Fight Over $3 Billion Health Care Contract

PHOENIX (CN) - A competitor used a vendor's confidential information to win a $3 billion health-care contract with Maricopa County, the vendor claims in court.

Magellan Health Services sued Mercy Maricopa Integrated Care, the Maricopa County Special Health Care District dba Maricopa Integrated Health System, and health system CEO Betsey Bayless, in Superior Court.

Betsey Bayless is a political power in Arizona. She was secretary of state from 1997 to 2003, was a two-term chairwoman of the Maricopa County Board of Supervisors, director of the state Department of Administration, a member of the state Board of Regents.

Magellan claims that Maricopa Integrated Health Systems used its confidential information to procure a $3 billion contract to become Maricopa County's Regional Behavioral Health Authority (RBHA).

Magellan and MIHS partnered together in 2010 to implement an Integrated Home Health Program, and MIHS signed a confidentiality agreement and became privy to Magellan's "business plans and strategies for the management of an integrated behavioral and health services plan," according to the complaint.

Magellan claims that MIHS and Bayless told it in November 2012 that it they planned to partner with insurer Mercy Care Plan to form Mercy Maricopa Integrated Care, to compete with Magellan for Arizona's RBHA contract.

Magellan was issued the state's RBHA contract in 2007.

Magellan claims it discussed its bid strategy at a meeting of the IHH Advisory Panel in October 2012, attended by Bayless, MIHS Chief Operating Officer William Vanaskie and MIHS-affiliated member Kate Rhodes.

"Many components of Mercy's bid proposal carried the same form and structure of the Magellan bid proposal on account of MIHS', Bayless', and others use of Magellan's confidential information and trade secrets learned through information disclosed to MIHS under the confidentiality agreement and the MOU, and through participation by Bayless, Vanaskie and Rhodes on the IHH [Integrated Home Health] Advisory Panel," the complaint states.

Mercy was awarded the bid on March 20, the complaint states. Magellan says its bid came in second, 95 points behind, out of 1,000 points total.

"Mercy, a company formed on or about Nov. 13, 2012, lacked any experience in administering the delivery of services for a state Medicaid program, yet was awarded a contract valued at $3 billion based on a submission prepared by Bayless and other with access and privilege to Magellan's confidential information and trade secrets," the complaint states.

It access to Magellan's confidential information enabled Mercy able to "submit a response to a complex and sophisticated solicitation; deprive Magellan of a successful bid despite Magellan having provided the services at issue for approximately five years; obtain an award of a contract valued at $3 billion; and become a direct competitor to Magellan in the future by potentially obtaining 'past performance' criterion necessary to compete for such contracts in the future," according to the complaint.

Magellan claims Mercy should have been disqualified from bidding on the contract "because its structure is in direct violation of Arizona statutory law": that it did not have a required Arizona Department of Insurance Certificate of Authority, nor had it completed applications to the Centers for Medicare and Medicaid Services at the time of its bid submission.

Magellan claims that "last-minute amendments to the solicitation were tailored specifically to allow MMIC to submit a proposal with administrative services provided through a subcontractor, despite ADHS' [Arizona Department of Health Services'] insistence on requiring single entity structure in the years leading up to the solicitation, thereby unfairly advantaging Mercy; the weight afforded certain aspects of Mercy's bid was biased to allow Mercy to be awarded the proposal, while Magellan's previous behavioral health experience was completely disregarded; and the scoring process used to evaluate the bids was flawed."

Magellan says it has protested the award to the state.

It seeks an order to stop MIHS and Mercy from using its confidential information in connection with the contract and future contracts, and from performing under the awarded contract.

Magellan is represented by Michael Love and David Derickson, with Ridenour, Hienton & Lewis.

Without getting into specifics, Bayless said that Mercy Maricopa is "studying" the challenges that have been filed with the state and in Maricopa County Superior Court, and that it "will respond in the appropriate venues."

"However, we are confident in the strength of our bid and we are proud to offer a unique, collaborative approach to meet Maricopa County Medicaid recipients' behavioral health needs, and to integrate the behavioral health and medical services for those with serious mental illness," Bayless added in a statement.

Follow @jamierossCNS

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