Basing their decision in part on faulty information, the Metro Employee Benefit Board rejected a proposal that might have saved the city close to $1 million a year over the next three years.
Last month, the Austin-based USA Managed Care Organization was one of four companies seeking to administer Metro’s Self-Insured PPO plan for its employees. Along with the other contenders, the company submitted a proposal to the 10-member Benefit Board, which is responsible for managing medical insurance plans for city workers.
Out of these four proposals, USA’s monthly costs, listed at $140,925, were easily the lowest. But citing 17 weaknesses in USA’s bid—more than in any other proposal—board director Jim Luther nixed USA and recommended that only Cigna and Blue Cross Blue Shield be named as the finalists. The board unanimously accepted the committee’s recommendations.
USA officials, however, contend that Luther, who was assisted by a staff person and the board consultant, badly misinterpreted their bid. In a letter addressed to Luther, the board’s 10 members, and Mayor Phil Bredesen, USA senior vice president Phil Overstreet asked that the company be allowed to give a presentation before the board awards the contract. “With the elements of confusion and misunderstanding regarding our proposal, we believe it is imperative that our firm have the opportunity to fully explain our proposal,” he wrote.
USA officials never did get that chance, and this past Monday the board voted unanimously to give the PPO contract to Blue Cross Blue Shield. But in the wake of Overstreet’s letter, there is still a lot of confusion and even controversy about the decision. No one is saying that Luther is favoring Blue Cross; the question is whether he and his assistants did a poor job at presenting USA’s proposal to the board. Considering that Blue Cross’ annual administrative costs will be nearly $912,000 greater than USA’s—the debate may just be gathering stream.
In the June 14 meeting of the Benefit Board’s six-person Medical and Life Committee, Luther presented a report showing that out of the four health care companies in the running for the contract, USA Managed Care was the only firm that did not have Saint Thomas Hospital in its network. In a later interview with the Nashville Scene, in which he talked about USA’s weaknesses, he again mentioned that the company did not have a contract with Saint Thomas.
But company officials insist that they signed a deal with the hospital right before they submitted their proposal and that they reported this development in a memo to the Benefit Board staff. When contacted again by the Scene, Luther sifted through the company’s proposal and found the memo in question.
Saint Thomas is one of Nashville’s largest hospitals. By not having the institution originally listed in its network, USA Managed Care suffered in the eyes of the board members. “I would take a jaundiced eye to a provider that says we don’t cover Saint Thomas,” says attorney Larry Ashworth, who sits on the Medical and Life Committee. (Ashworth was not present, however, at the June 14 meeting.)
Board member Bob Nash, who chairs the Medical and Life Committee and made the motion to accept Luther’s recommendations, argues that USA’s proposal was in general far weaker than Blue Cross’. “With or without Saint Thomas, their network is simply not competitive,” he says, correctly pointing out that out of the three other competing firms, USA has the smallest network. “They were so far out of the ballpark that if that’s the only issue they’ve got, they’re not even close.”
But the Saint Thomas flap wasn’t the only discrepancy between what the committee said about USA’s proposal and what was actually listed in the proposal. In the pivotal June 14 meeting, Luther informed the board that a main weakness in USA’s bid was that the firm “would not have dedicated claims examiners assigned to the board’s account.” But on its proposal, USA clearly indicated that it would have claims examiners dedicated solely to the board’s account.
Luther also informed the board that because USA would have to open a new claims office in Nashville, the staff would be new and inexperienced with company procedures. USA officials criticize the committee’s logic. “This is totally false,” Overstreet wrote in his letter to the board members. “We did commit to staffing a full-service claims office in Nashville, [and] this office will be staffed with experienced personnel and supervision from our corporate headquarters.”
In their letter to the board members, USA officials never insisted that they deserved Metro’s PPO contract. What they wanted, however, was the chance to go before the board and fully explain their proposal.
When she received the letter, board member Phyllis West e-mailed Luther requesting that the company be allowed a hearing. She regrets that neither he nor the board’s office gave USA that opportunity. “Since [Luther and his staff] made the mistakes, they should have allowed the company an opportunity to correct those mistakes,” West says. “USA came in nearly $1 million lower than their competitors. That’s a significant difference and is something we should have looked at.”
