Grand Jury Investigates Jindal Administration


It’s TRUE! A federal grand jury is investigating the Jindal administration’s award of a $185 million contract, according to a subpoena.

handcuffs-dollarsThe Baton Rouge-based federal grand jury subpoenaed documents related to the state’s awarding of the contract for Medicaid claims processing to a company for which the state’s health chief once worked.

Client Network Services Inc., called CNSI and based in Gaithersburg, Md., was awarded the contract in 2011 amid some complaints that the company “low balled” the price and made erroneous assumptions in its proposal.

The contract was awarded by the state Department of Health and Hospitals and signed off on by the Jindal administration amid complaints from other vendors.

At the time, state health secretary Bruce Greenstein, a one-time CNSI executive, said he took himself out of the contract dealings. Documents revealed Greenstein influenced a document change that allowed CNSI to compete.

Former DSS Secretary Nichols
Former DSS Secretary Nichols

Commissioner of Administration Kristy Nichols said the state Division of Administration complied with the federal subpoena and delivered the documents requested. She said the subpoena was handled by the division’s general counsel and she only recently became aware of its existence.

“They processed the request like all subpoena requests. They simply produced the documents and moved forward,” Nichols said. “We have zero tolerance for any wrongdoing and are fully prepared to cooperate.”

Nichols released a copy of the subpoena in response to a public records request filed by The Advocate.

cautionThe subpoena was issued by U.S. Attorney for the Middle District Don Cazayoux. The documents were to be returned to the grand jury room by Jan. 30. Cazayoux declined comment Thursday.

Specifics of the subpoena included:

  1. All documents submitted by the four proposers in response to the state’s solicitation of proposals. The proposers were CNSI, ACS State Healthcare, LLC; HP Enterprise Services, LLC, and Molina Medicaid Solutions.
  2. All financial information, including but not limited to financial statements, income statements, balance sheets, and statements of profit and loss, submitted by the firms in connection with or response to the proposal.
  3. Documents sufficient to show the date and time at which each response to the proposal was received by the state of Louisiana.

DHH LogoThe state Department of Health and Hospitals released a prepared statement through its communications office in response to questions: “DHH does not have any details regarding an investigation of the MMIS (Medicaid Management Information Systems) contract award. DHH has not received a subpoena and to our knowledge no employee at DHH has received a subpoena.”

CNSI takes over the processing of Medicaid claims from doctors, hospitals and others who provide health care services to the poor in 2014. At that time, the full conversion from current vendor Molina would occur.

Nichols said she found out about the subpoena March 15 from the attorney general’s office, which advised caution and to “just be aware of (CNSI contract) amendments in general.”

The CNSI contract has been amended once since it was signed, increasing its $185 million cost by about $9 million. Some work that current vendor Molina was contracted to do, has been moved to CNSI.

A second contract amendment proposed by the state health agency would have added $40 million more to the contract to cover advanced fraud detection, in both pre-claims payment and post-claims payment. The amendment that would have increased the contract was sidelined recently by the Division of Administration.

Nichols said the size of the contract addition gave her pause.

“I felt it was a large amount for an amendment and in consideration of full transparency and full competition it would be prudent to do a request for proposal,” Nichols said.

BUSTED-blurNichols said the decision to seek new proposals for the expanded work was made before she knew about the subpoena.

When the contract was approved, wary legislators said they would keep an eye on contract changes. Legislators are required to review contract changes over a specific amount.

State health agency executives said CNSI had agreed to live with the price for the work in the contract. At the time, that CNSI was picked because it submitted the lowest price, according state health agency officials.

The firm set a $184.9 million price for the 10-year pact.

The highest projected cost was $394 million for HP Enterprise Services of Palo Alto, Calif. ACS State Healthcare of Atlanta submitted the second lowest price at $238 million. The aborted $40 million contract amendment would have put the price at close to what ACS offered.

Molina, the current vendor, was disqualified because its score in the technical evaluation of proposals did not hit the score required to advance.