AUSTIN (AP) — A state contracting scandal that dealt Republican Gov. Greg Abbott the first crisis of his administration escalated Monday with a scathing state report about Texas’ health commissioner, who responded by giving no indication he would resign.
An outside investigation ordered by Abbott did not explicitly call for the removal of Health and Human Services Commissioner Kyle Janek, who was appointed by former Gov. Rick Perry in 2012 and makes $260,000 a year. But a two-month review of a $110 million no-bid contract awarded last year — which public corruption prosecutors in Austin are also now investigating — concluded that failures by Janek helped create an environment in the 56,000-person commission that enabled the deal.
The 92-page report urged changes at the top to fix deep problems in the agency that oversees the state’s Medicaid program, welfare payments and access to women’s health services. But in a letter to state leaders, Janek sounded like he did not intend to leave.
“My goal is to make HHSC a model for good government and ethical leadership,” Janek wrote. His letter did not address criticism in the report about his performance, which included relying on a “bubble” of close advisers that bred tension within the agency.
“For the enterprise to succeed, he must succeed,” the report said of Janek’s office. “In our view, this simply isn’t possible without significant changes either in management structure or in executive leadership.”
In a statement, Abbott said he will use the report to determine “what additional actions must be taken,” but made no mention of Janek or whether any other changes are forthcoming.
“The report’s findings are deeply troubling. It is now more clear than ever that the Texas Health and Human Services Commission has been riddled with operational, managerial, structural and procedural problems that go far beyond any individual or contract. That is unacceptable,” Abbott said.
No sector of state government has been hammered more by lawmakers through Abbott’s first legislative session than Janek’s agency. Fallout over the lucrative contracts to Austin-based 21CT, a tech consulting company, to root out Medicaid fraud has already led to the resignation of top Janek deputies and put the brakes on other massive contracts as the state sought to put new controls in place.
The unusual nature of the 21CT contract was first revealed following an investigation by the Austin American-Statesman. 21CT has rejected claims that the company did not win a competitive bid. But the report paints a problematic purchase that skipped necessary scrutiny for a deal of that size and left top agency executives in the dark.
Janek came up through the Legislature, serving in both the House and Senate before Perry appointed him to oversee a commission that provides food and medical benefits to more than 4 million people — about 1 in 6 Texas residents. Janek has previously criticized his former general counsel and inspector general, both of whom have since resigned, over how the 21CT deal was chosen and approved.
The fallout has made contracting reforms and ethics unusual priorities for the Legislature this spring.
In many ways, the fallout from the 21CT contract resembles the near collapse of Texas’ $3 billion cancer-fighting agency in 2012 over lucrative awards that also skirted necessary scrutiny. That saga ended with several resignations, the indictment of a former top executive and more oversight within the Cancer Prevention and Research Institute of Texas.
Statement from 21CT’s director of government affairs, Mike Rosen:
“21CT takes great exception to the report’s unsupported claim that the agency has nothing to show for its investment when in fact our work resulted in identification of hundreds of millions of dollars in suspicious Medicaid payments. We believe this conclusion represents a deep misunderstanding of the substance, expectation and purpose of the contract.
“21CT reached out to each member of the Strike Force at its inception offering to assist its efforts and demonstrate how our work meets or exceeds contractual obligations. However, the Strike Force never contacted 21CT to discuss the findings, or how the state can continue to utilize the solutions we provided even after the contract ended. It is disturbing the Strike Force interviewed ‘a segment of the vendor community’, yet ignored the vendor whose contract is in question.
“As a business that operates in and at the mercy of the state’s procurement process, we watch with great interest the Legislature’s efforts to institute contracting reforms. All stakeholders, including taxpayers and companies that do business with the state, must have confidence that the system is fair, transparent and ethical, and companies should not be penalized for following protocols under the law and as directed by agencies they serve.
“We continue to stand ready to share information about our thorough compliance and the hundreds of millions of dollars in potential Medicaid overpayments we helped the state identify. We have further offered to meet with HHSC-OIG to discuss how they may best independently utilize the delivered resources moving forward for the benefit of good Medicaid providers, patients, and all taxpayers.”
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