$62.5 million online payment system will not be launched

image A new computer system for paying North Dakota’s Medicaid bills will be delayed until April 2011, said an executive who apologized Tuesday to state lawmakers for his company’s tardiness in finishing the $62.5 million project.

"I understand when you sign up with a partner, you put your own reputation and credibility at stake, and I understand your disappointment in us," said Mark Boxer, a senior vice president for the software’s developer, Affiliated Computer Services Inc. ( ACS – news – people ) of Dallas.

Boxer spoke to the North Dakota Legislature’s Budget Section, an interim committee that includes the Legislature’s Democratic and Republican floor leaders and members of the House and Senate appropriations committees.

The state and federal Medicaid program provides medical assistance for the poor. North Dakota’s Department of Human Services now uses a system developed in the 1970s for processing bills from doctors, dentists and other medical professionals who provide services to Medicaid clients.

State officials say the system has become clumsy and difficult to change, and has resulted in slower bill payments and a backlog of claims.

The agency began planning for a replacement six years ago, with hopes of spending $25 to $30 million on a successor system that would be ready by 2007. The 2005 Legislature approved $29.2 million for the initiative.

However, higher-than-expected bids from software contractors, and new federal standards for designing Medicaid management systems helped drive up the price tag. Lawmakers ended up setting aside $62.5 million for the project over four years, including $55.2 million in federal money and $7.3 million in state funds.

Once the development agreements were in place, the new system was expected to be running by July 2009. The Legislature’s interim Information Technology Committee, which has been monitoring the project, was later told the date had been pushed forward to May 2010.

On Tuesday, Boxer said the project will not be finished until April 2011.

"When you look at the number of lines of code that are inherent in a system of this magnitude, it’s an incredibly complex undertaking that takes an incredible amount of coordination," Boxer said. "I think when you look at development efforts of the size that we’re talking about here, traditionally there are delays, and delays get driven by things that you just don’t know you’re going to hit."

Jenny Witham, the Department of Human Services’ information technology director, said the delay will not increase the state’s contract costs. Other states also are struggling to change their Medicaid processing systems, Witham said.

Rep. Rick Berg, R-Fargo, said the state had few other alternatives.

"Your company and our state are standing in the middle of the stream," Berg told Boxer. "I don’t know if we have any choice, really, but to move forward."
Copyright: Forbes

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