STATE OF FLORIDA DEPARTMENT OF CORRECTIONS WEXFORD HEALTH SOURCES, INC., Petitioner, vs. DC Case No.: DC16-36 Contract No. C2869 STATE OF FLORIDA, DEPARTMENT OF CORRECTIONS, Respondent. / PETITION OR AMENDED PETITION FOR FORMAL ADMINISTRATIVE PROCEEDINGS, AND FORMAL WRITTEN PROTEST Pursuant to Sections 120.569 and 120.57(1) and (3), Fla. Stat., and Rule Chapter 28-110, Fla, Admin. Code, Petitioner Wexford Health Sources, Inc., hereby files its Formal Written Protest and Petition for Formal Administrative Proceedings to contest the award of Contract No, C2869 to Centurion of Florida, LLC, and the terms and conditions of that contract, for Comprehensive Health Services in Region I, Region II, and portions of Region III. In support of this Petition and Protest, Wexford states as follows: PARTIES 1. The Ageney affected is the Florida Department of Corrections (“DOC” or “the Department”), whose headquarters are located at 501 South Calhoun Street, Tallahassee, Florida 32399-2500, and whose Bureau of Procurement is located at 4070 Esplanade Way, Tallahassee, Florida 32311. The Agency’s file number for this contract is C2869. 2. Petitioner is Wexford Health Sources, Inc. (“Wexford”), whose address for purposes of this solicitation is Foster Plaza 4, 501 Holiday Drive, Pittsburgh, PA 15220. For Purposes of this proceeding, Wexford’s address shall be that of its undersigned attomeys, ‘OERTEL, FERNANDEZ, BRVANT & ATKINSON, P.A., P.O. BOX 1110, TALLAHASSEE, FLORIDA 32902-1110Kenneth G. Oertel and M. Christopher Bryant, of Oertel, Femandez, Bryant & Atkinson, P.A., 2060 Delta Way, P.O. Box 1110, Tallahassee, Florida 32302-1110, telephone number 850-521- 0700, facsimile number 850-521-0720. NOTICE 3. The Department notified Wexford by email on Monday, February 1, of its intent to enter into a contract with Centurion of Florida, LLC (“Centurion”) to provide health services in Department correctional institutions located in DOC Regions I, Il, and III. ‘The email did not contain the notice required by Section 120.57(3)(a), Fla. Stat., of the need or opportunity to timely file a protest. The Department did not post notice of the contract award on the state's internet-based Vendor Bid System (“VBS”) or on the Department's own website. 4. Wexford, through undersigned counsel, immediately contacted the Department's legal staff and requested a copy of the contract. The contract was provided to Wexford’s attomeys by email from the Department's general counsel's office on Tuesday, February 2, at approximately 3:30 p.m. The transmittal of the contract again did not contain the notification required by Section 120.57(3)(a) of the opportunity or need to timely file a protest. However, in an abundance of caution, Wexford filed a Notice of Protest within 72 hours of its attorneys’ receipt of the contract. A copy of the Notice of Protest, filed on Friday, February 5, 2016 at 2:45 pm., is attached hereto as Exhibit “A.” This Petition and Formal Written Protest is being filed within 10 calendar days of that Notice of Protest. 5. On Wednesday, February 10, 2016, the Department entered an “Order Dismissing Petition, with Leave to Amend,” a copy of which is attached to this Petition as Exhibit “B.” In the Order, the Department asserts that “there was no competitive bid process applicable to this contract,” and that therefore the protest procedures of Section 120.57(3), Fla. Stat., do not apply. 2 (OERTEL, FERNANDEZ, BRYANT & ATKINSON, P.A., P.O. BOX 1110, TALLAHASSEE, FLORIDA $2302-1110‘The Department further states that it will treat the Notice as an initial Petition secking a hearing, albeit one that does not conform to the Uniform Rule of Procedure requirements for petitions, ‘The Department has given Wexford until February 17, 2016, to file an Amended Petition. 6. Wexford disputes the Department's assertions that this acquisition is not required to be done as a competitive procurement, and that Section 120.57(3) does not apply. However, Wexford recognizes that the Department's determination is likely not immediately judicially reviewable, and that Wexford likely must pursue the administrative remedy provided. Thus, without waiving its entitlement to Section 120.57(3) proceedings, Wexford’s Petition should be treated by the Department as the Amended Petition which the Department’s Order allows Wexford to submit, IBSTANTIAL INTER] AFFECT 7. Wexford is a company that routinely engages in the business of providing health care services to inmates in correctional settings across the nation, and has done so for