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MIK ALAN POGUE Photographer of political events & pseudo events, of people in their natural surroundings Rag office 478-0452 Austin empires through cozy subcontracts with members of the corporate family. Consider the case of H. Ross Perot. In 1966, Perot was a part-time employee of Texas’ Blue Shield’s data processing division while trying to get his Electronic Data Systems, Inc., off the ground \(see Obs., April 14, Blue Shield’s payroll, Blue Cross gave EDS a subcontract to develop a computer system for processing Medicare Medicaid insurance claims. EDS retained ownership of the system developed and sold it, with appropriate modifications, in 31 other states. Will we hear another verse of that marketing melody? At the May meeting of the DPW, Dr. Gates protested vehemently 10 The Texas Observer Bookkeeping & Tax Service CU 503 WEST 15TH, AUSTIN 78701 0 OFFICE HOURS: 9 A.M. TO 5 P.M. AND BY APPOINTMENT ANYTIME GOOD NEWS FOR MOTHER EARTH NEWS COLLECTORS The Observer Bookstore has restocked a good supply of all back issues of those famous down-home how-to-do-it Mother Earth News magazines … from #1 through the current #26. Check the gaps in your collection \(every Mother Earth contains an ad describing order the issues you want at the Observer Bookstore discounted prices of $1.25 each, 5% sales tax included. Don’t forget the Observer Bookstore’s standing special deal for Mother-Earth News: any six issues for the price of five, if ordered at the same time. No charge for postage if remittance accompanies your order. THE TEXAS OBSERVER BOOKSTORE 600 West 7th .Austin, Texas 78701 that the department would own the utilization review system to be developed under TARP. The contract between TMF and Blue Cross is silent as to the question of ownership. The contract between the DPW and Blue Cross has a section entitled “Rights to use of utilization review computer programs.” The section guarantees DPW’s continued right to use the system’s operating instructions and program decks in the event of contract termination, on the condition that “such information shall be restricted to use by employees of the state agency and the contractor.” In short, the department does not own the system outright, and there seems to be nothing to prevent the TMF from marketing it. THE BOARD heard Denton’s letter politely, asked no questions of his staff and moved on. I was next on the agenda. I presented certain questions about the costs of TARP. A contract attachment estimates operational costs of $1.6 million for the first year of implementation. That figure does not include the data processing costs, which may be paid for through Blue Cross’ subcontract with EDS. When I inquired about the data processing costs, I was told by board member Morris Garrett of Fort Worth that the board would concern itself with those expenses at a later date. I then asked DPW Commissioner Raymond Vowell if he had figures on costs involved in the subcontract with EDS. He replied that he did not. I was informed that I had less than 90 seconds to complete my questions. I asked the board members if they were aware that studies by the General Accounting Office, HEW and the U.S. Senate Finance Committee have indicated that Blue Cross’ arrangement is grossly inefficient and \(to use the phrase of HEW’s audit missioner Raymond Vowell informed the board that all these studies pertained to the Title XIX Medicare program, and that the DPW was concerned with Title XVIII of Medicaid. My three minutes were up. \(My subsequent efforts to get information on the automatic-data-processing costs of the Medicaid program produced a rather interesting conversation with Dr. Gates. When I handed him a written request for “any available data on rates paid EDS for claims processing and review,” he told me that the DPW does not maintain such,: records. As I walked out of his office, I noticed that a drawer of one of his fileS is The hoard next entertained opposition speeches from George Benz and Lee Sanders of the San Antonio Health Advisory Council, a non-profit citizens’ group for consumer advocacy in health affairs. Benz and Sanders brought up a document submitted by the Texas Hospital Association when that group entered its formal objections to TARP In JanUary. The statement pointed out that ; “soinelea.ders and proponents of the TMF proposal, through their high-level connections with Blue Cross-Blue Shield, appear to have possible conflicts of interest which could lead to embarrassment and possible condemnation by an inquiring public if the costs of the TMF program exceed those of the Blue-Cross-Blue-Shield program, a likelihood that appears quite probable.” Sanders then gave the board a list of the names and affiliations of some persons associated with TARP the eight persons listed have held offices or performed duties for both Blue Shield and the TMF. Seven of the eight have performed functions for both the TMF and the TMA. The board voted affirmatively on the TARP contract. When the vote was completed, Chairman George Butler of Houston said, “We don’t want to gloss over these allegations.” He then instructed Vowell to “get something from the attorney general to clear this up.” On June 14, Vowell sent a query letter on the conflict-of-interest question to Atty. Gen. John Hill. A brief on the subject, drawn up by TMA attorney Pickens, accompanied the letter. Pickens included lists of Texas Blue Cross’ and the TMF’s boards of directors.* His TMF list gives the names of directors elected in May of this year. Drs. Dryden and Hallmark, who are listed as directors of the TMF on its 1971 articles of incorporation, are no longer directors. Dr. Smith remains on the board. When asked whether his work for TARP and DPW was being paid for by Blue Cross-Blue Shield, the TMA or the TMF, , Pickens said, “It would not he ethical for me to answer that questiiin.” of noted, “The attorney at law conflict ‘id have no application to the. sitaifttion relating to any DPW concern. As a side comment, the representation of multiple clients if full disclosure is made to all parties is not a conflict of interest.” It will be interesting to see how Hill will respond to the issue. He once wade a campaign promise to do away with the practice of allowing state agencies to hire outside counsel. Pickens and Stone are presently employed as outside counsel to state agencies, despite the campaign promise and despite a rider to last year’s appropriations bill prohibiting payment of state revenues to registered lobbyists. [1] * Pickens’ communication carefully omits mention of the directors and officers of Texas BlUe Shield, since it is not a party to the TARP contract. There . is a legal distinction between Blue \(‘rosy\(incorporated as Group Hospital comprising a non-profit parent corporation, Group. Medical and Surgical Services, and a wholly-owned subsidiary for-profit corporation, Group Life and entities are separated in law, they are hard to distinguish in operation. Texas Blue Cross and Blue Shield share a letterhead .. and Dallas address. They also share a president, several vice-presidents, a secretary and a treasurer. Three bodies with one head have a tendency tO act and speak as one body.