FILED
OFFICE OF ADMINISTRATIVE HEARINGS
06/26/2019 3:46 PM

STATE OF NORTH CAROLINA

IN THE OFFICE OF
ADMINISTRATIVE HEARINGS
19 DHR 02032

COUNTY OF WAKE
North Carolina Provider Owned Plans
Inc d/b/a My Health by Health
Providers,
Petitioner,
v.
NC Department of Health and Human
Services,
Respondent,
and
UnitedHealthcare of North Carolina,
Inc.,
Respondent-Intervenor,
and
Blue Cross and Blue Shield of North
Carolina,
Respondent-Intervenor,
and
WellCare of North Carolina, Inc.,
Respondent-Intervenor,
and
AmeriHealth Caritas of North Carolina,
Inc.,
Respondent-Intervenor,
and
Carolina Complete Health, Inc.,
Respondent-Intervenor.

ORDER ON
PETITIONER’S
MOTION FOR STAY OF CONTESTED
ACTIONS

THIS MATTTER COMES on for consideration on the Motion for a Temporary
Restraining Order and Stay of Contested Actions (the “Motion”) filed by Petitioner
North Carolina Provider Owned Plans, Inc. d/b/a My Health by Health Providers
(“Petitioner” or “My Health”).

In support of, and in opposition to, the Motion,

Petitioner, Respondent, and Respondent -Intervenors filed numerous affidavits and

 other evidentiary materials. On 2 May 2019, this Tribunal held a hearing on the
Motion.
Having considered the Motion, briefs, exhibits, and affidavits supporting and
opposing the Motion, and the parties’ arguments at the hearing, the Undersigned
finds and concludes that the Petitioner’s request for a stay of contested action
should be DENIED for the reasons explained below.
I.
BACKGROUND
1.

This case arises from the State’s transformation of its Medicaid

delivery system from one that is primarily based on a fee-for-service model to a
managed care system operated by Prepaid Health Plans (“PHPs”) under capitated
contracts. N.C. Sess. Law 2015-245, as amended (the “Transformation Act”).1 The
transformation is intended to “provide budget predictability for the taxpayers of this
State while ensuring quality care to those in need.” N.C. Sess. Law 2015-245, § 1.
2.

Pursuant to the Transformation Act, the General Assembly mandated

that Respondent, the North Carolina Department of Health and Human Services
(the “Department”), conduct a procurement as directed in the Transformation Act
and award PHP contracts resulting from that competitive process. See generally
N.C. Sess. Law 2015-245, as amended.

The Department issued a request for

N.C. Sess. Law 2015-245 was amended by N.C. Sess. Law 2016-121; N.C. Sess. Law 2017-57, §
11H.17.(a); N.C. Sess. Law 2017-186, Part IV; N.C. Sess. Law 2018-5, § 11H.10.(c); N.C. Sess. Law
2018-48; N.C. Sess. Law 2018-49, §§ 4-6.

1

 proposals, and, after receiving eight proposals, the Department conducted an
evaluation process.
3.

At the conclusion of the evaluation process, the Department’s

Evaluation Committee determined that My Health was the sixth-ranked offeror.
The Department awarded four statewide PHP contracts and two regional PHP
contracts to five separate awardees but did not award any contract to My Health.
Petitioner’s Motion seeks a stay of the implementation efforts for the awarded PHP
contracts pending the full adjudication of its Verified Petition for Contested Case
Hearing (“Petition”).
II.
PROCEDURAL HISTORY
4.

On 25 February 2019, My Health submitted a request for a bid protest

meeting to the Department protesting the Department’s decision not to award it six
regional contracts. A bid protest meeting was held on 26 March 2019, and the
Department denied My Health’s request for relief by the Protest Denial Letter on 5
April 2019. Petition ¶ 132. My Health filed its Petition and the Motion on 9 April
2019. The Tribunal denied the request for a temporary restraining order on 15
April 2019, leaving the request for a stay of contested actions pending before the
Tribunal.
5.

The Department filed memoranda in opposition to the Motion on 12

April 2019, and 24 April 2019. Respondent-Intervenors2 filed their memoranda in

This Tribunal granted five Intervenors the right to intervene for purposes of My Health’s request
for injunctive relief and has otherwise deferred ruling on the motions to intervene:
2

 opposition on 24 April 2019, and My Health filed its brief in support on 29 April
2019. The Tribunal heard argument on the request for a stay of contested actions
on 2 May 2019. The portion of the Motion requesting a stay of contested actions is
now ripe for determination.
III.
FACTUAL BACKGROUND
6.

This Tribunal recites the following factual basis solely for the purpose

of deciding this Motion.

These facts are not binding at a final hearing on the

merits. Lohrmann v. Iredell Mem’l Hosp., Inc., 174 N.C. App. 63, 75 (2005) (noting
that it is “well settled that findings of fact made during a preliminary injunction
proceeding are not binding upon a court at a trial on the merits”).

A.

The Medicaid Transformation Act

7.

In September 2015, the General Assembly enacted the Transformation

Act, North Carolina Session Law 2015-245, requiring transformation of the State’s
Medicaid program for most beneficiaries and services from a predominantly fee-forservice model to a Medicaid managed care model. The Transformation Act was
amended several times between 2015 and 2018. See supra, footnote 1.
8.

North Carolina’s Medicaid managed care program is expected to serve

over 1.6 million people and involve annual funds of about $6 billion. Affidavit of
James Edward Ludlam, IV (“Ludlam Aff.”), ¶ 6.
UnitedHealthcare of North Carolina, Inc. (“United”); Blue Cross and Blue Shield of North Carolina
(“BCBSNC”), WellCare Health Plans of North Carolina, Inc. (“WellCare”); AmeriHealth Caritas
North Carolina, Inc. (“ACNC”); and Carolina Complete Health, Inc. (“CCH”). All Intervenors, except
CCH, filed briefs and made oral argument for the Tribunal’s consideration. CCH has taken no
position on this Motion.

 9.

