MCOS- Iowa Medicaid contract triggers legal action over alleged conflicts of interest

MM Curator summary

The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.


[MM Curator Summary]: In which an extensively documented set of concerns about the way the state made its MCO award decision is discussed. TL/DR- Lucy, you got some splainin’ to do.


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The state of Iowa is accused of conflicts of interest in hiring a company that soon will begin managing the state’s billion-dollar Medicaid program. (Photo illustration via Canva)

With Iowa’s newest Medicaid managed-care provider set to begin work in less than three weeks, the state is now being accused of conflicts of interest in hiring the company.

A civil petition filed in Polk County District Court alleges Iowa’s newest Medicaid managed-care provider, Molina Healthcare of Iowa, was selected last fall in part because its CEO, Jennifer Vermeer, is Iowa’s former Medicaid director.

Vermeer, the petition claims, “worked closely over time” with those who played a key role in hiring her company to help deliver billions of dollars’ worth of Medicaid-funded health care services to almost 800,000 Iowans.

Molina is expected to begin working in Iowa on July 1.


The petition was filed recently by CareSource Iowa Co., an Ohio-based nonprofit Medicaid managed-care company that failed to win the Iowa contract.

CareSource now seeks judicial review of the Iowa Department of Health and Human Services’ decision to hire Molina over CareSource, alleging the competitive bidding process used by DHHS produced an “unfair, biased result” that resulted in the hiring of “the only bidder that hired as its CEO a longtime colleague/supervisor” of state workers tasked with evaluating the bidders.

The petition notes that Molina earned 98% of the available points handed out during the evaluation process — a score that “even DHHS’s top witnesses admitted was shockingly high” and which CareSource argues “was no coincidence and demonstrates unfair bias” on the part of DHHS.

In court filings, DHHS has admitted to many of the factual claims made by CareSource, but has denied any bias or wrongdoing.

Bid evaluators allegedly lacked experience 

The hiring process that sparked the petition dates back to May 2021, when DHHS published a notice of its intent to solicit proposals from companies to manage Iowa’s Medicaid program. At the time, DHHS said it planned to select “up to four” companies for the work.

DHHS’s written solicitation for proposals did not disclose the specific evaluation criteria to be used in selecting the winning companies, and instead said only that DHHS would conduct a “comprehensive, fair and impartial evaluation.”

CareSource says it “invested millions of dollars and thousands of hours in learning about Iowa Medicaid’s needs and preparing an extensive and detailed proposal” to submit.

Each of the five members of DHHS’s evaluation committee independently reviewed each of the proposals submitted by five bidders: CareSource, Molina, UCare Iowa, Aetna Health of Iowa, and an incumbent Iowa Medicaid managed-care provider, Amerigroup.

According to CareSource, none of the evaluators compared any features of the proposals to any of the competing proposals, nor did they compare the proposals to the specific evaluation criteria or any other objective scoring methods.

The five evaluators eventually met to engage in scoring the bids through a pro

cess of consensus – although, according to Care Source, “there is no documentation of the reasoning justifying the consensus scores assigned to the various proposals.”

CareSource alleges the evaluation committee was comprised of DHHS staffers who “had spare time to devote to the evaluation process,” but didn’t necessarily have the expertise the job required.

“The disparity of the evaluators’ levels of experience with Medicaid managed care contracts was striking,” CareSource alleges. One evaluator, Jennifer Steenblock, had more than 30 years of experience specifically in Medicaid, but was the only member of Iowa’s Medicaid Leadership Team to assist with the evaluations.

A second evaluator had worked at Iowa Medicaid for only nine months at the time, while a third had no experience with Medicaid managed care oversight and helped run a state-run, long-term care facility that was the focus of a U.S. Department of Justice investigation.The remaining two evaluators had some management experience within DHHS but lacked “substantial experience with Medicaid managed care,” CareSource alleges.

Questions raised about conflicts of interest

While two of the five evaluators allegedly individually contacted the state’s procurement officer to raise concerns about their potential or perceived conflicts of interest due to their close working relationship with Amerigroup, these same evaluators would later testify that they “were told not to worry” about the issue, the petition claims.

