Pataki's Sick Department of Health

How a Collusive Contagion Has Infected a $34 Billion Bureaucracy

In the weeks between Pataki's 1994 election and inaugural, the new governor made it clear that he planned to move immediately to force Medicaid recipients into managed-care programs, a controversial experiment for which he sought a waiver from the Clinton administration just three months into his term. A band of good friends from his campaign was poised to profit from this potentially lucrative policy shift, executing an operating agreement for a Medicaid managed-care company called CarePlus by May 1995.

Incorporated that October, the untested company's certification was fast-tracked through DOH by April 1996, qualifying it to cover Medicaid enrollees. Barbara DeBuono listed it that month as one of the firms ready to take Medicaid patients, saying it had met the state's "fiscal test," even though court records would later reveal it was unable to produce a financial statement two years later.

Protracted delays in winning Clinton approval of the switch—because of questions in Washington about its impact on the quality of care—forced CarePlus to find business elsewhere, applying in February 1997 for a contract under DOH's brand-new and highly touted Child Plus Health program. It took until November 6, 1998—three days after Pataki was re-elected—before DOH finally sent the comptroller the first of a series of Child Health Plus and Family Health Plus contracts for the wired company, eventually totaling $218.6 million.

It also took years before CarePlus got rolling as a Medicaid insurer, but it now covers 70,000 enrollees. The tens of millions DOH has paid it for Medicaid—after it was designated by the department as a provider in five counties—comes on top of the $85,661,767 it's so far received under its multi-year Child Plus contract (its Family Health Plus contract is just beginning).

CarePlus has prospered at DOH, though it came in dead last in the department's fiscal review when it got that first major contract—for $13 million—and despite dismal ratings in surveys published by the department itself. In 1999 and 2000 (the latest years for which results are available), CarePlus was the lowest-rated of the 30 Medicaid managed-care plans in a DOH consumer survey, scoring "significantly worse than the statewide average" on eight of 10 questions put to members. It was in a league almost by itself, with the second-lowest plan getting six bad scores. Asked in one question if they would "recommend the plan to family or friends," members said no about CarePlus more often than about all but one other plan in New York.

The department's internal assessment has been kinder to the company than consumers have, finding in a January 2002 newsletter that there had been no deficiencies the previous year. However, its latest public report, issued in 2001 for 2000, found that CarePlus had the highest rate of primary care and OB/GYN turnover of any Medicaid plan in the state, more than twice the statewide average, and warned that such a rate "may disrupt continuity of care." While the company did get passing grades on the department's assessment in several other categories, it scored well below average on prenatal care, childhood immunization, and adult "access to health care services."

Despite this record, the company's state business is booming. Starting with one of the smaller Child Plus contracts, it now has the 13th largest of the 30 awarded, competing with major, established HMOs. After the Family Plus contract was awarded last year, its four-county coverage expanded to include Manhattan, while the company's Medicaid enrollment has leapfrogged from a couple thousand. Its principals and their businesses, as well as its lawyers and other associates, have contributed $511,647 to the Pataki campaign and the state GOP committee over the years, giving $119,484 in 1994, when early donors were placing their IOUs.

The leading CarePlus players at the start were John Moore, a young fundraiser with a desk in the finance office of the 1994 campaign headquarters, and Bart Lawson, the longtime executive director of the Greater New York Health Care Facilities Association and a major bundler of adult- and nursing-home contributions to Pataki. Moore, who was described in business stories as the CarePlus founder, was initially listed on the company's capital call as a $30,000 investor with a 13 percent stake, though that designation was quickly changed to show the name of Kathleen Moore, who sources say is related to John. John Moore and Lawson were soon made members of the company's five-member Board of Managers, with Lawson becoming CEO and president even while he continued to run his nursing-home association.

According to half a dozen sources who know Moore, he was sharing an office at 110 East 42nd after the election with the governor's then and current top campaign consultant, Kieran Mahoney, when he helped create CarePlus in 1995 and 1996. Richard Farren, Pataki's lawyer and DeBuono's brother-in-law who represented CarePlus during this period, told the Voice: "Moore was at Kieran's offices for a couple of years. They got together shortly after Pataki was elected governor. I don't know if they were partners or whether they were just sharing space. Moore was a self-promoter in the campaign, trying to show he had all these connections." Moore is listed as a paid fundraiser in the 1994 filings, contributing ($3000) more than he was paid ($1157).

Another campaign operative from 1994, ex-Pataki aide Jeff Wiesenfeld, whose wife is a CarePlus bookkeeper, said Moore was "a very significant fundraiser for the governor who reported directly to Patrick Donohue," the deputy director of the finance unit. Wiesenfeld recalled that Donohue and Moore "had an apartment together on Park Avenue near 38th Street, close to the campaign headquarters," a recollection other Pataki activists shared. Moore's principal entry into the Pataki inner circle, however, was Mahoney, not Donohue, the sources recall.

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