The Transformation Act gives the Department the “full authority to

manage the State’s Medicaid and NC Health Choice programs” and requires it to
“be responsible for planning and implementing the Medicaid transformation
required by this act.” N.C. Sess. Law 2015-245, § 4(1). Among many other tasks,
the Transformation Act further requires the Department to “[o]versee, monitor, and
enforce capitated PHP contract performance;” “[e]nsure sustainability of the
transformed Medicaid and NC Health Choice programs;” and “[e]nter into capitated
PHP contracts for the delivery of the Medicaid and NC Health Choice services …”

Id. § 5(3), (4), (6).
10.

The Transformation Act required the Department to award four

statewide PHP contracts to entities to operate and administer an at-risk, Medicaid
managed care business. Id. § 4(6), as amended by N.C. Sess. Law 2018-48. The
Transformation Act also directed the Department to award “up to 12” regional PHP
contracts. N.C. Sess. Law 2015-245, § 4(6), as amended by N.C. Sess. Law 2018-48.
It further directed the Department to define six regions comprised of whole
contiguous counties that reasonably distribute covered populations across the State.

Id. § 5(2).
11.

A PHP is defined in pertinent part as “an entity, which may be a

commercial plan or provider-led entity that operates or will operate a capitated
contract for the delivery of services . . ..” Id. § 4(2), as amended by N.C. Sess. Law
2018-48 (emphasis added).

 12.

A commercial plan (“CP”) is “a person, entity or organization, profit or

nonprofit, that undertakes to provide or arrange for the delivery of health care
services to enrollees on a prepaid basis except for enrollee responsibility for
copayments and deductibles and holds a PHP license issued by the Department of
Insurance.” Id. § 4(2)a, as amended by N.C. Sess. Law 2018-48.
13.

A provider-led entity (“PLE”) is an entity that meets all of the

following criteria:
1.

A majority of the entity’s ownership is held by an
individual or entity that has as its primary
business purpose the ownership or operation of one
or more capitated contracts described in
subdivision (3) of this section or Medicaid and NC
Health Choice providers.

2.

A majority of the entity’s governing body is
composed of individuals who (i) are licensed in the
State as physicians, physician assistants, nurse
practitioners, or psychologists and (ii) have
experience treating beneficiaries of the North
Carolina Medicaid program.

3.

Holds a PHP license issued by the Department of
Insurance.

Id. at 4(2)b, as amended by N.C. Sess. Law 2018-48.
14.

CPs could submit offers for statewide contracts only. PLEs could

submit proposals for one of the statewide contracts, for a contract for one or more of
six regions covering the state, or for both. Affidavit of Mona M. Moon (“Moon Aff.”) ¶
8; Affidavit of Kimberley Rene Kilgore-Kilpatrick (“Kilgore-Kilpatrick Aff.”), ¶ 3, Ex.
A (RFP § II, p. 8).

 B.

Design of the Procurement

15.

The procurement that is the subject of the Motion involved efforts by

multiple divisions within the Department and other state agencies spanning
multiple years and two gubernatorial administrations. Ludlam Aff. ¶ 3; Affidavit of
Sarah Gregosky (“Gregosky Aff.”), ¶ 3.
16.

In developing RFP #30-190029-DHB (the “RFP”), the Department

acknowledged the significance of Medicaid managed care succeeding, and the risk
and potential implications of its failure including the potential impacts on
beneficiaries, providers, and PHPs. Ludlam Aff. ¶¶ 6, 7. It also considered the risk
to the financial viability of a plan if a PHP does not secure enough members. Id. ¶¶
7, 8; Affidavit of Julia Kraemer Lerche (“Lerche Aff.”), ¶¶ 3, 7.
17.

The Department developed the RFP using not only its own employees,

but also subject matter expert consultants. Some of the Department’s personnel
who were deeply involved in Medicaid transformation had similar experience in
other states. Supplemental Affidavit of James Edward Ludlam, IV (“Ludlam Supp.
Aff.”), ¶ 11. The national consulting firm retained by the Department, Manatt,
Phelps & Phillips, LLP (“Manatt”), also had experience with Medicaid managed
care, including experience with PLEs in other states, for review and assistance with
development of the RFP. Id. ¶ 10. The Department also employed Mercer, a global
consulting firm with Medicaid managed care experience, as an actuarial consultant.
Lerche Aff. ¶ 4.

Among other things, Mercer assisted the Department in

considering the minimum number of covered lives needed to ensure financial

 viability of PHPs providing Medicaid managed care under contracts awarded
through the Department’s competitive procurement process. Id.
18.

Based in part on the information reviewed by Mercer, for this initial

implementation of Medicaid managed care, the Department exercised its discretion
to establish an outside limit of 10 regional PLE contracts with no more than one
PLE contract in each of Regions 1 and 6 and no more than two PLE contracts in the
other four regions. Lerche Aff. ¶ 8.
19.

Before issuing the RFP, the Department sought input from legislators,

the United States Centers for Medicare and Medicaid Services (“CMS”), other
states, industry experts, and stakeholders regarding the design and implementation
of Medicaid managed care in North Carolina. Ludlam Supp. Aff., ¶¶ 10-14. It also
published policy papers and legislative materials stating the Department’s intent to
issue a single RFP for all PHPs. Id. at ¶¶ 12, 14, and Exs. A (p. 16), B (pp. 1, 4-10),
C (p. 1), F (p. 33), and G (slide 3).

C.

The RFP, My Health’s Submission, and the Department’s Evaluation
Process

20.

The Department issued the RFP on 9 August 2018. Kilgore-Kilpatrick

Aff. ¶ 7 and Ex. E, p. 1.
21.

The RFP refers to a phase-in approach for Medicaid managed care

implementation with Phase I scheduled to begin on 1 November 2019, and Phase II
scheduled to begin on 1 February 2020. Kilgore-Kilpatrick Aff. ¶ 3 and Ex. A, RFP
§ I, pp. 6-7.

 22.

The RFP provided that only CPs were eligible to submit offers for

statewide contracts and that PLEs were “eligible to submit offers for Statewide
and/or Regional Contracts.” Kilgore-Kilpatrick Aff. ¶ 3 and Ex. A, RFP § II, p. 8.
The RFP further stated that the Department would determine the award of
statewide contracts before determining regional contract awards, and that if a PLE
was awarded a statewide contract it would no longer be considered for a regional
contract award. Id. Additionally, the RFP “strongly encouraged” PLEs to submit
proposals for more than one region and stated that the Department would award no
more than one regional contract for each of Regions 1 and 6 and no more than two
regional contracts for Regions 2, 3, 4, and 5. Id.
23.

