State was unaware of Optum’s prior legal troubles before company was hired, Miller says

Vermont’s top health care official said the state did not know about the technology firm Optum’s previous legal problems when it decided to hire the company as a consultant to work on Vermont Health Connect.

Lawrence Miller, chief of Health Care Reform, said Optum was hired for its experience remediating other state-based exchanges, and because it charged less than other firms that were interviewed.

Optum, which is a wholly owned subsidiary of health insurance giant United Health Group, used to be known as Ingenix. The company rebranded two years after settling a massive fraud case brought by Gov. Andrew Cuomo in 2009 when he was New York’s attorney general.

Miller said had the state known about the case it likely would have hired Optum anyway.

“When I look at a settlement that’s somewhat old, that didn’t involve an admission of wrongdoing, and is in a different line of business, it doesn’t appear to be something that would’ve changed my mind,” he said.

United Health and other insurers knowingly used Ingenix data to systematically underpay out-of-network rates, and were thereby able to shortchange doctors and their patients to the tune of hundreds of millions of dollars, according to Cuomo’s lawsuit.

Optum, as Ingenix, operated two large databases that the insurance industry used to calculate out-of-network provider rates. Ingenix said the data was “independently researched” and “proprietary” when it sold it back to insurers.

United Health never admitted fraud, but agreed to settle a federal class action lawsuit for $350 million, which went to the doctors and patients they allegedly shortchanged.

The company also agreed to spend $50 million toward developing a truly independent database managed by a nonprofit, which the industry uses for the same purpose as the Ingenix databases.

In an email to VTDigger, Optum spokeswoman Christine Farazi also downplayed the significance of the fraud case. She said it was “a five-year-old agreement we reached in New York related to physician cost databases, and is not part of the work in Vermont.”

Miller also rejected an assertion made by former Auditor of Accounts Randy Brock in a commentary. Brock alleged that Optum obtained a “no-bid” contract with the state. Miller says there wasn’t time to go through an 18-month request for proposal process. The state instead used a simplified bid process and interviewed three other firms, including KPMG and Deloitte Touche, for the work.

Secretary Lawrence Miller testifies in front of the House Appropriations Committee Tuesday. Photo by Alicia Freese/VTDigger

Chief of Health Care Reform Lawrence Miller. VTDigger file photo

Optum and the state are currently in negotiations for a broader contract to take over as the primary technology vendor for CGI, with which Vermont will part ways next month.

The contract under consideration is a “time-and-materials” agreement, Miller said, so the rate will be important to containing costs.

Obama Care Fix-it Gurus

The decision to hire Optum was largely based on its “recent engagements,” Miller said.

United Health has made a cottage industry out of the Affordable Care Act via Optum, which has become the go-to fix-it company for troubled insurance exchanges.

Optum has been consultant for state-based exchanges in Minnesota, Maryland, Massachusetts and Hawaii. Kyle McDowell, an Optum vice president leading operations in Vermont, said the company “has a presence” in virtually every exchange.

McDowell declined to compare Vermont’s progress in building its own exchange to other states where he has worked. The challenges faced by each state are too different, he said.

Optum was also part of the team that swooped in earlier this year to help get back on track.

The scope of Optum’s involvement with Vermont Health Connect going forward is still unclear. Its current contract is for $5.6 million, and will include a report on the remaining technology pieces that need to be fixed or built.

Miller said Optum will likely continue to be involved in operations and could end up building some of the remaining IT functions. The state may also subcontract some of that work, he said.

Vermont has a $171 million federal grant to implement the Affordable Care Act. It will ultimately pay CGI close to $70 million.

It’s unclear how much has been spent on other aspects of implementation, as the most recent figure from the state is $72 million total.

The federal government will continue to allow states to use implementation grants to build exchange sites into next year. The original deadline was Jan. 1, 2015.

Miller has said before that he expects Vermont will use its entire implementation grant to complete the Vermont Health Connect project.

After that, the state will pay for ongoing maintenance and operation.

CORRECTION: Randy Brock is the former state auditor, not treasurer, as originally stated in this article.

Morgan True


  1. Lyle M. Miller, Sr. :

    This is outrageous. I thought the people in charge of this mess were supposed to be adept at knowing the details. It seems that we have another case of yielding to pressure from the Governor to push his agenda through that the underlings continue to fail to do a complete investigation about the people they have hired to work for the State of Vermont. This is so wrong when an ordinary citizen like myself cannot get a job as a volunteer in a nursing home without a complete background check. This is another example of politicians doing almost anything to get their way even if it hurts the citizens the are elected to serve in the long run.

