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Bridgewater did not return numerous calls from New Times seeking comment on the FourThought arrangements. But current and former AHCCCS employees say the agreement was useless in preventing what appeared to be blatant conflicts of interest.

For one thing, employees of FourThought made up about 25 percent of the department Bridgewater was to oversee. If she followed the agreement to the letter, AHCCCS employees claim, she could not do anything relating to a fourth of her staff and resources.

Current and former division employees say that despite Bridgewater's agreement not to issue orders to employees of her company, she did so regularly. Those employees also allege that she made managerial decisions that, by definition, had a financial impact on her private firm.

One ex-employee, hired to supervise consultants by Bridgewater's company, says he was repeatedly caught in political crossfire related to the apparent conflict of interest.

In 1992, G. Michael Smith says he was directed to terminate a project that a FourThought consultant had been working on.

Smith says his manager, a state employee, told him to cancel the project without telling the FourThought consultant. When Smith expressed concerns about terminating the project behind the consultant's back, he says he was told that the consultant had a "special relationship" with Bridgewater, his employer.

Smith says he asked his supervisor if he was talking about conflict of interest. Smith says he was told that "conflict of interest" was an unwelcome phrase in the department--one that Smith should not bring up again if he wanted to survive as an AHCCCS employee.

The AHCCCS manager in question did not return calls from New Times. Other AHCCCS spokespeople, however, insist that Bridgewater stayed true to the terms of her agreement. They say that if she had been seen giving direction to her own company's employees, as some AHCCCS employees have alleged, it was only because she was relaying orders from higher-ups.

Ultimately, Smith says, his curiosity and candor earned him a reputation for being uncooperative. After four years with AHCCCS, he was terminated in August of last year. He says leaving was not easy.

He thinks AHCCCS is, overall, a worthwhile program.
AHCCCS officials have always claimed that the seemingly incestuous relationships between contractors, state employees and providers is a by-product of the relatively small pool of skilled data managers in the health-care field. AHCCCS claims, essentially, that such relationships cannot be avoided.

They certainly are continuing. Bridgewater left AHCCCS in November. Her replacement, LeAnn Dale, is an ex-FourThought employee who has also worked for Mercy Care Plan, the second largest of the 15 health plans that have AHCCCS contracts.

At times, AHCCCS has suffered for being perhaps too far ahead of the curve of national health-care policy. Since most of the other states don't have managed-care systems, national Medicaid regulations about the administration of federal money often fail to fit with AHCCCS' goals and methods.

Examples of vague federal rules, a lack of oversight of important processes and wasted money are not hard to come by.

AHCCCS has been warned on several occasions that it needs prior approval for certain large expenditures on data-processing software, equipment and personnel. In 1992, AHCCCS was hard at work developing a plan to expand program services to cover mental health and needed the data-processing equipment to meet those needs. AHCCCS had been spending money on products it would need for months--but Health Care Financing Administration balked when asked to make the federal contribution to those purchases.

In October of that year, the federal government approved plans for the mental health services equipment, but indicated it would not reimburse the several hundred thousand dollars AHCCCS spent between April 1992 and February 1993. The feds said that AHCCCS had spent the money without necessary approval; for a time, it looked as if the state would have to eat those costs. Ultimately, HCFA agreed to repay those funds--but not before a lot of panicky phone calls between AHCCCS and HCFA offices in San Francisco.

It wasn't the only time it would happen.
In 1993, AHCCCS needed to purchase software design equipment for a federally mandated system which would streamline claims processes and cut down on paperwork.

Again, AHCCCS records show, the program had to ask HCFA for retroactive approval of the funds to cover purchases it had already made.

HCFA personnel told AHCCCS officials that money was being spent on the $8 million project before it had been approved. Discussions continued for several months, but in June 1994, HCFA finally told AHCCCS that all federal money for the project would be cut off. It would not flow again until the state stopped spending money the feds hadn't allocated.

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Dave Plank