The RFP specified the following five areas in which proposals would be

evaluated and the weight assigned to each area:
Offeror Qualifications/ Experience (20% weight)
Scope of Services (70% weight)
Use Cases (5% weight)
Client References (5% weight)
Bonus Points: Marketplace Participation (2.5% weight)

Id. pp. 17-19. The “Scope of Services” subsection was further broken down into
eight sub-subsections, with individual weights ranging from 5% to 25% of the total
evaluation. Id. pp. 17-18.
24.

The RFP sought responses and explanations to at least 65 questions

not including subparts, along with 7 use case scenarios, which set out detailed,
multifaceted health care scenarios and requested the offerors to respond with “the
program and services listed within each use case” and directed that offerors could

 “include a detailed narrative, diagrams, exhibits, examples, sketches, descriptive
literature or detailed information specifically tailored for the North Carolina
Medicaid Managed Care to demonstrate its ability to meet or exceed requirements.”
Kilgore-Kilpatrick Aff. ¶ 5 and Ex. C.
25.

At proposal opening on 19 October 2018, the Department received

proposals from eight offerors: Aetna; ACNC; BCBSNC; CCH; My Health; Optima
Family Care of North Carolina, Inc. (“Optima”); United; and WellCare. Ludlam Aff.
¶ 21.
26.

Evaluation Question 1 in Section VIII, Attachment O to the RFP,

required an offeror to indicate if it was submitting a proposal for a statewide or a
regional contract, or both. Kilgore-Kilpatrick Aff. ¶ 5 and Ex. C, RFP § VIII, p. 8.
Evaluation Question 2 in Section VIII, Attachment O to the RFP, required an
offeror submitting a regional proposal to indicate the regions it was proposing to
serve. Id.
27.

WellCare, United, BCBSNC, ACNC, and Aetna, which are CPs, all

submitted proposals for statewide contracts. See Moon Aff. ¶ 9. Of the three PLE
offerors, My Health and CCH also submitted proposals for statewide contracts. Id.
CCH and Optima submitted proposals for regional contracts. Id.
28.

My Health responded to Evaluation Question 1 by indicating that it

was applying for a Statewide Contract:
Offeror Qualifications/Experience
Evaluation Question

 1. The Offeror shall indicate if it is submitting a proposal as a Statewide or
Regional contract. Check all that apply.
Response
Statewide Contract

XX

Regional Contract _____

Kilgore-Kilpatrick Aff. ¶ 11 and Ex. I, Excerpts of My Health Proposal, p. 8. My
Health similarly directed its application for a statewide, and not regional, contract
throughout its response to the RFP. Specifically, My Health: submitted a cover
letter stating that it was submitting a proposal in response to the RFP as a
“Statewide Prepaid Health Plan qualifying as a Provider-Led Entity”; did not mark
any regions in response to Question 2; and stated that questions associated with
regional contracts were “not applicable” in responding to Table 1: Minimum
Qualifications Table in Section III, Attachment O. Id. and Ex. J, October 18, 2018
letter from My Health (emphasis in original); Moon Aff ¶ 8.
29.

The Department established an Evaluation Committee that included

individuals with significant experience with Medicaid, complex government
programs, and managed care. Ludlam Aff. ¶ 22. The Evaluation Committee
consulted subject matter experts during the evaluation process including a
physician, pharmacists, nurses, and social workers. Id. ¶ 23.

The subject matter

experts had experience in health care, state budgeting, claims payment, technology,
and other areas impacting Medicaid. Id.
30.

The Evaluation Committee met 46 times over four months. Id.; Moon

Aff. ¶ 4. Evaluation Committee training and kick-off meetings were held between 17
October 2018, and 24 October 2018. Id. The Evaluation Committee then met to

 evaluate and score the proposals, beginning on 25 October 2018, and finishing on 24
January 2019. Id. ¶ 5. The Evaluation Committee rated the proposals by section for
each offeror using a consensus method of scoring. Id.
31.

After

the

Evaluation

Committee

completed

its

scoring,

the

Department’s Medicaid contracting section conducted a quality assurance review of
the scoring. Id. ¶ 7.
32.

Of the offerors that submitted proposals, WellCare received the highest

score followed by United, BCBSNC, ACNC, Aetna, My Health, CCH, and Optima.

Id. ¶ 9.
33.

My Health received a score of 626.71280, which was 61.435% of the

total possible points. Id. The highest scoring offeror, WellCare, received 71.824% of
the total possible points (with a score of 736.19304), and the fourth ranked
statewide offeror, ACNC, received 68.943% of the total possible points (with a score
of 706.66204). Id.
34.

CCH received a score of 628.39969 (or 61.307% of the total available

points), and Optima (which only sought regional contracts in Regions 4, 5, and 6)
received a score of 573.48539 (or 55.950% of the total available points). Id.

D.

Contract Awards

35.

After conducting its evaluation process, the Evaluation Committee

recommended the award of the statewide contracts to the four highest rated offerors
(WellCare, United, BCBSNC, and ACNC). Moon Aff. ¶ 11. The committee did not
recommend the award of any regional contracts. Id. at ¶ 12.

 36.

The Evaluation Committee made its recommendation to Mona M.

Moon, North Carolina Medicaid’s Chief Operating Officer. Id. ¶ 14. Ms. Moon then
made the recommendation to the Department’s Deputy Secretary of NC Medicaid,
Dave

Richard.

Id.

Mr.

Richard

accepted

the

Evaluation

Committee’s

recommendation regarding the award of the four statewide contracts, and he also
recommended the award of a contract to CCH for Regions 3 and 5. Id.; KilgoreKilpatrick Aff. ¶ 10 and Ex. H, p. 1.
37.

Department

Secretary

Mandy

Cohen

accepted

Mr.

Richard’s

recommendation, Moon Aff. ¶ 14, and, on 4 February 2019, the Department
awarded statewide PHP contracts arising out of the RFP to WellCare, United,
BCBSNC, and ACNC, and regional PHP contracts covering Regions 3 and 5 to CCH.
Kilgore-Kilpatrick Aff. ¶ 8 and Ex. F. The contracts consisted of the RFP and the
successful offerors’ responses, along with other documents specifically enumerated
in the RFP. Id. ¶ 3 and Ex. A, RFP § I, p. 8.
38.

