Bismarck Tribune

By TOM RAFFERTYBy TOM RAFFERTY

Timing could prove critical in getting started on what could be the most expensive technology project the state has ever encountered.

Legislators were shocked last month when they were told a Medicaid claims processing system would cost $57 million, which is almost double what the Legislature planned for when they appropriated money for the project in 2005.

Pam Sharp, director of the Office of Management and Budget, said the Medicaid Management Information System would be the most expensive technology project to date, surpassing the ConnectNDproject - which links all state agencies, colleges and some public schools - by more than $18 million.

"Ithink we can honestly say this is the biggest technology project the state has ever done,"Sharp said.

The good news is that the federal government will pay 90 percent of the project - at least in the near future.

The Medicaid Management Information, known as MMIS, is responsible for processing more than 6 million claims each biennium worth more than $1 billion. The claims come from a variety of providers, including dentists, doctors, hospitals, nursing homes, pharmacists, therapists, psychiatrists and ambulance services.

The claims have to be checked by the system for mistakes before the claims can be paid.

The system is complex because it has to be programmed for several types of medical procedures that thousands of recipients receive.

Sen. Ralph Kilzer, R-Bismarck, said it was like jumping into cold water when he heard about the cost increase.

He and others are still wondering why a consultant's estimate of the costs was so low.

"Inever really did get a deep down reason why the estimate doubled,"Kilzer said.

What was more shocking than the price to some legislators was the fact that only one company, ACS Healthcare Solutions, based in Dallas, submitted a bid for the project.

Maggie Anderson, director of medical services for the Department of Human Services, said the estimates were done with the best information at the time, but significant changes have happened since then.

Several states also are pushing to update antiquated systems.

"Because quite a few states are replacing their systems, there is a demand on the market,"Anderson said.

INPUT, a company that conducts government market research, released a report in 2005 showing that there will be $4.1 billion worth of MMIScontracts in the next three years, as 20 states are re-evaluating their systems.

Bruce Greenstein, vice president of health care for CNSI, said his company decided not to bid the project because of the amount the Legislature appropriated.

"We determined that the amount allocated wasn't enough to do the whole job well enough,"Greenstein said.

There are only five companies that are experienced in developing MMIS systems nationwide.

States are pushing for new systems because their technology is antiquated, there will be new requirements from the federal government and because there are concerns that the federal government could reduce its 90 percent share.

"It's frankly a good deal for states now because you get 90 cents for every dollar you spend,"said Michael Davis, senior vice president and chief operation officer of ACS Healthcare Solutions.

ACSdoes about $5 billion in revenue each year and employs approximately 50,000 people worldwide. The company is doing MMISwork in 13 states - the largest being Texas.

Rick Hulbert, senior vice president of ACS's Western region, said he doesn't know why other vendors did not submit bids.

"Isuspect companies pick customers as carefully as customers pick vendors,"Hulbert said. "We bid it because we thought it was a perfect state for us."

Davis said developing new MMISsystems is very labor intensive, requiring a staff of up to 150 people. Many of the workers are computer programmers writing millions of lines of computer programming code so that the system can process thousands of types of medical claims.

Problems

Although money is seen as one of the obstacles of getting a new system, those who deal with it on a daily basis can't wait for it to be replaced.

The main problem is the amount of time it takes to process a claim.

Shelly Peterson, president of the North Dakota Long Term Health Care Association, said the project is critical for nursing homes and other long-term care facilities because some facilities have to wait several months to receive Medicaid payments. She said some of those facilities depend on Medicaid for 75 percent to 80 percent of their income.

Chip Thomas, president of the North Dakota Health Care Association, said hospitals like to have claims paid within 30 to 45 days of providing service, but some claims have taken up to 120 days.

"The mechanism is so slow that it isn't able to keep up with demand,"Thomas said.

Suzie Herr, a Department of Human Services employee who handles calls from providers about claims, said customer service would improve greatly if the system is updated.

She said she handles up to 120 calls a day, but because of the large volume of calls, her job is to return messages left by providers.

"We never pick up a live phone," Herr said.

Anderson estimated that replacing the system could save $32.2 million in the first seven years of operation.

Footing the bill

Most legislators agree the project has to be started soon, but they are having a tough time figuring out how to come up with about $2 million needed to secure additional federal funding.

In 2005, the Legislature approved spending up to $29.2 million for the project, with about $3.7 million of that amount to come from the state's general fund. Because of the increase in cost, the state needs to come up with about $2 million more to match additional federal funds that are needed.

Legislators meet only every other year, making it difficult to spend additional money for the project when they are not in session.

The Budget Section, comprised of 45 legislators, voted last month to allow the Department of Human Services to negotiate with ACSto get a better deal before the committee considers whether it should approve a loan of $2 million to the Information Technology Department.

Some members of the Budget Section are reluctant to approve a loan because they fear such a move is a job for the entire legislative assembly.

Sen. Dick Dever, R-Bismarck, said he thinks the Information Technology Department has the authority to acquire a loan to be used for MMIS.

"The purpose was for them to take advantage of technology acquisitions when the opportunity is there,"Dever said.

Rep. Ken Svedjan, chairman of the Budget Section, said it's possible the costs will be brought down through negotiations, but the total reduction probably won't be very significant.

Svedjan said he is looking into the possibility of the Department of Human Services finding the additional $2 million within its budget, rather than having a legislative committee approve a loan.

Svedjan is still confident that the project can be started this year.

"Idon't think anybody is trying to scuttle this project,"Svedjan said. "Ithink most people are well aware this is an aged system that needs to be replaced."

Other options would be to rebid the project or wait for the next legislative session, which meets in January 2007.

Peterson said she was "blown out of the water"at the cost increase but thinks the state has to go ahead with the project regardless of the cost.

"We don't have a choice,"Peterson said. "We are backed into a corner."

(Reach reporter Tom Rafferty at 223-8482 or tom.rafferty@;bismarcktribune.com.)