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Something else I don’t quite understand

Tuesday, Apr 26, 2016

* Doubek

Republican Gov. Bruce Rauner is about as pro-business as Republicans come, right?

He’s got to be one of those free-market libertarian types, right?

Would you be surprised to learn his health care department is considering giving a multi-million-dollar contract to one company to provide products thousands of Illinoisans need?

This is a little story about the nitty-gritty dealings of government that affect real people and the real people who run businesses.

Go read the rest.

- Posted by Rich Miller        

  1. - Joe M - Tuesday, Apr 26, 16 @ 11:42 am:

    Governor Rauner’s procurement reforms at work

  2. - Geor G - Tuesday, Apr 26, 16 @ 11:45 am:

    Sounds like someone is teed up to win that RFP.

    Also, this doesn’t bode well for the idea that the Rauner administration can keep its word on a deal. Big trust issues there.

  3. - Daniel Plainview - Tuesday, Apr 26, 16 @ 11:47 am:

    Sole source for products made by hundreds of different providers in a competitive market? Only a superstar could come up with this.

    Here’s a hint for all you Rauner staffers that have never been in the private sector: If a provider is fishing for a big state contract and promises something that sounds too good to be true, it most assuredly isn’t.

  4. - walker - Tuesday, Apr 26, 16 @ 11:49 am:

    Bad assumption. Venture capitalists of Rauner’s sort, are not “free-market libertarian types.” Quite the opposite.

    They leverage their money on the dysfunctions and failures of the pure free market, often focus on the government as primary revenue sources, and use the courts to mitigate risk.

    Anti-competitive concentration of power within a market, is often their primary tactic for success.

  5. - Hamlet's Ghost - Tuesday, Apr 26, 16 @ 11:52 am:

    Guvmint picking one winner and lots of losers?

    We can expect outrage from John Tillman and the IPI crowd any second now. [Or hour, or day or decade . . .]


  6. - Louis G. Atsaves - Tuesday, Apr 26, 16 @ 11:56 am:

    400 individual providers statewide who it turns out can churn their numbers and reduce their costs to the state by $5.4 million? After feeling some heat? And now he is worried that his business will be “decimated?” Is the State his only client or a major client? Can he still turn a profit after reducing his costs according to his own study?

    Although giving those types of services to one provider can also be a gamble, (what happens if it suddenly goes out of business?) what harm is there getting bids and then looking at all the possibilities?

  7. - Formerly Known As... - Tuesday, Apr 26, 16 @ 11:56 am:

    Buying in bulk can save money and using a single supplier can help maintain quality.

    Obviously, it can also decimate the competition depending on the market size.

    Ms Doudek also asks a good question. If the free market was working so well to begin with, why were the other suppliers able to offer cutting prices by $5.4 Mill instead of doing that all along?

  8. - BIG R. Ph. - Tuesday, Apr 26, 16 @ 11:57 am:

    The Durable Medical Industry has already been decimated by Medicare and their “competitive bidding” process. That is why you do not see any Mom & Pop home care providers.

    What ends up happening is these large providers come in. They want to “mail order” everything because they can’t cover the WHOLE state.

    Mom & Pop are cut out and then they “force feed” diapers. This means that once the recipient is enrolled they get auto-shipped whether they are in need or not. Yes the State gets a cheaper price per unit but overall end up spending much, much more due to diaper wastage.

    Also the recipient does not get to choose brand due to comfort, adsorption etc. They get whatever cheapie brand the provider chooses (Read whatever brand they make the most profit on)

    After everyone else is wiped out then prices mysteriously begin rising when the contract is up for renewal. But guess what? No one else out there to bid!

  9. - Arthur Andersen - Tuesday, Apr 26, 16 @ 11:59 am:

    Joe M. beat me to the punch on “procurement reform,” but how can all of this be kosher under current law?

    A sole-source that, pardon the expression, doesn’t hold water, ex parte conversations, changing the terms of the RFP midway-I haven’t spent quality time with the Procurement Code in a long time, but this ain’t right.

  10. - Harry - Tuesday, Apr 26, 16 @ 12:00 pm:

    Establishment Repubs like Rauner are NOT laissez faire capitalists, they love the controlled market where they can reward friends and donors. The main difference with the Democrats is just which pigs get priority at the government trough.

  11. - Anon221 - Tuesday, Apr 26, 16 @ 12:02 pm:

    What struck me the most was this from the article-

    “… but Peterson said state bureaucrats believe they have a quality issue that causes some people to cycle through more diapers, pads and other products each month than is considered reasonable.”
    I have an elderly close relative who has to use these products for the rest of her life. Who is going to make the decision while she is in a nursing home as to what reasonable use is, especially if this goes to a single provider?

    This is just as ludicrous as the proposal to give home health providers three strikes and you’re out on overtime limits.

  12. - Ghost - Tuesday, Apr 26, 16 @ 12:02 pm:

    why doesnt the state just do a reimbursement schedule like medicare and indicate what they will pay, for a lot
    of these things. then sell to whiever will take the approved rate. no monoply and savings in many areas.