Two other evaluators identified potential conflicts of interest on DHHS-supplied disclosure forms but, according to CareSource, there was no follow-up by DHS and the two were never asked if they could set aside any bias or personal opinions they might have.

The most qualified evaluator, Steenblock, had worked closely with Molina’s CEO, Vermeer, when Vermeer served as Iowa’s Medicaid director and when she later consulted for Iowa Medicaid, CareSource alleges in its petition to the court.

CareSource also claims that documents produced by DHHS demonstrate that the department’s “leadership was concerned Amerigroup would pursue litigation if not selected for an managed care organization contract.”

In the end, Molina was the top-scoring bidder, followed by Amerigroup and then CareSource. Rather than award all three of the companies a contract, DHHS Director Kelly Garcia opted to award only two contracts — one for Molina and one for Amerigroup.

Separately, Iowa Total Care has a managed care contract with Iowa that is expected to run through 2025. Together, the three companies are expected to manage the Medicaid program that each year provides $7 billion worth of health care services to 788,000 low-income or disabled Iowans.

According to the petition, Garcia later testified that her decision to hire Molina was based solely on the points awarded by the evaluators. According to CareSource, Garcia was “surprised and concerned by Molina’s extraordinarily high score,” but didn’t go back to the evaluation committee to investigate the basis for the score.

Withheld documents allegedly contradict testimony 

Last September, CareSource filed a formal request to have DHHS reconsider its decision, but the request was denied. CareSource then filed an administrative appeal, sought documents from DHHS and deposed the five evaluators and Garcia.

An administrative law judge held a hearing over several days last November and eventually issued a decision denying CareSource’s appeal.

On March 24, DHHS allegedly advised CareSource that it had discovered in its own offices three binders of procurement-related materials belonging to one of the evaluators, Brandi Archibald, that had not been turned over to CareSource in response to prior requests for such information.

The newly disclosed documents included handwritten notes on the proposals submitted by Molina, Amerigroup, and CareSource and “were squarely covered by CareSource’s September 2022 public records request” to DHHS, the petition alleges. The state agency admits the records “were merely sitting on a shelf in DHHS’s own offices,” according to the petition. The records allegedly contradict testimony by Archibald that she took no notes during her review of the bid proposals.

After the discovery of those records, CareSource asked DHHS to conduct another sweep of its offices to ensure no other relevant materials were missed. In April, DHHS turned over “still more evaluator materials it had failed to produce in response to the public records request,” the petition alleges.

This second batch of newly discovered records include handwritten notes from another evaluator who had testified that he took no notes, as well as extensive, typed notes prepared by Steenblock, the petition alleges.

Molina has been sanctioned by states, feds

CareSource is now asking that a district court judge review DHHS’s decision, reverse that decision, and order the department to either add CareSource as a third winning bidder or begin a new evaluation process, using a “fresh slate of unbiased and properly trained evaluators who are instructed to compare the proposals as required by Iowa law.”

A hearing on the matter is scheduled for Oct. 20. Amerigroup and Molina have each been granted the right to intervene and be heard in the case.

In recent years, Molina has had problems with state and federal regulators.

Last June, the state of California took enforcement action against Molina Healthcare of California and imposed a $1 million fine against the company for its failure to acknowledge and resolve 29,124 provider disputes between September 2017 and September 2018.

Days later, Molina Healthcare and its previously owned subsidiary, Pathways of Massachusetts, agreed to pay $4.6 million for alleged violations of the False Claims Act. Federal officials had alleged that Molina owned and operated a group of mental health centers that improperly submitted claims for reimbursement while failing to properly license and supervise mental health center staff.

In 2019, the Molina of Texas was fined $500,000 by regulators in Texas who alleged the company had been unable to pay beneficiaries’ claims on time. That penalty was imposed one year after the company agreed to settle allegations of late payments by paying a combined total of $7.7 million to the Texas Department of Insurance and various health care providers in the state.