On the same day, the Department publicly announced the contract

awards and provided information regarding the implementation timeline including
launch of Medicaid managed care in Regions 2 and 4 in November 2019, followed by
the launch of Medicaid managed care in Regions 1, 3, 5, and 6 in February 2020. Id.

E.

Implementation Activities

39.

Following the 4 February 2019 contract awards, the Department and

the Intervenors began work toward implementing Medicaid managed care.
Gregosky Aff. ¶ 4.

 40.

Over 300 Department employees, consultants, and contractors are

working on behalf of the Department to implement Medicaid managed care. Id.
Vendor support staff has been trained in the details of North Carolina Medicaid
managed care design. Ludlam Supp. Aff. ¶ 8.
41.

As of April 8, 2019:
a.

The Department had hosted 208 meetings with the contract
awardees;

b.

The contract awardees had provided 819 deliverables to the
Department required under their contracts; and

c.

The Department had reviewed and provided feedback on 196 of
those deliverables.

Gregosky Aff. ¶ 5.
42.

The Department has identified features and tasks that must be

completed before performance of the contracts. Id. ¶ 8. As of April 12, 2019, the
Department expected 210 features and 790 tasks to have been completed by the end
of April 2019, and an additional 274 features and 650 tasks to have been completed
by the end of May 2019. Id. Additional CMS approvals are needed before launch.
Ludlam Supp. Aff. ¶ 6. Notices to potential program beneficiaries must be printed,
beneficiaries must be educated about their choices, and open enrollment must occur.
Gregosky Aff. ¶¶ 6, 7. Provider contracts also must be finalized. See id. ¶ 9.

F.

MyHealth’s Bid Protest

43.

My Health submitted a request for a bid protest meeting to Secretary

Cohen and Kimberley Kilpatrick, the Department’s Contract and Compliance

 Specialist, on 25 February 2019, pursuant to 1 N.C. Admin. Code 05B .1519(c)(1)
and the terms of the RFP. Kilgore-Kilpatrick Aff. ¶ 14 and Ex. L.
44.

In its protest, My Health asked that the Department amend its award

decisions by offering My Health six regional contracts. Id. My Health also requested
that the Department permit My Health to participate in implementation activities
while its protest was pending. Id. My Health’s protest does not specifically request
award of a statewide contract. Id.
45.

Secretary Cohen designated Principal Deputy Secretary Susan Perry-

Manning to act as the Department’s executive officer for purposes of My Health’s
protest. Petition, Ex. A, p. 1. A protest meeting was held before Principal Deputy
Secretary Perry-Manning on 26 March 2019. Id.
46.

On 5 April 2019, Principal Deputy Secretary Perry-Manning issued her

decision denying My Health’s protest. Id. p. 28. This contested case followed.
IV.
ANALYSIS

A.

Standard of Review

47.

Petitioner brings this contested case pursuant to the Administrative

Procedure Act of North Carolina (“NC APA”), N.C. Gen. Stat. § 150B-23 et. seq. The
NC APA specifically authorizes an Administrative Law Judge to “[s]tay the
contested action by the agency pending the outcome of the case, upon such terms
[s]he deems proper, and subject to the provisions of G.S. 1A-1, Rule 65[.]” N.C. Gen.
Stat. § 150B-33(b)(6).

 48.

Rule 65 of the North Carolina Rules of Civil Procedure authorizes the

issuance of a preliminary injunction. Like a temporary restraining order, a
preliminary injunction serves to maintain the status quo pending trial on the
merits. Providence Volunteer Fire Dep’t v. Town of Weddington, __ N.C. App. __,
800 S.E.2d 425, 435 (2017).
49.

A preliminary injunction “is an extraordinary measure.” Ridge Cmty.

Inv’rs, Inc. v. Berry, 293 N.C. 688, 701, 239 S.E.2d 566, 574 (1977) (emphasis
added). It will be issued only if: (i) a petitioner is able to show the likelihood of
success on the merits of its case and (ii) is likely to sustain irreparable loss unless
the injunction is issued or if, in this Tribunal’s opinion, such relief appears
necessary for the protection of petitioner’s rights during the course of litigation.

Providence Volunteer Fire Dep’t, __ N.C. App. at 435; see also G. Gray Wilson,
North Carolina Civil Procedure § 65-1 (2018). The burden is on the petitioner to
establish its right to a preliminary injunction. Pruitt v. Williams, 288 N.C. 368, 372,
218 S.E.2d 348, 351 (1975).

B.

Analysis

50.

My Health argues that it is entitled to a stay because it is likely to

succeed on the merits of its claims and it will suffer irreparable harm absent a stay.
In support of its Motion, My Health argues the merits of its claims. This Tribunal
has carefully considered the parties’ arguments and, in summary, concludes that
My Health has not demonstrated the likelihood of success on the merits of its
claims.

 (i)

Standards Governing Contested Cases

51.

Prior to addressing the merits of My Health’s claims, this Tribunal

first sets out the basic principles which governs its review of this contested case.
52.

The actions contested by My Health in this contested case relate to the

Department’s procurement of capitated PHP contracts as part of the State’s
Medicaid Transformation.
53.

The

Department

is

the

“single

state

agency”

charged

with

administrating the State’s Medicaid program. 42 U.S.C. § 1396a(a)(5) (requiring
“the establishment or designation of a single State agency to administer or to
supervise the administration of the plan . . .”); N.C. Gen. Stat. § 108A-54 (“The
Department is authorized to establish a Medicaid Program . . . .”); N.C. Gen. Stat. §
108A-54.1A (“The Department [] is expressly authorized and required to take any
and all necessary action to amend the State Plan and waivers in order to keep the
program within the certified budget, except as provided in G.S. 108A-54(f).”).
Because the Department has the “full authority to manage the State’s Medicaid and
NC Health Choice programs,” it is unsurprising that the General Assembly vested it
with the responsibility “for planning and implementing the transformation required
by the [a]ct.” N.C. Sess. Law 2015-245, § 4(1). This included the procurement of
capitated PHP contracts. Id. at § 4(3).
54.

