State was unaware of Optum's prior legal troubles before company was hired


Vermont's top health care official said the state did not know about the technology firm Optum's previous legal problems when it decided to hire the company as a consultant to work on Vermont Health Connect.

Lawrence Miller, chief of Health Care Reform, said Optum was hired for its experience remediating other state-based exchanges, and because it charged less than other firms that were interviewed.

Optum, which is a wholly owned subsidiary of health insurance giant United Health Group, used to be known as Ingenix. The company rebranded two years after settling a massive fraud case brought by Gov. Andrew Cuomo in 2009 when he was New York's attorney general.

Miller said had the state known about the case it likely would have hired Optum anyway.

"When I look at a settlement that's somewhat old, that didn't involve an admission of wrongdoing, and is in a different line of business, it doesn't appear to be something that would've changed my mind," he said.

United Health and other insurers knowingly used Ingenix data to systematically underpay out-of-network rates, and were thereby able to shortchange doctors and their patients to the tune of hundreds of millions of dollars, according to Cuomo's lawsuit.

Optum, as Ingenix, operated two large databases that the insurance industry used to calculate out-of-network provider rates. Ingenix said the data was "independently researched" and "proprietary" when it sold it back to insurers.

United Health never admitted fraud, but agreed to settle a federal class action lawsuit for $350 million, which went to the doctors and patients they allegedly shortchanged.

The company also agreed to spend $50 million toward developing a truly independent database managed by a nonprofit, which the industry uses for the same purpose as the Ingenix databases.

In an email to VTDigger Optum spokeswoman Christine Farazi also downplayed the significance of the fraud case.

She said it was "a five-year-old agreement we reached in New York related to physician cost databases, and is not part of the work in Vermont."

Miller also rejected an assertion made by former Auditor of AccountsRandy Brock in a commentary. Brock alleged that Optum obtained a "no-bid" contract with the state. Miller says there wasn't time to go through an 18-month request for proposal process.

The state instead used a simplified bid process and interviewed three other firms, including KPMG and Deloitte Touche, for the work.

Optum and the state are currently in negotiations for a broader contract to take over as the primary technology vendor for CGI, with which Vermont will part ways next month.

The contract under consideration is a "time-and-materials" agreement, Miller said, so the rate will be important to containing costs.

The decision to hire Optum was largely based on its "recent engagements," Miller said.

United Health has made a cottage industry out of the Affordable Care Act via Optum, which has become the go-to fix-it company for troubled insurance exchanges.

Optum has been consultant for state-based exchanges in Minnesota, Maryland, Massachusetts and Hawaii. Kyle McDowell, an Optum vice president leading operations in Vermont, said the company "has a presence" in virtually every exchange.

McDowell declined to compare Vermont's progress in building its own exchange to other states where he has worked. The challenges faced by each state are too different, he said.

Optum was also part of the team that swooped in earlier this year to help get back on track.

The scope of Optum's involvement with Vermont Health Connect going forward is still unclear. Its current contract is for $5.6 million, and will include a report on the remaining technology pieces that need to be fixed or built.

Miller said Optum will likely continue to be involved in operations and could end up building some of the remaining IT functions. The state may also subcontract some of that work, he said.

Vermont has a $171 million federal grant to implement the Affordable Care Act. It will ultimately pay CGI close to $70 million.

It's unclear how much has been spent on other aspects of implementation, as the most recent figure from the state is $72 million total.

The federal government will continue to allow states to use implementation grants to build exchange sites into next year. The original deadline was Jan. 1, 2015.

Miller has said before that he expects Vermont will use its entire implementation grant to complete the Vermont Health Connect project.

After that, the state will pay for ongoing maintenance and operation.


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