over 24 years. Wexford has previously provided such services to the Florida Department of Corrections, and to county jail systems in the State of Florida, and Wexford currently provides such services to the Department in Region IV. 8. The contract awarded to Centurion is for services currently being performed by another health care provider, Corizon, Inc. On November 30, 2015, Cotizon gave notice to the Department that it was terminating the contract, effective May 31, 2016. A copy of Corizon’s termination letter is attached as Exhibit “B.” The Department then approached Wexford to assist s, and to determine an it in determining how to retain another contactor to provide those ser affordable pri within the Department’s current and reasonably anticipated health services COERTEL, FERNANDEZ, BRYANT & ATKINSON, P.A., P.O. BOX 1110, TALLAHASSEE, FLORIDA 32302-1110budget, with the understanding that Wexford would have an opportunity to submit an offer to provide the services. 9. Wexford’s substantial interests are affected by DOC's award of a contract to Centurion, and particularly considering the terms and conditions contained in that contract, because it denied Wexford the ability to submit a fair, responsible, and comparable proposal to the Department to provide the same services, and to derive business opportunities and positive net revenue from this contract, 10. Further, unlike the “per diem” contracts which put the financial risk on the vendor, the Department has consistently used to provide health cate services, the contract awarded to Centurion is a “cost plus” contract. The contract requires the Department to reimburse Centurion for all actual expenditures incurred by Centurion, including but not limited to salaries, wages, and benefits for all staff; inpatient and outpatient hospital expenses; Physician’s fees; therapeutic and diagnostic ancillary services; medical and office supplies; medical equipment; computer equipment; licenses and permits; non-formulary and emergency medications and therapeutics; background checks; and insurance costs. In addition, the contract requires the Department pay Centurion an “administrative fee” of 13.5% of the actual expenses for “corporate support costs and profit.” 11, All of the moneys to be paid to Centurion are subject to a cap of $267,968,000 annually. For fiscal year 2015/2016, the entire General Appropriation Act Line Item for Inmate Health Services is only $286,147,085. See, Chapter 2015-232 Laws of Florida, Line Item 737. 12. Wexford’s Region IV contract is paid from that same line item, and in the current. fiscal year the Department has paid Wexford approximately $4 million per month for comprehensive services. Payment to Centurion up to the contract maximum, using the 4 COERTEL, FERNANDEZ, BRVANT & ATKINSON, P.A., P.O. BOX 1110, TALLAHASSEE, FLORIDA 32302-11102015/2016 figures as a measure, would leave less than $20 million to pay Wexford for its services annually. Wexford’s substantial interests in getting paid in full for its contractual services provided to the Department are therefore being adversely affected by the terms of the Centurion contract. BACKGROUND 13. In the 2011 Legislative session, the Florida Legislature passed Senate Bill 2000, the Appropriations Act, for the period July 1, 2011, through June 30, 2012. The Act was approved by the Governor, subject to certain line item vetoes not relevant here. The Act, designated Chapter 2011-69, Laws of Florida, contained proviso language that directed the Department to issue Requests for Proposals to award contracts to private companies for the provision of health services. The instruction to use a competitive “RFP” process was in keeping with the very strong public policy in this state that “fair and open competition is a basic tenet of public procurement;” and that “such competition reduces the appearance and opportunity for favoritism and inspires public confidence that contracts are awarded equitably and economically.” Section 287.001, Fla. Stat. The contract the Department entered into with Centurion was done in vi lation of the directive to award prison health service contracts by use of a Request for Proposals. 14, The contracts sought were for an initial five year period, with an optional five year renewal period at the Department's discretion. Proposers responding to the RFP were required to provide a single “capitation rate,” a full-tisk per-inmate, per-day figure for all services. 