STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
KEYSTONE PEER REVIEW ORGANIZATION, INC.,
Petitioner,
vs.
AGENCY FOR HEALTH CARE ADMINISTRATION,
Respondent,
and
EQHEALTH SOLUTIONS, INC.
Intervenor.
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) Case No. 10-9969BID
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RECOMMENDED ORDER
The hearing in this case was conducted, as noticed, on November 29 and 30, 2010, and December 1, 2, 7, and 8, 2010, in Tallahassee, Florida before John D. C. Newton, II, a designated Administrative Law Judge of the Division of Administrative
Hearings.
APPEARANCES
For Petitioner: J. Stephen Menton, Esquire
Martin P. McDonnell, Esquire Rutledge, Ecenia, & Purnell, P.A.
119 South Monroe Street, Suite 202 Post Office Box 551
Tallahassee, Florida 32302
For Respondent: Daniel Lake, Esquire
Agency for Health Care Administration 2727 Mahan Drive, Suite 3431
Tallahassee, Florida 32308
For Intervenor: Robert H. Hosay, Esquire
John A Tucker, Esquire Foley & Lardner LLP
106 E. College Avenue, Suite 900 Tallahassee, Florida 32311
STATEMENT OF THE ISSUE
The issue in this proceeding is whether the intended action of Respondent, Agency for Health Care Administration, to award a contract to Intervenor, eQHealthSolutions, Inc., is contrary to the agency's governing statutes, the agency's rules or policies, or the solicitation specifications. The standard of proof for this proceeding is whether the proposed agency action is clearly erroneous, contrary to competition, arbitrary, or capricious.
PRELIMINARY STATEMENT
On September 28, 2010, following consideration of vendor responses to an Invitation to Negotiate, the Respondent, Agency for Health Care Administration (AHCA), posted notice of its decision to award a contract for Comprehensive Utilization Management Program Inpatient Medical and Surgical, Home Health, Prescribed Pediatric Extended Care (PPEC), and Therapy Services to Intervenor, eQHealth Solutions (EQ). Petitioner, Keystone Peer Review Organization (KePro), timely filed a notice of intent to protest the award. On October 11, 2010, KePro filed a Formal
Written Protest and Petition for Administrative Hearing. EQ filed a Petition to Intervene with AHCA on October 22, 2010. AHCA forwarded the Protest and Petition to the Division of Administrative Hearings on October 29, 2010, along with the Petition for Leave to Intervene.
On November 2, 2010, the undersigned granted intervention to EQ. On November 4, 2010, the parties participated in a Case Scheduling Conference. November 5, 2010, the Notice of Hearing, setting the hearing to begin November 29, 2010, and an Order of Pre-Hearing Instructions establishing expedited discovery procedure were issued.
The undersigned conducted a pre-hearing conference on November 23, 2010. KePro filed a Motion to Amend Petition for Formal Administrative Hearing on November 22, 2010. EQ filed a response in opposition on November 24, 2010. The Motion was granted at the outset of the hearing.
Just before the hearing, the parties filed several motions. On November 24, 2010, EQ filed a Motion for Summary Recommended Order. KePro filed its response on November 29, 2010. The motion was denied at the conclusion of the first day of hearing.
On November 23, 2010, EQ filed a Motion in Limine to Exclude Evidence and Argument Regarding Specification of the ITN and a Motion in Limine to Exclude Evidence of any RFI or other Procurement. Both motions were denied without prejudice to
objections to specific evidence on the grounds asserted in the motions.
KePro presented testimony from the following Witnesses: Christopher Bouvier, Roberta Bradford, Edward Cabrera, M.D., Kathleen Core, Lakia Daniels, Claire Davis, Joseph Dougher, Karen Eaton, Ryan Fitch, Anne Frost, Meghan Harris, Angela Christina Smith, Scott Conner Ward, and Barbara Vaughan. KePro also introduced into evidence excerpts from the depositions of Patrick Tullier and Sean Marchiafava.
AHCA presented the testimony of Darcy Abbott and Shevaun Louisa Harris. EQ presented testimony of Edith Castello.
Due to the volume of exhibits and the expedited schedule, AHCA, to streamline conduct of the hearing, prepared an exhibit notebook containing most of the proposed exhibits of all parties. Consequently, while some exhibits are denominated as AHCA exhibits, this does not mean that they were offered by AHCA.
The following exhibits were admitted into evidence: KePro Exhibits 1, 5-7, 9, 12, 14-17, 30, 32, 39, 40, 47-50, and 53;
AHCA Exhibits 1-41, 43, 44, 48-58, 70-73, 83-91; and EQ Exhibits
7-9, 12, 13, and 16.
An Order of Post-Hearing Instructions, issued December 9, 2010, established filing deadlines, page limits, preferred structure of proposed recommended orders, issues to address, and some technical requirements for submitting proposed recommended
orders. On December 20, 2010, following a telephone conference with counsel for all parties, the undersigned entered an Order Enlarging Page Limit and Regarding Chapter 2010-151, Laws of Florida. The Order enlarged the page limit for proposed recommended orders to 45 pages and suggested that the parties address the applicability and effect of chapter 2010-151.
The court reporter filed the 12-volume transcript of the final hearing on December 13, 2010. The parties timely filed proposed recommended orders on December 23, 2010. The Proposed Recommended Orders and the full record of the proceeding have been considered in preparation of this Recommended Order.
FINDINGS OF FACT
AHCA and the Invitation to Negotiate
AHCA is the state agency responsible for administering the Medicaid Program in Florida. Medicaid is the state and federal partnership that provides health coverage for selected categories of people with low incomes.
Florida's Medicaid recipient population is over
2.8 million individuals. Over one third of this population receives services on a fee-for-services basis. Florida Medicaid spending in Fiscal Year 2008-2009 was approximately
$18.8 billion.
AHCA’s Division of Medicaid Services is responsible for serving the Medicaid population. AHCA seeks, through the
Invitation to Negotiate (ITN) that is the subject of this case, to enter into a new contract with a federally designated Quality Improvement Organization (QIO) for the development and implementation of a statewide comprehensive utilization management program.
Utilization management is the process of determining the medical necessity of particular health care procedures and treatments, and their appropriateness under Medicaid or other relevant insurance plans. Prior authorization is a major part of utilization management. Prior authorization, as the name implies, requires a provider or beneficiary to propose the service to be provided, identify the reasons for it, and obtain authorization before providing the service in order to receive payment from Medicaid. It requires determinations of whether the service is covered by Medicaid, whether the service is medically appropriate in the circumstances, and whether it is the most cost effective service in the situation.
KePro currently provides AHCA prior authorization services under a contract. Lakia Daniels, Government Operations Consultant for AHCA, manages the current KePro contract with AHCA.
