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Capital Journal: Wrapper

Apr 6, 5:28 PM EDT

South Dakota in dispute over Medicaid tech project


SIOUX FALLS, S.D. (AP) -- South Dakota officials and a contractor hired six years ago to work on a new computerized Medicaid management system have not been able to resolve differences on the project.

The state signed a $62 million contract in 2008 with Client Network Service Inc. of Maryland to develop a new computerized system for the program that pays medical expenses for poor people. The state ended the contract in 2010 because of a dispute on the timing and quality of the work, but the state and the company have since agreed to resume the project.

Yet, the parties haven't agreed on a timeline to finish the project and state officials are now blaming the federal government - which is financing 90 percent of the new system's cost - for complicating the project at times.

South Dakota officials sent a letter earlier this year to the Centers for Medicare and Medicaid Services, which oversees federal health programs and is funding the upgrade, expressing disappointment over changes in the federal agency's original plan for the system's overhaul, the Argus Leader ( http://argusne.ws/1h485NY ) reported on Sunday. Since the contract was awarded in 2008, the agency has changed its Medicaid billing requirements, affecting the state's project.

State Rep. Mark Mickelson has questioned the program, calling it a "classic three-way standoff."

"The state's tried to fire the vendor," the Sioux Falls Republican said. "CMS wouldn't let us. The state has tried to negotiate a reasonable timeline with the vendor, and the vendor won't negotiate."

A spokesman for the federal agency in Denver, Mike Fierberg, challenged the characterization that it "forced" the state to mediate with the contractor.

"We did strongly suggest that it was the best alternative after each side had filed suit against the other," Fierberg told the newspaper in an email. "This was because the (system) work was, by the state's own assessment, at least 60 to 65 percent complete at the time."

Fierberg added that changing contractors would have caused a lengthy delay because of the bidding process to a find a new company.

One of the main goals that South Dakota officials had for the new program was to have a tool that would help the state analyze Medicaid data. The system currently being used can pay claims, but it can't provide an analysis, for example, of which providers are getting the most money and whether they are also getting the best results.

Now the contractor is involved in litigation in Louisiana where the administration of Gov. Bob Jindal canceled a 10-year, $200 million contract after a federal grand jury subpoena to look into how the contract was awarded.

The Gaithersburg, Md., company filed a wrongful termination lawsuit against Louisiana last year and has argued that documents will show it did nothing wrong.

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