A month after the Valencia County commission unanimously voted to enter into a contract with Lovelace Health System for a hospital/24-hour emergency health care facility, the provider has filed an appeal in district court, asking to be released from fulfilling the contract.
After more than two hours in executive session on Oct. 25, the commissioners voted 5-0 to award the contract to LHS to build and operate the facility. Lovelace has not signed the contract.
Lovelace, the only provider to respond to a request for proposal for a hospital/24-hour emergency health care facility put out by the county in late April, filed a notice of appeal in the 13th Judicial District Court late Monday afternoon.
The notice doesn’t contain the basis of the appeal, which will be filed at a later time by LHS, but it did include a determination letter from the county in response to Lovelace’s request to withdraw its proposal.
In a letter dated Oct. 24, Lovelace gave two reasons for its withdrawal.
The provider claims it didn’t understand that the commission required it to make cash payments to subsidize the costs of the third-party medical services contract for inmates at the Valencia County Detention Center.
In addition, LHS believed the contract to be for eight years, but after discussion with the commission and county attorneys said it came to understand the commission required a provision to allow for termination of the contract by the county after the third year, as per state statute.
“These are requirements with which LHS simply cannot comply, both from a business standpoint and potentially from a legal on ...” the letter reads.
The letter from Lovelace references an Oct. 18 letter from the county — that the News-Bulletin does not have — which the company says suggests since LHS submitted a proposal in response to the county’s RFP, Lovelace “somehow agreed to contractually bind itself to the proposed terms in the form of contract ...”
In the response to Lovelace, which was dated Oct. 25, county purchasing officer Rustin Porter argued under the conditions of the RFP, responses are considered firm for 90 days after the due date for proposals or 60 days after a best and final offer was due, if one is solicited.
“The due date for receipt of the proposals was Aug. 8, 2018. The county did not request best and final offers,” Porter wrote. “According to the solicitation, LHS’s response is considered firm until Tuesday, Nov. 6, 2018.”
The RFP also specified the contract between the county and a provider would follow the format specified by the county, and contained the terms and conditions in the sample contract that was in the RFP.
Porter’s letter continues, noting if an offeror objected to the county’s terms and conditions in the contract, they had to propose specific, alternative language for the county to consider.
“LHS did not object to any of the county’s terms and conditions in its response to the solicitation, nor did it propose specific alternative language to the form of (the contract),” Porter wrote. “... Instead, the county received a substantially revised health care facilities contract nearly two months after the submission of LHS’s proposal ...”
In it’s revised proposal, Lovelace attempts to revise its offer to subsidize the inmate health care contract, use the mill levy funding for unauthorized purposes and require the county to agree to defend and indemnify LHS contrary to law, the county’s Oct. 25 letter reads.
According to the proposal Lovelace submitted in response to the RFP, it was prepared to subsidize up to $950,000 a year to the detention center for inmate health care. The current inmate health care contract costs the county $940,673 annually.
According to Porter’s letter, Lovelace proposed changes to the contract include using the mill levy funds for construction “in contravention of the mill levy question approved by the voters, as well as to utilize the public’s mill levy funds as liquidated damages” if the county decided to terminate the contract after the first three years, as is allowed by state law.
Liquidated damages are often part of a contract and are typically paid as damages for failure to perform under the contract.
Under the state’s Hospital Funding Act, the county may terminate its contract with Lovelace or any provider without cause after the third year of the contract with 180 days notice.
The contract awarded under the terms of the RFP would be for eight years, but still subject to the three year termination power of the county, a stipulation Lovelace argued it was not aware of prior to the proposal submission deadline.
The RFP allowed for 475 optional points for the inmate health care subsidy — 50 points for each $100,000 contributed to the county on an annual basis — which Lovelace received all of by offering to subsidize up to $950,000 annually.
In its response, Lovelace writes that upon award of the contract, LHS would enter into a memorandum of understanding that spelled out the time frame for the subsidy to be paid, how it was spent and how surplus funds in any given year would be allocated.
“LHS(’s) remorse upon discovering it was the only offeror and its recognition that rendering a firm offer for the entire of the $950,000 cost of inmate medical care to secure the full 475 points available for this item may not have been necessary to secure the position as the highest ranked offeror does not constitute a mistake of fact ...” Porter wrote.
Lovelace attempted to revise its offer to limit the subsidy to urgent and emergency health care services, according to the county’s letter.