15. The use of a “capitation rate” in contracts for correctional health care is not unusual. This per diem rate is applied each month to the average daily population (“ADP”) of ‘OERIEL, FERNANDEZ, BRYANT & ATKINSON, P-A, P.O. BOX 1110, TALLAHASSEE, FLORIDA 32902-1110inmates in the institution for which the contractor is responsible for providing care. The inmate population at any given institution will often fluctuate on a daily basis, as inmates are processed into the system upon sentencing, transferred to and from facilities, are discharged from the system, or die. The capitation rate in such contracts typically increases each year to account for general inflation, and for inflation in the costs of providing health care. 16. The Department ultimately awarded two contracts as a result of the 2011 legislation: Contract No. C2758 to Wexford for Region IV health services for the period December 21, 2012 through December 20, 2017; and Contract No. C2757 to Corizon for Regions I, Il, and Ill, effective October 1, 2012 through September 30, 2017. Each contract allowed for renewal of the contract by the Department for an additional five year period, Each contract allowed the contractor to terminate the contract without cause upon 180 days notice. On November 30, 2015, Corizon gave notice of termination of its contract, effective May 31, 2016. NATURE OF THE CONTROVERS' 17, On January 29, 2016, the Florida Department of Corrections entered into a no-bid contract with Centurion of Florida, LLC to provide comprehensive healthcare services to prison inmates in Regions 1, 2, and 3 in the state, These Regions encompass an area stretching from Escambia County to Highlands County. The contract is for a two year period, with up to three one year extensions. The Contract has a maximum annual value to Centurion of $268 million, 18, The contract awarded by the Department of Corrections to Centurion was accomplished without complying with competitive acquisition procedures contained in Section 287, Florida Statutes. This is contrary to the legislative intent contained in the 2011 Appropriations Act proviso language specific to the very contract the Department proposes to COERTEL, FERNANDEZ, BRYANT & ATKINSON, P.A., P.O. BOX 1110, TALLAHASSEE, FLORIDA 32302-1110,replace with the Centurion contract. That legislative directive was to award the contracts through requests for proposal. 19. The Centurion contract states that it was issued pursuant to Sections 945.025(4) and 287.057(3), Florida Statutes. Notably, these statutory provisions date to 1980 (for the Chapter 945 provision) and 1990 (for the Chapter 287 provision), long before private comprehensive correctional health care existed. 20. These statutory sections do not authorize the Department to award a no-bid contract for healtheare services for inmates in the majority of Florida State correctional facilities, for a future term that may last for five years. The statutory sections cited by the Department have never been invoked by the Department, in over 15 years of contracting for large scale comprehensive health services, to authorize a non-competitive procurement. The only reasonable interpretation of these statutes is that they were only intended to allow the case-by- case immediate delivery of healthcare services for which competitive procurement was infeasible, not the award of long-term, area wide contracts without any competitive award processes being followed prior to the execution of the contracts. 21. The contract also contains provisions which violate the Eighth and Fourteenth Amendments of the United States Constitution. This conclusion is mandated by the decision in Costello v. Wainwright, 525 F.2d 1239 (5" Cir. 1976); opinion reinstated by, Costello v. Wainwright, 430 U.S. 325 (1977). In that decision, it was determined that the Florida Department of Corrections, pursuant to the Constitution of the United States, was required to provide constitutionally adequate healthcare service to all prison inmates. The Fifth Circuit Court of Appeals noted that “...the State of Florida, having chosen to operate a penitentiary system, must operate that system in accordance with the Constitution of the United States,” 7 COERTEL, FERNANDEZ, BRVANT & ATKINSON, P.A., P.O. BOX 1110, TALLAHASSEE, FLORIDA 32302-1110Costello v. Wainwright, 525 F.2d at 1251; citing to Gates v. Collier, 501 F.2d 1291, 1319-1320 (5™ Cir. 1974). 