  13. - Daniel Plainview - Tuesday, Apr 26, 16 @ 12:04 pm:

    - what harm is there getting bids and then looking at all the possibilities? -

    You do know what sole source means, right?

    If not, that extra $125k annual income in your household should go a long way toward some purchasing classes at your local JC.

  14. - RNUG - Tuesday, Apr 26, 16 @ 12:06 pm:

    All I’ll say is you can do almost anything under the procurement rules if you know how to write the bid specs …

  15. - RNUG - Tuesday, Apr 26, 16 @ 12:07 pm:

    And you can always do a sole source if the proper people are willing to sign their names to it.

  16. - Anon - Tuesday, Apr 26, 16 @ 12:08 pm:

    I wonder what kind of juice this Binson’s company has that it was able to get the RFP to go forward with just a public comment.

  17. - Earnest - Tuesday, Apr 26, 16 @ 12:09 pm:

    This is a great thing. We need to get rid of these small, weak providers. /s

  18. - Illinoisian - Tuesday, Apr 26, 16 @ 12:12 pm:

    From a purely procurement perspective, if it is cheaper to do sole-source, why is that *a priori* a bad thing? Am I missing something? Since when is a sole-source contract a “monopoly?”

  19. - Harry - Tuesday, Apr 26, 16 @ 12:13 pm:

    Where is this talk of sole source coming from? The proposal seems to be to competitively bid for one contract to supply a statewide requirement. That is NOT a sole source bid.

  20. - Lomez - Tuesday, Apr 26, 16 @ 12:14 pm:

    An RFP seeking a sole provider is not the same thing as a “sole source procurement” under the Code.

  21. - Lomez - Tuesday, Apr 26, 16 @ 12:17 pm:

    Also, the fact that there were cost savings available but not pursued until now has nothing to do with the free market.

    It has to do with the State doing a poor job of procurement, specifically contract renegotiation.

  22. - Union thug - Tuesday, Apr 26, 16 @ 12:19 pm:

    This has pay off all over it. Medicaid sets the rate they pay for any service or product. Provider can either take it or not be a provider. Some things they will only cover specific brands. They can control the cost and quality already.

  23. - Lomez - Tuesday, Apr 26, 16 @ 12:22 pm:

    ==And you can always do a sole source if the proper people are willing to sign their names to it.==

    And there is a public hearing option for interested parties to challenge a sole source. Advance notice must also be provided to the Procurement Policy Board and posted publicly on the Procurement Bulletin.

    This all would be an interesting discussion if this were actually a sole source procurement, and not an RFP seeking a sole provider.

  24. - DuPage Bard - Tuesday, Apr 26, 16 @ 1:03 pm:

    Sole source provider achieving savings is not a bad deal. Having that provider write the RFP is not a good thing.
    How often will this be bid out? Is it a 2 year contract 4, 6, 10, 15?

  25. - BBG Watch - Tuesday, Apr 26, 16 @ 1:22 pm:

    Gov. Rauner and the diapers he controls

  26. - wordslinger - Tuesday, Apr 26, 16 @ 1:33 pm:

    I can smell the meat-a-cookin.

  27. - Change my diapers - Tuesday, Apr 26, 16 @ 1:33 pm:

    Who is the Lobbyist or Attorney for Binson’s? It has to be some wired Republican. This stinks worse than my kid’s diaper!

  28. - steve schnorf - Tuesday, Apr 26, 16 @ 1:45 pm:

    I guess the S-T would really be surprised to learn that the state gives one vendor a contract worth multiple millions of dollars to provide goods or services thousands of people need or use all the time. Duh!

  29. - Jon Sindorf - Tuesday, Apr 26, 16 @ 3:21 pm:

    Right on Ghost. Let the state set new rates, establish a quality threshold for the product and let any qualified Illinois provider decide to participate at those rates. Competition will keep those in the game honest. Bad product bad service equals no customers choosing your business. Easy.

  30. - Arthur Andersen - Tuesday, Apr 26, 16 @ 3:39 pm:

    Lomez, thank you for pointing out my verbiage error in the use of “sole source.” I do know the difference, but like I said, I’m a bit rusty.

    As always, Schnorf is spot-on when he notes that there are more than a handful of State contracts that are filled by one vendor. The concerns with these can range from how the specs were drafted to price when only one proposer is responsive.

