New Medicaid Contractor Misses Deadline After Controversial Bid Award

CARSON CITY – A firm hired in January to take over operation of the state’s Medicaid billing and information systems has failed to complete the first key step in the process by an August deadline and has been given an extension to Dec. 5.

The Medicaid contract with HP Enterprise Services is one of the biggest for the state at a cost of $177 million over five-plus years, and proved controversial when it was approved by state officials in January.

HP had originally committed to transferring the existing Medicaid Management Information System now being operated by Magellan Medicaid Administration by Aug. 1, a five-month process that began March 1.

But Charles Duarte, administrator of the state Division of Health Care Financing and Policy, which oversees the Medicaid program, said this week the work was not completed by the deadline. The Department of Health and Human Services agreed to an extension to Dec. 5 to complete the transfer, he said.

The issue was HP finding the number of qualified staff it needed to complete the transfer on time, Duarte said.

The company is on track to complete the transfer by the new deadline, an assessment shared by a separate independent contractor called Public Knowledge hired by the state to oversee the work, he said.

“So far what we’ve seen with HP is they have been very willing to live up to their commitments and we’re going to hold them to that,” Duarte said.

An HP executive involved in the transfer said today the new deadline will be met.

“We’re definitely firing on all cylinders to make that date,” said Stu Bailey, general manager for state and local government health care in the Western U.S. for the company. “We meet with the state on a regular basis to ensure that. The IV&V (independent validation and verification) has been heavily involved to validate that what we’re saying and what we’re doing is on track, so we’re feeling comfortable that that date will be met.”

Bailey said two issues, one involving the scope of the project not being precisely as it was described in the request for proposal, and the other being staffing issues, led to the delay. The company is transferring its California Medicaid contract to a competitor and the process has taken longer than expected, making staff unavailable for the Nevada transfer, he said.

The HP contract was approved by the Board of Examiners, including Gov. Brian Sandoval, in January, but not without controversy. The second lowest bidder, ACS, raised numerous concerns about the negotiations that resulted in HP winning the contract, including $30 million in additional value that brought the cost of the HP bid close to that of ACS.

Because of the cost involved in filing a formal protest, including a $245,000 non-refundable charge to post a bond, ACS elected not to challenge the award, however.

ACS elected not to comment for this story.

Duarte said the delay in completing the transfer is resulting in some missed savings to the state, but the amount of money lost so far has not yet been quantified. State officials do expect the company to make up those lost savings once the transfer is complete, he said.

“There are other ways of achieving those savings through the contract term and we’re going to leave that open for discussion after the transfer,” Duarte said. “All of our focus right now is making sure that that goes off smoothly so there is no interruption in provider payments and authorization of services for Medicaid recipients.

“But I will be intently working with them after the takeover to make sure that we can achieve those savings that we said we were going to achieve – and that they said they would,” he said.

The Medicaid information system is critically important to Nevada and the U.S. Department of Health and Human Services, which share in the costs of delivering medical services to the approximately 300,000 low-income Nevada recipients, typically families, seniors and the disabled.

Source: U.S. Government.

Nevada health care providers, including doctors and dentists, suffered major financial difficulties in 2003 when the state transitioned to a new Medicaid information system operated by First Health Services Corp. that encountered numerous problems when it first started up.

Bailey said he has been made well aware of the concerns, not only by Duarte and his staff, but by Nevada lawmakers and health care providers as well.

The company has been meeting with state officials and the current contractor on a weekly basis for the past six months to ensure a smooth transition, he said.

Duarte said the HP contract is not for a new system, but what he calls a “lift and drop” where the existing system is transferred to the new contractor.

The transfer process is now in the stages where both systems are being tested in parallel prior to finalizing the transfer, he said. The timely transfer of the system is important because some of the Magellan staff is going to work for HP, and so the company won’t be able to continue to provide the services required indefinitely, Duarte said.

“There is going to be a point in time in which Magellan can’t continue full operations, and so again, that is another driving reason why we want to get this done Dec. 5,” he said.

HP Enterprise Services will serve as the fiscal agent for the state’s Medicaid program when the transfer is complete, managing the state’s Medicaid system, including the processing of payments to medical providers, for the life of the contract.

Duarte said the state does have the ability to seek damages for a failure of the company to deliver on the terms of the contract, but that the decision at this point was not to “lawyer up” but instead to get the work done.

The federal Department of Health and Human Services is also involved in ensuring HP and the state get this work done, he said. When certified, Nevada will get enhanced federal funding, he said.

The Medicaid program is one of the costliest in the state budget, accounting for $1.6 billion this year, with $500 million of that coming from the state general fund. Federal support and other sources make up the rest of the budget.

HP Enterprise Services is the largest provider of Medicaid information system services in the country, operating in 21 of 38 states that have outsourced their programs. It processes about 1 billion provider claims each year.

Bailey said the company is successful because it works to ensure client satisfaction.

“I’ll tell you it’s not enough for us to have the business,” he said. “Beyond that we need to have clients that are happy. Client satisfaction is big on our radar screen.”


Audio clips:

Nevada state Medicaid Administrator Charles Duarte says the focus now is completing the transfer on time and without disruption:

101911Duarte1 :22 for Medicaid recipients.”

Duarte says he will be working with HP to ensure projected savings are achieved:

101911Duarte2 :11 said they would.”

Duarte says HP so far has been willing to live up to its commitments:

101911Duarte3 :08 them to that.”

Duarte says the current contractor won’t be able to continue to provide services indefinitely:

101911Duarte4 :11 done Dec. 5.”

HP Executive Stu Bailey says the company is confident it will make the Dec. 5 deadline:

102011Bailey1 :22 will be met.”

Bailey says client satisfaction has been important to the company’s success:

102011Bailey2 :33 doing for them.”