Ohio Medicaid: It’s Not a Conflict If You Only Own Stock in the Parent Company
Ohio Medicaid Director Maureen Corcoran was not in a conflict of interest when she signed multibillion-dollar contracts earlier this year, lawyers in her department argue. This is because it only owns shares in parent companies, not their Ohio subsidiaries to which it has awarded contracts.
The ministry made this point in a Friday motion in a court case in which a disappointed bidder tries to overturn a process that resulted in the award of $ 22 billion in managed care activities to six companies. Testimony in the case, which was provided by Paramount Advantage, resumed Monday after a two-week hiatus.
Paramount, based in Toledo, argues that the process was biased against it and in favor of huge healthcare competitors, some of whom have been sued for fraud by Ohio Attorney General Dave Yost.
Corcoran did not respond to questions in the past month if she owns shares in companies involved in managed care procurement or in the company that has won a related contract to reshape the way the state provides services to children with complex behavioral needs.
In Friday’s court file, Medicaid attorneys argued that the questions over the director’s assets were part of “a smear campaign intended to harass and embarrass Director Corcoran and this court should not allow this tactic. “.
He also claimed that Corcoran was not aware of his holdings.
“The possibility that she owns such stocks had not occurred to her,” the file said. “It’s not unusual for someone investing retirement funds to focus on risk and return rather than individual investments. There is no evidence that Director Corcoran had reason to believe that she owned shares in any of the companies to which contracts were awarded. “
However, some possible evidence may lie in the disclosures she has made to the Ohio Ethics Commission since becoming director of Medicaid in early 2019. In those, Corcoran said she held at least $ 1,000 of shares in UnitedHealth Group and Humana, both of which have subsidiaries that won managed care contracts in Ohio. She also said she owns at least $ 1,000 of shares in CVS Health, whose Aetna subsidiary has won the billion dollar contract for children with behavioral needs.
The Medicaid filing late last week acknowledged that Corcoran still held shares in CVS and UnitedHealth, but said it had sold its shares in Humana.
One would think that any profit made by these subsidiaries in Ohio would likely end up in the bank accounts of their parent companies, thus marrying the interests of the parent company and the subsidiary.
But according to Ohio Medicaid, there is apparently no conflict of interest as long as a company is large and sophisticated enough to put a long chain of other subsidiaries between the parent company and the unit getting billions from taxpayers. Ohio, UnitedHealth Community Plan of Ohio.
The Medicaid motion noted that UnitedHealth Group has more than 1,200 subsidiaries and that in March “the direct parent company of UnitedHealth Community Plan of Ohio Inc. was not UnitedHealth Group Inc., but“ Three Rivers Holdings Inc. ”, which in turn was not owned by UnitedHealth Group Inc., but by “AmeriChoice Corporation”.
The motion adds: “In other words, Director Corcoran did not have a direct interest in UnitedHealth Community Plan of Ohio Inc., but only in the parent company of the parent company of the UnitedHealth Community Plan of Ohio parent company. Inc. “
Medicaid lawyers have made a similar argument about the relationship between Aetna Better Health of Ohio Inc. and CVS, which became the country’s fourth-largest company after its $ 70 billion merger with Aetna in 2018 and 2019.
Among the questions Corcoran has not answered is how much stock it owned in healthcare companies while its department negotiated with their subsidiaries. Ohio law states that government officials who award contracts to companies in which they own stock must file a “affidavit indicating the exact status of that person in relation to the company or other organization.“
However, Medicaid attorneys contend that Corcoran did not have a “vested and defined interest” in the companies because its investment advisor handled day-to-day transactions.
They backed up this claim with a 2002 Ethics Commission advisory opinion saying that investors do not have a specific and direct interest in a business simply because they own a portion of a mutual fund, IRA, 401K or similar fund over which a person has no control over investment decisions.
The opinion of the ethics committee seems to make a distinction between these types of funds and stocks.
“A shareholder of a company has an interest in the company and therefore has an interest in the contracts of the company for the purposes of” state law, according to the opinion.
More information about Corcoran’s investments could come to light on Tuesday, when she is due to appear on the witness stand – although Franklin County Common Pleas Judge Julie M. Lynch has said she will severely limit this. that Paramount attorneys can ask the head of Medicaid.
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