Audit faults Dean team on HMO contract
A state auditor's report found that the administration of former Vermont governor Howard Dean failed to take steps to prevent the appearance of impropriety in negotiating a contract for processing health care claims of state employees.
The 1993 report, part of a broader look at Vermont's contract bidding process, found that two state officials involved in the rebidding of the contract had ties to the law firm that represented the company, Community Health Plan, which shortly after winning the contract was taken over by another company.
Ultimately, the report concluded, the state awarded the work to a firm ill-prepared to handle the administrative demands and complexities of the contract. "Alarmingly, we found that the winning bidder is wholly inexperienced in the administration of insurance plans similar to that covered by this contract," the auditor, Edward Flanagan, wrote.
Flanagan noted in his report that the bidding for the contract took on larger significance when viewed in light of the fact that it was a part of Dean's effort to overhaul Vermont's health care system. "If the State is judged to have been unable to effectively administer a contract of this nature, there will be some who . . . will question . . . the state's ability to administer health care reform efforts," Flanagan wrote.
Vermont severed its contract with the company in 1993, according to Attorney General William Sorrell, who was then the newly appointed secretary of administration. He said the contract had been fairly negotiated, without conflict of interest.
"I thought those who made the decision to go with CHP bent over backwards to have the process be open and complete; they just made a mistake," Sorrell said. "It wasn't sleazy how they did it."
Jay Carson, a Dean campaign spokesman, noted that CHP provided the lowest bid. He added, "There simply was no impropriety. This was the case of the government of Vermont trying to provide quality service for the lowest cost. [It] chose a company that turned out was not up to the job. The state then got out of that contract and recouped significant punitive monetary damages." A separate review by the state auditor, released in March 1997, found that a separate state report issued in 1993 that was critical of CHP had never been made public -- as was required. "The serious findings contained in the report and the Department's failure to issue the report with appropriate remedial orders, which could have included restitution to Vermont consumers and punitive fines, underscore the Department's failure to protect Vermont consumers and comply with the relevant statutes," the 1997 report said.Carson said of that report: "The fact that the report was not disclosed was an oversight by the department and the report was subsequently fully disclosed." Flanagan, who noted he supports Dean's bid for the Democratic presidential nomination, said in an interview, "The facts in the [1993] report are accurate."
The disputed contract was put out to bid by the state in 1992, and requests for proposals were sent to 20 companies.
A short time after the contract's start, complaints were lodged about CHP's performance, but the state did not "require the full, in-depth critical review of CHP's performance called for," the June 1993 auditor's report says. The report also found that the state's secretary of administration, David Wilson, an influential lobbyist and aide to Dean and his predecessor, had participated in meetings to decide whether to rebid the contract as well as meetings about rebidding procedures for the contract. Flanagan concluded that this created an "appearance of impropriety" because Wilson was cofounder of a law firm, Wilson & White, that represented CHP. Wilson had recused himself from matters involving CHP during his tenure with the Dean administration, according to Flanagan's report. Wilson died in 2001.
In response to Flanagan's charges, Wilson wrote in May 1993, "I did not participate in any meeting where a substantive decision was either seriously considered or made to rebid the contract."
Flanagan also cited the work of then assistant attorney general Andrew MacLean, who negotiated and reached an employment agreement with Wilson & White while working on the CHP contract. MacLean disclosed his prospective employment for the law firm to state officials, whom Flanagan faulted for not ending MacLean's involvement in the CHP contract work.
