Error foiled Medicaid pact, state says

In this March 27, 2014 file photo, Sen. Missy Irvin, R-Mountain View, asks a question during a meeting of the joint House and Senate Committees on Public Health at the Arkansas state Capitol in Little Rock, Ark.
In this March 27, 2014 file photo, Sen. Missy Irvin, R-Mountain View, asks a question during a meeting of the joint House and Senate Committees on Public Health at the Arkansas state Capitol in Little Rock, Ark.

A paperwork error prevented the state Department of Human Services from awarding a contract to build the state's Medicaid eligibility and enrollment system after the department was unable to agree on contract terms with the highest-scoring bidder, a department official told legislators Thursday.

Dick Wyatt, chief information officer with the Human Services Department's office of systems and technology, told the Legislature's Joint Performance Review Committee that a document awarding the contract in 2012 to Noridian Healthcare Solutions of Fargo, N.D., was "final," barring the state from awarding the contract to another company.

The Department of Finance and Administration's Office of State Procurement "had prepared the wrong document, and sent it to Noridian, and that precluded us from stepping down" and negotiating with other bidders, Wyatt said.

Facing an Oct. 1, 2013, deadline to begin enrollment using the system, department officials decided to build it using workers through an existing contract for technology services available to all state agencies.

Under that contract, the Human Services Department pays companies for the workers' time and materials, rather than for meeting specific goals.

While enrollment through the system began on time, the lack of performance measures in the staffing contracts has been blamed for missed deadlines and an estimated cost that has more than doubled to about $200 million.

If the Department of Human Services had been able to award a contract to the second-highest-scoring bidder, Fall Church, Va.-based Northrop Grumman, the state would have been better off because officials would have "one throat to choke," Wyatt said.

But such a contract wouldn't have eliminated other difficulties, such as changing federal requirements and flaws with IBM's Curam software, he added.

"I think there would have been [cost] increases requested due to all the other problems that we encountered ourselves," Wyatt said. "At some point it becomes uneconomical for them to continue on."

The department is replacing the 25-year-old system it uses to enroll Arkansans for Medicaid and food-stamp benefits because of eligibility rules, created by the 2010 Patient Protection and Affordable Care Act, that went into effect Jan. 1, 2014.

The older enrollment system is unable to determine eligibility under the new rules, Human Services Department officials have said.

In January, the department replaced Calverton, Md.-based EngagePoint, its lead vendor on the project, with Princeton, N.J.-based eSystems.

The Human Services Department also hired McLean, Va.-based Cognosante to help manage the project.

Meanwhile, the Department of Information Systems has hired Gartner Inc. of Stamford, Conn., to evaluate the project, including whether the Human Services Department should continue implementing it with IBM software or scrap it and start over using different software.

Because building the system has taken longer than expected, the Human Services Department had to delay by about eight months required annual checks of the incomes of Arkansans enrolled in Medicaid.

The delay resulted in a backlog of about 600,000 Medicaid recipients whose incomes are due to be checked by Sept. 30.

About 200,000 of those whose incomes are to be checked are covered under the state's private option, which uses Medicaid funds to buy private insurance for low-income Arkansans.

Since mid-June, the department has been checking the incomes of thousands of Medicaid recipients each day.

As of Monday, it had sent notices to more than 47,000 Medicaid recipients informing them that their coverage was set to end, in most cases because the recipients had not responded to notices from the department seeking proof of their incomes.

Coverage is set to end Saturday for about 33,000 recipients and for about 14,000 on Sept. 1, a Human Services Department spokesman said.

Of the four companies that responded to a 2012 bid solicitation by the Human Services Department to build the eligibility and enrollment system, Northrop Grumman and Noridian were the only two deemed "worthy enough" to give oral presentations, Wyatt said.

According to a report by legislative auditors, Noridian bid $65.4 million and Northrop Grumman bid $52.8 million.

Wyatt said state officials thought they had reached an agreement with Noridian, but Noridian then "came back and said they didn't realize they had to do the" food stamp portion of the project, Wyatt said.

He said he notified Noridian on Feb. 12, 2013, that the department was dropping its negotiations with the company and was told the next day that the department would not be able to negotiate with another company.

The Oct. 1, 2013, deadline to start enrollment using the new system didn't leave enough time to solicit more bids in hopes of awarding a contract, he said.

Noting that the U.S. Department of Health and Human Services' Centers for Medicare and Medicaid Services granted the state an extension to begin conducting the annual income checks, Sen. Missy Irvin, R-Mountain View, asked if state officials requested an extension on the enrollment deadline.

Wyatt said he was "told they were not going to move the deadline."

Irvin said she found that hard to believe.

"It just blows my mind that we wouldn't have done this, that we would have allowed ourselves to be backed into a corner like this," she said.

A Section on 07/31/2015

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