Md.'s Medicaid Claims System Contract Suspended, According to Audit

By Deidre McPhillips

ANNAPOLIS—More than $27 million has been paid to replace an outdated system that manages Medicaid claims for the state, but work has fallen grossly behind schedule and is unreliable in quality, according to an audit released this month by Maryland's Department of Legislative Services.

A five-year, approximately $171 million information technology contract has been suspended indefinitely, the audit said.

The Maryland Department of Health and Mental Hygiene found that “the existing project schedule and related documents contained pervasive logical errors and factual inaccuracies” and “a shifting and fundamentally unreliable account of the progress of the project,” the audit stated.

The new Medicaid Enterprise Restructuring Project, or MERP, would have replaced the current Medicaid Management Information System to meet certain federal requirements and improve oversight of the Medicaid program, a process that many states have started.

A separate analysis of the fiscal year 2015 budget for the Department of Health and Mental Hygiene by the Department of Legislative Services indicates that the project was awarded to Computer Sciences Corp. with Board of Public Works approval in February 2012, but that “progress on the MERP has significantly deteriorated.”

The Maryland Department of Health and Mental Hygiene declined to comment on the audit’s findings.

The contract suspension will allow the state’s new health secretary and Medicaid director the “opportunity to thoroughly review the department’s options prior to moving forward,” Karen Black, a media representative for the department, wrote in an email. The review period is expected to be complete by March 20.

Computer Sciences Corp., a Virginia-based information technology company, could not be reached for comment.

The company awarded the contract has implemented similar systems in two states, but with cost increases up to 300 percent and schedules up to three years beyond the original plan, the audit states.

The company also had similar contracts canceled in two other states due to significant cost increases and work defects, the audit states.

Maryland’s Department of Health and Mental Hygiene knew this when they awarded the contract to Computer Sciences Corp. in January 2013, the audit states.

But this potentially deal-breaking information was not shared with the Board of Public Works before the contract was signed, the audit says. In fact, the company’s technical proposal was rated “excellent.”

The audit also reports that the Department of Health and Mental Hygiene changed the terms of the contract proposal eight times, but only reported one change to the Board of Public Works—a change in contract language that brought the contractor’s liability down from unlimited to three times the value of the contract if there was a breach. According to the audit, the department was legally required to submit that change for review.

Thomas J. Barnickel III, legislative auditor with the Department of Legislative Services, said that while he recognizes that the department didn’t do anything illegal, he does not think officials there are addressing the issue appropriately.

“There were warning signs that this was a risky procurement, and this information should have been presented to the board,” he said. “You can’t undo what you did at this point. All we’re saying is provide more information. Be candid, transparent, open.”

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