22. The 5" Circuit held that “the fact that the Florida State Legislature had provided funding for operation of the Florida prisons in less amounts than requested by the defendants is no excuse for the continued existence of unconstitutional conditions of incarceration.” Costello at 1251. In addition, “the right of [incarcerated persons] to be secure in their constitutional rights cannot be made dependent upon the action of the state legislature in appropriating additional money, an area which we can all recognize from the course of human experience is a field in which relief too often comes too little and too late.” Costello at 1252. This is an obligation the State of Florida has which cannot be avoided. The Department of Corrections has determined that it is in its best interest to engage private healthcare contractors to provide adequate healthcare services to all inmates within the prison system operated by the Florida Department of Corrections that satisfies the requirements described in Costello v. Wainwright. 23. Further, all state agencies, including the Florida Department of Corrections, are prohibited from expending any funds not specifically appropriated by the Florida Legislature, In the current fiscal year, the Florida Legislature has appropriated $286,147,085 to the Department of Corrections for inmate healthcare. Presently, the only means for delivering these mandated health services to prison inmates is through the use of private contractors, which the Department has engaged through the contracts executed with Wexford and Corizon, including the contract it recently executed with Centurion to replace the services provided by Corizon, The Department has no funds, or personnel, or approved positions in the 2015-2016 budget, to provide these services on its own. ‘OERTEL, FERNANDEZ, BRYANT & ATKINSON, P.A., P.O. BOX 1110, TALLAHASSEE, FLORIDA 32302-111024. The contract allows Centurion to be paid on a “cost plus” basis. In other words, the more Centurion expends in performing its services to provide prison healthcare, the more the Department of Corrections must pay it. The only cost controls in this contract which limit how much Centurion can spend and, thus, how much it must be paid by the Department, is a $268 million annual cap that, based on the current fiscal year’s budget, is over 93% of the total inmate health services line item in the state budget. Simply put, Centurion can bill the Department of Corrections an unlimited amount each month it is performing under this contract, subject only to ‘an annual cap of $268 million. Those monthly bills will include a cost-plus “administrative fee” (corporate support costs and profit) for Centurion of 13.5% of the actual expenses incurred by Centurion. 25. Asa result of this award, there is no requirement in this contract nor incentive for Centurion to perform in a manner that prevents the available funds from being exhausted before the end of the fiscal year. Since the contract contains only a 60 day notice requirement for termination (instead of the 180 day notice requirement in the Wexford and Corizon contracts), Centurion can incur expenses at any level, and can terminate the contract when it reaches the point where there are only two months worth of funds left. That situation is a foreseeable outcome of this contract. Should these expenditures exceed the amount the Legislature has appropriated for the entire state to provide adequate health services to the inmates in question, the State of Florida will be unable to provide these services to any inmates in its custody. In order to comply with the Costello mandate, the Department would have to use funds appropriated by the Legislature for other purposes, which it cannot legally do. 26. The Department of Corrections no longer directly employs medical staff capable of providing prison health services. It must rely on private vendors to provide these services ina COERTEL, FERNANDEZ, BRYANT & ATKINSON, P.A., P.O, BOX 1110, TALLAHASSEE, FLORIDA 22302-1110manner that satisfies the U.S. constitutional requirements to provide adequate health services to prison inmates. Since the contract the Department of Corrections has awarded to Centurion contains no monthly cost controls, and instead only an annual maximum, there is nothing in this contract which would prevent Centurion from exhausting the total amount of funds the Legislature has appropriated to the Department of Corrections for prison healthcare long before the term of the contract or end of the fiscal year is reached. Nor would Centurion have any incentive to control its spending on health care services; since its “administrative overhead” (i.e. profit) is a percentage of the expenses it incurs, Centurion in fact has the perverse incentive to spend all of the budgeted funds as early in the contract as possible. 