FILE - Louisiana State University main campus

Louisiana State University in Baton Rouge

LSU officials did not follow typical university procedures when licensing a medical software program, creating potential conflicts of interest and possibly violating the state constitution, the Louisiana Legislative Auditor says.

LSU President F. King Alexander asked the Legislative Auditor to review the relationship between the university and the nonprofit Louisiana Health Information Technology Foundation, or LaHIT. The foundation was created to find a for-profit partner to commercialize CLinicial InQuiry or CLIQ, an LSU-developed software application that provides a web-based portal for electronic medical records and clinical data.

Public universities often license their research to for-profit companies in hopes of spurring economic development, raising money for the university, and creating real-world benefits beyond the academic pursuit of knowledge. But the LaHIT arrangement was unusual for several reasons.

Dr. Frank Opelka, who at the time was LSU’s Executive Vice President for Health Care and Medical Education Redesign, did not use the university’s Offices of Technology Management in his efforts to license CLIQ, instead relying on contract attorneys from the Taylor Porter law firm, according to the Legislative Auditor’s report. LSU typically does not use third parties to commercialize its technology.

According to the auditor’s report, Opelka claimed licensing the software directly would have subjected the process to the state’s public bid law. But LSU actually is subject to the University Pilot Procurement Code which exempts technology transfers from competitive bidding requirements, the report says.

And while the LSU Board of Supervisors was briefed on LaHIT, three agreements related to the CLIQ licensing were never brought to the board for formal approval, the auditor says. That includes a deal with sublicensee HarmonIQ Health System Corporation that failed to include the 40 percent equity stake LSU officials thought they were getting, which would have ensured the university and its developers shared in revenue from a potential buyout.

“According to Dr. Opelka, LaHIT’s equity position meant that a substantial portion of proceeds from a buyout of HarmonIQ would go to LaHIT,” the Legislative Auditor’s report says. “LaHIT could then distribute all or a portion of the proceeds to LSU. Dr. Opelka further stated that if all proceeds were distributed to LSU, then LSU may have simply had its budget cut with no gain to LSU, and that proceeds that stayed at LaHIT would not be subject to budget cuts and, therefore, could be used for programs that benefited LSU.”

The report says HarmonIQ had no assets when it was formed and only obtained a line of credit after signing the sublicense agreement with LaHIT. HarmonIQ was to be funded through LSU’s hospital partnerships, with payments based on the company’s ability to help LSU serve those partnerships.

LSU paid HarmonIQ about $954,000 toward fulfillment of the university’s contracts with partner hospitals, the auditor says. LSU also paid Taylor Porter approximately $410,000 for legal services related to the licensing of the CLIQ software.

LSU may have violated the state constitution by using public funds to pay legal services for the benefit of a private, for-profit corporation, the report says. If any LSU employees’ time was spent working on the creation of HarmonIQ while on LSU payroll, those costs also may have violated the constitution.

In 2014, LSU entered into a $45,000 consulting contract with Oscar Diaz, president of HarmonIQ. The contract called for Diaz to assess the commercial potential of the CLIQ software and provide advice on the resource requirements and other considerations for making the technology commercially viable.

In January 2015, LSU Health Care's Services Division entered into a membership contract with the Healthcare Services Platform Consortium, of which Diaz was CEO. The contract was signed by Dr. Wayne Wilbright in his capacity as CEO of LSU HCSD.

Under the membership contract, LSU HCSD paid $240,000 in “benefactor” and other dues to the HSPC covering two years of membership, the Legislative Auditor says. HCSD also paid Harmon IQ $282,668 under a different contract signed in 2016. Wilbright may have violated the Louisiana Code of Ethics by signing both contracts, because he stood to gain royalties based on the successful commercialization of CLIQ, the auditor says.

In his response to the audit, Alexander, the LSU president, largely concurs with the organizational weaknesses reported by the Legislative Auditor. Among several other planned changes, he says the university has created a new Board of Supervisors committee responsible for oversight of affiliated organizations and an Office of General Counsel that reports directly to the president. The OGC reduces the need to rely on outside counsel and provides stronger oversight when outsourcing legal services is necessary, he says.

In his response, Wilbright agrees procedures related to technology transfers should be strengthened and transactions should be reviewed for possible conflicts of interest. Ethics opinions about potential conflicts should be sought before finalizing contracts, he says.  

LSU terminated its license agreement with LaHIT in 2017, the auditor’s report says. The termination was based on the failure to meet milestones specified in the agreement.

Staff Writer

David Jacobs is a Baton Rouge-based award-winning journalist who has written about government, politics, business and culture in Louisiana for almost 15 years. He joined The Center Square in 2018.