Getting the new Medicaid billing system up and running at the Department of Health and Human Services has cost $56 million to date in state and federal funds even though the original bid for the project was $15 million – overruns the vendor says are not its responsibility.
Bruce Greenstein, vice president of healthcare with CNSI, the Maryland-based vendor that sold Maine its Medicaid system, said the company is actually losing money on the project, and some of the cost overruns are a result of changes in the system approved by the federal Medicaid office.
Greenstein knows the project from both sides of the fence.
He was the associate regional administrator for the Boston office of the Centers for Medicare and Medicaid Services, which oversees such system installations, from May of 2003 until February of 2005, during part of the time the system was being built and when it went live in January 2005. He was not in charge when the state decided to hire CNSI in 2001.
Asked if he influenced the state in its dealing with CNSI, Greenstein said he only became aware of the project when it became a problem.
“My treatment of the Maine project and indirectly CNSI was certainly far from favoritism,” he said. “I was very tough on the state and on that project.”
“It was significantly under budgeted to start with,” he said. “The state had underestimated and CNSI underestimated what the total cost would be.”
Part of the problem was CNSI had never built a Medicaid billing system before, but the state knew the vendor from a previous project and its original bid was half that of the only other company to complete the bidding process.
Greenstein said the cost estimate was so low because CNSI didn’t understand how complicated Medicaid billing could be. He said the company has worked with the nuclear regulatory commission, Amtrak, national security offices and the Census Bureau.
“People writing the bid proposal thought they knew what complicated large systems look like, then you get into Medicaid,” he said.
State health and finance officials agree with that assessment today, saying they are probably now getting close to what they should have paid in the first place.
In the interim the system became a nightmare for Medicaid providers and the state. Nursing homes, doctors, dentists, and other care providers couldn’t get the system to pay their bills. Hundreds of thousands of claims got stuck in the system, so the state started sending out so-called interim payments that were not tied to bills, but were based on history.
Now that the system is paying most claims accurately, the state is trying to collect all that interim money. Of the $507 million total, $250 million has been recovered and $85 million is under agreement to be paid by the end of this fiscal year, but $172 million is still outstanding.
Adding to the state’s fiscal woes is the decision by Greenstein’s successor in the regional Medicaid office to stop federal reimbursement of the project for cost overruns after July of 2005.
“There is no more federal funding for this program,” said Richard McGreal, the current associate regional administrator for Medicaid, and there won’t be until the state submits a new plan and proves the system can do all the vendor promised – something beyond just paying the bills.
Gordon Smith of the Maine Medical Association called the project Maine’s version of the Massachusetts “Big Dig.”
He said it will be 2007 before the system can do things like pay bills electronically submitted for patients who receive both Medicaid and Medicare. “It’s not acceptable,” Smith said.
Calls for accountability
While some legislators are calling on the Department of Health and Human Services to demand CNSI help pay the outside costs to make the system operational, Greenstein said that’s not in the picture.
“There’s no plan for us to pay money for other contractors,” he said. “Whose fault is it that things are running longer? That’s not something that’s cut and dry. I mean if anything, this has been a money-loser for us. This has not been a profitable project.”
On top of the original contract with CNSI, which went from $15 to $23 million in the first several years of the project, and then up to $25 million, the state also has spent:
• $7.7 million on consultants, Xwave to help with project management
• $7 million on consultants, Deloitte and Touche to do auditing and claims reconciliation
• $3.5 million on consultants, First Data Government Solutions
• $5.2 million on support from the state’s office of information technology
• $8 million on hardware and smaller vendors
Rep. Kevin Glynn, R-South Portland, a member of the Health and Human Services Committee, has been calling for CNSI to help pay for the overruns.
“I believe that CNSI owes the state for the damages that they’ve caused,” Glynn said, adding that the state is reluctant to push it because that would reveal the administration’s own shortcomings.
“If it goes to a collection action, the state’s screw-ups in all of this go front and center,” Glynn said.
Rep. Richard Burns of Berwick, a Democrat on the HHS Committee and a carpenter, said CNSI should have lived by its bid.
“I’m a contractor. I give people a price on a service and I pretty much am compelled to stay within the parameters of my proposal. If I suspect the job I’m bidding on has hidden concerns, I’m obligated to tell,” he said.
“I think we should be obligated to pay the portion that was committed to in our initial contract,” Burns said. At the very least, Maine officials should not recommend the company to other states, he said.
States sign up
While CNSI says the project here isn’t making them any money and it already has given $5 million in free service, Greenstein admits it paved the way for the firm to get other state contracts. Before Maine the company didn’t have any experience in Medicaid billing.
“We agree that we have benefited from the miseries that Maine had to endure,” said Doug Porter, head of Washington State’s Medicaid department, who has signed a $150 million contract for CNSI to build its Medicaid system. Washington spends more than twice the amount Maine does on Medicaid for three times the number of recipients.
“We have a better contract that holds the vendor more accountable than they were in Maine,” Porter said, adding better project management and better infrastructure should make a difference in Washington.
“A big one is provider readiness,” Porter said. Based on discussions he’s had with CNSI and people in Maine, “That was not adequately addressed in that proposal…Providers were just totally taken by surprise.”
Porter, whose system is not scheduled to go live until the end of 2007, is happy with his choice of vendors.
“I think if we had to do it all over again likely we would have made the same decision based on the merits of the proposal,” Porter said.
Michigan also has signed a contract with CNSI, and Greenstein said Nebraska is considering it.
What makes the CNSI system attractive is its promise to be more flexible than traditional billing systems, allowing, for example, easy editing of the program when eligibility rules change. It also is supposed to provide integrated reports on patients for all the services Medicaid covers so a state can look at what it’s spending on whom and better manage it.
“Forward thinking states like Michigan, Maine and Washington have adopted this approach and are emerging as the standard bearers for the future of Medicaid,” Greenstein wrote in an article now featured on the CNSI web site.
When asked if the people in Maine would agree with that assessment, Greenstein conceded that some functions of the system are still being worked out, but Maine wanted something more than the traditional billing system.
“The state doesn’t get credit for really trying to do something that was really innovative. With that innovation comes risk,” he said.
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