Florida law establishes three competitive procurement processes for state agencies. They are Invitation to Bid, Request for Proposal, and Invitation to Negotiate. Agencies use
an Invitation to Bid when they can specifically define the scope of work for a service or establish precise specifications defining the commodity sought. Agencies may use the Request for Proposal when the purposes and uses for a service or commodity can be specifically defined and the agency can identify necessary deliverables. Agencies may use the ITN process when they need to determine the best method for achieving a specific goal or solving a particular problem. An agency uses the ITN process to identify one or more responsive vendors with which it may negotiate in order to obtain the best value for the state. The ITN process is the most flexible and least restrictive competitive procurement process.
On May 19, 2010, AHCA issued ITN No. 1007, which is the subject of this proceeding. AHCA’s ITN sought vendors to provide a Comprehensive Utilization Management Program for Inpatient Medical and Surgical, Home Health, Prescribed Pediatric Extended Care (PPEC), and Therapy Services. The ITN included Attachments A through L. AHCA amended the ITN on June 25, 2010. References to ITN in this Recommended Order are to the ITN as amended. None of the parties challenged the ITN or the amendment.
The contract and the utilization management to be provided under it are critical to Florida's system for controlling Medicaid costs and reducing Medicaid fraud.
The ITN contained "Evaluation Criteria." It specified that the criteria were for use in the initial evaluation of vendor replies to the ITN. The ITN also said that vendors whose replies did not comply with the mandatory criteria would not be considered for evaluation. The ITN provided vendors the opportunity to develop methodologies and systems for achieving the purposes of the contract. It repeatedly stated that requirements were minimum requirements, leaving vendors free to propose better or more comprehensive services or means of providing services.
The ITN stated that "[t]he use of 'shall,' 'must,' or 'will' (except to indicate futurity) . . . indicates a requirement or condition from which a material deviation may not be waived by the State." It defined a material deviation as one in which "the deficient response is not in substantial accord with the solicitation requirements, provides an advantage to one respondent over another, or has a potentially significant effect on the quality of the response or on the cost to the State."
The ITN included a process for vendor questions. The process provided that AHCA's responses to the vendor questions would be posted as an addendum to the ITN. Vendor questions and AHCA answers were included in the June 25, 2010, amendment to the ITN.
AHCA is using the ITN procurement process to select a vendor to undertake the substantial task of providing comprehensive utilization management for inpatient medical and surgical, home health, and prescribed pediatric extended care (PPEC), and therapy services for Florida's Medicaid population. The ITN also described providing a Neonatal Intensive Care Unit (NICU) care and home health monitoring program and retrospective medical record reviews as services under the contract.
The contract will be a fixed price, also described as fixed fee, contract. The ITN schedules refer to the fee or price as cost. This and the varying use in the ITN, the responses, and the testimony of "fee", "price", and "cost" foster confusion. This Recommended Order uses "cost" to refer to the amount that vendors proposed to charge AHCA either in the aggregate for the services, or as they allocate the amount charged to various components of the services provided including specific staff, training, web site maintenance and the like.
The implementation and execution period for the contract for all services, except therapy services, ends June 30, 2011. For therapy services the implementation and execution period is to end March 31, 2011. For all services the contract is to run for three years ending June 30 2014. It may be renewed for up to three years.
The ITN provided vendors the anticipated annual review volume in Attachment M-1, a form vendors were required to complete. The anticipated volumes were:
Prior Authorization Inpatient Services - 510,000 Prior Authorization Home Health Visits - 55,000
Prior Authorization for Private Duty Nursing, PC, and PPEC 140,000
Prior Authorization Therapy Services - 140,000 Claims Analysis, Respiratory Therapy - 1 Retrospective Medical Record Reviews - 2,000 NICU Care Monitoring Program 700
Home Health Comprehensive Care Monitoring Program - 4,000 Special Studies/Quality Improvement Projects - 1.
Although the contract will be for three years, the service volumes do not vary year to year. Florida's Medicaid program has not previously required prior authorization for therapy services.
Attachment M-1 sought detailed cost information about various services and components of the project from replying vendors. Effectively, it asked the vendors to allocate their proposed total costs among the various services and components used to provide the services. They include, but are not limited to, items such as prior authorization review for inpatient services, prior authorization review for home health visits, prior authorization for therapy service, NICU care monitoring, customer service, development and Maintenance of a web-based system, database development, salaries, benefits, temporary personnel, postage, rent, office equipment, advertising,
telecommunicating equipment, computer equipment, overhead, and profit.
The ITN described the Medicaid program and services.
It described the purpose of the intended contract, giving the goals of the contract and describing general services the vendor would provide. The ITN left to the vendors the challenge and opportunity of proposing the best method for achieving the purposes of the contract and providing the services needed.
The ITN also emphasized the importance of "timely, efficient, productive, consistent, courteous, and professional" performance of services. The technical specifications of the ITN included a wealth of factors and required information. Among them were: limitations on the use of subcontractors, descriptions of how beneficiary information would be protected, lobbying disclosures, client references, information about the vendor's experience and qualifications, information about management and key personnel qualifications, detailed staffing information, a draft contract implementation plan, training plans, computer hardware requirements, computer software requirements, and disaster recovery plans. A 52 page attachment to the ITN described the scope of services the successful vendor would provide.
The ITN required that the vendor maintain the ability to manage the volume of work 24 hours per day, seven days a week.
It required at least one Florida location where the vendor would perform its contractual responsibilities.
The ITN required vendors to develop electronic review instruments for the contract services. It mandated that the instruments allow data input by reviewing professionals. It permitted vendors to provide up to 30 percent of inpatient reviews through a rules-based or criteria-driven algorithm. It permitted vendors to apply recognized medical necessity standards, so long as they met the minimum of InterQual Level of Care criteria and fulfilled all state and federal Medicaid requirements.
The ITN advised that the contract would include rigorous review completion timeframes for the contract services. Examples of the timeframes follow. First level review of prior authorization reviews for elective pre-admission, admission, and continued stay inpatient services must be completed within four hours from receipt of a completed request. If a service request is referred to a physician, the ITN required physician review of the requests within one business day of when the request is complete. First level review of home health skilled nursing or nurse's aide visits must be completed with one business day of the request. Physician review must be completed within two days of the request. First level review of requests for therapy services must be completed within one business day of completion
of the request. Physician review must be completed within three business days.
By repeated references to subcontracting and limitations upon the practice, AHCA manifested both the importance of subcontracting and caution about the issues that could accompany subcontracting. For instance, the ITN prohibited subcontracting, assigning, or transferring any work to any party, except for subcontractors identified in the response, without AHCA's prior written consent. Prior written consent required AHCA’S review and written approval of the terms of the subcontract.
The ITN also required detailed information about proposed subcontractors' Medicaid experience and other information, just as it did for key employees and Management Information Systems (MIS) employees of the vendors. The ITN required vendors to describe how they would coordinate with subcontractors and communicate with them. It emphasized that the vendor remained fully responsible for fulfilling all contractual requirements to AHCA. These are just some of the references to subcontracting and requirements for it imposed by the ITN.
