Senate majority leader questions high cost of new state Medicaid contract

CARSON CITY - A lawmaker Wednesday questioned whether state officials did everything possible to negotiate the lowest cost for a recently approved $177 million Medicaid contract.

Sen. Steven Horsford, D-Las Vegas, asked Medicaid program Administrator Charles Duarte if the contract with HP Enterprise Services reflects a 10 percent reduction in the cost of state contracts sought by lawmakers to help address Nevada's current fiscal crisis.

"There's nothing we could do with this contract to reduce the amount that they are getting paid in order to use some of those proceeds to cover these . . . provider rates and services that are being impacted?" Horsford asked.

The state Medicaid budget proposes to continue or implement new reimbursement rate reductions to a variety of medical providers as part of Gov. Brian Sandoval's plan to balance the state general fund budget. Those reductions would total nearly $60 million.

Horsford cited some of the wage rates for employees in the contract, such as $85 an hour for a business analyst, $105 an hour for a senior business analyst, a certified project manager for $135 an hour, clerical at $40 an hour and $160 an hour for a system administrator.

"To me those seem like excessive amounts for that contractor to be billing the state compared to, as you indicate, your own qualified staff who may be able to do some of this," he said. "I know we need a contractor and I know there are a lot of benefits to having this contract in place.

"My concern is whether we have achieved every possible cost savings in issuing that contract and if that contractor is billing us reasonable amounts and that there is a checks and balance, an accountability, for what is being billed," Horsford said.

Duarte said: "I don't believe the rates are unreasonable and I don't believe we have the capacity in the state nor in my agency to do the work that is being proposed here. This is highly technical work that is being done on very complex systems."

Duarte said the agency would be happy to discuss the rates and other issues in more detail in future legislative budget subcommittee hearings.

He did say the contract came in as a budget neutral project.

That comment provoked a sharp response from Horsford, however, who said the intent was to reduce contract costs.

"That is not it, Mr. Duarte," he said. "That is not the intent."

"I understand," Duarte replied.

Charles Perry, president of the Nevada Health Care Association, told the legislative budget panel that the skilled nursing homes he represents are one segment of the health care provider profession that will be seriously affected by the rate decreases recommended in Sandoval's budget.

He testified that the industry would have extreme difficulty in providing care with the proposed reduction of $20 a patient day for Medicaid recipients.

"We've learned how to deal with less for an awful long time," Perry said. "I'm not sure we can continue to do it."

Four firms bid on the Medicaid contract. HP's base bid was about $140 million, while the second lowest bidder came in at $179 million. The contract negotiation process with HP resulted in the final $177 million contact, which covers a five-year period.

Duarte said the contract for the company to manage the state's Medicaid information system, including the processing of payments to medical providers, provides the amount the state can pay to the firm, not the amount that must be paid.