FILED
OFFICE OF ADMINISTRATIVE HEARINGS
06/26/2019 3:48 PM

STATE OF NORTH CAROLINA
COUNTY OF WAKE
Optima Family Care of North Carolina
Inc,
Petitioner,
v.
North Carolina Department of Health
and Human Services Mandy Cohen MD
MPH in her ofc capacity as Sec of the
Dept and Dave Richard in his ofc
capacity as Deputy Sec of the Dept of NC
Medicaid,
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.

IN THE OFFICE OF
ADMINISTRATIVE HEARINGS
19 DHR 01959

ORDER ON
PETITIONER’S
MOTION FOR STAY

THIS MATTTER COMES on for consideration on the Motion for Stay (the
“Motion”) filed by Petitioner, Optima Family Care of North Carolina, Inc.
(“Petitioner” or “Optima”). In support of, and in opposition to, the Motion,
Petitioner, Respondent, and Respondent-Intervenors filed numerous affidavits and

 other evidentiary materials. On 16 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 on the Motion, 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 Optima was the eighth-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 Optima. Petitioner’s
Motion seeks a stay of the implementation efforts for the awarded PHP contracts
pending the resolution of this contested case.
II.
PROCEDURAL HISTORY
4.

On 4 March 2019, Optima submitted a request for a bid protest

meeting to the Department protesting the Department’s decision not to award it
regional contracts.

A bid protest meeting was held on 9 April 2019, and the

Department denied Optima’s request for relief by the Protest Denial Letter on 12
April 2019. Amended Petition ¶ 6.

Optima filed its Amended Petition and the

Motion on 22 April 2019.2
5.

Optima filed its brief in support of its motion on 2 May 2019 and the

Department and Respondent-Intervenors3 filed their memoranda in opposition on 9

Optima initially commenced this contested case by filing a Petition for a Contested Case Hearing
with this Tribunal on April 5, 2019.
2

This Tribunal granted the following four intervenors the right to intervene for purposes of Optima’s
request for a stay and has otherwise deferred ruling on their motions to intervene:
UnitedHealthcare of North Carolina, Inc. (“United”); Blue Cross and Blue Shield of North Carolina
(“BCBSNC”), WellCare Health Plans of North Carolina, Inc. (“WellCare”); and AmeriHealth Caritas
North Carolina, Inc. (“ACNC”). This Tribunal granted Carolina Complete Health, Inc.’s (“CCH”)

3

 May 2019. The Tribunal heard argument on the request for a stay on 16 May 2019.
The Motion 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. See Affidavit of
James Edward Ludlam, IV (“Ludlam Aff.”), ¶ 7.
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

motion to intervene in full. With regard to this Motion, all five intervenors (the “Intervenors”) filed
briefs and materials with the Tribunal and made oral argument for the Tribunal’s consideration.

 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. See Affidavit of Mona M. Moon (“Moon
Aff.”) ¶ 16, Ex. A (RFP § II, p. 8).

B.

Design of the Procurement

15.

The procurement that is the subject action is the culmination of efforts

by many people over several years and has spanned two administrations. Ludlam
Aff. ¶¶ 3, 6. It has involved multiple divisions within the Department and other

 state agencies, such as the Department of Insurance. 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. ¶¶ 7-11. It also considered the risk
to the financial viability of a plan if a PHP does not secure enough members. Id.;
Affidavit of Julia Kraemer Lerche (“Lerche Aff.”), ¶ 3.
17.

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

who had relevant experience, but also subject matter expert consultants. Ludlam
Aff. ¶ 12. For example, the Department retained Manatt, Phelps & Phillips, LLP
(“Manatt”), a national consulting firm with Medicaid managed care experience, for
review and assistance with development of the RFP. Id.
18.

The Department also employed Mercer, a global consulting firm, 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. 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. Id. at ¶ 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 Aff. ¶ 7.

C.

The RFP and the Department’s Evaluation Process

20.

The Department issued the RFP on 9 August 2018 to solicit offers for

PHPs through a competitive procurement process. Moon Aff. ¶ 3.
21.

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.” Moon Aff. ¶¶ 4,5.
22.

At proposal opening on 19 October 2018, the Department received

proposals from eight offerors: Aetna; ACNC; BCBSNC; CCH; North Carolina
Provider Owned Plans, Inc. dba MyHealth by Health Providers (“My Health”);
Optima Family Care of North Carolina, Inc. (“Optima”); United; and WellCare.
Ludlam Aff. ¶ 25. Optima, a PLE, submitted a proposal for contracts in Regions 4,
5, and 6. Optima Reply, Ex. H, Excerpts of Optima Proposal, p. 3.
23.