The Department’s discretion under the Transformation Act is broad,

but it is not unbridled. Under the NC APA, the Department, may not exceed its
authority or jurisdiction, act erroneously, fail to use proper procedure, act

 arbitrarily or capriciously, or fail to act as required by law or rule. N.C. Gen Stat.
§150B-23. Indeed, to prevail in this contested case, My Health must demonstrate
that it was deprived of property or otherwise substantially prejudiced3 and the
Department acted in a manner contrary to the NC APA. Id.
55.

In contested case proceedings, due regard is to be given to the

demonstrated knowledge and expertise of the agency with respect to facts and
inferences with the agency’s specialized knowledge. N.C. Gen. Stat. Ann. § 150B-34.
But this does not mean complete deference. It is generally recognized that, when
reviewing the underlying merits of an agency’s interpretation, “courts consider, but
are not bound by, such the interpretations of administrative agencies [].” Morris

Commc'ns Corp. v. City of Bessemer City Zoning Bd. of Adjustment, 365 N.C. 152,
156 (2011).
56.

However, a reviewing body “does not have authority to override”

discretionary decisions made by an agency when that “discretion is exercise in good
faith and in accordance with law.” Lewis v. N.C. Dep't of Human Res., 92 N.C. App.
737, 740, 375 S.E.2d 712, 714 (1989). Rather, such decisions may be reversed as
arbitrary, capricious, or an abuse of discretion when they are “patently in bad faith”
or “whimsical” in the sense they “indicate a lack of fair and careful consideration” or
“fail to indicate any course of reasoning and the exercise of judgment.” Id. at 740
(internal citations and quotations omitted). It is presumed, absent evidence to the
contrary, that an agency “discharge[d] its duties in good faith and exercise[d] [its]
The harm required to establish substantial prejudice cannot be conjectural or hypothetical; it must
be concrete, particularized, actual or imminent. Surgical Care Affiliates, 235 N.C. App. 620, 631
(2014).
3

 power in accord with the spirit and purpose of the law.” Painter, 288 N.C. 165, 178,
(1975); see also Richardson v. N.C. Dept of Pub. Instruction Licensure Section, 199
N.C. App. 219, 223-24 (2009) (recognizing that an “agency’s decision is presumed to
be made in good faith and in accordance with governing law.”) Thus, the “arbitrary
or capricious standard is a difficult one to meet.” Lewis, 92 N.C. at 740.

(ii)

Likelihood of Success on the Merits
a.

57.

My

My Health is Not Likely to Succeed in Showing that the
Transformation Act Requires the Department to Award Six
Regional Contracts
Health

first

claims

that

the

Department

violated

the

Transformation Act; it argues the act required the Department to award a
minimum of six regional contracts to PLEs. P’s Brief,4 p. 12. Resolution of My
Health’s claim first requires this Tribunal to interpret the provisions of the
Transformation Act as they relate to the procurement of capitated PHP contracts.
58.

The “first principle of statutory interpretation is to ascertain the intent

of the legislature and carry out such intention to the fullest extent.” Parkdale

America, LLC v. Hinton, 200 N.C. App. 275, 278 (2009) (internal citations and
quotations omitted) (recognizing that “[a] question of statutory interpretation is
ultimately a question of law.”)
59.

The words chosen by the General Assembly are the primary

consideration in determining its intent. Id. In certain circumstances, it is also
appropriate for this Tribunal to consider “[t]he construction adopted by the
“P’s Brief” refers to Petitioner’s Brief in Support of Motion for Stay of Contested Actions dated 29
April 2019.

4

 administrators who execute and administer a law in question [.]” John R. Sexton &

Co. v. Justus, 342 N.C. 374, 380 (1995). “Testimony, even by members of the
Legislature which adopted the statute, as to its purpose and the construction
intended to be given by the Legislature to its terms, is not competent evidence upon
which the court can make its determination as to the meaning of the statutory
provision.”5 Milk Commission v. National Food Stores, 270 N.C. 323, 332–33 (1967)
(disregarding affidavits introduced by plaintiffs as evidence of legislative intent on
the grounds they “were not competent for that purpose”).
60.

The “key question in this contested case” is whether there was a

legislative mandate requiring the Department enter award a minimum of six
regional contracts to PLEs, in essence, one for each region. P’s Brief, p. 15. This
Tribunal, with the aforementioned rules in mind, concludes that My Health’s
argument is inconsistent with the plain language of the Transformation Act.
61.

The starting point for answering this key question is Section 4(6) of

the Transformation Act. In final form, Section 4(6) provides in pertinent part as
follows:
Number and nature of capitated PHP contracts. – The

number and nature of the contracts required under
subdivision (3)6 of this section shall be as follows:

a.
Four contracts between the Division of Health
Benefits and PHPs to provide coverage to Medicaid and
In support of its Motion, My Health submitted affidavits of two former legislators which the
Department moved to strike. At the hearing on May 2, 2019, My Health admitted that these
affidavits are not necessary to My Health’s Motion. May 2, 2019 Tr. p. 54. Consistent with Milk
Commission, this Tribunal has not considered the affidavits of the former legislators in ruling on My
Health’s Motion.
6 Section 4(3) of the Transformation Act details the “capitated contract with PHPs” required to be
entered into by the Department as part of the State’s Medicaid transformation.
5

 NC Health
contracts).

Choice

recipients

statewide

(statewide

b.
Up to 12 contracts between the Division of Health
Benefits and PLEs for coverage of regions specified by the
Division of Health Benefits pursuant to subdivision (2) of
Section 5 of this act (regional contracts). Regional

contracts shall be in addition to the four statewide
contracts required under sub-subdivision a. of this

subdivision. Each regional contract shall provide coverage
throughout the entire region for the Medicaid and NC
Health Choice services required by subdivision (4) of this
section. A PLE may bid for more than one regional
contract, provided that the regions are contiguous.
(emphasis added)
N.C. Sess. Law 2018-48 (emphasis added). Section 5(2) of the Transformation Act
requires the Department to:
Define six regions comprised of whole contiguous counties
that reasonably distribute covered populations across the
State to ensure effective delivery of health care and
achievement of the goals of Medicaid transformation set
forth in Section 1 of this act. Every county in the State
must be assigned to a region.
N.C. Sess. Law 2015-245, § 5(2).
62.