The tasks described by the ITN rely upon computer and internet technology for communication, analysis, efficiency, and speed. Among other things, the ITN sought a vendor that would provide a web portal for communication, for providers to submit
requests for authorization, and for providers to submit information and documents necessary to support the request. The ITN made the importance of a vendor's MIS abilities, experience, and personnel to successfully accomplishing the task clear. The ITN required a detailed description of the vendor's "approach for designing, developing, and maintaining a web-based prior authorization system, which is available to authorized users and providers, as described in the ITN." AHCA identified some required characteristics and tasks that must be performed.
Similarly, the ITN identified minimum requirements for system generated reports, but it did not limit the frequency or content of the reports. It left to the vendors the task of developing and maintaining the system that would perform the tasks, have the needed characteristics, and generate the reports required.
The ITN required that:
The Vendor shall have in-house Management Information Systems (MIS) capability. The Agency will not approve a subcontractor for this function.
The Vendor shall maintain a sufficient number of qualified MIS and technical staff to continue operation of the Vendors systems, provide prompt, on-going system support and accurate data access to the Agency and its authorized service providers.
It did not specifically identify this requirement as a mandatory criterion.
The ITN also required vendors to provide résumés for "MIS staff." This is the only area of expertise where the requirement for résumés went beyond identified key staff positions.
The vendor's staff is essential to achieving the goals of the ITN's proposed contract. Staff is key to making judgments about what services should be authorized and obtaining more information about the reasons that the service has been requested. Staff is also critical to meeting the short review timeframes. The ITN emphasized the importance of staff. It cautioned vendors that AHCA reserved the right to determine that staff was insufficient and to require the vendor to cure the insufficiency. It also required detailed information about staff including résumés, staffing charts, and minimum requirements for key staff.
Protection of beneficiary privacy is another subject emphasized by the ITN. Several portions required compliance with state and federal privacy requirements, including the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Also, the ITN required vendors to explain in detail how they would protect patient privacy.
Evaluation and Negotiation Process
AHCA established a two-step process for selecting a vendor with which to contract. Stage one was evaluation of the
prospective vendors' responses to the ITN. Stage two was the negotiation phase.
In the evaluation phase, each vendor submitted a reply to the ITN. The replies contained the vendor's technical proposal, cost proposal, and staffing proposal for providing services identified in the ITN. It also provided information requested by the ITN and any other information that the vendor chose to include. During the evaluation stage, the vendor replies were to be evaluated, scored, and ranked based on the requirements of the ITN.
The purpose of the evaluation and scoring was to determine which vendor or vendors would move to the negotiation phase. It was not to determine which vendor would be awarded the contract.
The negotiation phase was to determine with which vendor AHCA would contract. In the negotiation phase, AHCA would gather more information about the vendors, their abilities, and their proposals. The negotiation phase was an opportunity for AHCA to critique vendor proposals and question vendors. It also was an opportunity for each vendor to respond to those critiques and questions as it determined best.
July 14, 2010, was the deadline for submitting replies to the ITN. KePro, EQ, and Alliant ASO ("Alliant") timely submitted replies to the ITN. KePro and EQ are parties to this
proceeding. Alliant is not. No vendor protested the terms, conditions, or specifications of the ITN.
AHCA’s procurement office reviewed the replies for compliance with mandatory minimum requirements. All met the requirements.
The Deputy Secretary for Medicaid for AHCA, Roberta Bradford, appointed seven AHCA employees to the evaluation team. They were Claire Anthony-Davis, Lakia Daniels, Princilla Jefferson, Kathleen Core, John Loar, Ryan Fitch and Scott Ward. Ms. Bradford selected these individual because of their experience and subject matter expertise in areas involved in the ITN.
For example, Claire Anthony-Davis was AHCA’s Home Health Policy Analyst. She had experience in utilization management and prior authorization of home health services, as well as experience monitoring AHCA’s contracted peer review organization (PRO). Kathleen Core, AHCA’s Medical Health Care Program Analyst, managed the Pediatric Extended Care (PPEC) Services program. She had experience in Medicaid policy and prior authorization. The other evaluation team members had similarly relevant experience.
The members of the evaluation team were sufficiently skilled and experienced to evaluate the ITN replies in accordance with the ITN and in compliance with Florida law.
The members of the evaluation team independently evaluated the vendor replies. Each employed his or her personal skills and experience in the course of the evaluations. The evaluators had and considered written evaluation instructions, Conflict of Interest Questionnaires, the ITN, all addenda including the vendors' written questions and AHCA's answers, all the vendors' ITN replies, and the evaluation tool.
The evaluation process took place over several days.
Each team member completed his or her own individual, detailed score sheets for each vendor. Each of the evaluators carefully and thoughtfully scored the ITN replies to the best of their ability and in good faith in accordance with the ITN requirements.
Only Ryan Fitch reviewed the financial information and scored the financial stability of the responding vendors. He rated KePro higher for financial stability than the other two vendors. He gave KePro a perfect score. This was the only time in more than two dozen reviews that Mr. Fitch has assigned a perfect score to a company.
Scott Ward, AHCA's Information Technology officer, was the only evaluator to review the information technology components of the ITN responses. Mr. Ward did not review any other aspects of the proposals. Mr. Ward assigned a score of 56 to KePro's information technology response and a score of 47 to
EQ's. Mr. Ward focused on responsiveness of the replies to specific and limited information technology requirements of the ITN. Those were primarily minimum technical requirements necessary for compatibility with the Agency hardware and software and compliance with AHCA information technology standards. He also checked to verify that the vendors had provided the descriptions of their information technology systems required by the ITN and descriptions of their experience with the systems.
He did not and could not evaluate whether those descriptions were accurate. He did not evaluate or score the ability of the systems described to perform the tasks required. Mr. Ward also was not aware of misrepresentations by KePro in the information technology section of its response. This Recommended Order addresses those misrepresentations later.
After the evaluators completed scoring, AHCA's procurement office tabulated the vendors' original cost proposals and recorded the scores in the scoring sheets. The individual evaluators ranked the vendors. Two evaluators scored EQ the highest. Two evaluators scored Alliant the highest. One evaluator scored KePro the highest. The average of all scores for each vendor was the same.
AHCA invited all three vendors to participate in the negotiation phase. The letter advising the vendors that they had been selected to proceed to negotiations stated: "The
negotiation and selection process will consider each company's ability to meet or exceed the requirements of the ITN."
Ms. Bradford appointed an eight-person negotiation team. The team members were Darcy Abbott, Shevaun Harris, Lakia Daniels, Claire Anthony-Davis, Kathleen Core, Scott Ward, Barbara Vaughan and Anne Frost.