  2. Sam Lincoln :

    A $400 million settlement for “knowingly” defrauding doctors and patients, but not “admitting” wrongdoing? Exactly what is the difference? These are the people our government is choosing to do business with? I don’t care if it was ten minutes ago, five years ago or back in the day, being dishonest and cheating your clients is still being dishonest and cheating, no matter what way you spin it. Only government officials with little to lose would keep shoveling the coal on this fast moving train.

  3. Keith Stern :

    Considering how Peter Shumlin conducts his own business affairs, dealing with his destitute neighbor specifically, it looks like a good fit.

  4. Wendy wilton :

    I guess those folks at VT Health Connect, including Lawrence Miller, Mark Larson and the Governor’s staff don’t know how to use Google…

  5. rosemarie jackowski :

    Remember this in November… or will citizens just continue to vote along Party lines. If so, we get what we deserve.

  6. Linda Baird-White :

    JUST when we didn’t think it could Possibly get any WORSE: It’s becoming downright Suspicious.


    Optum, (which is a wholly owned subsidiary of health insurance giant United Health Group,) used to be known as Ingenix. The *company rebranded two years after settling a *massive *fraud *case brought by Gov. Andrew Cuomo
    in *2009 when he was New York’s attorney general.


    Vermont’s top health care official said the *state did not know about the technology firm *Optum’s previous *legal problems *when it decided to hire the company as a consultant to work on Vermont Health Connect.


    Why didn’t the current administration take adequate precautions to have OPTUM-Ingenix’s track records (*to include former business names) *checked first Before considering a contract with them? One would expect that would be Standard Operating Procedure (SOP).


    The Vermont State Attorney General should be involved in approving ANY CONTRACTS to include a background check because it’s Obvious the current administration is not capable of utilizing a thorough decision making process to include thorough examinations of a contractors prior track records.

  7. victor ialeggio :

    “Optum has been consultant for state-based exchanges in Minnesota, Maryland, Massachusetts and Hawaii. Kyle McDowell, an Optum vice president leading operations in Vermont, said the company “has a presence” in virtually every exchange.”

    It’s your basic tag-team set-up: CGI comes in first, to soften up the chump, followed by Optum with the knockout punch. It’s truly a pleasure to be worked over a couple real professionals.

    • Linda Baird-White :

      Victor Ialeggio, you are referring to an illegal practice known as COLLUSION.

      Considering the current administrations lack of ability to properly handle the Contractor Selection Process, that theory (if substantiated) would support why this administration has been such an easy target. Too much damage has already been done that is going to hurt our economy for a Very Long Time to come.


  8. Linda Baird-White :


    I don’t know how the selection process works for decisions on hiring contractors but in the case of how the current administration has handled the decision making process for hiring contractors, the Vermont State Attorney General should be involved in the approval process for hiring contractors. A background check should the the very first item on the list.

  9. rosemarie jackowski :

    Does anyone believe that the AG would ever go against the governor – especially a governor with a “D” after his name?

    The Office of AG should be depoliticized. We need to remember how the AG was appointed.

  10. Angelo Napolitano :

    The most –“TRANSPARENT ADMINISTRATION EVER” thats what he said…. below link choose your link…. so many of them

  11. Angelo Napolitano :
  12. Linda Baird-White :

    Angelo Napolitano…….W O W…….!

  13. Bruce Post :

    Although I philosophically support a comprehensive single-payer program, I sincerely doubt this Administration can or will ever bring such a plan to fruition. And, at the rate it is going, perhaps it never should.

    Unfortunately, they remind of the title of a book by Jimmy Breslin: “The Gang That Couldn’t Shoot Straight.” They evidently cannot talk straight either. Either they are fibbing about not knowing about Optum/United Health or they are so utterly incompetent that the term “due diligence” never crossed their minds. That seems to cast some doubt on the claim that “if we put a businessman in charge, things would run better.”

    In that regard, here is a comment I posted on Digger almost two years ago in relation to its story “First contractor for single-payer financing plan backs out; proposal on track for January report to the Legislature”:
    “October 10, 2012 at 6:42 am

    I have been removed from the world of health care policy for many years and am not up on the current “landscape” of consultants and also the tangled web of interrelationships in the business. But … this statement caught my eye:

    “Robin Lunge, director of health care reform for Vermont, said United Health Group had another subsidiary that wanted to bid on state projects, and the group didin’t want to jeopardize such opportunities.”