MyHealth contends that the above-cited language is evidence of a

“mandate of the General Assembly” that reflects its intention that “the Department
award regional contracts to [PLEs] to ensure coverage of all six regions.” P’s Brief,
pp. 12, 14. This Tribunal is not so persuaded.
63.

Section 4(6) – the key provision – details the number and nature of

capitated PHP contracts required under the Transformation Act. As to the number,
the General Assembly mandated only that the Department enter into a certain
number of statewide contracts with “PHPs,” but it did not mandate that the

 Department award any of those statewide contracts to PLEs specifically. Further,
while the General Assembly explicitly mandated the award of four statewide
contracts to PHPs, it used permissive language to authorize “[u]p to 12” regional
contracts with PLEs. N.C. Sess. Law 2015-245 § 4(6), as amended by N.C. Sess. Law
2018-48 § 1. By using the phrase “up to,” the General Assembly set a range (12 or
less) on the number of contracts to be awarded under Section 4(6)b.7
64.

My Health argues that the floor for this range is six and, as support,

points to “coverage of regions” language appearing in Section 4(6)b. P’s Brief, pp. 1516. However, the “coverage of regions” language does not appear to set a floor on the
number of contracts, but rather distinguishes between the nature of the PHP
contracts authorized under Section 4(6)a and 4(6)b.
65.

While Section 4(6)a mandates the award of statewide contracts to

provide coverage statewide, Section 4(6)b permits the Department to award PLEs
regional contracts in the six regions designed by the Department for coverage of an
entire region. Thus, based on the plan language of Section 4(6)b, the Department
not only had the authority to enter into statewide contracts for “coverage. . .
statewide,” but it also could enter into regional contracts for “coverage of regions.”
Again, the General Assembly leaves it within the discretion of the Department as to
the exact number of regional contracts, which, based on the plain language of
None of the parties have cited, nor has this Tribunal found, any North Carolina cases specifically
interpreting the meaning of the phrase “up to.” While this Tribunal is not bound by the reasoning of
courts in other jurisdictions, it notes that other courts have interpreted the plain meaning of the
phrase “up to” as one that sets a range. See e.g., Kipp v. Kipp, 844 So. 2d 691, 693 (Fla. Dist. Ct. App.
2003) (“the plain meaning of the phrase “up to” leads us to the inescapable conclusion that the
phrase set a cap but not the amount[.]”); Arness v. Franks, 138 F.2d 213, 216 (C.C.P.A. 1943)
(interpreting the phrase “up to 30%” to mean “anything from zero to 30%”).
7

 Section 4(6)b, could be “up to 12.” The Department, exercising this discretion,
awarded CCH regional contracts in Regions 3 and 5 for coverage of those regions.
66.

In conclusion, to find as My Health has argued in contested case,

would require inserting words into the Transformation Act, and, failing to give the
full effect to the words actually selected by the General Assembly. This contravenes
the duty of this Tribunal, which is “to give effect to the words actually used in a
statute and not to delete words used or to insert words not used.” Lunsford v. Mills,
367 N.C. 618, 623, 766 S.E.2d 297, 301 (2014). The General Assembly could have
mandated that the Department award a minimum number of PLE regional
contracts, like it did for the statewide contracts, or award PLE contracts for each of
the six regions in the state. It did neither. This Tribunal therefore concludes that
My Health is not likely to succeed on this claim.
b.
67.

MyHealth is Not Likely to Succeed in Showing that the
Department erred in failing to consider it for Regional Contracts

My Health next argues that the Department erred in it award of

capitated PHP contracts because it “refus[ed] to consider MyHealth for any of the
provider-led entity contracts.” P’s Brief, p. 24. My Health alleges that this action,
along with the Department’s failure to “offer provider-led contracts in all six regions
substantially prejudiced MyHealth.” Id.
68.

Even if My Health had persuaded this Tribunal to adopt its statutory

construction arguments, My Health still would not be likely to prevail in its
argument that the Department should have awarded My Health regional contracts
for the reasons explained below.

 69.

As an initial matter, this Tribunal notes that the RFP’s opening

directives to offerors stated: “a. CPs are eligible to submit offers for Statewide
Contracts. b. PLEs are eligible to submit offers for Statewide and/or Regional
Contracts.” Kilgore-Kilpatrick Aff. ¶ 3 and Ex. A, RFP § II, p. 8.
70.

Evaluation Question 1 required offerors to identify the type of contact

it was seeking with its proposal; it stated: “The Offeror shall indicate if it is
submitting a proposal as a statewide or regional contract. Check all that apply.”
Kilgore-Kilpatrick Aff. ¶ 5 and Ex. C, RFP § VIII, p. 8 (emphasis added). My Health,
in response to this question, checked the Statewide Contract option “XX” and did

not check the regional contract option. Kilgore-Kilpatrick Aff. ¶ 11 and Ex. I, p. 8.
71.

Additionally, Evaluation Question 2 stated in pertinent part:
If the Offeror is submitting a Regional proposal (as
indicated in Question #1 above), the Offeror shall indicate
the Region(s) … it is proposing to provide Medicaid
Managed Care services and coverage. (If the Offeror is
submitting a Statewide proposal, it is presumed that the
Offeror is proposing to provide Medicaid Managed Care
services and coverage in Regions 1-6 in their entirety and
the Offeror shall not be required to make any indication.

Kilgore-Kilpatrick Aff. ¶ 5 and Ex. C, RFP § VIII, p. 8. My Health did not mark any
regions in response to Evaluation Question 2. Farrell Supp. Aff. ¶ 19.
72.

My Health claims that it did not believe that it was required to

indicate in its proposal that it was seeking regional contracts in addition to a
statewide contract based on the parenthetical in Evaluation Question 2 quoted
above. Farrell Supp. Aff. ¶ 19. However, the parenthetical refers to a statewide
proposal being required to provide service and coverage in all six regions “in their

 entirety” and did not relieve My Health from indicating that it was seeking regional
contracts in the event it was not awarded a statewide contract and desired to be
considered for regional contracts.
73.

