Waste-Case Scenario

While negotiating a $21 million contract with Broward County, Unisys swept a $100 million health-insurance mess right under the rug.

In January 1993 Chiles unveiled a massive health care reform package, which included more than 100 proposals to extend insurance coverage to all Floridians while controlling health care costs. Chiles designated Cook his "point man," adding he was "very much in the inner circle."

Various elements of Chiles' plan drew intense opposition from business groups, health care providers, and insurance companies, sparking fierce legislative warfare. During these battles Cook, a former Marine, called himself a "lightning rod"; others called him arrogant and a zealot. He was accused of a power grab for pushing legislation giving his agency more authority over health issues. He argued heatedly with key committee chairmen over attempts to weaken Chiles' reforms. Even the governor once compared Cook to a ferocious dog straining at the leash, and when health care negotiations stalled, Ben Graber, then House Health Care chairman, told reporters, "I think the pit bull may have drawn too much blood."

One of the more controversial legislative issues was whether the state employee health-insurance plan, in particular, should be used to help control health care costs. Chiles and Cook proposed shifting state employees into huge purchasing alliances with other groups, rather than having the insurance plan administered separately. But the proposal had a powerful enemy: Blue Cross/Blue Shield of Florida, which had managed the state insurance plan for seventeen years. Legislators -- who are covered by the plan -- listened to Blue Cross instead of Chiles and Cook; they defeated the alliance provision. News reports at the time said that Chiles lashed out at Cook over the loss.

Cook, in turn, confronted Blue Cross lobbyist Harry G. Landrum on the fourth floor of the Capitol and, according to Landrum and others who witnessed the scene, angrily vowed revenge against Blue Cross. When the Capitol press corps reported the incident, Cook said he didn't recall a shouting match, adding "there is no bad blood between us and Blue Cross." But when state investigators began probing the Unisys controversy in 1996, they received statements alleging Cook "harbored animosity" toward Blue Cross and said "Blue Cross will pay a price" for opposing the Chiles reforms.

Whatever the truth, in the final compromises over health care reform, Cook's superbureaucracy, AHCA, won a new power: control over the bid process for the state employee health-insurance contract. When the contract came up for renewal in 1995, AHCA developed a bid process it said was designed to reduce state health costs by fostering competition. As it turns out, the process favored Unisys over Blue Cross/Blue Shield.

Blue Cross had successfully managed the state health-insurance program for seventeen years, negotiating large discounts with health care providers, which saved the state tens of millions of dollars. Unisys, on the other hand, had never run a health-insurance system before, and its track record, when it came to government contracts, was spotty at best. In 1995, for example, the State of Wisconsin penalized the company for poor performance regarding a $16 million contract to develop a computer system to monitor Medicaid bills. Massachusetts sued over performance issues linked to a 1994 contract to develop a $7 million motor-voter registration program. And in 1991 Unisys pleaded guilty to criminal misconduct in a Pentagon procurement scandal, resulting in fines totaling $190 million.

Nonetheless, the complicated bid-scoring system developed by Cook's agency gave just about as much credence to Unisys' promises as Blue Cross' impressive seventeen-year track record. Judging on technical capabilities for providing administrative services, the AHCA awarded Blue Cross 6000 points. Unisys, with absolutely no health-insurance experience, scored 5744.

With technical scores so close, the bottom line became cost. Blue Cross bid $102.2 million over eight years to administer the health-insurance system. Unisys said it could be done for merely $86.6 million. Based on the scoring system, Blue Cross received 2931 points and Unisys, 3458. That 527-point difference gave Unisys the higher overall score, and AHCA announced its intent to award the contract. Blue Cross appealed, claiming that experience should have counted for more in the bid process. But a state administrative hearing officer ruled in favor of Unisys and AHCA. With Cook's agency in charge, Blue Cross was out and Unisys was in.

Unisys took over the health-insurance program on January 1, 1996. Three weeks later Charles Salerno sounded the first alarm.

Salerno, then chief of customer service for the Division of State Employee Insurance, was quoted in a front-page story in the Tallahassee Democrat under the headline, "Unisys Has a Few Bugs of Its Own to Cure." In the interview Salerno revealed that some doctors weren't signing up for the new Unisys provider network, while others complained that they couldn't get through to Unisys. Salerno added: "Ultimately, down the line, this thing could snowball." He was right.

"It was obvious to us that Unisys should not have been put in the position to run that program," Salerno said recently. "They just never had the capability. They went into this thing, they low-balled the bid by underestimating the number of staff people they were going to need. It was obvious the software didn't have the flexibility and capability to perform. They had no corporate knowledge of running a health program."

By February 1996, just a month after Unisys took over, state legislators were hearing from angry state employees. Salerno was called to testify before the Senate Banking and Insurance Committee. His bosses were not happy. "I was outspoken," he said. "I was severely chastised to the point where I was put under a gag order that I was not to speak to the news media or legislators. Doug Cook wanted me fired because of my testimony."

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