27. In other words, under this contract, Centurion is in a position where it can bankrupt the Department of Corrections of all the finds it has available to provide prison health services long before the fiscal year in question has expired. Were this to happen, the Department of Corrections would be unable to provide adequate healthcare to any of Florida’s inmates. In fact, Florida would be unable to provide any healthcare services to its inmates at any time it comes to a point where it has run out of funds the Legislature has appropriated for the Department of Corrections to provide such services. No state agency may expend funds not authorized and appropriated by the Legislature. 28. Were this to occur, the United States Department of Justice Civil Rights Division would take immediate and severe action against the State of Florida for violating the Civil Rights of all its prison inmates. The United States Department of Justice is extremely vigilant on these matters. The consequence of such would be catastrophic to the State of Florida and would have unprecedented consequences, 10 COERTEL, FERNANDEZ, BRYANT & ATKINSON, P.A., P.O, BOX 1110, TALLAHASSEE, FLORIDA 32302-111029. Nevertheless, the fact remains that under this contract, Florida can be placed in a position where it would be totally unable to provide any healthcare services to its inmates, This foreseeable and, yet perilous, situation would be caused solely by the terms of the no-bid to with Centurion, as a result of its failure to contract the Department of Corrections entered obtain competitive proposals from qualified vendors, and to secure a contractor with a payment mechanism that ensures adequate health care services will be available throughout the fiscal year. Instead, the Department of Corrections, for reasons it has not explained, chose to enter into this unilateral cost-plus contract award ial 30. Potentially, the award to Centurion could, over the term of five years (the i two year contract term, plus three optional renewal years), amount to well over $1 billion, Centurion’s guaranteed profit from this contract, in that situation, would be over $130 million, It is beyond question that other qualified and experienced vendors would have, were they asked, provided the Department of Corrections with healthcare proposals that would be much more economical to the State of Florida and which would result in significant cost savings to the state. 31. Thus, the contract awarded to Centurion, by not being entered into through a competitive process and by also containing a cost plus provision without any corresponding monthly cost controls, makes it extremely likely that all the money appropriated by the Florida Legislature to the Department of Corrections for prison healthcare, will be exhausted prior to the end of the fiscal year and prior to the end of the contract term. Should this occur, the Department will have no other means to fulfill its duties to provide adequate prison healthcare under the requirements of Costello v. Wainwright and in accordance with Florida law limiting state agencies to appropriations of funds made by the Legislature W COERTEL, FERNANDEZ, BRYANT & ATKINSON, P.A., P.O, BOX 1110, TALLAHASSEE, FLORIDA 32302-111032. The inclusion of a possible three year extension to this two year no-bid contract is also anti-competitive and unnecessary. The Department has already initiated an Invitation 10 Negotiate (“ITN”) development process for contracts to follow the five year contracts that were awarded to Corizon and Wexford in 2012, as discussed above, The ITN process, initiated in December 2015, will most likely have resulted in new, competitively-acquired contracts for health care services well before the expiration dates of the original 2012 Corizon and Wexford contracts DISPUTED ISSUES OF MATERIAL FACT 33. Wexford has initially identified the following disputed issues of material fact, or mixed questions of law and fact, which it reserves the right to supplement as additional facts become known to it: (@) Whether the Department has a policy, based on multiple procurements of health care services since the year 2000, of acquiring health care services through competitive solicitation. Wexford contends that it has, (b) Whether there is adequate funding appropriated by the Legislature in the current fiscal year’s budget, and reasonably anticipated in the 2016-2017 budget, to pay both the Centurion and Wexford contracted