A Shawnee County judge has rejected Aetna for Better Health’s challenge of how the state awarded the contracts to manage its $4 billion Medicaid program.
District Judge Thomas Luedke said he couldn’t find the state’s decision to deny Aetna a contract to administer KanCare was unreasonable or unlawful.
Luedke set aside Aetna’s complaints that the procurement process was based on unstated evaluation criteria as well as selecting “arbitrary and irrational” tiebreaking criteria in technical scoring.
He also dismissed arguments about scoring records being destroyed and that the process was marked by a conflict of interest with the state’s Medicaid director leaving for a company with a stake in one of the bidders.
The decision was handed down Tuesday, the day before Aetna had to start notifying its beneficiaries that they would have to enroll with a different managed care company, which takes over Jan. 1.
Aetna could not be reached immediately for comment Wednesday morning.
Aetna’s case against the state was principally based on how it broke a tie in technical scoring with Healthy Blue, a coalition that the includes Blue Cross and Blue Shield of Kansas as well as Blue Cross and Blue Shield of Kansas City.
State documents show that Sunflower Health Plan and UnitedHealthcare led the scoring among the seven bidders seeking to administer the KanCare program, which provides health coverage to more than 400,000 less-affluent Kansans.
Sunflower led the way with 729.25 points out of 1,000 points available. They were followed by United with 683.25 points. Aetna and Healthy Blue were tied at 522.
The state awarded the contracts to two incumbent providers, Sunflower and United. It gave the third contract to Healthy Blue, deciding against renewing Aetna’s contract to administer KanCare.
Aetna had said the method used to break the tie in awarding the contract with Healthy Blue was unlawful. The judge disagreed.
Leudke noted that the process used in selecting new managed care companies to oversee the state’s Medicaid program was a “negotiated procurement” that required judgment and discretion.
“This judgment and discretion is exercised to determine the best interests of the state of Kansas. This is not strictly a mathematical equation, nor is it required to be,” Luedke wrote in his opinion.
While Luedke acknowledged that Aetna and Healthy Blue had the same cumulative score in the technical review phase, he said there were other factors in play that tilted the playing field in favor of Healthy Blue.
“Simply because the cumulative scores were the same, it does not mean the products were equal,” Luedke wrote.
“This was only the tip of the iceberg. ‘Significant differences’ existed below the surface,” he wrote.
The state developed a scoring system for the bidders’ responses to 36 technical questions used to evaluate their proposals.
The state determined the maximum number of points available for each technical question, ranging from five to one.
A score of five meant bidders received all the points possible, a score of four meant they received 75% of the available points, a three meant they received half the available points and a two meant they received 25% of the points.
A score of one meant the bidders received no points.
For example, if the maximum number of potential points available for a technical question was 50 points and a bidder received a rating of a four for its response to a question, the bidder received 75%, or 37.5 points, for that question.
The bidders were evaluated in seven major topic areas, including their experience and qualifications, member experience, their provider network, quality assurance and how they would respond to hypothetical case situations.
In evaluating the differences between Aetna and Healthy Blue, the state noted that Healthy Blue fared better in the topic areas that were evaluated.
For instance, Healthy Blue scored higher than Aetna in five of the seven areas that were evaluated, including experience and qualifications, member experience, the provider network and their responses to the hypothetical case questions.
By comparison, Aetna scored higher than Healthy Blue in just two of the seven areas, including quality assurance.
While Aetna and Healthy Blue were tied in overall points, Healthy Blue had greater consistency, Luedke write. Additionally, he noted that Healthy Blue scored higher in more than 70% of the topic areas.
However, Aetna told the court it was not sufficiently credited for the weight of the topic areas in which it scored better than Healthy Blue.
But the judge said that the importance assigned to each topic area was a matter of professional judgment and discretion.
“While the court may differ in opinion with the relative importance of respective topic areas, the court is not at liberty to substitute its judgment for the professional judgment of the agency officials, who oversaw what was billed to be the largest contract in state history,” he wrote.
“The very fact that the scores of Aetna and Healthy Blue were so close suggests deference to the judgment and expertise of state officials involved in managing the bidding process,” Luedke wrote.
“The implication of these scores can be evaluated in different ways. It is sufficient to say that there was an abundance of information to compare and contrast, to determine which bidder suited the best interests of the state.”
Luedke said the court’s only role in this case was to determine whether the state’s method of evaluation resulted in an unlawful procedure, failed to follow prescribe procedure, or was otherwise “unreasonable, arbitrary or capricious.”
He found that the state’s method of evaluating the scores was within the scope of its expertise and discretion.
He said those standards were laid out in the request for proposal.
“The way the review was conducted should have been no surprise to any of the bidders,” Luedke wrote.
The judge’s 48-page opinion spent little time on the scoring records that were destroyed during the procurement process, which had been the topic at a couple of legislative committee meetings.
In arguing for a rebidding the contracts, Aetna cited the destruction of notes and other documents compiled by teams that evaluated the bidders’ responses to technical questions used to score the proposals.
Aetna urged the judge to hold the state accountable for destroying the records, which Aetna has sought so it could get a better idea of why it lost out in the bidding.
The records in question were notes taken by members of four evaluation committees responsible for reviewing and evaluating the bidders’ responses to 36 technical questions.
Each evaluation committee was made up of five people who collectively offered experience and expertise related to the subject matter covered in the questions reviewed by each committee.
However, the ultimate decision about awarding the contracts was made by the three-person procurement negotiating committee, which included state health Secretary Janet Stanek and social services Secretary Laura Howard.
The state’s lawyers say that the procurement negotiating committee didn’t rely on those records, which were destroyed at the recommendation of Mercer, a consultant aiding the state in awarding the contracts.
“The only way that Aetna could receive any relief from the destroyed documents would be if they could establish that the margin in the technical scoring between Aetna and Healthy Blue substantially favored Aetna to the extent that it would have changed the consensus scoring,” Luedke wrote.
“Other than a possible inference from the destruction of the notes themselves, there is no evidence to suggest the consensus would have been favorably altered in Aetna’s behalf,” he wrote.
Luedke also dismissed Aetna’s claim that the process was marred by a conflict of interest after the state’s Medicaid director, Sarah Fertig, went to work as the government relations director for Blue Cross and Blue Shield of Kansas.
Blue Cross and Blue Shield of Kansas owns a 5% stake in Healthy Blue.
Luedke notes that after Fertig announced she was leaving the state as Medicaid director, she was barred from having a role with the KanCare procurement.
He also said that Fertig’s position with Blue Cross did not involve the KanCare procurement. She also was prevented from any association with Healthy Blue and its bid on the KanCare contract.
The KanCare bids were not opened until January 2024, months after Fertig had already left the state’s employment.
The state’s procurement director found that there was no reason to invalidate the Healthy Blue contract since Fertig has disassociated with KanCare after she announced she was leaving the state and her position at Blue Cross didn’t involve the state’s Medicaid program.
The procurement director said that any prohibition of a state employee seeking work with a vendor who becomes a state contractor is only directed to the former employee and not the vendor contract.
Further, there was no evidence that Fertig’s employment with Blue Cross had any relationship to Healthy Blue and the bidding process for the KanCare contract.
Luedke didn’t object to the finding of the procurement director.
“The court cannot find that this rationale was unreasonable, arbitrary or capricious, that it was not supported by substantial evidence, or that it was the result of an unlawful procedure or a failure to follow a prescribed procedure,” he wrote.