To review the proposals, the Department established an Evaluation

Committee that included individuals with significant experience with Medicaid,
complex government programs, and managed care. Ludlam Aff. ¶¶ 26-27. The

 Evaluation Committee consulted subject matter experts during the evaluation
process, including a physician, pharmacists, nurses, and social workers, with
expertise in various areas relevant to the evaluation. Id. ¶ 28.
24.

The RFP states that the scoring of proposals will be based on the

following criteria:
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)
Moon Aff. Ex. A (RFP § II, 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.
25.

Over the course of four months the Evaluation Committee conducted

46 meetings. Moon Aff. ¶ 6. The Evaluation Committee rated the proposals by
section for each offeror using a consensus method of scoring by which the voting
members would agree on a particular rating for each offeror’s response to each
question. Id. at ¶ 8. At least five of the seven voting members were required to be
present for purposes of rating or scoring responses. Id. The Evaluation Committee
made, recorded and kept notes of its meetings. Id. at Ex. G. After the Evaluation
Committee completed its scoring, the Department’s Medicaid contracting section
conducted a quality assurance review of the scoring. Id. ¶ 15.

 26.

Of the offerors that submitted proposals, WellCare received the highest

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

Id. ¶ 17.
27.

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.
28.

CCH, which also sought regional contracts, 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. Optima scored the lowest, or tied for the lowest
score in seven out of 11 areas scored under the Scope of Services and also had the
lowest score of all offerors for the use case scenarios. Id. at ¶ 22.

D.

Contract Awards

29.

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. ¶ 20. The committee did not
recommend the award of any regional contracts. Id. at ¶ 21.
30.

The Evaluation Committee made its recommendation to Mona M.

Moon, North Carolina Medicaid’s Chief Operating Officer. Id. ¶ 26. 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.
31.

Department

Secretary

Mandy

Cohen

accepted

Mr.

Richard’s

recommendation, 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. Id. The contracts
consisted of the RFP and the successful offerors’ responses, along with other
documents specifically enumerated in the RFP. Id. at Ex. A (RFP § I, p. 8).

E.

Implementation Activities

32.

Following the 4 February 2019 contract awards, the Department and

the Intervenors began work toward implementing Medicaid managed care.
Gregosky Aff. ¶ 4.
33.

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 Aff. ¶ 35.
34.

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.

 35.

The Department has identified features and tasks that must be

completed before performance of the contracts. Id. ¶ 8. 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 Aff. ¶ 32.
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.

Optima’s Bid Protest

36.

Optima submitted a request for a bid protest meeting pursuant to 1

N.C. Admin. Code 05B .1519(c)(1) and the terms of the RFP. See Petition, ¶ 14. A
protest meeting was held before Principal Deputy Secretary Susan Perry-Manning
on 9 April 2019. Amended Petition, ¶ 6. On 12 April 2019, Principal Deputy
Secretary Perry-Manning issued her decision denying Optima’s protest. Id. This
contested case followed.
IV.
ANALYSIS

A.

Standard of Review

37.

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).
38.

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).
39.

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

40.

Optima 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, Optima argues the merits of its claims. This Tribunal has

 carefully considered the parties’ arguments and, in summary, concludes that
Optima has not demonstrated the likelihood of success on the merits of its claims.

(i)

Standards Governing Contested Cases

41.

Prior to addressing the merits of Optima’s claims, this Tribunal first

sets out the basic principles which governs its review of this contested case.
42.

The actions contested by Optima in this contested case relate to the

Department’s procurement of capitated PHP contracts as part of the State’s
Medicaid Transformation.
43.

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).

 44.

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, Optima must demonstrate that
it was deprived of property or otherwise substantially prejudiced4 and the
Department acted in a manner contrary to the NC APA. Id.
45.

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).
46.

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
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).
4

 “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]
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.

47.

Optima Has Not Shown It Is Likely to Prevail on Its “Threshold
Criteria” Argument

Optima argues that the Department denied Optima’s proposal on the

sole basis that it fell short of an undisclosed “threshold” to meet overall
expectations. Amended Petition ¶ 16.
48.

The record evidence shows that Optima received the lowest score of all

eight Offerors, including the lowest score awarded in 7 out of the 11 areas scored
under Scope of Services: 1) Administration and Management; 2) Program
Operations; 3) Members; 4) Quality and Value; 5) Stakeholder Engagement; 6)
Claims and Encounter Management; and 7) Compliance. In addition, Optima had
the lowest score among all offerors for the use case scenarios. Moon Aff. ¶ 22.
49.

After completing scoring of all proposals, the Evaluation Committee

discussed whether to award regional contracts to the two offerors that had
submitted proposals for regional contracts:

CCH and Optima.

