Ohio Medicaid: It’s not a conflict if you only own stock in the parent company

Ohio Medicaid Director Maureen Corcoran didn’t have a conflict of interest when she signed multi-billion-dollar contracts earlier this year, her department’s attorneys are arguing. That’s because she only owns stock in parent corporations — not their Ohio subsidiaries to whom she awarded contracts.

The department made the argument in a Friday motion in a court case in which a disappointed bidder is trying to overturn a process that resulted in the award of $22 billion worth of managed-care business to six corporations. Testimony in the case, which was brought by Paramount Advantage, resumed Monday after a two-week hiatus.

Toledo-based Paramount is arguing that the process was biased against it and in favor of huge healthcare competitors, some of which have been sued for fraud by Ohio Attorney General Dave Yost.

Corcoran for the past month hasn’t answered questions about whether she owns stock in companies involved in the managed-care procurement or in the company that won a related contract to reshape how the state provides services to children with complex behavioral needs.

In last Friday’s court filing, Medicaid’s lawyers argued that questions about the director’s holdings are part of “a smear campaign intended to harass and embarrass Director Corcoran and this court should not permit this tactic.”

It also claimed that Corcoran was unaware of her holdings.

“The possibility of her owning such stock had not occurred to her,” the filing said. “It is not unusual for someone investing retirement funds to focus on risk and return rather than on individual investments. There is no evidence Director Corcoran had any reason to believe she owned stock in any of the corporate entities to whom contracts were awarded.”

However, some possible evidence might lie in the disclosures she’s made to the Ohio Ethics Commission since she became Medicaid director in early 2019. In those, Corcoran reported owning at least $1,000 worth of stock in UnitedHealth Group and Humana, both of which have subsidiaries that won Ohio managed-care contracts. She also reported owning at least $1,000 worth of stock in CVS Health, whose subsidiary Aetna won the $1 billion contract for kids with behavioral needs.

Medicaid’s filing late last week acknowledged that Corcoran still held stock in CVS and UnitedHealth, but said she sold her shares of Humana.

One might think that any profit those subsidiaries make in Ohio are likely to end up in the bank accounts of their corporate parents, thereby marrying the interests of parent company and subsidiary.

But according to Ohio Medicaid, there’s apparently no conflict of interest so long as a corporation is big and sophisticated enough to put a long chain of other subsidiaries between parent and the unit getting Ohio taxpayers’ billions, UnitedHealth Community Plan of Ohio.

The Medicaid motion noted that UnitedHealth Group has more than 1,200 subsidiaries and that as of March “the direct parent of UnitedHealth Community Plan of Ohio Inc. was not UnitedHealth Group Inc., but ‘Three Rivers Holdings Inc.,’ which in turn was not owned by UnitedHealth Group Inc., but by ‘AmeriChoice Corporation.’”

The motion adds, “In other words, Director Corcoran did not have a direct ownership interest in UnitedHealth Community Plan of Ohio Inc., but only in the parent company of the parent company of the parent company of UnitedHealth Community Plan of Ohio Inc.”

The Medicaid lawyers made a similar argument about the relationship between Aetna Better Health of Ohio Inc. and CVS, which became the nation’s fourth-largest corporation after its $70 billion merger with Aetna in 2018 and 2019.

Among the questions Corcoran hasn’t answered is just how much stock she owned in the health companies as her department negotiated with their subsidiaries. Ohio law says government officials awarding contracts to companies in which they own stock must file an “affidavit giving that person’s exact status in connection with the corporation or other organization.“

However, Medicaid’s lawyers are arguing that Corcoran didn’t have a “definite and direct interest” in the corporations because her investment advisor handled day-to-day transactions.

They supported that claim with a 2002 Ethics Commission advisory opinion saying that investors don’t have a definite and direct interest in a company just because they own part of a mutual fund, IRA, 401K or similar fund in which a person has no control over investment decisions.

The Ethics Commission opinion appears to make a distinction between those kinds of funds and stocks.

“A stockholder of a company has an ownership interest in the company and therefore has an ownership interest in the company’s contracts for the purposes of” state law, the opinion said.

More information about Corcoran’s investments might come to light on Tuesday, when she is expected to take the witness stand — although Franklin County Common Pleas Judge Julie M. Lynch said she would sharply limit what Paramount’s attorneys can ask the Medicaid chief.

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This story was republished from the Ohio Capital Journal under a Creative Commons license.