Prison Health Contract Under Scrutiny
Department of Corrections Secretary Julie Jones is under fire for signing a $268 million, no-bid contract for prison health services after one of the state's two vendors walked away from a five-year, $1.2 billion deal three years early.
Jones signed the new contract with Centurion of Florida LLC in January, a little more than a month after Corizon Health exercised a 180-day cancellation provision in its contract with the state. Corizon Health, which handles care for more than three-fourths of Florida's 100,000 inmates, will continue to operate health services for prisoners until the end of May.
But Wexford Health Sources, which provides health care for about 18,000 prisoners in the southern portion of the state and wanted the temporary contract, is questioning Jones's handling of the agreement with Centurion.
Wexford is criticizing the terms of the "cost plus management fee" contract, in which the state has agreed to pay Centurion a 13.5 percent fee for administrative and overhead costs --- an amount that could exceed $31 million --- on top of the company's actual costs.
Wexford President Dan Conn told The News Service of Florida on Friday that the company intends to challenge the award of the contract, even after Jones told Wexford it couldn't.
Because the contract was issued for health services and was prompted by an emergency, Jones said the department "is under no requirement to enter into a bidding process."
Even so, Jones said she sought quotes from four potential vendors prior to selecting Centurion, which came in the cheapest and which she said had an "outstanding reputation" in the other five states in which the company provides health services for inmates. One of the vendors dropped out, leaving Wexford in competition with two others.
"This is a classic case of how vendors react when they bid higher and they're not selected. They're trying to undo this procurement instrument in order to come in again to try to get the work. They had their chance," Jones said Friday during an interview in her office.
Two of the potential providers offered estimates based on cost-plus calculations, while Wexford submitted a quote based on the per-inmate, per-diem --- or "full risk" --- rate under which it is currently paid.
Comparing the different types of cost estimates is like comparing "apples to bananas," Conn said.
"We are very disappointed that there was no process to obtain comparable apples-to-apples bids. Therefore, the department cannot ensure that the most responsible, cost-effective bid was obtained for the Florida taxpayers. That's what bothers us," Conn said in a telephone interview.
Jones said she needs an extra $34 million --- on top of $229 million currently budgeted for prison health services --- to fund the additional cost of the Centurion contract for the 2016-2017 fiscal year.
Sen. Joe Negron, who chairs a subcommittee that controls prison spending, said he "generally supports" the direction in which Jones is headed, but would have preferred that she enter an agreement with the vendor that would eventually take over for a longer period.
"Now we're opening up the possibility that we could have one company doing a short-term arrangement under exigent circumstances and then having to transition to perhaps another company. Every time we change contractors or vendors, it doesn't go well and it's more expensive," Negron, R-Stuart, said.
House Speaker Steve Crisafulli said Jones' signing of the contract took his staff by surprise.
"We were not apprised that the Department of Corrections had signed a contract. We are only now finding out the details. While we have been generally supportive of the direction Secretary Jones has been taking, our members have lots of questions about her recent decisions," Crisafulli, R-Merritt Island, said in a statement.
Under the agreement, the state can renew Centurion's contract --- slated to run from May through January, 2018, when the agency is expected to select new health service providers --- for up to three years.
The contract will allow Centurion --- whose lobbyist is Dean Cannon, a former House speaker --- to give the state a 60-day notice if it intends to leave the state, four months shorter than Corizon's 180-day termination notice requirement.
Wexford filed a notice of intent to protest the contract with Jones, but the secretary rejected that attempt on Wednesday. The company intends to file an administrative complaint that "will lay out all of the things that we find objectionable about the actual contract that they signed and the process they used," Conn said.
Nearly all corrections agencies and managed health care plans have stopped using cost-plus contracts because of the risk involved, Conn said.
"The problems with cost-plus contracts are the fact that there's nothing to stop you from continually spending money," he said.
But Jones said Centurion will have to submit monthly billing statements, which will allow the agency to scrutinize the vendor's spending. The information will also give the department "a competitive edge in future health care contract negotiations," Jones said.
The public dispute puts Wexford in an uncomfortable position --- it still has a contract worth about $48 million a year with the state, and it is hoping to secure a more lucrative, long-term agreement in the future.
"I like the secretary. We work well with her. We just want to get the points out so that everybody can understand what the issues are. We just want to get the facts on the table," Conn said.
Allowing a new company to reap $30 million more than what it is spending may have touched a nerve --- Corizon and Wexford both claim they are losing money on the health care contracts. Jones said last year that Corizon estimated it was losing about $1 million a month providing health care to more than 80,000 inmates.
It is unknown how much Wexford would have charged the state under the temporary contract because the company has said the information is a trade secret and, therefore, should be shielded from the public. Jones' office is trying to get the company to change its position on keeping the quote private but said the proposed amount was "significantly higher."
Jones, who has been highly critical of the current contracts with Wexford and Corizon, is using what is known as an "invitation to negotiate," or ITN, process to select new health care vendors.
Some lawmakers are also questioning whether the privatization effort has been a failure.
"That's an open question right now," Negron said, pointing out that the state's costs for health care for inmates were skyrocketing and "the quality was suspect" when the Legislature decided to outsource the services.
Lawmakers can now compare the services under both scenarios, but, if it decides to stick with a private contractor, should pick one that has a "track record of success" in Florida and other states.
"The predicament we find ourselves in now is awkward," he said.
But Jones blamed the privatization problems on the agency's original contracts with Wexford and Corizon, inked before Gov. Rick Scott appointed her to take over as secretary a year ago.
"I think these vendors underbid. Knowing all of this now, I think we have a much better landscape, using the ITN process, and we have a lot more information on how to privatize in order to hold vendors accountable," she said. "So, no, I don't think it's a failed experiment in that, should we have not done it? I can't answer that question. Was it done correctly? In my estimation, no. Is it worth another try at privatizing? Yes."