Face the Facts: Why Health Net Escaped Consequences of IG Investigation

By NEIL GORDON

Last week, POGO blogged about a Department of Veterans Affairs Inspector General (IG) report finding that a service-disabled veteran-owned small business (SDVOSB) named Enterprise Technology Solutions (ETS) had used its special status to allow the Fortune 500-sized health insurance provider Health Net to improperly benefit from a federal contracting program for small and/or disadvantaged businesses. Despite catching both companies red-handed, however, the IG only referred ETS for possible suspension or debarment.

Is Health Net “too big to debar”? Let’s look at the facts:

Health Net currently has 22 instances of misconduct in our Federal Contractor Misconduct Database, including a temporary suspension from the Medicare program in 2010 and hundreds of millions of dollars in fines, penalties, and settlements paid to private plaintiffs and state regulators since 1995. However…

Health Net is a very big company. It currently ranks number 221 in the Fortune 500, with $11.9 billion in revenue and 7,400 employees.

More importantly, Health Net is also a very big federal contractor, receiving billions of dollars in contracts every year. Almost all of those dollars come from the Pentagon to administer part of the TRICARE health insurance program for millions of active-duty and retired military personnel and their families.

Relations between Health Net and the government are very cozy. Health Net has spent millions of dollars on federal lobbying and campaign contributions. Recall that ETS, the company that allowed Health Net to benefit from the SDVOSB program, was formed in 2006 – with Health Net’s encouragement – by a former senior VA official named Donald Neilson. (According to Nextgov, Neilson served as director of VA Information Management Services.) The Veterans Affairs IG has released three reports in recent years identifying contracting improprieties involving former VA employees who went on to form or work for SDVOSBs.

POGO found other instances of government officials walking through the revolving door into Health Net. Thomas Carrato, president of Health Net Federal Services (the division of Health Net that administers TRICARE), previously served as Executive Director of TRICARE Management Activity. In 2006, Health Net Federal Services formed a TRICARE Advisory Committee composed of retired senior Defense Department officials and top brass, including Principal Under Secretary of Defense for Personnel and Readiness Charles L. Cragin. According to a press release, “members of the Advisory Committee will meet quarterly near the nation’s capitol [sic] to provide [Health Net Federal Services] with strategic guidance.”

A big company with lots of cash to spend on political influence, a loyal customer in the Pentagon, and a constantly spinning revolving door add up to the Veterans Affairs IG’s disparate treatment of Health Net and ETS. It’s part of a larger pattern we’ve seen in recent years with Boeing and its non-suspension suspension; the brief time-outs for IBM, L-3 Communications, Booz Allen Hamilton, and GTSI; and the hands-off approach taken with regard to BAE Systems, BP, KBR, and now Health Net.

Neil Gordon is an investigator for the Project On Government Oversight.

Follow @NEGordon

Comments

[Sean Church]

Neil please contact me I have information. That finally. May be able to hold. healthnet federal services, healthnet insurance the joint commission and. urac accountable. When the contract was severed the. Vista system national data base did not which in turn where normally. Healthnet federal services would be. Able to maintain this information. If they. Hadn't lost this contract. Now tens of thousands veterans' protected health information is being transferred to a healthnet federal services which violates several privacy rules. The joint commission explained. The veterans had notify the joint commission individually. They veterans can only do so if they all know.
Sorry about the way this is written... I'm on a smartphone.
Thank you

[Scott Amey]

Mr. Johnson,

I'm hoping that the OIG's referrals include DOJ and that the VA's Suspension and Debarment Committee is looking at all of the players involved. We have been in touch with the Hill and hope to see legislation or a hearing on the issue, especially VA and SBA's failure to hold agencies, companies, and individuals accountable.

[Mike]

Tom (Health Net is a very big company. It currently ranks number 221 in the Fortune 500, with $11.9 billion in revenue and 7,400 employees). Thats why they are free to walk away. $imple economics.

[Tom Johnson]

If the IG report is correct, why is Mr. Neilson not being prosecuted for fraud? Did the IG determine that he did not know that what he was doing? Was he breaking the law? He made millions that could have helped thousands of Vets if the IG report is correct. Is Congress looking into this?