My Health’s position also is inconsistent with other aspects of its

proposal including that My Health responded “not applicable” to certain questions
in Table 1: Minimum Qualifications Table regarding regional contracts and stated
in the cover letter to its proposal that it was making a statewide proposal. Moon Aff.
¶ 8; Kilgore-Kilpatrick Aff. ¶¶ 11, 12 and Exs. I and J.
74.

In summary, this Tribunal finds that the Department reasonably

construed My Health’s responses to the RFP as failing to indicate that it was
applying for both statewide and regional contracts and therefore concludes that
MyHealth is not likely to prevail on this argument.
c.
75.

MyHealth is Not Likely to Succeed in Challenging the
Department’s RFP Design and Evaluation Process.

Finally, My Health makes a variety of arguments relating to the

Department’s RFP design, evaluation process, and scoring of various questions. P’s
Brief, pp. 27-35. Given that My Health arguments hinge, in large part, on
legislative intent, this Tribunal begins its analysis of these claims with the General
Assembly’s intent in enacting the Transformation Act.
76.

The General Assembly enacted the Transformation Act with the intent

“to transform the State’s current Medicaid and NC Health Choice programs to
programs that provide budget predictability for the taxpayers of this State while
ensuring quality care to those in need.” N.C. Sess. Law 2015-245, § 1. To accomplish

 its goal, the General Assembly chose a capitated system where the Department
would enter into capitated contracts with PHPs for delivery of the services to the
State’s Medicaid beneficiaries. N.C. Sess. Law 2015-245, § 4(3). The capitated
contracts were to be the result of a competitive procurement process handled by the
Department. Id. The General Assembly vested the Department with “the full
authority to manage” the State’s Medicaid program. N.C. Sess. Law 2015-245, §
4(1), as amended by N.C. Sess. Law 2016-121.
77.

My Health primarily argues that the Department erred in procuring

capitated PHP contracts because the RFP design and evaluation process was
allegedly biased against PLEs and in favor of CPs. P’s Brief, pp. 27-35. Similar to its
other arguments, My Health’s argument is premised on the assumption that the
Transformation Act required the Department to award PLEs capitated PHP
contracts and, more specifically, contracts in all six regions. See e.g., P’s Brief, p. 30
(arguing that the Transformation Act “envisioned that 75 percent (i.e., 12 of 16) of
the contracts awarded would be awarded to provider-led entities[.]”) Again, the
Tribunal finds this interpretation inconsistent with the Transformation Act and, for
the reason explained below, concludes that My Health is not likely to prevail on its
arguments challenging the RFP design and evaluation.
78.

The Transformation Act gives the Department broad discretion in

designing the RFP and procuring capitated PHP contracts for the State’s Medicaid
transformation.

The

General

Assembly

“[d]efine[d]

the

overall

goals

of

transformation and the structure of the delivery systems for the program.” N.C.

 Sess. Law 2015-245, § 2(1). But the General Assembly delegated the responsibility
of “entering into capitated PHP contracts for the delivery of . . . services” to the
Department. N.C. Sess. Law 2015-245, § 5(6), as amended by N.C. Sess. Law 2016121 and N.C. Sess. Law 2018-49. Thus, the Department’s procurement was not
simply to include PLEs in the State’s Medicaid transformation but to procure PHPs
(which could be a CP or PLE) to operate capitated contracts for the delivery of

services to the State’s Medicaid beneficiaries. Indeed, the General Assembly
designed the State’s new Medicaid program to achieve the goal of ensuring the
sustainability of the capitated system, as well as ensuring: (i) budget predictability
through shared risk and accountability, (ii) balanced quality, patient satisfaction,
and financial measures, and (iii) efficient and cost-effective administrative systems
and structures. N.C. Sess. Law 2015-245, § 1.
79.

When analyzing the record evidence and taking into consideration the

clear intent and goals of the General Assembly in enacting the Transformation Act,
this Tribunal concludes that My Health has failed to show that the Department
acted in a manner that would warrant revisiting the RFP or the evaluation process
80.

The Tribunal notes that My Health contends that the language of the

Transformation Act required the Department to issue two requests for proposals –
one for CPs and one for PLEs. P’s Brief, p. 29 (noting that N.C. Sess. Law 2015-245,
§ 4(3) states “all contracts shall be the result of requests for proposals (RFPs) issued
by the Department[.]”) There is nothing appearing in the plain language of the
Transformation Act requiring the Department to undertake such action.

 81.

The Transformation Act uses the term RFP in both the singular and

plural. Compare N.C. Sess. Law 2015-245, § 4(3) with N.C. Sess. Law 2015-245, §
5(12) (requiring the Department to report to the Joint Legislative Oversight
Committee on Medicaid and NC Health Choice the “[t]ime line for issuance of RFP
and solicitation of bids”). The General Assembly could have mandated that the
Department issue separate RFPs for CPs and PLEs, but it did not. Instead, the
Transformation Act requires all PHP contracts to cover the same services and be
subject to the same contract terms. N.C. Sess. Law 2015-245, § 4(4) and 5(6), as
amended by N.C. Sess. Law 2016-121, N.C. Sess. Law 2018-48, and N.C. Sess. Law
2018-49.
82.

As for the request for proposal at issue in this contested case, the

record evidence demonstrates that the Department designed the RFP after much
thought and based on the input of legislators, CMS, stakeholders, and Medicaid
managed care experts to identify the PHPs that were best able to achieve the goals
of the new Medicaid managed care model chosen by the General Assembly and
comply with the laws and regulations that apply to all PHPs, regardless of whether
they are CPs or PLEs. Ludlam Aff. ¶¶ 3, 5-11; Ludlam Supp. Aff. ¶¶ 10, 11, 13;
Lerche Aff. ¶¶ 3-8.
83.

Moreover, the record is devoid of any evidence the Department

discharged its duties in evaluating the proposals other than in good faith. The
Department submitted evidence in opposition to the Motion demonstrating that the
Department’s evaluation process was extensive, thorough, and fair. This includes

 evidence that: the Evaluation Committee consisted of individuals with varied
experience relevant to the PHP contracts being procured; the Evaluation Committee
consulted subject matter experts; the Evaluation Committee held over 40 meetings
from October 2018 to January 2019; the Evaluation Committee used a consensus
scoring, an approach that would account for potential differences among committee
members; and the Department’s Medicaid contracting section conducted a quality
assurance review to ensure consistency and accuracy of the scores awarded to
proposals. Ludlam Aff. ¶¶ 22-23; Moon Aff. ¶¶ 4-5, 7; Kilgore-Kilpatrick Aff. ¶¶ 6, 7
and Ex. D and Ex. E.
84.

