More details have surfaced in a conflict-of-interest scandal involving two California gubernatorial appointees involved in a $26 million no-bid contract awarded by the California Department of Corrections and Rehabilitation (CDCR) for medical scheduling services. PLN previously reported that the chief of CDCR's Division of Health Care Services, Dr. Peter Farber-Szekrenyi, was forced to resign after the federally-appointed healthcare receiver, Robert Sillen, learned of the questionable contract. [See: PLN, July 2007, p.33].

The contract involved a three-year pilot program at two Southern California prisons to schedule health care specialists for priority medical visits. The contract was awarded to Medical Development International (MDI), a Florida-based firm that provides similar services to 27 federal Bureau of Prisons facilities.

MDI's scheduling efforts reportedly reduced CDCR's medical specialist backlog at the two prisons from 500 to zero. But it did so, in part, by not scheduling any such visits when the estimated cost of treatment would exceed $5,000. This amounted to making "medical decisions," which required a medical license, something MDI lacked. Accordingly, federal court Special Master John Hagar stopped all work by and payments to MDI, and Robert Sillen vowed to ban MDI from operating in California prisons. [See: PLN, Sept. 2007, p. 26].

Upon closer examination, the contracting process appeared even murkier. The paperwork was "pushed through" with the aid of MDI's Sacramento lobbyist, Mark Nobili, who was paid at least $170,000 for his services.
And suspiciously, Marc Keller, another gubernatorial appointee to CDCR's healthcare leadership who approved the contract, had previously been an employee of Mobile Medical, an MDI subsidiary. Indeed, Keller still held $10,000 to $100,000 of the company's stock when he began working at the CDCR. Although he sold it two weeks before MDI's contract with the CDCR was inked, his hands may not be clean under the state's Political Reform Act.

California's Inspector General is investigating the matter. The alleged "influence peddling" resulted in Farber-Szekrenyi approving the contract with MDI on August 31, 2006 without notifying Sillen. However, MDI commenced work before the contract was formally issued based upon approval by Farber-Szekrenyi and Keller, and after receiving assurances that the company would be paid. Farber-Szekrenyi covered his actions by stating there was an emergency, with hundreds of backlogged medical appointments.

But the bad smell didn't go away. It remains to be explained how a $26 million contract was not competitively bid, how it involved a former employee and stockholder of the firm that was awarded the contract, and whether a medical license the company did not have was required.
Farber-Szekrenyi and Keller were forced to resign. MDI sued state officials for $3.6 million in services they claim were provided before Hagar froze their work and stopped payments; however, the case was dismissed in federal court. In August 2007, MDI filed a claim with the California Victim Compensation and Government Claims Board in another effort to obtain payment.

Sillen is presently developing contracts for medical scheduling services through other contractors. But conspicuously absent from reports on this issue was any discussion of the prisoners whose medical needs went unattended when MDI would not schedule specialist treatment in excess of $5,000.

Sources: Los Angeles Times, Sacramento Bee