John Keel, the Texas State Auditor, just issued his report on the Health and Human Services Commission, its Office of Inspector General and their controversial and scandal-laden, no-bid acquisition of Medicaid fraud detection software from Austin firm 21CT.
Workplace not conducive to ethics, integrity and accountability
While the full report has not been digested, a key finding by Keel is that the climate within HHSC and OIG was not conducive to “ethics, integrity, and accountability, which affected the procurement from 21CT and the attempt to extend that procurement.”
In fact, Keel reports that agency staff were intimidated by former deputy inspector general for enforcement Jack Stick, although no names are given within the report.
Multiple interviews conducted for this investigation, as well as records reviewed during this investigation, revealed examples in which staff were concerned about the working environment and potential retaliation by the former deputy IG if they did not carry out his instructions. Executive management at the Commission and the OIG are ultimately responsible for the working environment in which staff conduct their duties. Their failure to create and maintain an environment emphasizing ethics, integrity, and accountability did not serve the State’s interests. It is important to note that, when the former deputy IG became the Commission’s chief counsel, that individual also became the Commission’s ethics adviser.
Jack Stick was the man in charge
The report clearly lays the blame on Stick as the primary driver behind the 21CT acquisition and shepherding it to avoid the competitive bidding process.
The former deputy IG was the primary decision maker for the procurement and worked to promote 21CT to the Department of Family and Protective Services and other potential customers. Specifically:
- The former deputy IG was the primary decision maker for all aspects of the procurement from 21CT, but that individual did not have professional experience in procurement or required training.
- The former deputy IG encouraged the Department of Family and Protective Services to hire 21CT.
- The former deputy IG worked to promote 21CT to other potential customers.
Stick and company lied to the feds
Probably the most damning finding is that the report confirms that Stick and company lied to the federal government to get funds for the 21CT software. They told the Center for Medicaid and Medicare Services that 21CT had won a competitive bid process.
The information that the Commission and the OIG submitted to the federal Centers for Medicare and Medicaid Services (CMS) stated that the OIG had conducted a competitive procurement. Specifically, the advance planning document submitted to CMS stated that “HHSC OIG reviewed several vendors via a competitive, best value procurement which provided the Statement of Work to vendors with offerings within specific standard industry classifications.” However, the Commission and the OIG did not have support for that statement. Approval from CMS was necessary in order for the Commission and the OIG to receive federal funds for the procurement of fraud detection services and, ultimately, CMS approved the use of Medicaid funds for the procurement.
Feds paid $17 million of the $19 million to 21CT
The State Auditor’s report neglects to say how much the feds paid but the Governor’s Strike Force report doesn’t.
Finally, we believe the use of federal funding for the project, which provided $17.3 million of the original cost of $19.7 million covered by the first two purchase orders, represents significant issues.
The full report is available online.