Value Health has sold the Defense Department procurement consulting group of its subsidiary, Lewin-VHI, in an effort to prevent the loss of military healthcare contracts.
The sale of the defense procurement business comes less than a month after Avon, Conn.-based Value Health put all of Lewin on the block for the same reason.
Lewin advised the Pentagon on a $2.5 billion military managed-care contract on which another Value Health subsidiary, Value Behavioral Health, won an estimated $183 million in mental health and substance-abuse treatment business. That business came through a subcontract with Qual-Med, the HMO that won the Pentagon contract.
The General Accounting Office, Congress' investigative arm, last month concluded that, because of this conflict of interest, the Defense Department should not have awarded the contract to Qual-Med, a Pueblo, Colo.-based subsidiary of Health Systems International of Woodland Hills, Calif.
The Lewin defense procurement consulting business was bought by its own management, led by the group's head, David Kennell. It will now be called Kennell and Associates and will be based in the Washington area.
Lewin, based in Fairfax, Va., is still for sale. A deal between Lewin's management and Value Health is pending.
Robert Rubin, M.D., Lewin's president, said if the consulting subsidiary's management succeeds in buying Lewin from Value Health, "we would hope that (Kennell) considers rejoining us." But he added that Kennell is free to do what it wants.
On July 27, the GAO recommended that Foundation Health Federal Services of Rancho Cordova, Calif., win the contract instead of Qual-Med because of the conflict of interest.
The Defense Department had 60 days to abide by or reject the GAO decision, and the Pentagon is expected to respond as early as this week.