The Evaluation

 Committee noted that “CCH and Optima are the lowest scoring Offerors by a
margin of more than 75 points relative to the fourth highest scoring Offeror.” The
Evaluation Committee stated that “Optima’s total score indicates the Offeror, on
average, failed to achieve the threshold to “meet expectations,” i.e., 60% of the total
possible points or 615.” Moon Aff. ¶ 18 and Ex. H, Summary of Evaluation Process,
p. 6. The tabulation of the scores on that page similarly notes Optima “did not
achieve average score of Meets.” Id.
50.

The average score of “Meets” refers to the five-level rating scale that

the Department used to evaluate offeror responses to most questions. This rating
scale assigned 60% of possible points to those responses for which the Evaluation
Committee determined the response “met” expectations and indicated “the capacity,
capability, or experience to implement or operationalize the approach” described.
Moon Aff. ¶ 24.

Under the five-level rating scale, 100% of available points were

only given if the offeror “substantially exceed[ed]” expectations, and 85% of
available points were given if the offeror “exceed[ed]” expectations. Id.
51.

Based on the current record, it appears that the Department rationally

discussed whether to award regional contracts to PLEs, and in particular whether
to award a regional contract to Optima. Nothing in the RFP required that a contract
be awarded to an offeror scoring at least 600 (or 625) points. It thus makes no
difference whether Optima was rejected for failing to reach a threshold to meet
overall expectations. It was within the Department’s discretion not to award a
contract to the lowest scoring offeror.

 52.

Optima has therefore not demonstrated a likelihood of success that it

can show that the Department’s failure to award Optima a contract “evinces a lack
of fair and careful consideration or want of impartial, reasoned decision making.”

R.J. Reynolds Tobacco Co. v. N.C. Dep’t of Env’t & Natural Res., 148 N.C. App. 610,
618, 560 S.E.2d 163, 168-169 (2002) (internal quotation marks and citation
omitted).
b.
53.

Optima has Not Shown That It is Likely to Prevail on Its Claims
That the Department Improperly Scored Optima’s Proposal

Optima also asserts that the Department’s scoring of Optima’s

responses to certain discrete RFP questions was arbitrary and capricious and
constituted an abuse of discretion.

In particular, Optima alleges that the

Department should have awarded it the maximum points available for its responses
to Questions 7, 10, and 11, which would have increased its score by 55 points.
Optima, however, has not demonstrated it is likely to succeed on this contention.
54.

Again, it appears from the record currently before this Tribunal that

the Department’s evaluation process was extensive, thorough, and fair.

The

Evaluation Committee consisted of numerous individuals who have experience in
past procurements and the health care industry, including some who have
experience with Medicaid and managed care organizations. The Evaluation
Committee held over 40 meetings from October 2018 to January 2019, and
consulted with subject matter experts. Additionally, after the Evaluation
Committee completed the initial consensus scoring, the Department conducted a
quality assurance review to ensure consistency and accuracy of the scores awarded

 to the proposals. This Tribunal will not, under these circumstances, step into the
shoes of the Evaluation Committee and rescore Optima’s proposal. See e.g., Shields

Enters., Inc. v. United States, 28 Fed. Cl. 615, 632 (1993) (“[i]t is not the role of the
courts to step into the shoes of the evaluators and make a technical assessment of
the merits of a plaintiff’s proposal submitted in response to an RFP.”).
55.

Without an increase to its score of at least 55 points, Optima would

still remain the last place Offeror. Accordingly, because Optima has not
demonstrated a likelihood of proving that it was not awarded at least 55 additional
points because of scoring errors, it similarly has not demonstrated the necessary
element that it suffered “substantial prejudice” as a result of any claimed error.

Blue Ridge Healthcare Hosps. Inc. v. N.C. Dep’t of Health & Human Servs., ___
N.C. App. ___, 808 S.E.2d 271, 279 (2017) (quoting Surgical Care Affiliates, 235
N.C. App. at 628, 762 S.E.2d at 473-74).
c.

56.

Optima is Not Likely to Prevail on Its Claim That the
Procurement Evaluation and Contract Award did not Comply
with State Law.

Optima contests the Department’s evaluation of regional PLE offerors

and the award of two regional PHP contracts as contrary to law and otherwise
erroneous; it contends that the RFP design and scoring methodology were, in
essence, biased against PLEs. Optima’s argument primarily relies on its assertion
that the Transformation Act requires the Department to award, at a minimum, six
regional contracts to PLEs – one in each region designated by the Department.
Resolution of Optima’s claim first requires this Tribunal to interpret the provisions

 of the Transformation Act as they relate to the procurement of capitated PHP
contracts.
57.