As with the evaluation team, Ms. Bradford selected the negotiation team members because of their experience and subject matter expertise in matters related to the services addressed in the ITN. Five of the negotiators, Darcy Abbott, Shevaun Harris, Lakia Daniels, Claire Anthony-Davis and Kathleen Core, worked in the bureau of Medicaid services with direct responsibility for the current and contemplated contracts. Scott Ward was the director of AHCA Information Technology. Barbara Vaughan and Anne Frost were procurement office representatives. Scott Ward and Anne Frost also were Certified Project Management Professionals. Claire Anthony-Davis, Lakia Daniels, Kathleen Core and Scott Ward, had served on the evaluation team.
Ms. Daniels is the AHCA contract manager for the current utilization management contract. Ms. Abbott is the Administrator of all Medicaid sections under the current contract.
The members of the negotiation team were sufficiently skilled and experienced to conduct the ITN negotiations.
Shevaun Harris facilitated the negotiation sessions. A court reporter transcribed all sessions. Shevaun Harris was the team lead and is direct managing supervisor of the project and the contract that will result from the ITN.
AHCA negotiators met with KePro representatives on August 10, 2010. They met with EQ’s and Alliant’s representatives on August 12, 2010.
AHCA gave each vendor the same opportunity to appear at the negotiation sessions, by telephone and in person. AHCA gave each vendor the same opportunity to answer questions from the negotiation team.
The day before the first negotiation session, AHCA informed all vendors that they would not be permitted to make presentations as part of their negotiation session. This included PowerPoint and web-based presentations. AHCA did this because the negotiation team wanted to spend the time learning about the ITN replies and asking questions instead of basically listening to a sales pitch. The restriction applied equally to all the vendors. Nothing in the ITN or AHCA's letter scheduling the negotiation sessions advised the vendors that they would be permitted to use internet, PowerPoint, or any other assistive devices during negotiations.
After the first round of negotiations, the AHCA negotiation team discussed the replies and negotiations. It
preliminarily ranked the vendors. EQ ranked highest, but the team was concerned about EQ's costs. They were substantially greater than the costs of the other two vendors. The team consulted with AHCA senior management to ensure that the members understood the budgeted amount available for the contract and any other financial constraints on the decision.
AHCA conducted a second negotiation session with EQ on August 18, 2010. It focused on costs. AHCA scheduled the negotiation to obtain more information from EQ about the basis for its costs. AHCA obtained clarification and determined that EQ was willing to reduce its costs.
After the negotiation sessions, AHCA asked all of the vendors to submit their best and final offers (BAFOs). The team also concluded that EQ was the preferred vendor if it reduced its costs sufficiently. All three vendors timely submitted their BAFOs to AHCA.
The request to EQ for a BAFO stated:
Your proposed implementation costs exceed the Agency's budget for Fiscal Year 2010-2011. Please provide a revised cost proposal as follows:
One time Implementation Costs for Therapy Services reduced by at least 70-80%.
One time Implementation Costs for all other services (Inpatient, Home Health, and PPEC) reduced by at least 65-75%.
In addition to the revised cost proposal, please provide the following:
A detailed staffing plan to reflect the changes in the reduced Implementation costs.
Best and Final Cost Proposal for Implementation Costs, Operations Year 1, Operations Year 2, and Operations 3, eliminating the costs for analysis of respiratory therapy in Year 2 and Year 3.
AHCA's request to KePro for a BAFO asked KePro to:
Provide a detailed staffing plan with a breakdown- of FTE's for each aspect of the ITN's scope of services which includes the number of staff, when each staff member will start, whether the staff member will be on- going and if so, when they will be phased out.
Provide the number of on-site face-to- face assessments for Private Duty Nursing (PON), Prescribed Pediatric Extended Care (PPEC), and Therapy services.
Provide Best and Final Cost Proposal for Implementation Costs, Operations Year 1, Operations Year 2, and Operations 3, eliminating the costs for analysis of respiratory therapy in Year 2 and Year 3.
All three vendors submitted the requested BAFOs. KePro and EQ both reduced their costs.
The negotiation team unanimously agreed that AHCA should contract with EQ. It did not determine a "second place" vendor. A memorandum dated September 27, 2010, (Award Memo) states the team's recommendation. It summarizes the history of the ITN issuance and reply review. The Award Memo concludes with these two paragraphs:
Overall, EQ Health Solutions prevailed as the most favorable vendor. Their [sic]
proposal demonstrated that they [sic] can provide qualified and experienced professionals to meet the requirements of this multi-faceted program. Out of the three respondents, their [sic] proposed approach will provide the most comprehensive quality model for utilization management.
Per the recommendation of the negotiation team, and as Deputy Secretary for Medicaid, my signature below indicates my decision to award a contract for the comprehensive utilization management of Inpatient Medical and Surgical, Home Health, Prescribed Pediatric Extended Care (PPEC) and Therapy Services to EQ Health Solutions.
Deputy Secretary Roberta Bradford is the AHCA official with the authority to sign off on the contract. She signed the Award Memo, but the negotiation team prepared the memorandum. Ms. Bradford deferred to the team's recommendation. Neither Ms. Bradford nor other senior management officials of AHCA reviewed any information or documents other than the Award Memo to decide upon the proposed award.
The Award Memo does not explain how the EQ proposal provides the best value to the state. The Award Memo does not provide AHCA senior management with any analysis of the respective cost proposals submitted by the vendors.
The AHCA files and records and records for the ITN do not contain a document that analyzes the cost differential between the vendors or that articulates how contracting with EQ would provide the best value for the state. They also do not
contain a short plain statement that explains the basis for the selection of the vendor and that sets forth the vendor's deliverables and price pursuant to the contract, along with an explanation of how these deliverables and price provide the best value to the state. AHCA's practice before awarding a contract is to maintain a "solicitation file" that contains documents relating to the solicitation process. After awarding a contract AHCA creates a "contract file."
Ms. Bradford did not receive or review a cost comparison of the BAFOs. She was not aware of the cost difference between the KePro and EQ proposals. She did not receive or review a written or oral presentation of the relative merits of the vendor proposals or the reasons for choosing EQ, other than the Award Memo.
Ms. Bradford relied entirely upon the recommendation of the negotiation team.
On September 28, 2010, AHCA posted Notice of its intent to contract with EQ on the Agency procurement website. AHCA did not post an explanation or basis for its proposed decision. Reply and Negotiation Overview
As a whole, the reply of EQ and its responses in the negotiation sessions demonstrated a more thorough analysis of the tasks presented by the ITN and the challenges they presented. EQ presented more detail in descriptions of its systems and web
portal than KePro did. This is true both in the narrative and the screen shots provided.
EQ's reply demonstrated research and understanding of legal requirements involved in the process, such as the work needed to prepare for fair hearings. KePro did not display the same level of research and understanding.
For example, KePro proposed a Facebook page for Medicaid beneficiaries, but it had not considered the legal and personal privacy issues that may arise or how to address them.
Another example, addressed in detail later, is the analysis of the needs for newly established prior authorization review of therapy services. EQ identified factors and difficulties that newly imposed therapy reviews would create. It determined that therapy reviews could be more difficult and time consuming than inpatient service reviews. EQ crafted its proposal to address those factors and difficulties. KePro did not demonstrate even consideration of the differences between therapy reviews and inpatient service reviews.
