Maine Medicaid cuts losses on $50M of IT

By Patty Enrado
12:00 AM

AUGUSTA, ME – After spending more than $50 million on a new billing system, the Maine Department of Health and Human Services is cutting its losses with plans to contract with a new vendor by June 2008.

Maine spent $47 million from late 2001 through January 10, 2007, and committed an additional $7 million trying to modernize its system.

Lack of resources and oversight, ill-defined requirements and vendor inexperience all contributed to the project’s problems – the most serious fallout being the suspension of hundreds of thousands of claims and delayed payments to the state’s providers.

While the Joint Standing Committee on Health and Human Services considers next moves, the state signed a new contract in late March with Rockville, Md.-based CNSI, its original technology vendor, to continue operating and maintaining the system. The contract includes the development of additional functionality and an option to extend operations beyond the June 2008 switchover.

The Centers for Medicare and Medicaid Services declined to comment. However, Vivek Gore, vice president of technology for CNSI, said that CMS’ involvement in the negotiations was critical. CMS had suspended project funding in 2005, but it agreed to fund 50 percent of operations to avoid the risks involved in no settlement being reached, according to Gore.

Gore said the current system is adjudicating 95 percent of the claims without manual intervention and that the reduction of suspended claims has gone down from 650,000 in 2005 to 60,000 to date. Maine State Rep. Hannah Pingree said the current system is working at a “functional level.”

 “What I think most everyone can say with relative confidence today is that the state contracted these services with a company that was just not equipped to do the job,” Pingree said. “They were the lowest bidder, and I’m sure that like any other competing business, they made a very good case for themselves at the time – and they may have fully believed that they could deliver the service. The state and federal governments had every reason to believe that they could.”

While CNSI experienced difficulties in Maine, Dave McLaury, chief deputy director for the Michigan Department of Community Health who oversees CNSI’s $51.5 million implementation in his state, said, “Our project is going well. We have plenty of executive oversight.” Michigan hired Tier Technology to provide independent testing and its Project Control Office and executive steering committee provide project management and oversight, respectively.

CNSI’s $180 million project in Washington State, which includes operation and maintenance until 2012, has completed its milestones on its way to its December 2007 go-live date.

Dick Thompson, CIO of Maine’s Department of Health and Human Services, said the department is preparing to submit advanced planning documents to CMS by early May at the latest that will outline service requirements for the third-party vendor.

In the meantime, $1 million was appropriated to compensate providers who can demonstrate financial burden, said Maine State Rep. Anne Perry. “The DHHS is working with a provider group to determine the best parameters for the distribution of these funds,” she said.

“Some members of the (Joint Standing) Committee have discussed meeting this summer to scrutinize DHHS and the services it provides,” said Rep. Donna Finley. “It is hoped we can be a true oversight committee.”

“The legislature will play a more expanded role this time around in reviewing contracts to ensure that an experienced vendor is selected,” said Pingree.

Going forward, the department will prepare upfront evaluations under more rigorous project management with an oversight process in place, said Thompson. “The state is putting significant efforts into IT projects,” he said, which counters some of the criticism leveled at the state.

“To the current administration’s credit, they inherited the system and have done everything they could to take responsibility to make it work,” Pingree said. “They have made good-faith efforts to get a usable product out of what the vendor gave us, and they recognize that there comes a time when it’s in the best interest of the state to cut bait.”