Dealing with pandemic in Georgia cost taxpayers more than $1 billion early on

Nursing homes, like this one in Atlanta where National Guard troops  joined in fighting the coronavirus, are still required under Gov. Brian Kemp’s new executive order to take aggressive steps to curb the spread of the virus. In the same order, the governor lifted the shelter-in-place for most of the state’s 10.6 million residents. Curtis Compton

Nursing homes, like this one in Atlanta where National Guard troops joined in fighting the coronavirus, are still required under Gov. Brian Kemp’s new executive order to take aggressive steps to curb the spread of the virus. In the same order, the governor lifted the shelter-in-place for most of the state’s 10.6 million residents. Curtis Compton

In the first few months of the COVID-19 pandemic the state obligated about $1 billion in federal spending for everything from grants, isolation gowns, masks and mobile facilities to doctors and nurses at hospitals and nursing homes across Georgia, according to a report officials sent the U.S. Department of Treasury.

As of the end of the state’s fiscal year, June 30, it still had an additional $2.4 billion in Coronavirus Relief Funds money for COVID-19 response, according to the report recently sent to the federal government. The state will send another, more up-to-date report to the federal government in coming weeks.

The recent report — obtained by The Atlanta Journal-Constitution — lists dozens of companies from Georgia and across the country that received contracts worth at least $50,000 during the hectic days and months after the state began feeling the impact of the pandemic and health care facilities desperately needed staff and equipment to deal with COVID-19.

According to the report, among the contracts was one potentially worth up to $220 million for a subsidiary of Jackson Health Care, the Alphretta-based health care staffing company; $51.5 million for PAE Holding Corp., an Arlington, Va.-based infrastructure and logistics company that converted the Georgia World Congress Center into a temporary hospital and staffed it; a $35 million contract to Sandy Springs-based Ipsum Diagnostics for COVID-19 tests; and a host of multimillion-dollar deals for contact tracing, testing and equipment.

They included a $6.5 million contract with a former state official and gubernatorial front-runner to provide isolation medical gowns and a $4.29 million agreement to buy gloves and surgical gowns from the company of a former legislator who incorporated her business after the state shut down for the pandemic.

Kelly Farr, head of the governor’s Office of Planning and Budget, said the state had no choice but to act quickly to help health care facilities in need in March and April.

“Remember, everybody was talking about how they were going to run out of facemasks by the end of the day,” Farr said. “It was what had to be done. You needed to find what you could find.”

The state was about a month into the pandemic when Gov. Brian Kemp announced a no-bid agreement with Jackson Healthcare to provide, through a subsidiary, additional critical care doctors, nurses and other staffers to medical facilities in need. State officials asked the company to help in March when Phoebe Putney Memorial Hospital in Albany was overwhelmed by a COVID-19 outbreak.

According to the Department of Community Health, the company has provided almost 2,300 health care professionals — doctors, nurses, respiratory therapists and other staff — to more than 150 hospitals and nursing homes. It had been paid about $50 million by the end of September.

The agreement raised some eyebrows at the Capitol because Rick Jackson, the company’s CEO, and his family have been major campaign contributors to Republicans over the years and have been active in state politics.

However, Jackson backed the losing Republican runoff candidate — Lt. Gov. Casey Cagle — in the 2018 race for governor. The family contributed $51,000 to Cagle’s campaign before giving $6,600 to Brian Kemp after he won the GOP runoff. Kemp eventually won election as governor that fall.

The governor’s emergency declaration allowed state agencies to sign deals without the traditional bidding process because staffing and equipment were needed quickly as the health care system ramped up to deal with the pandemic.

In the early days of the pandemic, state officials scrambled to obtain enough protective equipment, hospital beds, medical equipment, COVID-19 tests and other supplies. The state looked for suppliers, and agencies got solicitations from companies — sometimes with introductions from state politicians — wanting to provide equipment, everything from ventilators to disposable medical gowns.

When the pandemic hit, former state Rep. Paulette Rakestraw, R-Hiram, founded SourceLine Medical Supply. Her co-founder, Jad Shraim, a financial services industry veteran, had contacts in the medical supply business. Rakestraw had business and marketing experience.

She also had political contacts from her time in the General Assembly and with a national organization seeking a balanced budget amendment to the U.S. Constitution. “Paulette decided to leverage her contacts throughout the nation to help get much needed pandemic supplies in the hands of the people that need them,” according to her SourceLine biography.

Rakestraw incorporated SourceLine on April 1. On April 13, the Georgia Emergency Management and Homeland Security Agency agreed to pay the company $390,000 for 1.5 million rubber gloves. The next day, SourceLine got another order for 500,000 surgical gowns at a cost of nearly $4.3 million.

Rakestraw said her status as a former legislator had nothing to do with getting the contracts.

“We got on the vendor list like everybody else,” she said. “They called and were talking to us. We quoted them some things. Some items they awarded to us and some they didn’t.”

In response to written questions, GEMA said it “has done business with many vendors throughout the course of this (pandemic) response, some of which were new companies.” The agency said it received information about SourceLine through its online vendor portal, and the company was vetted by GEMA and the State Accounting Office.

GEMA said SourceLine’s prices were competitive with other vendors and that Rakestraw’s political connections played no role in the contracts.

Former longtime state Insurance Commissioner John Oxendine, a one-time front-runner in the Republican race for governor in 2010, offered in May to get the state 1 million isolation gowns for $6.55 each, a price in line with other state contracts for similar gowns.

“The delivery time to your office will be 10 to 12 business days,” Oxendine wrote GEMA, according to emails obtained by the AJC through the Georgia Open Records Act. “One reason for the delay is that it takes three days for the Chinese government to release the product once it arrives at the airport.

“If the gowns are shipped by sea to Los Angeles, and then trucked to Atlanta, it will take closer to 20 business days. However, I can get the cost down to $4.70 each.”

The state accepted the higher price, agreeing to pay $6.55 million to Oxendine’s LabRx LLC.

Oxendine said he sold gowns to other states and municipalities and Georgia wasn’t the first state he approached.

“You don’t get rich selling this stuff,” the former commissioner said. Usually it’s pennies per gown, he said.

“I honestly do not think I got any special deal," he said. "My price was comparable to the market price.”

Chris Clark, president of the Georgia Chamber of Commerce, provided an introduction for a member of his board from Ernst & Young, a multinational professional services firm, to then-GEMA Director Homer Bryson, according to emails obtained by the AJC. In its report, the state told the federal government that it would spend up to $16.4 million with Ernst & Young for contact tracing, through the Department of Public Health.

Farr said some of the federal money has gone to pay the salaries of state agency employees who have worked on the pandemic.

The federal money can be spent on coronavirus-related expenses through the end of the year.

When the pandemic is finally in the world’s rearview mirror, Farr said the federal government may come back and more closely question how states spent relief funds. But he said Georgia and other states had to take quick action to help overwhelmed health care systems fight COVID-19 and couldn’t go through the usual, often lengthy procurement process.

“We did it because we didn’t think we had a better option,” he said.