Although My Health may disagree with the scores that the Evaluation

Committee awarded its proposal on discrete questions, absent My Health showing
that the Department abused its broad discretion or erred in some other manner,
there is no basis for this Tribunal to disturb the scores awarded by the Department.
Likewise, there is no basis for this Tribunal to entertain My Health’s invitation to
rewrite the RFP by eliminating certain questions characterized by My Health as
being “fundamentally flawed commercial-plan-only biased questions.”8
85.

In sum, this Tribunal concludes that My Health is not likely to prevail

on the merits of its claims raised in this contested case.

(iii)

8

Irreparable Harm

See Transcript of Hearing on Petitioner’s Motion for A Stay of Contested Actions, p. 38.

 86.

Having determined that Petitioner has failed to establish a likelihood

of success on the merits of its claims, this Tribunal need not reach the question of
whether Petitioner will suffer irreparable harm.
V.
CONCLUSION
87.

The dispute in this contested case shows that, as in most RFPs,

reasonable people could reach different conclusions on how an RFP should be
designed and evaluated. However, the current record before this Tribunal shows
that the Department properly exercised the discretion granted to it in designing and
procuring contracts for Medicaid transformation in North Carolina. It does not
appear that anything about the development of the RFP, the evaluation process, the
Department’s award decisions, or its bid protest process and decision could be
considered unlawful, arbitrary and capricious, whimsical, erroneous, or lacking in
any judgment.
88.

Under these facts, My Health is unlikely to succeed on the merits of its

claims against the Department. My Health’s request for a stay of contested actions,
therefore, is denied.
SO ORDERED, this the 26th day of June, 2019.

TJ
Tenisha S Jacobs
Administrative Law Judge

 CERTIFICATE OF SERVICE
The undersigned certifies that, on the date shown below, the Office of
Administrative Hearings sent the foregoing document to the persons named below
at the addresses shown below, by electronic service as defined in 26 NCAC 03
.0501(4), or by placing a copy thereof, enclosed in a wrapper addressed to the person
to be served, into the custody of the North Carolina Mail Service Center who
subsequently will place the foregoing document into an official depository of the
United States Postal Service:
Jeffrey A Belkin Esq.
jeff.belkin@alston.com
Attorney For Intervenor
A Andre Hendrick
1180 West Peachtree Street Suite 1800
Atlanta GA 30309
Attorney For Intervenor
Rodney E Alexander
ALEXANDER RICKS
rodney@alexanderricks.com
Attorney For Intervenor
Mary K Mandeville
ALEXANDER RICKS
1420 E. 7th St., Suite 100
Charlotte NC 28204
Attorney For Intervenor
Eric Franklin Fletcher
Brooks Pierce
efletcher@brookspierce.com
Attorney For Intervenor
Charles Foster Marshall
Brooks Pierce
cmarshall@brookspierce.com
Attorney For Intervenor
Jessica Thaller-Moran
Brooks, Pierce, McLendon, Humphrey & Leonard LLP
jthaller-moran@brookspierce.com
Attorney For Intervenor

 Jennifer Kay Van Zant
Brooks, Pierce, McLendon, Humphrey & Leonard, LLP
jvanzant@brookspierce.com
Attorney For Intervenor
Elizabeth H Black
Haynsworth Sinkler Boyd PA
eblack@hsblawfirm.com
Attorney For Respondent
Robert Y Knowlton
Haynsworth Sinkler Boyd PA
bknowlton@hsblawfirm.com
Attorney For Respondent
Boyd B Nicholson Sr.
Haynsworth Sinkler Boyd PA
nnicholson@hsblawfirm.com
Attorney For Respondent
Karen D. Walker
Holland & Knight LLP
karen.walker@hklaw.com
Attorney For Intervenor
Roger V Abbott
Mayer Brown LLP
1999 K Street NW
Washington DC 20006
Attorney For Intervenor
Luke Levasseur
Mayer Brown LLP
1999 K Street NW
Washington DC 20006
Attorney For Intervenor
Marcia G Madsen
Mayer Brown LLP
1999 K Street NW
Washington DC 20006
Attorney For Intervenor

 Shannon R. Joseph
Morningstar Law Group
sjoseph@morningstarlawgroup.com
Attorney For Intervenor
Lisa G Corbett
NC Department of Health and Human Serivces
2001 Mail Service Center
Raleigh NC 27699
Attorney For Respondent
John R Green
NCDOJ
jgreen@ncdoj.gov
Attorney For Respondent
Colleen M Crowley
North Carolina Department of Justice
ccrowley@ncdoj.gov
Attorney For Respondent
Matthew William Wolfe
Parker Poe Adams & Bernstein
mattwolfe@parkerpoe.com
Attorney For Petitioner
Melanie Black Dubis
Parker Poe Adams & Bernstein LLP
melaniedubis@parkerpoe.com
Attorney For Petitioner
Robert A Leandro
Parker Poe Adams & Bernstein, LLP
robbleandro@parkerpoe.com
Attorney For Petitioner
Donna D Smith
Special Deputy Attorney General, NC Department of Justice
AGO_PublicAssistance@ncdoj.gov
Attorney For Respondent

 Colin Alexander Shive
Tharrington Smith
cshive@tharringtonsmith.com
Attorney for Intervenor
Felix Hill Allen
Tharrington Smith LLP
hallen@tharringtonsmith.com
Attorney For Intervenor
Paul J Puryear Jr.
Wyrick Robbins Yates & Ponton LLP
4101 Lake Boone Trail Suite 300
Raleigh NC 27607
Attorney For Intervenor
Lee M Whitman
Wyrick Robbins Yates & Ponton, LLP
lwhitman@wyrick.com
Attorney For Intervenor
This the 26th day of June, 2019.

D
Daniel L. Chunko
Administrative Law Judge Assistant
Office of Administrative Hearings
6714 Mail Service Center
Raleigh NC 27699-6700
Telephone: 919-431-3000