Louisiana Voice

There is more damage control awaiting the most ethical administration in Louisiana history and just as with the Bruce Greenstein saga, the Department of Health and Hospitals (DHH) is front and center.

The Louisiana Board of Ethics last Thursday (Feb. 19) voted to file ethics charges against Galen Schum, DHH Secretary Kathy Kliebert’s brother-in-law, because of his failure to comply with state law requiring him to report income he received from a company under contract to DHH. ETHICS CHARGES

On Nov. 17, 2011, while Schum was serving as Director of Regional Operations for the Office of Behavioral Health (OBH), Magellan Health Services signed a two-year contract with OBH to administer behavioral health managed care services for children and adults.

That contract, approved on Jan. 23, 2012, and which went into effect on Mar. 1, 2012, was originally in the amount of $354 million for two years, but was amended to a three-year contract for $547.78 million and is scheduled to expire on Saturday.

On Feb. 13, 2012, just three weeks after the contract was approved and just over two weeks before it went into effect, Schum submitted a job application to Magellan and was hired on Feb. 27, only two days before the contract took effect.

He resigned from Magellan on Jan. 31, 2014 but during the time he was employed there, he earned more than $146,000 in salary, according to documents obtained by LouisianaVoice.

Kliebert was serving as Deputy Secretary of DHH when the Magellan contract was approved on Nov. 17, 2011, and remained in that capacity until April 1, 2013, when she was elevated to her current position of Secretary.

State law (R.S. 42:1114) provides with respect to the filing of financial disclosure statements, “…that each public servant and each member of his immediate family who derives anything of economic value, directly, through any transaction involving the agency of such public servant or who derives anything of economic value of which he may be reasonably expected to know through a person which (1) is regulated by the agency of such public servant, or (2) has bid on or entered into or is in any way financially interested in any contract, subcontract, or any transaction under the supervision or jurisdiction of the agency of such public servant shall disclose the following:

• The amount of income or value of any thing of economic value derived;
• The nature of the business activity;
• Name and address, and relationship to the public servant, if applicable, and
• The name and business address of the legal entity, if applicable.

The disclosure statement is required to be filed each year by May 1 and shall include such information for the previous calendar year.

R.S. 42:1102 defines “immediate family” as the children of the public servant, spouses of his children, his siblings and their spouses, his parents, spouse and the spouse’s parents.

“Galen Schum violated …the Code of Governmental Ethics by failing to file a financial disclosure statement on or before May 1, 2013, disclosing income received during 2012 from Magellan Health Services, Inc., and on or before May 1, 2014…at a time when Magellan Health Services, Inc. had a contract with the Louisiana Department of Health and Hospitals—Office of Behavioral Health and while his sister-in-law, Kathy Kliebert, served as the Deputy Secretary and Secretary of the Department of Health and Hospitals,” the Board of Ethics document says.

The board issued a formal request that the Ethics Adjudicatory Board:

• Conduct a hearing on the foregoing charges;
• Determine that Galen Schum has violated (state law) with respect to the foregoing counts, and
• Assess an appropriate penalty in accordance with the recommendation of the Louisiana Board of Ethics to be submitted at the hearing.

Other documents obtained by LouisianaVoice indicate that Schum, on Jan. 18, 2011, in his capacity as Director of Regional Operations for OBH, presented a report to the Louisiana Commission on Addictive Disorders on the status of OBH’s ongoing privatization efforts—efforts which led directly to the awarding of the Magellan contract.

It was at that same Jan. 18 meeting that Kliebert announced to the commission that she had been selected as the new DHH Deputy Secretary and would be leaving her position at OBH.

Schum also participated in a commission meeting on Oct. 11, 2011, at which time he gave the commission “a brief update on the Louisiana Behavioral Health Partnership,” according to commission minutes of that meeting.

Schum said that the selection of the Statewide Management Organization (SMO) had been completed and that Magellan Health Services “was the vendor selected to be the Louisiana SMO, and that the Office of Behavioral Health was currently involved in the contract negotiation process with Magellan.”

Finally, the minutes of a Magellan Governance Board meeting of June 20, 2012, indicate that Schum was employed as a Reporting Analyst for the company.

Magellan had come under sharp criticism from the Legislative Auditor’s office in August of 2013 in a report that said the administration’s privatization of mental health and addictive disorder treatment programs had created confusion and added costs for local human services district that provide the care. http://www.nola.com/politics/index.ssf/2013/08/audit_shows_privatization_of_m.html

That audit report, which examined privatization results at human services districts in Baton Rouge, Houma, New Orleans and Amite, said privatization had caused problems with claims payments which increased costs for the districts and made it more difficult for the districts to receive reimbursement for services. The report also said the districts lost money under a requirement that they use Magellan’s electronic health records system.

The Capital Area Human Services District in Baton Rouge, for example, told auditors that its administrative costs for billing claims had increased $270,000 a year since the privatization took effect. That cost was attributed to problems with claims reconciliation and collection, the audit said.

Meanwhile, the report said, DHH failed to ensure that Magellan processed claims in a timely manner, often taking weeks or months to process claims. The report also said DHH failed to penalize the company when it did not meet planning and technical benchmarks. “No sanctions have been imposed on Magellan for not meeting all required contract provisions,” it said.

Just another Jindaled state agency headed for yet another privatized train wreck.

But don’t say we never warned you.