Lawsuit looming over canceled Medicaid contract

BATON ROUGE (AP) — A Maryland-based company whose nearly $200 million Medicaid contract with the state was terminated is threatening legal action against Gov. Bobby Jindal’s administration, which has refused to negotiate a settlement.

Client Network Services Inc., known as CNSI, said in a statement Friday from lawyer Kathryn Harris that the state won’t work in good faith to avoid legal action.

The Jindal administration scrapped the contract March 21, after details emerged about a federal investigation into the contract award. CNSI said the cancellation of the 10-year contract for Medicaid claimed processing and bill payment was improper.

“CNSI will aggressively pursue all legal remedies in order to be justly compensated for the state’s improper cancellation and to protect our corporate reputation, which the state has repeatedly impugned by its unsubstantiated allegations,” Harris said in the statement.

Jindal’s Health and Hospitals Secretary Bruce Greenstein, who once worked for CNSI, resigned amid the ongoing probe and a separate state investigation by the attorney general’s office.

Greenstein has denied any involvement in the contract award, but the Jindal administration has accused him of inappropriate contact with CNSI throughout the bid process.

Jindal’s Division of Administration said Greenstein exchanged hundreds of phone calls and thousands of text messages with CNSI during the bid process, creating an unfair advantage for the firm.

CNSI’s threat of a lawsuit comes after an attorney representing the state, Richard Zimmerman, sent word to the company Thursday that the Jindal administration wouldn’t accept CNSI’s settlement offer.

Zimmerman wrote that CNSI was paid $17 million for its work.

“It is the state’s position that CNSI is not entitled to receive any additional costs, expenses or other amounts resulting from the termination of the contract,” he wrote. “It is further the state’s position that CNSI owes the state reimbursement for a significant portion of the payments which have already been made to CNSI.”

CNSI spokesman Sonny Cranch wouldn’t say Friday how much money the company was seeking from the state. He said the timeline for filing a lawsuit was “yet to be determined.”

“We are disappointed by the state’s continued intransigence in working toward a business-like resolution of this matter,” Harris said. “Although the state had indicated a willingness to consider serious discussion, the state’s response is very much in line with their stonewalling throughout this process.”

Top CNSI officials have said they don’t know why the contract award is under investigation and have said the company received it after a fair review process by the state Department of Health and Hospitals, not because of Greenstein.

Greenstein was vice president of CNSI from 2005 to 2006.

Lawmakers raised concerns about the contract two years ago when it was awarded and questioned the health secretary’s involvement. But the Jindal administration still proceeded with the deal.

Greenstein acknowledged under questioning from lawmakers in 2011 that a decision he made in the bid solicitation process made CNSI eligible for the contract. He also met with a top CNSI official within days of taking the health secretary’s job.

The Jindal administration said it has learned that around the time Greenstein made the eligibility change, there were multiple phone calls and texts between Greenstein and CNSI officials, including 16 communications on the day Greenstein made the decision.

CNSI officials have called the DHH decision a clarification that confirmed CNSI could be eligible as the primary contractor on the work. Otherwise, they said the company still would have bid on the job as a subcontractor for another firm.

CNSI beat out three other companies for the contract. Critics said the company underestimated the true cost of the job and made incorrect assumptions to win the bid.

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