A dozen lawyers crowded around a quartet of polished wooden tables in Omaha’s federal courthouse Thursday, an indication of just how much is at stake in a legal fight over Nebraska’s Medicaid program.

Three companies that recently won state contracts stand to collect a share of roughly $1.2 billion a year to oversee health care for 233,000 Nebraskans on Medicaid.

Two other companies have sued, alleging they were shut out by Nebraska officials who violated competitive bidding laws.

On Thursday, the two sides made arguments intended to shape the first key ruling in the lawsuit.

“This competitive bidding process wasn’t competitive at all. It was arbitrary from beginning to end,” said Andrew Collins, an attorney representing AmeriHealth Nebraska.

Since the lawsuit was filed about two months ago, state officials have turned over 20,000 emails and other documents related to the bidding process. None of those documents revealed bad faith, collusion or fraud by any state employee, said Assistant Attorney General David Lopez.

“Not only is there no fire, there’s no smoke,” he said, urging the judge to rule soon in the state’s favor so Nebraska’s neediest residents don’t experience interruptions in their health care.

U.S. District Judge Robert Rossiter must soon decide whether to grant the plaintiffs a preliminary injunction and halt the contracts before they are implemented on Jan. 1. After more than three hours of oral argument by six lawyers, Rossiter took the matter under advisement without issuing a ruling.

Also at stake is an effort to rework the $2 billion-a-year state and federal Medicaid program, which officials say is currently managed under a fractured system of contractors who provide different services in different areas of the state.

Under a new state program called Heritage Health, the three winning bidders will administer physical and mental health care, as well as pharmacy services, to Medicaid patients statewide. Officials with the Department of Health and Human Services have said the new approach will make the program more efficient so it saves taxpayer dollars and delivers better care.

HHS put out a request for proposals to manage the new program last year. Officials with HHS and the Department of Administrative Services announced an intent to award contracts to the top three bidders in February.

But they took a second look after two of the losing bidders filed protests. Officials determined there had been a scoring error in the corporate overview section of the proposal, so they brought in a new group of evaluators to score the bids a second time.

In March, they announced the three final bid winners. Aetna Better Health of Nebraska, which currently has a Medicaid contract with the state, dropped from third to fourth place when the final standings were released.

Aetna and AmeriHealth Nebraska, which finished out of the top three both times, have brought lawsuits against the state.

Lawyers for Aetna focused the judge’s attention on the law that requires all state contracts in excess of $50,000 to be bid according to an agency’s procurement manual or a process approved by the director of Administrative Services.

They argued that re-scoring the original bids, rather than starting over from scratch, had never been done before on other contracts. State officials brought in five new “inexperienced” evaluators to complete the scoring in 48 hours, far too short a time to throughly review 1,500 pages of materials, they contended.

Lawyers for the plaintiffs also pointed to an email exchange in which an attorney for Administrative Services told a lawyer for HHS not to provide guidance to the new evaluators.

“Each evaluator brings with them their knowledge, experience, preferences and prejudices. It is the average of these unique perspectives across five evaluators that we hope will get us the best vendor,” said the email by Doug Wilken, an attorney for Administrative Services.

Robert Slovek, an Omaha lawyer representing Aetna, said the email shows scoring decisions were arbitrary and, therefore, in violation of state law. He said not only did the illegal action result in irreparable harm to his clients, but also to Nebraska taxpayers, who have a right to expect public employees to follow the law on what represents one of the biggest contracts in state history.

“If that doesn’t meet the public interest, I don’t know what does,” Slovek said.

Lopez, with the Attorney General’s Office, said the law explicitly gives the director of Administrative Services the discretion to approve scoring and bidding procedures. That’s because no procurement manual can be written to account for all possible scenarios that come up during a bidding process, especially one with the complexity of health care management.

To be found in violation of the law, the plaintiffs must show that state officials acted in bad faith. Lopez argued that no such evidence has been submitted, so the request for preliminary injunction should be denied.

“There simply has not been a showing, even remotely, of illegal conduct by any state official,” Lopez said.

Contact the writer: 402-473-9587, joe.duggan@owh.com

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