A second top Texas health official resigns, and probe is launched

A second top state health official resigned Friday amid mounting pressure from Texas lawmakers who — responding to an American-Statesman investigation — have called for state and federal probes into a multimillion-dollar, no-bid contract awarded to an Austin technology company.

Doug Wilson, inspector general of the Health and Human Services Commission, resigned Friday at the request of Gov. Rick Perry, who appointed him in 2011. Wilson’s resignation, effective Dec. 31, came the same day the state auditor said he was launching an investigation into the procurement of contracts at the Office of Inspector General. State Auditor John Keel said he will work closely with the Public Integrity Unit, which investigates allegations of corruption against state officials and is based in the Travis County district attorney’s office.

“Ongoing questions regarding the awarding of contracts at the Texas Health and Human Services Commission have caused the governor to lose confidence in Wilson’s ability to carry out the important oversight responsibilities of this office,” Perry spokeswoman Lucy Nashed said in a statement.

Wilson’s ouster comes a week after the resignation of the commission’s chief counsel, Jack Stick, who previously had been Wilson’s deputy. His resignation came a day after the Statesman asked the agency questions about Stick’s role in steering business to 21CT, a data analytics company hired to help with Medicaid fraud investigations.

Dr. Kyle Janek, executive commissioner of the health agency, also announced Friday that three employees — including the wives of Stick and Wilson — would be placed on paid administrative leave. Erica Stick is chief of staff for the agency; Frianita Wilson works in purchasing in the Department of Family and Protective Services.

Frianita Wilson signed off on a $402,000 deal with 21CT that was also canceled last week. Officials said they don’t believe she or Erica Stick acted improperly.

“There is not even a hint of wrongdoing on their part, but Dr. Janek felt it was best to temporarily remove anyone who might be perceived to have a conflict out of an abundance of caution to protect them and the integrity of the review,” commission spokeswoman Stephanie Goodman said.

Jack Stick’s chief of staff, Cody Cazares, also was placed on administrative leave Friday. He was employed at the inspector general’s office with Stick and worked closely with him while the 21CT contract was being brokered.

Wilson, who was earning $189,299 a year, didn’t return phone calls.

Call for a federal probe

State Rep. Garnet Coleman, D-Houston, a member of the House Public Health Committee, said he requested a federal investigation Friday. The bulk of 21CT’s initial $20 million contract and a pending $90 million extension canceled last week was from money awarded by the federal Centers for Medicare and Medicaid Services.

“If the contract was illegal, then the use of federal dollars was illegal,” Coleman told the Statesman.

Coleman said his complaint was filed with the U.S. inspector general of the Department of Health and Human Services.

“If he’s steering the contract to a particular group of people, that violates federal law,” Coleman said.

Stick declined comment Friday. Irene Williams, CEO of 21CT, has denied wrongdoing and blamed the escalating controversy surrounding her company on larger industry competitors who want her company’s work. 21CT, having lost its biggest contract, laid off more than 50 employees Thursday.

The software 21CT sold to the Office of Inspector General was intended to help investigators track down and predict Medicaid fraud. The Statesman investigation found that Stick and other officials had skirted procurement laws that call for a competitive bidding process.

Stick has shown a clear preference for 21CT as he touted the company’s technology at industry conferences and in a webinar in March 2012, well before the company was eligible for the contract, the Statesman found. Meanwhile, serious challenges, including faulty data and underdeveloped software, were downplayed as the company and state officials presented the program as an unprecedented success.

Janek also announced Friday that the agency would no longer use the purchasing method that allowed Stick and other officials to broker high-dollar deals without the traditional competitive bidding process.

The agency’s initial $20 million contract and now-cancelled $90 million extension were funneled through the state Department of Information Resources, a contracting hub that draws generic contracts with vendors who sell technology products or services. Through that department, government agencies can bypass the traditional bidding process and purchase from pre-vetted vendors, typically for such products as laptops or phones.

Janek said his agency will stop using that program for business with private companies. Texas legislators — including House Speaker Joe Straus — called this week for reforms to purchasing laws ahead of the 2015 legislative session.

‘I feel somewhat vindicated’

On Friday, legislators began calling for Wilson’s resignation, but his ouster was not unexpected as his office seemed unable to escape a morass of bad publicity and criticism from legislators, Medicaid providers and former employees.

In October, the Sunset Advisory Commission, a legislative panel tasked with nixing and fixing beleaguered state departments, excoriated Wilson, with one state senator saying, “We have a loss of confidence in your office.”

That audit described an overzealous, bloated and unorganized office whose efforts to recover money lost to Medicaid fraud have produced paltry results and aggravated health care providers who spend years while under investigation.

Wilson’s office had estimated more than $1 billion could have been overbilled by providers to Medicaid in recent years, but his investigators recovered only about $5.5 million. Meanwhile, a criminal investigation continues into one of the office’s own actuaries, who admitted to fudging numbers for cases against alleged fraudsters.

Wilson enjoyed some protection from this criticism because his office was technically independent of the sprawling Health and Human Services Commission.

Frustrated, legislators on the Sunset Commission in October considered the possibility of writing legislation that would make Wilson’s job no longer a governor-appointed post, and even discussed giving Janek purview over an office designed to hold his agency accountable.

“It’s just questionable whether or not they’re doing what they’re supposed to do,” said state Rep. Richard Peña Raymond, D-Laredo, during an October hearing at the Capitol. “I look at an agency that’s just broken.”

On Friday, Raymond told the Statesman, “I feel somewhat vindicated.”

Wilson said he inherited a dysfunctional agency that has improved under his watch, but he said, “there is no question that there are areas we need to work on.”

Officials with the Centers for Medicare and Medicaid didn’t respond to the Statesman’s emailed questions this week.

Veteran state Sen. John Whitmire, D-Houston, was the first in a chorus of Texas leaders calling for action Thursday after requesting an investigation by the Public Integrity Unit.

“If the laws were broken, people ought to be prosecuted, and, if rules were broken, they ought to be held accountable and fired,” he told the Statesman. “Let the investigation go down whatever path it leads — all the way to the top.”

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