rates, (©) Whether the financial commitments contained in the Centurion contract, together with the Department’s preexisting contract with Wexford, presents a substantial risk of insufficient funding for health services, and for Wexford’s contract. Wexford contends that they do. (@ Whether either Section 287.057(3)(a)5 or 945.025(4), F.S., authorizes such a large scale contract for comprehensive health services without a 12 ‘OERTEL, FERNANDEZ, BRYANT & ATKINSON, PA, P.O, BOX 1110, TALLAHASSEE, FLORIDA 32302-1110competitive procurement of some type. Wexford contends that neither statute authorizes such an award. (©) Whether Wexford was given the opportunity to submit pricing information to the Department for comprehensive health service in Regions I, II and Ill on a comparable basis as the Centurion contract, Wexford contends that it was not (Whether the no-bid proposal from Centurion, accepted by the Department, is an irresponsible proposal that fails to make sufficient provision for inmate healthcare, including but not limited to offsite healthcare in at least two of Centurion’s Regions, resulting in substantial risk of the Department being unable to fulfill constitutional duty to provide adequate healthcare to inmates. Wexford contends that itis. (g) Whether the “cost plus” contract containing only a 60 day notice for termination and no monthly cost controls that the Department has entered into with Centurion presents a substantial risk of the Department being unable to fulfill its constitutional duty to provide adequate health care to inmates, due to the likelihood of appropriated funding for health care being exhausted by Centurion prior to the end of any given fiscal year, Wexford contends that it does. (h) Whether the inclusion by the Department of three years of potential extensions into the Centurion contract is anti-competitive and contrary to public policy. Wexford contends that it is. (@) Whether the award of a contract to Centurion through a claimed exemption from competitive bidding is contrary to the last statement of legislative 1B ‘OERTEL, FERNANDEZ, BRYANT & ATKINSON, P.A., P.O. BOX 1110, TALLAHASSEE, FLORIDA 32802-1110intent that the Department award comprehensive health services contracts by the request for proposal process. Wexford contends that it is. @ Whether the contract awarded to Centurion will result in the Department paying an inflated sum to Centurion and be a waste of significant state resources. Wexford contends that it will. CONCISE STATEMENT OF ULTIMATE FACTS 34. As its concise statement of ultimate facts, Wexford asserts that the contract entered into by the Department with Centurion on a non-competitive basis, and on a cost-plus basis, is inconsistent with prior agency practice; and is anticompetitive; fails to properly allocate budgeted inmate health care appropriations to ensure adequate care will be provided to inmates in all Regions of the state for the entire fiscal year; will lead to the unconstitutional deprivation of health care services to inmate; and is contrary to state law and clear legislative directive for the provision of comprehensive health care services to inmates. QUEST TO RESOLVE BY MUTUAL AGREEMENT 35. Although the Department does not consider this proceeding to be governed by Section 120.57(3), Fla. Stat., Wexford requests the opportunity to meet with the Department at the earliest mutually available date, in order to attempt to resolve this matter by mutual agreement. 4 COERTEL, FERNANDEZ, BRYANT & ATKINSON, P.A., P.O. BOX 1110, TALLAHASSEE, FLORIDA 32302-1110FILED AND SERVED this Edf day of Februgry, 2016. KENNETH G. OERTEL Florida Bar No. 128808 M. CHRISTOPHER BRYANT Florida Bar No. 434450 OERTEL, FERNANDEZ, BRYANT & ATKINSON, P.A. P.O. Box 1110 Tallahassee, Florida 32302-1110 Telephone: (850) 521-0700 Telecopier: (850) 521-0720 CERTIFICATE OF SERVICE I HEREBY CERTIFY that the original of the foregoing Petition or Amended Petition for Formal Administrative Proceedings, and Formal Written Protest has been filed with the Agency Clerk, Florida Department of Corrections, Office of the General Counsel, 501 South Calhoun Street, Tallahassee, Florida 32399-2500, with a copy via Hand Delivery to Johnathon Sanford, Attorney Supervisor, Contracts, Office of the General Counsel, Florida Department of Corrections, 501 South Calhoun Street, Tallahassee, Florida 32399-2500 this [S¢kday of February, 2016. J i Li pert M. CHRISTOPHER BRYANT 15, COERTEL, FERNANDEZ, BRYANT & ATKINSON, P.A., P.O. BOX 1110, TALLAHASSEE, FLORIDA 32302-1110