EQ provided a link to a demonstration site for its information technology system. There is, however, no evidence that any AHCA employee used the link.
In its reply and in negotiations, KePro repeatedly referred to its experience as an AHCA contractor and specific individuals' knowledge of KePro.
AHCA concluded that EQ's reply and the information EQ presented in negotiations demonstrated a greater understanding of what was needed to successfully administer the prior authorization program and how to do it. The evidence supports that conclusion.
Costs and Staffing
The three vendors proposed significantly different costs, i.e. fees, to AHCA for the contract. KePro proposed
$38,900,064 for the life of the contract. EQ proposed
$51,084,928. The third vendor, Alliant, which is not a party to this proceeding, proposed $46,325,552.
EQ's proposed costs, the amount that the State will pay over the contract term, are $12,184,864 more than those of KePro. AHCA intends to contract with EQ instead of KePro, despite the twelve million dollar cost differential. This is in part because the replies and the negotiation sessions caused AHCA to conclude that KePro was "lowballing" its costs and/or unrealistic in establishing them. That conclusion is not clearly erroneous, arbitrary, or capricious.
Direct personnel costs account for $5,247,861 of the twelve million dollar difference. This is due to the differences in proposed staffing. EQ proposed 136.95 FTEs for the contract. KePro proposed 85 FTEs. EQ's average compensation cost per FTE is 95,521,518. This amount is $3,358.70 than KePro's average of
$92,162.482. But the compensation difference only accounts for
$460,021 of the $12,184,864 difference over the contract period. The number of FTEs is what causes the difference.
The difference between EQ's and KePro's plans for the Home Health Comprehensive Care Monitoring program contributed to the difference in FTEs in the vendor proposals. EQ's costs are
$2,081,669 more than KePro's costs. The Home Health Monitoring program calls for visits to the homes of home health care recipients in Miami-Dade County. The visits serve several purposes. One is to verify that the patients are receiving appropriate services. Another is to determine if the patients are actually receiving services. This purpose arises from the fact that 85 percent of the Medicaid funds expended on home health services in the nation are expended in Miami-Dade County. Consequently AHCA surmises that fraud may be an issue in that county. This second purpose is part of AHCA's effort to reduce Medicaid fraud. EQ staffed these visits with two people. KePro staffed them with one. AHCA determined that two people was a better staffing proposal due to the fraud detection facet of the visits and bad experiences of individuals making similar visits in the past.
AHCA's preference for the more costly EQ staffing proposal has not been proven clearly erroneous, arbitrary, or capricious. Realistic consideration of the completion timeframe
requirements are one reason. Even with the use of rules driven or criteria based algorithms that will trigger some automatic approvals, people perform critical functions in the review process. The role includes nurse or other professional review of requests that do not trigger automatic approval, doctor review of all denials, communication with providers and patients, provider education, assistance preparing for fair hearings, participation in fair hearings, and training for staff and providers. EQ's greater staffing level will likely result in more satisfactory performance of these functions.
The contract will include short timeframes for many tasks. Meeting the time requirements is important to prompt provision of needed medical services. EQ's staffing makes EQ more likely to meet or better the timeframe requirements.
Inadequate staffing can cause delays, possible medical complications, increased costs, dissatisfied providers, dissatisfied patients, AHCA handling customer inquiries and complaints that the contractor should be handling, and friction between the State and its contractor. The ability to require more staff or impose penalties, likely to involve delay or even legal proceedings, is a poor substitute for adequate staffing from the beginning.
In other areas, EQ's more costly proposals are more plausible than KePro's cheaper proposals. This too makes AHCA's
decision that the KePro costs were unrealistically low not clearly erroneous, arbitrary, or capricious.
The "other direct" cost category includes the following components: software, hardware, equipment purchase and rental, professional services, advertising, training, licensing, recruiting, legal, taxes, and miscellaneous. KePro proposed no costs for these components. EQ proposed costs of $1,443,691 for the same components. While the record does not reveal the basis for EQ's costs, it is more credible that there will be costs of some amount over a three year period than that there will be
none.
Similarly EQ's rent costs are more plausible than
KePro's. This is another reason AHCA's conclusion that KePro's costs were not realistic has not been proven clearly erroneous, arbitrary, or capricious.
For the implementation period, KePro allocates no rent cost. This is plausible since KePro is currently providing services and would be as it shifted from its existing contract to the new contract. It is plausible that KePro could handle the implementation work from the offices where it currently provides services.
For each full year of the contract, KePro represents rent costs of around $26,000 per year or an average for the three year period of $2,177.42 per month. EQ proposes rent costs of
$1,073,267. That includes implementation period rent of $43,139 and first year rent of $330,000, apparently increased by four percent per year to a third-year rent cost of $356,928. EQ's average monthly rent costs for the three full years of the contract are $28,614.67. Nothing indicates AHCA arbitrarily or capriciously accepted these costs instead of EQ's.
EQ and KePro differed $242,773 in their postage, shipping, and fulfillment costs. EQ's costs were $349,137 and KePro's costs were $106,364. For the 716,000 annual authorization reviews this correlates to EQ having 48.7 cents postage, shipping, and fulfillment costs per review and KePro having 14.8 cents costs per review. The record does not establish that accepting EQ's costs was clearly erroneous, arbitrary, or capricious or even that KePro's costs of less than one postage stamp per review were reasonable.
The difference between EQ's proposed cost for therapy services review and KePro's is $8,015,250. For AHCA to choose EQ as the vendor, despite the difference in proposed costs, it necessarily must have determined the EQ's costs for therapy services were more reasonable than KePro's.
In contrast to the magnitude of the differences between the vendors' costs for therapy services, the costs for inpatient reviews are similar. EQ's cost for 510,000 reviews per year of inpatient services exceeds KePro's by $1,307,187 for the contract
period. For each full year of the contract, differences between the vendors' inpatient review costs are relatively small. Year one KePro exceeds EQ by $8,832. Year two EQ exceeds KePro by
$129,455. Year three EQ exceeds KePro by $350,287.
The cost differences each year for providing 140,000 therapy service reviews are, on the other hand, dramatic. In year one EQ costs for therapy reviews exceed KePro's by
$2,481,073. In year two the difference is $2,558,825. For year three the difference is $2,673,456.
Year one, EQ's costs for therapy reviews are
$4,788,242. This is more than EQ costs for 510,000 inpatient service reviews the same year. Year two, EQ's costs for the inpatient service reviews are only $152,490 more than its costs for 140,000 therapy reviews. Year three, EQ's inpatient service review costs exceed the therapy review costs by just $219,207.
This is true even though the number of therapy reviews anticipated is 27.5 percent of the anticipated inpatient reviews.