    So, I followed the thread to United Health Group, wondering how it was connected to the Lewin Group. What I found was startling:”The Lewin Group is an OptumInsight company. OptumInsight is a wholly-owned subsidiary of UnitedHealth Group. UnitedHealth Group is a diversified health and well-being company dedicated to making health care work better. UnitedHealth Group offers a broad spectrum of products and services through two operating businesses: UnitedHealthcare, a health benefits business that serves more than 70 million individuals nationwide, and Optum, a health services business with three operating divisions: OptumHealth, OptumInsight (previously Ingenix) and OptumRx (previously Prescription Solutions). OptumInsight offers expertise in health intelligence, connectivity and workflow, helping turn information into insights that, delivered at the right time and place, can enable better informed decisions throughout health communities.”

    The Lewin Group evidently was purchased by UnitedHealth in 2007. As Jim Jeffords often said, “Jeezum Crow!!!” The large private insurers have their tentacles everywhere. Octopus, anyone?

    Next, I found a Washington Post article on the health reform debate in Congress in 2009. The lead paragraph stated, in part: “… few number-crunchers have shaped the debate as much as the Lewin Group, a consulting firm whose research has been widely cited by opponents of a public insurance option.”

    The Lewin Group emphasizes its firewall between its analysis and its huge owner, but as a VP of Lewin told the Post: “Lewin has gone through ‘a terribly difficult adjustment’ since it was bought by UnitedHealth in 2007, he said, because the corporate ownership ‘does create the appearance of a conflict of interest.’”

    Holy cow! All these takeovers, interwined interests, mergers, insider relationships. Howard Dean once said that he wanted the rest of the country be more like Vermont, and I guess it is.””

    Somehow, I don’t think this is going to end well.

    • Fred Woogmaster :

      Any quick remedies, Mr. Post?

      • Bruce Post :

        No, Fred, I don’t have a quick remedy. (But, I have a quick suggestion below.) I consider this to be a cautionary note, however.

        A management prof at Stanford wrote a phrase I remember well: Instead of “forgive and forget,” use “forgive and remember.” There are many lessons to be drawn from this, but if leadership adopts the same attitudes that got them into a problem, then they could commit similar mistakes/behaviors down the road.

        The BerryDunn report on Vermont Health Connect identified several problems, but two jumped out at me: first, political interference; and two, fear about bringing concerns to upper management. This is not confined to the Shumlin Administration or government. Plenty of private sector entities exhibit similar behaviors. I am sure you remember the Challenger shuttle disaster. Underlings at Morton Thiokol who warned about the O-rings were not listened to. There was tremendous pressure to launch, which was part of the NASA culture. We know how that turned out unfortunately.

        So, maybe going forward and despite what I said above, I can recommend a quick fix: deal with the political interference and create a climate where issues can be raised without fear by the folks down the pecking order.

  14. Angelo Napolitano :
  15. David Dempsey :

    CGI was originally given a contract for $42 million to build the IT system for Vermonts health exchange. In its usual penchant for lack of transparency, the administration quietly, behind the scenes, amended the contract and doubled the amount to $84 million. Optum was given a no bid contract for $5.69 million, to tell us what we know already, the exchange doesn’t work. If and when the administration amends that no bid contract, who knows how much we will pay them. The administration can ignore Vermonts bidding policy for hiring a contractor because they don’t have time to abide by the rules, does that mean that all the departments in state government can ignore the policy as well?

  16. Carl Werth :

    Where are all the partisan platitudes in this comment section of this story telling us that the republicans are just as bad if not worse, and that when single payer gets here it will all be unicorns and rainbows?

    Someone is slipping in their timeliness…

  17. Stan Hopson :

    “Doubling down on stupid, Peter Shumlin playing craps with Vermonters Healthcare” – Should be the headline.

  18. Wendy wilton :

    Leaving aside all the ineptitude in this debacle regarding the creation and operation of VHC, this whole thing is a financial problem for the state at a time we can least afford it. Taxes are out of sight and health care premiums will increase for 2015 as much as 10% due to this ‘plan’ hatched by the Shumlin administration, approved by our legislature.

    Governor Shumlin was forced to trim the current budget (for now) by $31 million. Those cuts are made to a budget that just took effect 6 weeks ago. These cuts will impact poor and rural Vermonters the most. See the other VTDigger articles to see what they are.