  31. - Anon221 - Tuesday, Apr 26, 16 @ 3:50 pm:

    Binson’s involvement in durable medical equipment-

  32. - Anon221 - Tuesday, Apr 26, 16 @ 3:57 pm:

    Darn keypad-

  33. - Now For The Full Story - Tuesday, Apr 26, 16 @ 10:13 pm:

    If you took the time to understand the facts like I have, you would have an accurate view of the situation:

    * The legacy vendors now complaining have benefitted from selling to the state at tremendously over-priced reimbursement rates for many years.
    * The Department sought to reduce its costs by soliciting a sole source bid in January. No surprise, because Indiana and Michigan saved big-time (20-30%) when they went sole source.
    * The legacy vendor lobbyists sought to kill the RFP throughout the spring, meeting with the Department and lobbying against the savings effort, and apparently with some success. Their lobbying organization published a newsletter detailing their requested quid-pro-quo of cancelling the RFP in exchange for a modest overall reimbursement rate cut averaging 10.5%.
    * The Department published this proposed rate cut and, as required by federal regulation, invited public comment as to whether the cut met the federal standard, which requires Medicaid programs to be operated in an efficient and economical manner.
    * Binson’s filed its public comment as a part of the Department’s legal proceeding. In that comment, which can be viewed by the public in the Department offices, Binson’s simply multiplied the quantity of product sought to be purchased by Illinois by the much lower competitive sole source prices from Michigan and Indiana, and which prices are publicly available.
    * Use of the Indiana prices would result in a 39.32% reduction in payments for Illinois and the Michigan prices result in a 42.28% reduction of payments. Compare that to the the legacy vendor proposal of a 10.5% reduction.
    * The differences in actual dollar savings are stunning. The legacy vendor proposal would result in annual savings of $4.5 million (they overstated the effect of their proposal by $.92 million). Using the Indiana numbers the annual savings is $16.8 million, and the Michigan numbers generate annual savings of $18 million. I’m not kidding. Get a copy of the Binson’s public comment and read it — simple numbers do not lie.. Over a decade the difference between the legacy vendor proposed savings and the sole source savings would be between $122 and 135.5 million. A nice piece of change we should use to restore human services and not distribute to legacy vendors.
    * The reality here is that you have been told less than half of the story. These legacy vendors have an unjustified and unsustainable deal — no wonder they are so intent on preventing the Department from actually accepting those bids.
    * The legacy vendor lobbying group (”Great Lakes”) has expressly and publicly encouraged the legacy vendors to directly and improperly lobby the Department on a current and pending RFP, and has encouraged legislators to do the same. Several legacy vendors intend to respond to the RFP, but may have rendered themselves ineligible if they lobbied the Department.
    * These legacy organizations prefer our cash-poor State to continue subsidizing their unsustainable business platforms. Sorry, but no responsible public servant, once informed about the savings available through sole source purchasing, can continue to toss cash out the window.

  34. - Mama - Tuesday, Apr 26, 16 @ 10:35 pm:

    As my very smart mother used to say, “Don’t put all of your eggs in one basket.” This is what he plans to do. His plan makes me wonder if there is some sort of kick-back in that plan.

  35. - JI - Tuesday, Apr 26, 16 @ 11:13 pm:

    We’ve needed competitive bidding in durable medical equipment for years.

    Notice that the companies complaining here aren’t complaining that there is a lack of competition in the bidding process, but that their own prices aren’t competitive and so they would lose out on business if the state stopped overpaying them.

  36. - Phil Johnson - Wednesday, Apr 27, 16 @ 7:53 am:

    As a vendor in this industry, a couple points:

    A)Regardless of the merits of single-vendor contracts, this RFP is a train-wreck that will hurt patients and end up costing the state money in the long-run. The RFP has no quality standards, so patients will be stuck with low-quality products. The RFP is so poorly structured it received 223 unique bidder questions, and yet we still don’t know how to respond.

    B) I’m still reeling from how blatantly the Administration reneged on the deal we negotiated over two months ago. Last Thursday, they told our industry association they were pulling the RFP. They apparently changed their mind Monday evening. They clearly can’t be trusted to keep their word.

  37. - Jon Sindorf - Wednesday, Apr 27, 16 @ 2:38 pm:

    Response to “Now the Full Story” no doubt written by a Binson’s mouthpiece. If the “legacy” vendors were achieving high levels of “profits” the competition would be fierce. The reality is a half dozen or so represent 80% of the entire state spend for incontinent products. There is no get rich in providing medical care for the indigent in Illinois. Factually, the State of Illinois is the slowest pay in the country. To finance their slow pay the State set reimbursement rates slightly higher. Waiting 210 days to get paid kills the competitive environment in Illinois. The “legacy” vendors in Illinois have trained staff that is knowledgeable about diagnosis, treatment plans, and product application. They are part of the care team. Binson’s is a wholesaler that drop ships the cheapest product they can buy on the open and secondary market. The department is on the right track to obtain the best pricing possible and maintain a competitive environment for Illinois small businesses. Why let the carpetbagger Binson’s into Illinois to hijack tax dollars back to Michigan?

  38. - Anon - Friday, May 6, 16 @ 3:06 pm:

    Well, looks like it’s moot anyway:

    Communications which should have been reported to the Procurement Policy Board under Section 50-39 of the Illinois Procurement Code occurred between the Department and representatives of potential bidders and potential bidders regarding whether the Department should proceed with the RFP. The Department is canceling the RFP and is making full reports to the Procurement Policy Board.

Sorry, comments for this post are now closed.

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