EQ justified the therapy costs in its second negotiation session. The review for therapy services is likely to consume a disproportionate amount of staff time for several reasons. Florida does not currently require prior authorization for therapy services. The change will be disruptive and time consuming. Providers, patients, patient families, and patient advocates will have to learn the system. They will have to learn
how to request services. And they will have to learn how to support the service requests. As importantly, they will have to learn to accept the fact that prior authorization is now required. All these facts may reasonably be expected to cause difficulties for the vendor and AHCA.
Therapy review is likely to result in a higher incidence of requests for additional information and more time spent communicating reasons for decisions than inpatient reviews. Therapy review is also likely to engender a disproportionate number of requests for reconsideration and fair hearings. This is partly due to the human reaction of people being told "no" for the first time in a system. Normal difficulties adjusting to new requirements and to a new system will also contribute. Support in the fair hearing process, which will be mandated by the contract, requires staff time. So too will the multiple communications and re-reviews that inevitably will be required as providers and patients alike learn and accept a new process.
The nature of therapy services is also likely to result in more fair hearing requests. Authorization of less service than requested will be a denial of services subject to fair hearing review. In the inpatient setting, this is not always so. Often, services such as a hospital stay can be extended if review at the end of the authorized stay indicates further time in the hospital is needed.
Because of these differences between prior authorization of therapy services and prior authorization of inpatient services, AHCA's decision to accept EQ's costs for therapy services has not been shown to be clearly erroneous, arbitrary, or capricious.
Information Management Systems
AHCA determined that EQ's proposal presented a better, fully developed and previously used information technology (IT) system than KePro.
The IT systems and IT staffing proposed by the vendors were important aspects of the utilization management services to be provided under the contract. The ITN made it clear that a significant portion of the prior authorization and other systems in the utilization management services were to be facilitated through the vendors' IT systems.
EQ developed its IT system. EQ has operated its system in a state Medicaid environment in Mississippi for approximately thirteen years and in Illinois for eight years. EQ’s in-house IT staff, the same staff that developed the system, will support it.
KePro did not develop its proposed IT system, MedManager. Another company, Preferred Physicians Health Alliance (PPHA) developed MedManager. KePro had never used the system or managed prior authorization reviews with it.
KePro was attempting to acquire PPHA's MedManager system through a purchase of PPHA’s assets in the summer of 2010. But when KePro submitted its ITN reply on July 14, 2010, KePro had not completed the asset purchase. There was no signed purchase agreement between KePro and PPHA, and no money had been exchanged.
KePro did not disclose these facts in its reply. KePro represented in its ITN reply that:
Our corporate system, MedManager, is wholly owned by KePro outright, including the design, software source code, and database schema. That enables us to control software changes and be responsive to change requests. We will make all system changes using our in- house, MIS staff.
This statement was not accurate. KePro did not own MedManager outright and did not have an enforceable agreement to purchase it. KePro did not acquire the assets of PPHA, including MedManager until July 16, 2010. During the entire period of the ITN process from reply submission to negotiations and BAFOs, KePro and its management had never used MedManager in any setting, commercial or Medicaid.
KePro’s Chief Executive Officer, Joseph Dougher, testified that KePro had hired PPHA's personnel and would rely upon them to maintain and refine MedManager. The ITN required vendors to provide résumés for the MIS personnel. KePro’s reply did not provide the résumés of any of the PPHA employees now
employed by KePro. It provided only the résumé of Wayne Bolton, a KePro employee of some 20 years. Mr. Bolton had no part in developing MedManager and has not overseen use of MedManager for any prior authorization program.
During KePro's negotiations with AHCA on August 10, 2010, Shevaun Harris of AHCA asked KePro Chief Executive Joseph Dougher directly if MedManager was a new system launching for the first time. Mr. Dougher stated that KePro had been using MedManager "on the commercial side of our business for about ten years." This statement was not accurate. KePro had never used MedManager.
In addition, the MedManager system KePro proposed had never been used before by KePro or PPHA in a state Medicaid environment.
The MedManager system was also not complete at the time of KePro's ITN reply. KePro did not disclose this to AHCA until the negotiation session.
The provider portal portion of the MedManager system was not complete. The ITN made clear that the provider portal was a critical part of the system AHCA was seeking.
At the time of the final hearing, KePro had not completed the provider portal. And KePro had not yet implemented it for any of its other Medicaid customers. AHCA would have been
the first KePro customer to use the MedManager provider portal in a Medicaid environment.
The AHCA negotiation team preferred EQ's IT system because it was fully developed and had been used in Medicaid environments for several years. Conversely team members were concerned that the KePro system was still under development. The content of the replies and communications during the negotiations provided a basis for these concerns even without the information revealed during discovery for this proceeding that KePro did not own MedManger when it submitted its reply and had not used MedManager before.
AHCA's preference for the existing and tested system used by EQ is not clearly erroneous, arbitrary, or capricious.
EQ's proposed disaster recovery plan is superior to KePro's. KePro proposed a tape back-up system. EQ proposed a network-based back-up system.
KePro's tape back-up system saves or backs up information and data once a day at 5:00 p.m. Under this system, if the system crashes any time before the daily back-up, all the day's data could be lost. In addition, the back-up tapes would have to be transferred to another site. This will delay recovery.
EQ's network-based back-up system backs up data and information continuously throughout the day. If the system
crashes, all the day's data entered before the crash would be saved. A network-based back-up system also provides continuous access to the backed-up data on the network in real time rather than having tapes that would have to be delivered from another site.
The network-based back-up system is superior. AHCA's preference for the EQ disaster recovery plan is not clearly erroneous, arbitrary, or capricious.
Additional ITN Considerations
EQ’s proposal recognized the importance of employee training to success. It provided for more training and more extensive training than KePro. AHCA determined that the training provisions added value to EQ's proposal.
EQ committed to having its reviewing physicians attempt to contact the physician ordering a service before denying the service. This practice has the potential to reduce incorrect denials and therefore mitigate the costs and disruption of fair hearing disputes. KePro did not make a similar proposal. AHCA determined that this, too, added value to EQ's proposal.
EQ proposed to handle all functions of the contract in-house without subcontractors. KePro proposed subcontractors. Although subcontractors were permitted, the AHCA team preferred the EQ proposal without subcontractors. This preference was based upon experience with delays and disputes arising with
subcontractors under other contracts. The ITN's many subcontractor provisions issues that can arise with subcontractors made it plain that use of subcontractors was a criterion for consideration. AHCA's preference for the EQ in- house proposal was not clearly erroneous, arbitrary, or capricious.
The ITN asked vendors to identify five hospitals that would be part of the NICU Care Monitoring Program. KePro identified five hospitals. EQ did not. AHCA asked EQ about this failure. EQ representatives advised AHCA of the geographic area for the hospitals and represented that they could identify them if requested. This response did not comply with the requirement to identify the five hospitals.
However, identification of the five hospitals was not specified as a requirement of the ITN that could not be waived. It also has not been shown to provide EQ an advantage over KePro or to have a potentially significant effect on the quality of EQ's response or on the cost of the services to the State.
