A Phoenix-based international health insurance firm that lost the bid and later its protest for a lucrative behavioral health contract with the state was still contemplating a formal appeal on March 4.

The Department Health Services awarded the $1.3 billion, three-year contract to ValueOptions of Virginia last month to oversee behavioral health services for about 60,000 poor and uninsured Maricopa County residents.

DHS is responsible for administering behavioral health services for the seriously mentally ill and for adults and children with general mental health and substance abuse disorders.

Schaller Anderson Behavioral Health filed a protest with DHS on Feb. 17, claiming, among other things, that information about its bid was fed to ValueOptions. In its 18-page protest, Schaller Anderson cited anonymous communications it had received as proof of the leak and “inappropriate contacts” between DHS and ValueOptions.

DHS Rejected Claim March 2

After a two-week investigation, DHS on March 2 rejected the claims of a leak, as well as Schaller Anderson contentions that ValueOptions and its parent company, FHC Healthcare, are financially unstable. A recent published report said the Arizona division of FHC posted a $16.4 million profit in 2002.

Schaller Anderson’s protest, filed by Paul Eckstein of the Brown and Bain law firm, also stated that DHS ignored federal law requiring evaluation of cost-effectiveness of bid proposals, and that Schaller Anderson’s proposal included allocations of from $58 million to $106 million to improve services and create savings from reduced profit and administrative costs.

“This investigation found no evidence substantiating those alleged inappropriate contacts,” concluded Jon Medwin, DHS procurement officer and administrator, in a 37-page response. “A protest alleging inappropriate contacts [based on similarities between the two proposals] should be supported by hard facts, not suspicion and innuendo.”

In a written statement from Schaller Anderson, CEO Joe Anderson said his company filed the protest “only after the most serious consideration of the manner in which the review process was conducted and the substance of the bids, and we believe the issues raised are compelling and warrant thorough evaluation.”

Firm Has Until March 7 To File Formal Appeal

Schaller Anderson has until March 7 to file a formal appeal with DOA.

Co-founded by Dr. Don Schaller, former director of AHCCCS, Schaller Anderson also is among bidders for the state’s self-insurance health program. Contract awards, which were to have been made last December, have been delayed because of legislative opposition to the Department of Administration’s bidding process and budget issues. —