A firm with ties to Louisiana’s health chief got the nod for a lucrative state Medicaid contract because it submitted the lowest price.

But state evaluators said the price is based on flawed assumptions of the work required, according to testimony and documents revealed during a legislative hearing Thursday.

Documents recently released by the state Department of Health and Hospitals under a legislative subpoena show that CNSI based its price on more than 70 factors, many of which the state health agency finds unacceptable.

DHH Secretary Bruce Greenstein worked for the company in 2005 and 2006. Greenstein’s intervention to alter the state’s solicitation for proposals made CNSI eligible to vie for the contract.

CNSI’s cost proposal is what gave the Gaithersburg, Md., firm the edge over two other contenders for the most lucrative contract in state government.

The highest projected cost for the 10-year pact was $394 million for HP Enterprise Services of Palo Alto, Calif., compared to CNSI’s $184.9 million price.

ACS State Healthcare of Atlanta submitted the second lowest price at $238 million.

The companies had similar scores in evaluation of the firms’ technical abilities to do the work required in the “solicitation for proposals,” including processing claims, running a call center and monitoring fraud and abuse.

CNSI had ranked third in the technical evaluation.

The technical evaluation made up 80 percent of the scoring while cost was 20 percent.

The disparity caught the attention Thursday of the Legislature’s health committees as they held a public hearing on DHH’s plan to award the contract to CNSI.

State law required the hearing before the contract can be awarded. But the committee cannot take any action.

“Does that cause you any pause in the cost projection?” asked state Rep. Rickey Nowlin, R-Natchitoches.

DHH Undersecretary Jerry Phillips said contract negotiations will tie down the figure that CNSI has given for performing the work.

Nowlin noted that the CNSI’s financial proposal was based on a series of assumptions — more than any other of those seeking the contract.

“We told them we would not recognize their assumptions,” said Phillips.

Senate Health and Welfare Committee Chairman Sen. Willie Mount wanted to know if CNSI bid too low or whether the amount could be increased in negotiations prior to the contract being signed.

Phillips said the state will hold CNSI to the bid in contract negotiations. If something goes awry, the contract award issue will be sent to the state Division of Administration, he said.

“What does that mean?” asked Mount, D-Lake Charles.

Phillips said at that point, a decision would be made whether to rebid the contract or go with an increase in the financial terms.

“We really don’t want to come back to the Legislature for an increase associated with this award,” said Phillips.

He once again emphasized: “The assumptions do not apply to the contract. If the bidder tries to make them apply, that is not acceptable.”

State Rep. J. Rogers Pope, R-Denham Springs, said he does not like the state deciding which firm it wants to get the work, then negotiating terms of the deal.

“Sitting down negotiating that contract really bothers me,” Pope said.

Phillips said the negotiations are common before the actual contract is signed when solicitation for proposals are involved.

Molina Medicaid Solutions, the current contractor, did not make the cut on the technical evaluation and did not advance to the cost scoring.

DHH’s evaluation documents note CNSI’s more than 70 assumptions that went into its price calculation.

“Many of these assumptions had specific volume limits (for example, number of provider re-enrollments; length of enrollee calls) that are in conflict with the SFP (solicitation for proposals) or not acceptable to DHH,” according to an evaluation document. The other two companies also included some assumptions that were in conflict; the numbers were “significantly lower” and without the “specificity that the CNSI cost proposal includes,” the evaluation states.

Because of comments about the assumptions made by the cost evaluation team, each firm was asked: “Are the costs included in your cost proposal realistic, complete and final if none of the assumptions of your cost proposal are valid or acceptable to the Department?”

“The three vendors responded ‘YES’,” the report stated.