asked LSU lawyers how to keep the estimated $40 million to $60 million profits from the software sales at LSU during a time when the administration of then-Gov. Bobby Jindal was decreasing higher education's annual state appropriation by whatever excess dollars were shown on the university's books. Opelka was appointed by Jindal as LSU's executive vice president for health care and medical education redesign. He was terminated after Democratic Gov. John Bel Edwards was elected in 2015.

Opelka said lawyers and administrators, not he, came up with the plan to create an affiliated nonprofit foundation to contract with a private firm for the sale of the software and to hold onto the profits for the university's benefit rather than seeing the money swept into the state's general fund.

At end of September 2014, Louisiana Health Information Technology Foundation, or LaHIT, was formed as a nonprofit to handle the CLIQ software sale.

The LaHIT board was chaired by Opelka and included Haydel; Bobby Yarborough, who was appointed by Jindal to the LSU Board of Supervisors; and Tim Barfield, who was Jindal's secretary of the Department of Revenue. HarmonIQ Health Systems Corp. was incorporated on Dec. 17, 2014, and Haydel was a founding board member. The licensure agreement between LaHIT and HarmonIQ was finalized on Feb. 25, 2016.

Haydel doesn't recall exactly when in 2016 she resigned from both boards. But she said she had nothing to do with any transactions.

"I never saw any contracts," Haydel said.

She said she joined the boards at Opelka's request and left when he told her that legal counsel had advised that she do so.

Haydel said she was never informed that her participation with HarmonIQ violated ethics laws. "No one has ever called me or asked about it or indicated that there were any ethics violations," Haydel said.

Opelka said he spoke with LSU lawyers about whom to add to the boards before doing so. He added that when the lawyers later said Haydel and other the LSU-linked directors should step down from LaHIT and HarmonIQ boards, he passed along that information to the board members.

In March 2017, LSU ended the contract with LaHIT, and in October 2018 ended its relationship with HarmonIQ.

Moore did not return two calls seeking comment.

Moore, who transitioned from running a family-owned oil company to an investment firm, was appointed to the LSU Board of Supervisors by Jindal in 2008. He was reappointed by Jindal and his current term ends June 1, 2020.

Moore is a major contributor to Republican candidates and causes. He is a leading backer of U.S. Rep. Ralph Abraham, the Alto Republican challenging Democratic Gov. John Bel Edwards' reelection this fall.

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