Judge dismisses Molina suit challenging contracts
Insurer seeks to block governor’s administration from issuing new contracts for companies to serve those on Medicaid
A judge Monday dismissed a lawsuit seeking to block the administration of Gov. Susana Martinez from proceeding at least temporarily with new contracts for health care companies to serve Medicaid recipients.
State District Judge Gregory Shaffer dismissed the case brought by Molina Healthcare of New Mexico, which is challenging its loss of a contract to provide Medicaid managed care after Dec. 31.
However, the legal wrestling match over billions of dollars in new Medicaid managed care contracts is far from over.
Molina and three other companies that failed to win contracts have filed protests with the state Human Services Department. If the protests are denied, new lawsuits are a near certainty.
The Human Services Department announced in January that it had selected Presbyterian Health Plan, Blue Cross Blue Shield of New Mexico and Western Sky Community Care to provide Medicaid managed care beginning in 2019.
In addition to Molina, United Healthcare of New Mexico lost a bid to continue serving Medicaid recipients. The two companies are in the final year of five-year contracts.
Molina, United and two other contract losers allege numerous violations of state purchasing laws and regulations in the contractor selection process.
Molina also has alleged the process was tainted by a possible conflict of interest because a department consultant on the Medicaid contracts has business ties to a sister company of Western Sky.
The department has denied the conflict-of-interest allegation and said the selection process was fair.
The enormous amount of money at stake for the winners and losers of the Medicaid contracts was evident by the crowd that showed for a hearing Monday afternoon before Shaffer. There were more than 20 observers, including lawyers and other representatives for health care companies.
Molina wanted the judge to stop the Human Services Department from proceeding further with the Medicaid contracts for the winning bidders until the department has ruled on Molina’s protest.
But the Human Services Department — joined by Western Sky, Presbyterian and Blue Cross — argued that the judge lacked jurisdiction to issue an injunction because Molina’s protest hasn’t yet been decided.
John Ziegler, an attorney for the department, said the request by Molina amounted to an attempt to circumvent the state Procurement Code, which provides for contract protests to issuing agencies, then appeals to District Court if protests are denied.
If contract losers can seek relief in District Court before protests are decided, “We’re opening up a can of worms,” Ziegler said.
Deana Bennett, an attorney for Molina, argued the Human Services Department was “holding all the cards.” Without explanation, the department has denied the company’s request not to proceed further with the contracting process while Molina’s protest is pending, she said.
But Shaffer ruled the court lacked jurisdiction in Molina’s case because the company’s administrative remedies for challenging the contract loss have not been yet been exhausted.
He also expressed practical concerns
about contract losers being able to pursue lawsuits before protests are decided.
“As soon as we open the door to the courthouse, where is the stopping principle?” he asked.
In a statement issued after the judge’s ruling, Molina said it would continue with its protest before the Human Services Department.
“We believe that New Mexicans deserve a thorough investigation into this procurement process, the results of which will have a profound impact on hundreds of thousands of our most vulnerable community members,” the statement said.
More than 850,000 New Mexicans are enrolled in Medicaid, the health care program for low-income people. About 700,000 of those receive managed care, with Molina serving about 220,000 and United more than 88,000.