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California Contract Healthcare Management Firm Locked Out; Fees Withheld;

State Officials Resign

by John E. Dannenberg

California?s federal receiver over prison healthcare, Robert Sillen, took umbrage with Florida-based private contractor Medical Development International (MDI) by withholding $2.6 million in fees and locking MDI out of two southern California prisons in February 2007. Two high-level state prison health care officials have resigned over the incident.

MDI had secured a questionable $26 million no-bid contract with the California Department of Corrections and Rehabilitation (CDCR) in August 2006 to provide outpatient scheduling of prisoners with medical specialists, an area of CDCR?s healthcare processing that had been chronically deficient. It was later reported that state officials who had reviewed MDI?s contract found it was overpriced and should have been competitively bid; they also questioned whether the company needed to have a medical license.

Regardless, MDI began work before the contract was finalized and was told to bill the state for services performed. The receiver?s office wasn?t notified of the arrangement.

Sillen?s chief of staff, John Hagar, learned about the contract and determined that part of MDI?s protocol was to only schedule appointments with specialists if the projected cost did not exceed $5,000. Thus, a medically-needy prisoner was not scheduled at all if the expense for his care was more than that dollar amount. The receiver?s office called this practicing ?corporate medicine? without a license, because MDI was inferentially making medical judgments, and expressed concern over the ?blatant attempt by MDI to put profits before patient care.?

Sillen ordered $2.6 million in payments to be withheld from the company in January 2007, citing ?billing irregularities.? The receiver?s office further ordered administrators at the California Correctional Institution at Tehachapi and the California State Prison, Los Angeles County (Lancaster) to ?discontinue utilizing MDI for any specialty services.?
Accordingly, MDI personnel were abruptly locked out of those facilities.

While MDI claimed it had reduced healthcare backlogs and was operating within California law, it remained hotly disputed as to whether they did so at the expense of the most medically-needy prisoners. Sillen reportedly declared he would ensure that MDI ?never works in California again? if the company discontinued its services.

Predictably the company sought legal redress, filing a motion with U.S. District Court Judge Thelton Henderson on April 3, 2007. MDI accused the state of withholding payments it was due and denounced the receiver for threatening its future business operations in California. Sillen?s office responded sharply, noting that MDI had performed work with no competitive bids and without an approved contract; the receiver also accused the company of billing errors and criticized its performance at Tehachapi and Lancaster.

Meanwhile, Dr. Peter Farber-Szekrenyi, director over CDRC?s Health Care Services, who had been appointed by Gov. Schwarzenegger in 2005, was forced out of his job. MDI stated Farber-Szekrenyi had given them the ?green light? to start working for CDRC before the company?s contract was approved. He was demoted and stripped of his responsibilities over prison medical care by Sillen in February 2007, and resigned on March 5, 2007 at the request of the Governor?s office. ?My role was not to do politics,? Farber-Szekrenyi said. ?It was to improve patient care, to reduce mortality and morbidity, and we did that to the best of our abilities. We succeeded in a lot of places. The rest is up to somebody else.?

Darc Keller, CDRC?s top healthcare policy advisor, had stepped down in February. Keller also had been involved in arranging MDI?s no-bid contract; he was subsequently investigated by the state Inspector General?s Office for a potential conflict of interest. Keller previously had been employed as a senior vice president with Mobile Medical International Corp., which was listed as an MDI subcontractor, and had owned $10,000 to $100,000 worth of Mobile Medical stock. Keller denied any wrongdoing, saying he sold the stock by August 8, 2006, several weeks before MDI began work at CDCR facilities.

The real losers in this convoluted prison healthcare blame game, however, are not Farber-Szekrenvi or Keller, or MDI, or the receiver?s office. They are the CDRC prisoners who continue to receive substandard and delayed treatment while for-profit companies strive to make money off their medical needs, and the taxpaying public that foots the bill for no-bid contracts arranged by ethically and morally conflicted state officials.

Sources: Sacramento Bee, Los Angeles Times, Associated Press

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