The 2009 Request for Information
AHCA first sought a vendor to provide the services involved here in 2009. At that time, AHCA issued a Request for Information inviting possible vendors to provide information about ways to provide the prior authorization services. KePro and EQ's predecessor, Louisiana Health Care Review, were among
those providing information. AHCA reviewed their information and met with representatives of each of them. During that process one or more of the 2010 negotiation team viewed a demonstration of EQ's system.
AHCA decided that it was not required to use competitive procurement to contract for the services. It selected EQ as the provider and moved toward executing a contract. In the process, Ms. Core received a more detailed explanation and demonstration of the EQ system.
KePro challenged the decision and requested an administrative hearing. AHCA denied the request. KePro appealed. During the appeal, the First District Court of Appeal stayed AHCA from contracting with EQ. The court subsequently issued an opinion holding that KePro was entitled to an administrative hearing to challenge the decision to contract with EQ. Keystone Peer Review Organization, Inc. v. AHCA, 26 So. 2d 652 (Fla. 1st DCA). AHCA decided not to proceed with the hearing. Instead it began the ITN process resulting in this proceeding.
Neither Ms. Core nor other AHCA negotiation team members considered the EQ system information they received during the aborted 2009 contracting efforts in deciding to contract with EQ after the ITN negotiations. If they had, it would not have mattered. EQ's ITN reply thoroughly describes and documents its
MIS system. The reply also provided a link to a demonstration of EQ's system. Consequently, any information the team members may have recalled from the 2009 efforts was provided in the 2010 ITN
process.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and of the subject matter of this proceeding. §§ 120.569 and 120.57, Fla. Stat. (2010).
KePro bears the burden of proving the proposed award of the contract to EQ does not comply with legal standards.
§ 120.57(3)(f), Fla. Stat. (2010).
This is a de novo proceeding. § 120.57(3)(f), Fla.
Stat. (2010). But it is not a typical de novo proceeding in which a factual basis for the Agency decision or error must be proven by the evidence. The Florida Legislature has established a specific standard of review and standard of proof for administrative hearings on protests to Agency proposals to contract through the competitive procurement process.
These statutory standards do not require a determination that the Agency has made the best decision or the only decision or the decision that the trier-of-fact would have made. The legislatively established standards state:
Unless otherwise provided by statute, the burden of proof shall rest with the party protesting the proposed agency action. In a
competitive-procurement protest, other than a rejection of all bids, proposals, or replies, the administrative law judge shall conduct a de novo proceeding to determine whether the agency’s proposed action is contrary to the agency’s governing statutes, the agency’s rules or policies, or the solicitation specifications. The standard of proof for such proceedings shall be whether the proposed agency action was clearly erroneous, contrary to competition, arbitrary, or capricious.
§ 120.57(3)(f), Fla. Stat. (2010).
KePro maintains that AHCA's decision is contrary to section 287.057, Florida Statutes, (2009) and related provisions that establish Florida's competitive procurement process in general and the invitation to negotiate process in particular. Before evaluating that argument, the version of the statute that applies must be determined.
AHCA prepared and released the ITN in May, 2009. The vendors submitted their replies in July 2010. The Legislature amended section 287.057 in 2010. Ch. 2010-151, §§ 14 and 16. The amendments took effect July 1, 2010.
Three sections of the 2009 statutes created the Invitation to Negotiate process. Section 287.012(17), Florida Statutes (2009), provided:
"Invitation to negotiate" means a written solicitation for competitive sealed replies to select one or more vendors with which to commence negotiations for the procurement of commodities or contractual services. The invitation to negotiate is used when the
agency determines that negotiations may be necessary for the state to receive the best value. A written solicitation includes a solicitation that is electronically posted.
Section 287.057(3), Florida Statutes (2009) provided: (3)(a) If the agency determines in writing
that the use of an invitation to bid or a
request for proposals will not result in the best value to the state, the agency may procure commodities and contractual services by competitive sealed replies. The agency's written determination must specify reasons that explain why negotiation may be necessary in order for the state to achieve the best value and must be approved in writing by the agency head or his or her designee prior to the advertisement of an invitation to negotiate. An invitation to negotiate shall be made available to all vendors simultaneously and must include a statement of the commodities or contractual services sought; the time and date for the receipt of replies and of the public opening; and all terms and conditions applicable to the procurement, including the criteria to be used in determining the acceptability of the reply. If the agency contemplates renewal of the contract, that fact must be stated in the invitation to negotiate. The reply shall include the price for each year for which the contract may be renewed.
(b) The agency shall evaluate and rank responsive replies against all evaluation criteria set forth in the invitation to negotiate and shall select, based on the ranking, one or more vendors with which to commence negotiations. After negotiations are conducted, the agency shall award the contract to the responsible and responsive vendor that the agency determines will provide the best value to the state. The contract file must contain a short plain statement that explains the basis for vendor selection and that sets forth the vendor's
deliverables and price, pursuant to the contract, with an explanation of how these deliverables and price provide the best value to the state.
Section 287.012(4), Florida Statutes (2009) provided that: "'Best value' means the highest overall value to the state based on objective factors that include, but are not limited to, price, quality, design, and workmanship."
The most significant changes of Chapter 2010-151 were to require more specificity in the invitation to negotiate and to include a requirement that "the agency shall award the contract to the responsible and responsive vendor that the agency determines will provide the best value to the state, based on the selection criteria."
KePro argues that the 2010 statute governs. It then argues that AHCA's consideration of use of subcontractors and numbers of staff is basing the decision on criteria not in the ITN and therefore a violation of the 2010 statute. The argument fails for two reasons.
First, the 2009 statute applies. "It is a well- established rule of construction that in the absence of clear legislative expression to the contrary, a law is presumed to operate prospectively." Walker & LaBerge, Inc. v. Hallifan, 344 So. 2d 239, 241 (Fla. 1977). Chapter 2010-151 does not state that it is to be applied retroactively. The 2010 changes affect
how an ITN is written. Statutes should be interpreted using common sense. Sch. Bd. v. Survivors Charter Schs., Inc., 3 So. 3d 1220, 1235 (Fla. 2009). It does not make commonsense to apply the 2010 amendments retroactively to an ITN written and released when the statute did not make such a specific reference to "selection criteria." Second, the ITN made it clear that subcontractors and staffing levels were important criteria.
Under the 2009 statutes and the standards created by section 120.57(3), Florida Statues (2010), the question becomes whether AHCA's decision that EQ will provide the best value to the state is clearly erroneous, arbitrary, or capricious.
§ 120.57(3)(f), Florida Statutes (2010). KePro bears the burden of proof.
KePro acknowledges that the ITN process does not require an Agency to choose the lowest priced vendor. But it maintains, correctly, that price is one of the factors to consider when determining best value for the state.
§ 287.012(4), Florida Statutes (2009).. The record, KePro argues, does not support choosing EQ's twelve million dollars more expensive proposal. The question presented is do the differences in quality, design, and workmanship of the two proposals justify choosing EQ's more costly proposal.
