New contractor’s checkered past
It’s far too early to celebrate the Shumlin administration’s belated firing of CGI, the contractor responsible for flubbing Vermont’s dysfunctional health care exchange. That’s because CGI’s designated successor, hired under yet another no-bid contract, is a company whose dubious origins raise even greater concerns.
The company is OptumInsight, a subsidiary of insurance giant UnitedHealth Group. Optum was awarded a $5.6 million no-bid contract to clean up some of the mess left by CGI in the wake of the Vermont Health Connect meltdown. Now, reportedly, the state is in the final process of negotiating another multimillion dollar contract with Optum to complete the work left undone by CGI.
The problem is that Optum may not be exactly what it seems. That’s because just three years ago, the company wasn’t named Optum at all. Until its name change in June 2011, Optum was called Ingenix Inc. Ingenix’s claim to fame came from being charged by New York Attorney General (and now Gov.) Andrew Cuomo with a massive fraud. According to the attorney general, Ingenix engaged in “a scheme to defraud consumers” by systematically causing insurers using its databases to overbill the nation’s patients by hundreds of millions of dollars for more than a decade. The databases in question were used by insurance companies to calculate the local “usual and customary charges” that insurers would pay.
What’s particularly significant is that the attorney general alleged that this was not an error, but a deliberate scheme designed, in a system ripe with conflicts of interest, to benefit, among others, Ingenix’s corporate parent, UnitedHealth.
According to the attorney general, the scheme allegedly worked like this: “Insurers knew most simple doctor visits cost $200, but claimed to their members the typical rate was only $77. The insurers then applied the contractual reimbursement rate of 80 percent, covering only $62 for a $200 bill, and leaving the patient to cover the $138 balance.”
By relying on Ingenix’s data, most major insurance companies, including UnitedHealth, CIGNA and Aetna, as well as the federal employees’ insurance system and TRICARE, serving military families, reimbursed patients less than they were due, leaving consumers across the country with hundreds of millions of dollars in higher out-of-pocket expense. In Vermont, in addition to CIGNA, MVP used Ingenix’s data. It is unclear if Blue Cross was involved.
A 2009 investigation by the U.S. Senate Committee on Commerce, Science and Transportation reached the same conclusion as Cuomo. “This is outrageous at any time, but especially as families all throughout our country are doing everything they can to make ends meet in this economy — this is despicable,” Sen. Jay Rockefeller (D-W.Va.), the committee chairman, said in a written statement.
Ingenix settled the New York fraud charges by agreeing to pay $50 million to have its database replaced by one set up and run by a new independent data provider. Ingenix neither admitted nor denied that it engaged in fraud.
In addition to the New York state investigation, numerous suits against the company and against insurers who used its data were filed all over the country. In 2009, in what was reported by the American Medical Association as the largest monetary settlement ever made over payments by a single insurer, UnitedHealth Group paid $350 million to customers and medical providers to settle the Ingenix litigation.
The Optum story is eerily reminiscent of CGI’s history, which involved the acquisition of a company that had a massive $474.5 million dollar judgment for botching a Mississippi government contract and then paid $5 million to settle litigation from the Federal Thrift Investment Board. It was also the subject of a U.S. Senate inquiry into four years of delays and cost overruns. CGI’s federal subsidiary was accused in a 2011 whistleblower suit of initiating a scheme to defraud the U.S. Department of Housing and Urban Development. CGI denied the allegation, and the suit is still pending.
All of this begs the question: Did the Shumlin administration know about Optum’s troubled background and, despite it, allow Vermont to enter into a multi-million dollar no-bid contract with a company that paid hundreds of millions of dollars to settle accusations of a massive fraud? Or worse, were officials completely unaware of the company’s troubled history at all?
Either way, with the Ingenix successor, OptumInsight, charged with “fixing” the badly broken Vermont Health Connect website, consumers may want to grab a bottle of aspirin and then scrutinize every health insurance bill they get with a calculator close at hand.
Randy Brock is a principal at Rockledge Risk Advisors and is a certified fraud examiner. He is a former Vermont state auditor and state senator from Franklin County and was the 2012 Republican nominee for governor.