    The expected 2015 increase in health care premiums could have been avoided by defaulting to the federal exchange and making the exchange voluntary. The legislature failed to provide Vermonters options in the event VHC did not work even though they had evidence during the legislative session about these problems.

    The budget cut in response to the revenue shortfall of $31 million may not have been necessary if we hadn’t built our own (failed) exchange at a huge cost of $90 million or so (so far) resulting in hiring hundreds of new state employees and contractors to try to run it. Gov. Shumlin failed us here and his administration is keeping up the charade.

    One party rule. Isn’t it great?

    • Doug Hoffer :

      Please provide evidence that the cost of the Exchange contributed to the estimated $31 million shortfall in revenues for fiscal year 2015.

      • Craig Powers :

        $71 Million spent on a system that does not work. $31 million deficit and climbing. Regardless of where the $71 million came from…it could have been used to plug that hole. She does not need to provide the evidence you so crave. The math is simple and straight forward.

        • Doug Hoffer :

          You are mistaken. The problems of the Exchange are completely separate from the estimated revenue shortfall. The federal funds allocated for the Exchange cannot be used to replace state general funds. If you can prove otherwise, please do so.

          • David Dempsey :

            We get the point and you are correct. But if the single payer plan is delayed or scrapped altogether, Vermonters will have to pay for the operating costs of the exchange. If the 1 year extension for using the Federal money fails to get the exchange functioning properly, the state might also have to pay the costs of finishing it on top of the operating costs. Thanks to Shumlins mandate, the exchange will be the only game in town.

          • Jim Manahan :

            I’m not convinced they are completely separate when you consider the vast resources being dedicated and focused on attempting to get the failed exchange operational. Meanwhile, those resources can’t be utilized to focus on the revenue shortfall issue or the myriad other issues impacting our state. The administration, in their foolish zeal to be first, has bitten off way more than they can chew. Time is money and the clock continues to tick on this reckless endeavor.

      • Wasn’t it at the very end of the 2013 legislative session that the Shumlin administration asked for more than $18 million in new funding for FY14 to run the exchange?

        If that’s the case, wouldn’t a similar amount of funding or $18 million or more be in the FY15 budget resulting in more than half of the $31 million expected shortfall?

        Thus, even though the $7o million plus plus to be spent building the exchange will be funded with federal funds, the money needed to keep the exchange running will be coming from Vermont taxpayers. This makes Wendy’s comment essentially correct.

  19. Carl Werth :

    One party rule is a very expensive nothing burger.

  20. don keelan :

    I had always believed that it would only be a matter of time when shady state contracting for services would mirror The Bronx and Jersey City. How fortunate we have been that it did take so long—but now it is here too.

  21. To date the decision to build and the attempted construction of the health care exchange has proven to be a costly and embarrassing disaster for the state. A disaster costing tens of millions of dollars with little of consequence to show for the money and effort put forth.

    Making things even worse, more money an amount yet undetermined, will have to be expended in an attempt to rescue the exchange. Assuming success, the taxpayers will then be faced with multi-million dollar annual costs to operate and maintain the exchange. An exchange that will be serving how many people and doing what?

    So we are where we are and it’s not pretty. What’s now important is where this process will stand down the road. Will the massive amount of taxpayer money spent be justified by a fully functioning automated system efficiently serving the state as promised or more of the same? At this point, we don’t know what the outcome will be.

    What we do know is that this entire misadventure is totally owned by Governor Shumlin, his handed picked staff and a Democrat dominated legislature. More significantly, the ultimate responsibility resides with the voters of this state who continued to put these very people in office.

    Larry Miller has a daunting task in front of him. Even if he is successful, in the end the question remains: What will the taxpayers have actually gotten with the exchange that warranted such staggering costs?

  22. Pat Crocker :

    This is all so complicated because it was engineered to assure that the private interests would get their piece of the action and then some. This national Rube Goldberg Machine could have been avoided entirely by instituting a public option – Medicare for all.

  23. Chris Lewis :

    “Miller says there wasn’t time to go through an 18-month request for proposal process”

    Really? So what is the reason behind this time crunch?

    It is because the Shumlin administration does not think things through (behind political aspirations of the governor). It does not even attempt to hide the fact that they do not perform due diligence.

    The same mistakes can be expected to occur in this exchange since this administration continues on its disastrous ways. (i.e., this administration does not learn from its mistakes. and there are many mistakes to learn from.)



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