The legislatively established standards of review and proof are critical to addressing the question. The standards
mean that the decision to be made is not whether the record proves that the EQ proposal is the best value to the state. The statutory standards mean the issue to resolve in this proceeding is whether AHCA's decision is "clearly erroneous, contrary to competition, arbitrary, or capricious."
The Recommended Order in Health Management Systems v.
Agency for Health Care Admin., Case 08-2566BID at 21 (Fla. DOAH Aug. 15, 2008) (Fla. AHCA Aug. 28, 2008) defines "clearly erroneous, contrary to competition, arbitrary, or capricious."
Agency action will be found to be "clearly erroneous" if it is without rational support and, consequently, the trier-of-fact has a "definite and firm conviction that a mistake has been committed." U.S. v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948).
An act is "contrary to competition" if it unreasonably interferes with the objectives of competitive bidding, which are:
To protect the public against collusive contracts; to secure fair competition upon equal terms to all bidders; to remove not only collusion but temptation for collusion and opportunity for gain at public expense; to close all avenues to favoritism and fraud in various forms; to secure the best values for the [public] at the lowest possible expense; and to afford an equal advantage to all desiring to do business with the [government], by affording an opportunity for an exact comparison of bids.
Wester v. Belote, 138 So. 721, 723-24
(Fla. 1931).
"An action is 'arbitrary if it is not supported by logic or the necessary
facts,' and 'capricious if it is adopted without thought or reason or is irrational.’" Hadi v. Liberty Behavioral Health Corp., 927 So. 2d 34, 38 (Fla. 1st DCA 2006).
AHCA identified and weighed factors including EQ's more fully developed and utilized IT system, the benefits of paying more money to have more staff, and the complications accompanying first time implementation of prior authorization review to therapy services in its decision. AHCA also reasonably drew conclusions about the relative competence and diligence of KePro and EQ from the information and analysis demonstrated by their replies and responses in the negotiation sessions.
These are logical and rational considerations. They are based upon facts presented in the replies, the negotiation sessions, and upon the experience and expertise of the AHCA negotiators. These logical and rational considerations lead AHCA to choose to contract with the more costly vendor in order to obtain the benefits of a proposal AHCA concluded would provide the best value to the State. AHCA's decision to award the contract to EQ is not clearly erroneous, arbitrary, or capricious. Other individuals considering the same information may have made a different decision. AHCA's decision may not be the best decision. But that does not make AHCA's decision clearly erroneous, arbitrary, or capricious.
AHCA's decision and the process it used were not contrary to competition. All vendors had an equal opportunity to reply to the ITN. AHCA made it clear that the process was open to varied proposals and that the ITN did not establish limited requirements. AHCA advised all vendors that it was looking for proposals that exceeded the requirements of the ITN. KePro did not prove collusion or favoritism, or offer any evidence of it.
KePro's "contrary to competition" claim rests on the fact that in 2009 some AHCA negotiators observed demonstrations of EQ's system. The argument fails for at least two reasons. First, the negotiators did not consider what they learned in the 2009 contracting process. Second, EQ's reply fully informed AHCA about its system with extensive descriptions, charts, and screen shots as well as providing a link to a demonstration. KePro had an equal opportunity to prevent similar information about its system.
AHCA does not have a document containing "a short plain statement that explains the basis for the selection of the vendor and that sets forth the vendor’s deliverables and price, pursuant to the contract, along with an explanation of how these deliverables and price provide the best value to the state". Section 287.057(1)(c)5, Florida Statutes (2010) requires the agency to maintain such a document in its contract file. Putting aside the question of whether failure to comply with this
requirement supports setting aside the intent to award, the issue is premature. The requirement requires setting forth "deliverables and price pursuant to the contract …." At this stage there is no contract upon which to base the required statement.
KePro did not establish that the proposed contract award to EQ is contrary to AHCA's governing statutes, AHCA's rules or policies, or the specifications of the ITN. KePro has also not established that the intended award is clearly erroneous, contrary to competition, arbitrary, or capricious.
EQ argues that KePro's inaccurate statements about MedManager make KePro's reply unresponsive and that it should therefore be dismissed. The ITN did not require that vendors have in-house MIS at the time of reply submission. It required that the replies propose providing MIS in-house. Consequently the fact that KePro did not own MedManager when it filed its reply does not make the reply unresponsive.
EQ also argues that KePro is not a "responsible vendor" as required by section 287.057(3)(b), Florida Statutes (2009) and that its reply should therefore not be considered. Section 287.057(3)(b) requires AHCA to award the contract to a responsible vendor. "'Responsible vendor' means a vendor who has the capability in all respects to fully perform the contract
requirements and the integrity and reliability that will assure good faith performance." § 287.012 (24), Fla. Stat. (2009).
This Recommended Order does not address the issue for two reasons. First it is not necessary to resolve the case. Second AHCA has not proposed agency action on this basis or ruled on the issue. The Findings of Fact provide AHCA the opportunity to address the issue if it chooses.
Based on the foregoing Findings of Fact and Conclusions of Law, it is Recommended that Agency for Health Care Administration enter a final order dismissing the formal written protest of Keystone Peer Review Organization, Inc. and awarding the contract to eQHealth Solutions, Inc.
DONE AND ENTERED this 12th day of January, 2011, in Tallahassee, Leon County, Florida.
S
JOHN D. C. NEWTON, II
Administrative Law Judge
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-3060
(850) 488-9675 SUNCOM 278-9675
Fax Filing (850) 921-6847 www.doah.state.fl.us
Filed with the Clerk of the Division of Administrative Hearings this 12th day of January, 2011.
COPIES FURNISHED:
Daniel Lake, Esquire
Agency for Health Care Administration 2727 Mahan Drive, Suite 3431
Tallahassee, Florida 32308
J. Stephen Menton, Esquire Martin P. McDonnell, Esquire Rutledge, Ecenia, & Purnell, P.A.
119 South Monroe Street, Suite 202 Post Office Box 551
Tallahassee, Florida 32302
Robert H. Hosay, Esquire John A. Tucker, Esquire Foley & Lardner LLP
106 E. College Avenue, Suite 900 Tallahassee, Florida 32311
Richard J. Shoop, Agency Clerk
Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3
Tallahassee, Florida 32308
Elizabeth Dudek, Interim Secretary Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3
Tallahassee, Florida 32308
Justin Senior, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3
Tallahassee, Florida 32308
NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
All parties have the right to submit written exceptions within 10 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.
| Issue Date | Document | Summary |
|---|---|---|
| Feb. 02, 2011 | Agency Final Order | |
| Jan. 12, 2011 | Recommended Order | Award of contract to vendor w/ $12 million more costly reply to Invitation to Negotiate wasn't contrary to governing statutes, rules, & policies and was not clearly erroneous, arbitrary, capricious, or contrary to competition. Law when ITN issues governs. |
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