Social Service Agency Reacts to Welfare Contractor’s Controversy

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Orange County social service officials updated county supervisors Monday about an impending decision to increase a welfare management contract to a firm at the center of an alleged Medicaid fraud scheme.

The company, Virginia-based Maximus, Inc., was sued by federal prosecutors for allegedly defrauding Medicaid out of millions of dollars intended for foster children services by making false reports, Voice of OC reported early Monday.

The firm – which is a campaign contributor to all Orange County supervisors – ultimately settled the case for $30 million.

Additionally, a 2010 state audit found that Maximus, which was put in charge of a California program for medical professionals with substance abuse issues, failed to report when doctors and nurses tested positive for drugs and alcohol.

Orange County supervisors are slated to vote today on a new three-year contract with the firm to operate most of the county’s welfare-to-work program.

The critical state audit and alleged involvement in Medicaid fraud was not disclosed in the staff report to supervisors.

In reaction to the Voice of OC story, Social Services Director Michael Ryan sent a memo to supervisors Monday emphasizing that the firm’s past controversies are not connected to its work for Orange County.

“The Social Services Agency has had no contractual issues with Maximus and the company has performed well. Additionally, neither of the programs that were subject to controversy in 2007 and 2010 relate to any work being done in Orange County,” Ryan wrote in his Monday evening memo.

“Maximus’ performance typically meets or exceeds the County’s performance measures,” he added, pointing to its rate of participants who are reported to be in the workforce.

(Click here to read Ryan’s memo to county supervisors).

County Supervisor John Moorlach, meanwhile, said Ryan did a good job of addressing the concerns.

“I let managers manage, so certainly they’re going to try and sift through all the noise and news and the issues concerning Maximus,” said Moorlach.

“Their performance measurements are great, so unless some new news comes up, I’m looking forward to the item tomorrow.”

Four county supervisors – Pat Bates, Todd Spitzer, Janet Nguyen and Chairman Shawn Nelson – didn’t return messages seeking comment.

Despite questions about the accuracy of Maximus’ reporting, Ryan didn’t explain in his memo how the county verifies that the firm is providing truthful information about its performance.

According to Maximus’ current contract, a county administrator is supposed to regularly inspect the firm’s work, including reviews of random case files every month. It’s unclear how often those inspections have taken place, and what the results have been.

Social Services Agency spokeswoman Terry Lynn Fisher said Monday afternoon that she had no information about Maximus or its work for the county.

In their lawsuit, federal prosecutors alleged that a Maximus vice president helped facilitate a scheme to bill Medicaid for foster children services in Washington, D.C. that company officials knew were never provided.

“After obtaining confirmation that such services were not performed through a [social services agency] computer search, and in the majority of instances after contacting the social workers who confirmed the services were not performed, Maximus nevertheless created files that indicated services were performed, and used such information to demand Medicaid pay for services not rendered,” the suit states.

Under the Maximus’ contract with Washington, D.C., the firm was given 10 percent of the Medicaid funds it helped the the city obtain.

(Click here to read the fraud lawsuit against Maximus.)

Maximus ended up settling the suit for $30 million, which postponed any criminal prosecution of its employees.

It’s unclear what steps, if any, Maximus has taken to prevent fraud in the wake of its settlement. Company spokesman Blake Travis didn’t return messages seeking comment.

Orange County has contracted with Maximus for welfare-to-work case management since the state’s CalWORKs program started in 1998.

The program is supposed to help welfare recipients prepare for and obtain jobs, in light of a 1996 federal law intended to foster employment among low-income Americans.

In Orange County, Maximus currently manages about 3,000 welfare-to-work cases of the roughly 5,000 total participants.

The firm’s current contract expires June 30, and social services executives are recommending that supervisors approve a new three-year contract today without opening the work to competitive bidding.

If approved, Maximus would receive an increase from $4.9 million per year to $6.3 million annually.

County staff suggest that the rise in cost is due to a new requirement that Maximus oversee case management “from the very initial stages of the client’s [welfare-to-work] process and maintain the case through the [welfare-to-work] event sequences.”

The staff report doesn’t explain how that differs from the firm’s current workload.

Additionally, it’s unclear why the contract wasn’t opened up to competitive bidding.

Moorlach also responded Monday to the revelation that Maximus gave maximum contributions to the campaign accounts of all five county supervisors.

In his “Moorlach Update” newsletter, Moorlach said that of the priorities he uses to vote for contractors, “how much they contributed to my campaign is not one of them.”

In an interview, Moorlach said he tells vendors that “just because you contribute to me doesn’t guarantee that I vote for you. I rely on the fact that the bid that you’re making is the lowest, most responsible bid in the pack. And I don’t really memorize who contributes to me.”

Campaign contributions, he added, shouldn’t automatically cast a bad light on contractors.

“Just because someone participates in the system, it doesn’t necessarily impugn them as bad vendors,” said Moorlach.

According to campaign records, Maximus gave a maxed-out $1,700 contribution to Supervisor Janet Nguyen in August 2009, as well as $1,700 to Supervisor Pat Bates’ campaign in 2010.

Supervisor Todd Spitzer’s campaign received $1,800 from the firm in 2011, while Supervisor John Moorlach received a $1,000 contribution in 2011 and another $800 the following year.

For supervisors’ Chairman Shawn Nelson, records show a $1,700 contribution in April 2010, another $1,700 in September 2010 and $1,800 in late June 2011.

You can reach Nick Gerda at ngerda@gmail.com, and follow him on Twitter: @nicholasgerda.

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