The state of Iowa last week awarded a two-year, $92 million Medicaid contract to Medco Behavioral Care Corp. after its chief rival, Value Behavioral Health, was disqualified.
Last month, Polk County District Judge Arthur Gamble nullified awarding of the state contract to Value to manage mental health services for 190,000 Iowa Medicaid patients because of an alleged conflict of interest.
However, Avon, Conn.-based Value has appealed the decision. In the wake of last week's action, Value is "looking at legal options," said Value spokeswoman Judith Hyfield-Starr. She declined to comment further.
Value Behavioral Health is the nation's largest manager of mental health programs, with 16.2 million people under its coverage, according to Open Minds Newsletter, a Gettsyburg, Pa.-based publication covering mental health providers. Medco ranks second with 13.5 million people.
Value originally won the Iowa contract to manage psychiatric services for the Iowa Medicaid patients. However, Park Ridge, N.J.-based Medco sued, charging that Value's parent company, Value Health, had a conflict of interest because its subsidiary, the consulting firm Lewin-VHI, helped to develop the state's managed-care Medicaid program.
Value officials contended that it put into place "extensive procedural safeguards" that were approved by state officials (Nov. 14, p. 12).
Eight other companies vied for the contract. The Medco contract guarantees the state at least 14% savings, which amounts to $16 million over two years.