Feds Gave Sweetheart Deal to Firm Linked To Medical Data Fraud

Richard Pollock | Reporter

Health and Human Services (HHS) Secretary Sylvia Burwell awarded a rarely used open-ended sole-source contract to a firm whose corporate owners were embroiled in a $400 million fraudulent medical data scheme that cheated doctors and consumers, according to a Daily Caller News Foundation investigation.

The company Burwell selected is Optum Labs, which is part of UnitedHealth Group’s Optum subsidiary. Andrew Slavitt, President Barack Obama’s nominee to head HHS’s Centers for Medicare and Medicaid Services (CMS), was formerly a top Optum executive at the time of the fraudulent database involved in the scheme. The database enabled insurers to pay dramatically lower reimbursements to doctors and patients for out-of-network care.

Optum and UnitedHealth Group settled the landmark fraud case with then-New York Attorney General Andrew Cuomo in 2009 and paid out a record $400 million. Optum Labs — which is one of nation’s largest medical data analytics companies — was not a party to the settlement.

Under the contract, Optum Labs will provide HHS with 160 million administrative claim records it accumulated over 20 years and 40 to 50 million electronic medical records it collected over the last seven years, according to Optum Lab spokesman Jeffrey Smith. Some of the records to be given to HHS are part of the database involved in the 2009 settlement, Smith says.

Cuomo — now New York’s Democratic governor — said at the time of the settlement that Optum and UnitedHealth Group had “ripped off patients” by rigging out-of-network reimbursements to providers and consumers. “Too many people have been hurt,” he said.

UnitedHealth Group’s insurance division, United Healthcare, is the nation’s biggest health insurance company and warned last month it may stop participating in Obamacare in 2017 due to unexpectedly large financial losses.

Slavitt left Optum to join CMS as deputy administrator and became acting administrator when Marilyn Tavenner stepped down after the troubled launch of Obamacare. Obama nominated Slavitt as the permanent administrator July 10, 2015, but a confirmation vote has yet to be taken in the Senate.

Slavitt was granted a rare “ethics waiver” by the Obama administration that permits him to rule on issues involving past employers. American Commitment, a conservative non-profit advocacy group, recently delivered to the Senate more than 20,000 letters it generated demanding rejection of Slavitt’s nomination.

It was clear from the beginning of the award process Burwell’s choice for the contract was Optum Labs. In a May 29 public notice, she declared the contract would be awarded without any competition, declaring, “this is a notice of intent, not a request for a quote. A solicitation will not be issued and quotes will not be requested.”

Optum Labs has hundreds of rivals. There are 971 health IT companies registered with the federal government under the same service code in which Optum Lab was awarded the account.

Burwell added in the May 29 notice that the sole-source contract also was a “blanket purchase agreement,” (BPA) which means the contract will provide continuous government orders without competing bidders. No dollar amount is specified for the contract.

Federal officials aren’t required by BPA procurement rules to issue any public notice or solicitation when the contract is up for renewal. The contract is for one year, with options to renew over the following four years. It started in September of this year.

“This seems like another example of the revolving door paying off for a contractor, and more proof that who you know might be more lucrative than what you know,” Scott Amey, general counsel for the Project on Government Oversight, tells TheDCNF.

Sen. Chuck Grassley, an Iowa Republican, tells TheDCNF that “sole-source contracts by their nature raise questions about whether the taxpayers are getting the best deal.”

Grassley, chairman of the Senate Committee on the Judiciary and a senior member of the Senate Committee on Finance that oversees Obamacare, demands the administration justify its decision to offer Optum Labs a sole-source contract.

“The administration should be explicitly transparent about the reasons for any sole source contracts, and especially here where the firm getting the contract has been controversial,” Grassley tells TheDCNF.

“Companies would love to get that contract because it means that there won’t be any on follow-on competition and the agency will place their orders only with them,” says a 30-year senior procurement officer in an interview with TheDCNF.

The procurement officer who requested anonymity tells TheDCNF that “when they say ‘sole- source,’ that means they’re not going to look to other people. They’re not going to consider anyone else. They’re going to go straight to who they’re going to pick.” He requested anonymity because he is barred from speaking on the record due to his governmental post.

“A sole source BPA is an instrument that any company would be probably would be happy to have. Let’s not kid ourselves,” the procurement officer tells TheDCNF.

American Commitment president Phil Kerpen says “it’s rather remarkable that a division of Andy Slavitt’s UnitedHealth Group, Optum Labs, has now gotten an open-ended contract from HHS.”

Kerpen points to the ethics waiver that allows Slavitt to make decisions involving his former employers as an especially important factor in questioning the Optum Labs sole-source award.

“I think that certainly the perception of corruption is one reason why the unusual ethics waiver from the administration is so inappropriate. You now have a top executive of a company that does business every day, both as a regulated entity and as a vendor, with a top executive right there in the building,” Kerpen says.

CMS officials insist Slavitt is not involved in the Optum Lab contract. But an HHS spokeswoman refused to make public the memorandum of understanding between the department and Optum Labs.

The Optum Lab contract is with an obscure HHS operation called the Agency for Healthcare Research and Quality (AHRQ). The House Appropriations Committee zeroed-out the agency in June. The bill is in the Senate awaiting action.

Republicans charge AHRQ duplicates many other agencies, including the National Institutes of Health for which congressional Republicans have increased funding.

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