As an initial matter, this Tribunal notes that 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
Department was responsible for “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 2016-121 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.
58.

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

legislative mandate requiring the Department to award a minimum of six regional
contracts to PLEs. This Tribunal concludes that, while the General Assembly
designed a delivery system in which PHPs could be CPs or PLEs, it granted the
Department discretion to determine the number of PHP regional contracts that
would be as part of that system.
59.

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.”)
60.

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

Co. v. Justus, 342 N.C. 374, 380 (1995).
61.

The starting point for answering the dispute in this case 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)5 of this section shall be as follows:

a.
Four contracts between the Division of Health
Benefits and PHPs to provide coverage to Medicaid and
NC Health Choice recipients statewide (statewide
contracts).
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)

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

 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.

Thus, as to the number of PHP contracts, the General Assembly, in

Section 4(6), 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.6
63.

The “coverage of regions” language appearing in Section 4(6)b does not

set a floor on number of contracts; it instead distinguishes between the nature of
the contracts authorized under Section 4(6)a and 4(6)b. While Section 4(6)a
mandates the award of statewide contracts for statewide coverage, Section 4(6)b
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 does note 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%”).
6

 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
plain 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 Section 4(6)b, could be “up to 12.”
64.

The Department, exercising this discretion, awarded CCH regional

contracts in Regions 3 and 5 for coverage of those regions. Optima contends that the
award of this contracts was improper because CCH was not a PLE. Based on the
current record currently before this Tribunal, Optima is not likely to succeed on this
argument as CCH, at this time, appears to satisfy to qualify as a PLE, as that term
is defined in section 4(2)b of the Transformation Act. N.C. Sess. Law 2015-245 §
4(2)b, as amended by Session Law 2018-48.
65.

In conclusion, Optima’s position regarding the minimum number of

PLE regional contracts required under the Transformation Act does not appear to
be supported by the plain language of the statute. The General Assembly clearly
stated that it was its intent in enacting the Transformation Act to ensure a
sustainable delivery system of services to the State’s Medicaid beneficiaries. N.C.
Sess. Law 2015-245, § 1(4). The delivery system chosen by the General Assembly
was capitated contracts with PHPs, which, based on the plain language of the
Transformation Act, could be a CP or PLE. 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
Optima is not likely to succeed on this claim.
66.

In sum, this Tribunal concludes that Optima is not likely to prevail on

the merits of its claims raised at this point in this contested case.

(iii)

Irreparable Harm

67.

Having determined that Optima has failed to establish a likelihood of

success on the merits of its claims, this Tribunal need not reach the question of
whether Optima will suffer irreparable harm.
V.
CONCLUSION
68.

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.

 69.

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

claims against the Department. Optima’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:
Mary K Mandeville
1420 East 7th Street Suite 100
Charlotte NC 28204
Attorney For Intervenor
NC Department of Health and Human Services, Division of Medical Assistance
2501 Mail Service Center
Raleigh NC 27699
Respondent
Rodney E Alexander
ALEXANDER RICKS
rodney@alexanderricks.com
Attorney For Intervenor
Jeffrey A Belkin Esq.
Alston & Bird LLP
jeff.belkin@alston.com
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
Terrill Johnson Harris
Fox Rothschild LLP
tjharris@foxrothschild.com
Attorney For Petitioner
Marcus C Hewitt
Fox Rothschild LLP
mhewitt@foxrothschild.com
Attorney For Petitioner
Elizabeth H Black
Haynsworth Sinkler Boyd, P.A.
eblack@hsblawfirm.com
Attorney For Respondent
Robert Y Knowlton
Haynsworth Sinkler Boyd, P.A.
bknowlton@hsblawfirm.com
Attorney For Respondent
Boyd B Nicholson Sr.
Haynsworth Sinkler Boyd, P.A.
nnicholson@hsblawfirm.com
Attorney For Respondent
A Andre Hendrick
Holland & Knight
1180 West Peachtree Street NW Suite 1800
Atlanta GA 30309
Attorney For Intervenor
Karen D. Walker
Holland & Knight LLP
karen.walker@hklaw.com
Attorney For Intervenor

 Shannon R. Joseph
Morningstar Law Group
sjoseph@morningstarlawgroup.com
Attorney For Intervenor
Donna D Smith
NC Department of Justice
AGO_PublicAssistance@ncdoj.gov
Affiliated Agency Attorney
John R Green
NCDOJ
jgreen@ncdoj.gov
Attorney For Respondent
Colleen M Crowley
North Carolina Department of Justice
ccrowley@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