CHARLESTON, W. Va. — For much of the past decade, West Virginia paid a Maine consulting firm to advise state officials on health care policy.

The firm, BerryDunn, with offices in Bangor and Portland, has received $13.9 million since 2004 to advise the state Department of Health and Human Resources. The company also was hired last year by the state Offices of the Insurance Commissioner.

BerryDunn is close enough to the state that it once had office space inside DHHR’s offices in downtown Charleston. It has since opened its own office, though it’s on the same block of Capitol Street as DHHR’s offices.

In summer 2011, former DHHR Secretary Patsy Hardy worked as a contractor for BerryDunn in Massachusetts.

But that’s mostly been below the radar. Then, BerryDunn came under scrutiny this week when the Legislative Auditor’s Office wondered in a special report about the firm’s advice to DHHR.

Auditors’ chief worry is that the department has not done enough to ensure the state gets a good deal on a pending 10-year contract worth about $20 million a year. The contract involves a complex computer system to process claims for the state Medicaid program, which provides health care to about 420,000 West Virginians.

Tim Masse, a principal at BerryDunn and head of its government consulting practice, told the Bangor Daily News he could not comment on the particular case in West Virginia except to say “that we have the agency’s full support.”

In general, though, Masse said BerryDunn has worked with several state governments, including Maine’s, on health care policy issues. In the last couple years business has picked up as state governments seek BerryDunn’s services to help them prepare for heath care reform. “There’s a lot they need to do to get ready,” Masse said.

DHHR asked to be exempted from normal purchasing rules in 2009, according to the report. BerryDunn has also helped the agency prepare the bid requests for the computer system.

But things haven’t gone so well. The contract has already been rebid twice. The agency has not given a reason for the first failure. The second bid was scrapped in March after it became tainted by a conflict of interest.

“Despite high cost consultant services and a purchasing exemption, which was granted to assist the agency in procuring a cost-effective system, the agency still failed to take every available precaution in regards to the state’s fiscal interests,” the legislative audit said this week.

DHHR hopes the third time is a charm. It plans to award the contract this fall to one of four bidders.

But auditors worry that DHHR has still not done enough to ensure it gets the state a good deal. That’s because would-be contractors weren’t asked to put up bonds in case they fail to deliver.

Instead, the department plans to withhold a portion of payments until it is satisfied the eventual contract winner has met certain benchmarks and done good work.

Deputy Medicaid Commissioner Ed Dolly said the decision not to ask for performance bonds was made by DHHR, not BerryDunn.

“As they stated, they looked at 47 states. Half had performance bonds,” Dolly said, referring to the legislative auditor’s report. “Well, half didn’t.”

Federal officials also had to sign off on DHHR’s plan, Dolly said.

Dolly thinks withholding money from the eventual contractor will be more effective than having to wait until everything has gone sour to try to collect the bond.

“If you start taking that money away from them immediately, one, you end up with more money than you would get through a performance bond,” Dolly said. “And two, they are more likely to come back into compliance.”

In other words, Dolly prefers the carrot and the stick at each step of the way over trying to throw out the baby and the bath water if everything turns messy.

“Most of these companies, they want to succeed, too, because they want more business,” Dolly said.

Both Dolly and Masse told the Charleston Daily Mail that the firm’s work includes far more than just advising DHHR about the computer system contract, known as the Medicaid Management Information System, or MMIS.

The auditor’s report did not attempt to quantify how much of BerryDunn’s work was related to the problematic MMIS bids and how much was for other services.

Dolly said the MMIS bids in question are only a “very small part” of BerryDunn’s work.

Starting in 2004, the firm did quality assurance on the current MMIS contract and helped get the system certified by the federal government.

Later, DHHR did another bid, again hired BerryDunn and broadened the firm’s scope of work.

Dolly and Masse said the company now helps DHHR monitor health care reform regulations, work on Medicaid-related technology projects and write grants for DHHR. BerryDunn also performs accounting work for the Bangor Daily News.

The Offices of the Insurance Commissioner have also hired BerryDunn to help give advice about a health insurance exchange. The commission has paid BerryDunn about $1.3 million since last August.

Dolly said part of the reason the state uses contractors like BerryDunn is to avoid growing the size of state government. Another reason is the level of expertise a consultant can provide.

Dolly said staffing needs ebb and flow, as does the demand for certain kinds of knowledge.

“You use them until you’re done with them and you’re done with them,” Dolly said of consultants.

He said some BerryDunn people would be used only for a short period of time while others will stay on projects and provide continual advice.

“You can’t pick and choose state employees like that,” he added.

BerryDunn has some workers here. Other workers join in conference calls or fly back and forth from Maine. Dolly said the flight expense was built into the contract.

Masse confirmed BerryDunn had paid Hardy, the former DHHR director, for work last summer.

Hardy left DHHR after Gov. Earl Ray Tomblin replaced her in late 2010.

“We didn’t hire her,” Masse said. “She was a contractor to BerryDunn for a project in Massachusetts.”

He said Hardy is not currently working for BerryDunn and that she had not done any work for the company in West Virginia.

The revolving door turns often at DHHR.

Nancy Atkins, the commissioner for the Bureau for Medical Services, which oversees the Medicaid program, was a consultant for Hewlett-Packard Co. before she returned to DHHR in 2009. She had to remove herself from involvement in the MMIS contract — one of the most significant contracts in state government — because HP is a bidder.

Earlier this year, DHHR rebid the computer system contract after questions about another conflict of interest. A consultant who had advised DHHR on the contract also worked for a company that may have benefited from the eventual contract.

Another bidder for the MMIS contract, Molina Healthcare, which has the current contract for the computer system and is vying to get the new contract, also has several former high-ranking state officials working for it.

BDN writer Whit Richardson contributed to this report.

© 2012 the Charleston Daily Mail