Questions surface over Minnesota's COVID-19 testing contract

Minnesota public health officials talk with pride of the free statewide COVID-19 testing system they set up last year, but questions are mounting about the cost of the no-bid contract they negotiated and a key pricing amendment still in the works.

The Minnesota Legislative Auditor's Office confirmed Friday that it has received multiple complaints about the rates billed to the state for COVID testing and is conducting "preliminary inquiries" into the issue, said Joel Alter, director of special reviews for the office.

Minnesota's contract is with Vault Medical Services of New York, which runs community testing clinics and communicates the results of about 9,700 COVID-19 diagnostic tests daily to the state and its residents. The contract also includes Infinity Biologix (IBX) of New Jersey, which runs the lab in Oakdale where saliva specimens are processed.

Under the emergency agreement struck last year, the state is billed $87 to $120.99 per test, depending on whether the sample came from a free community walk-up site or the statewide mail-order testing program.

Rates charged to private insurers can run $300 or more, unless the insurer has reached its own deal with Vault and IBX, according to interviews and insurance records. Some Minnesota insurers still do not have contracts spelling out their rates.

The state's contract with Vault was struck last October without competitive bidding, which is legal in an official emergency. A key page of the agreement, which defines budgets and caps spending for tests through September 2021, is still labeled "TBD" — to be determined.

State Department of Health officials hope to finalize that contract amendment this month. They're also working to finalize a deal that would allow other state agencies to buy testing services from Vault. Yet another agreement being negotiated would define Vault's role at mass-vaccination sites.

The state has not sought competing bids for any of that work.

Assistant Health Commissioner Dan Huff said Friday that state officials have looked at other options for testing but have found no better pricing for the full-service package of testing, prescribing and logistics than what it already negotiated with Vault and IBX.

IBX has a lab on the same floor of the building in Oakdale where the University of Minnesota Genomics Center (UMGC) processes COVID-19 saliva and nasal specimens. That lab is processing saliva specimens for $26 to $32 per test, depending on services needed, according to CIC Health, the Massachusetts firm that arranges testing contracts and physician ordering for UMGC.

Huff acknowledged that competitive bids might give state officials leverage to pressure Vault and IBX to adjust their pricing, but he said that would also slow things down while the virus continues to spread.

"The bid process is very time consuming and very resource-intensive," Huff said. "The reason we don't have to go out for bids is because we are in an emergency."

Chris Goldsmith, chief operating officer at Vault, said in an e-mail this month that prices in the amended deal won't change.

Wisconsin recently signed a deal with Vault to have it provide mail-order COVID testing free to state residents. Similar to Minnesota, Wisconsin agreed to pay $120.99 per test if insurance doesn't cover that amount first.

The Minnesota Health Department says residents are not supposed to get billed for COVID testing. The lion's share of the more than $150 million spent on testing in the state has been covered by federal grants and private insurance. But that doesn't mean the funding is an infinite resource.

"The several states we are working with for community testing have been quite interested in minimizing the price, presumably because they see federal financial support for this as a limited resource," Tim Rowe, CEO of CIC Health, said in an e-mail.

Sen. Michelle Benson, R-Ham Lake,, said she's asked the Minnesota Legislative Auditor's Office to investigate the deal between the state, IBX and Vault. Her concerns include whether the prices are too high and whether the contract gives Minnesota enough oversight and auditing power.

Benson, who chairs the Senate Health and Human Services Finance and Policy Committee, is voicing her concerns just as the state is seeing a new wave of hospitalizations — and more testing.

Last week marked the first sustained run since January in which more than 100 people per day on average were admitted to the hospital for COVID-19. Thursday, the most recent day with fresh data from the state, was the seventh triple-digit day in a row, according to the Star Tribune coronavirus tracker.

The total number of new cases of COVID grew by 1,845 on Sunday, bringing the state's tally of confirmed and suspected cases to 556,381 since the virus arrived in Minnesota 14 months ago.

There were 15 additional confirmed and probable deaths from complications of COVID announced Sunday, bringing the total to 7,020.

The new COVID cases announced Sunday came on a testing volume of about 31,000 tests. Those include tests processed through the state partnership with Vault as well as those handled at hospitals, other private labs and the state's public health lab in St. Paul.

When tested at a Vault site or with Vault's mail-order test, the patient is asked to provide their insurance information.

Under the testing contract, Vault and IBX bill the patient's insurer first, and then the state for any remaining balance under the capped rate. Conversely, if insurers pay more than the state's maximum, the state is supposed to get a credit toward any amount due.

The state has not yet been billed for any private insurance shortfall, Huff said.

Private insurers in Minnesota say that when the deal with IBX and Vault was struck last year, state officials didn't ask for their help or input, despite their extensive experience negotiating rate contracts with health care providers.

Once the deal was signed, state officials began urging residents to go to free community walk-up clinics or get a test mailed to them at home. All of those tests were "out of network," resulting in charges of $200 to $300 for lab services, plus medical fees ranging from $45 to $230, according to interviews and insurance-benefit documents.

"Vault and IBX are new vendors in Minnesota operating under an exclusive agreement with the state that did not fully take into account how or how much Minnesotans with insurance would be charged for their services," said Lucas Nesse, CEO of the Minnesota Council of Health Plans in St. Paul.

Joe Carlson • 612-673-4779