Unisys: Nobody Said Diversifying Was Easy

Its health-care business is drawing fire in Florida

Like a lot of old-line computer companies, Unisys Corp. is dead set on expanding its position in fast-growing computer-services businesses. In Unisys' case, a major thrust has been into providing computerized health-care services--claims processing and the like--for government employees. Lately, though, that initiative has run into trouble in three states, notably Florida, where authorities have started a criminal investigation of the company.

As recently as January, things looked a lot rosier. Unisys had won a key, $86 million contract to run Florida's state employee health-insurance business, which took effect on Jan. 1. For Unisys, the contract represented a big opportunity. It has long been in the medical-claims processing business. But in the Florida pact, it was doing more: For the first time, it was responsible for organizing the network of doctors and hospitals and processing claims. Succeeding might help it win other contracts, as states increasingly move to managed care for their employees.

Instead, the Florida contract is in jeopardy. In the first four months of 1996, Unisys was fined $525,000 for not meeting performance standards, says the Florida Department of Management Services, which says it subtracted the fines from Unisys' average monthly invoice of $1.1 million. Unisys says it has only been fined a total of $321,000 for January and February. The big problems: errors and slow response time, the state says. Unisys says it's getting any problems under control.

CRIMINAL PROBE. Now, however, the situation may be taking an even more serious turn. The Florida Law Enforcement Dept. confirms that it is conducting a criminal investigation of Unisys and some employees at the Tallahassee office that handles the contract. "If they've committed anything criminally wrong," says Douglas M. Cook, Director General of the Florida Agency for Health Care Administration, "we would terminate the contract." A spokesman says Unisys has done its own probe and found "absolutely no wrongdoing."

Part of the state investigation is based on allegations made against Unisys by Scott R. Youngstrand, 30, a onetime claims adjudicator who worked for Unisys for four months. Youngstrand says he was ordered to automatically deny some claims and shift others to electronic mailboxes with different starting dates so Unisys could avoid late fees. When he balked, he says, "I was terminated because I blew the whistle."

Unisys says that Youngstrand was terminated for "poor performance, poor attendance, and inappropriate conduct toward female co-workers"--charges Youngstrand denies. The company says it contacted the state at once upon hearing about the probe and has supplied records in answer to a subpoena. It also says shifting claims between mailboxes doesn't change the date of the claim.

Other states also are griping about Unisys' handling of traditional claims-processing contracts. Iowa sued Unisys for breach of contract in March, alleging errors in rate-setting. And Kentucky has withheld $7 million in payments to Unisys because of numerous glitches in the company's handling of a Medicaid claims-processing contract, according to Dee T. Maynard, former executive director of the state's Office of Personnel & Budget. Unisys acknowledges problems in Kentucky but says the Iowa suit has no merit.

"TOTAL CHAOS." In Florida, meanwhile, a state-sponsored review by Coopers & Lybrand, submitted in early May, pinpointed numerous errors and security problems that could lead to breaches of patient confidentiality. State Senator John Grant has asked the Senate to set up a select committee to look further into the issue. "We're gonna do some extensive investigating," he says.

Another naysayer is Benjamin R. Patterson III of Patterson & Traynham, attorneys for the American Federation of State, County & Municipal Employees, which plans to sue to rescind the pact. "The folks I've talked to are suggesting total chaos," he says.

The Florida contract may yet work out. Unisys has contracts with other states that are doing just fine. And in cooperation with Florida officials, it has worked out a detailed action plan to remedy remaining problems. One mitigating factor: After Unisys beat out 17-year administrator Blue Cross/Blue Shield of Florida Inc. in July, 1995, Blue Cross appealed and lost. The delay reduced the time Unisys had to get its system up and running.

State officials say they may cancel the contract if things don't improve by late September. "They have made substantial progress," says Cook, "but the jury's still out." If Unisys doesn't fix this contract quickly, it may come away with a badly sullied reputation in health care.

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