California scraps $179M Medicaid IT project in favor of fresh start

After six years, California's Department of Health Care Services and Xerox will discontinue their Medicaid IT system modernization project, reports California Healthline.

DHCS awarded Xerox a contract to take over, operate and upgrade the agency's legacy system and to design and implement a replacement management system for Medi-Cal, the state's Medicaid system. The legacy system is more than 30 years old, according to the report.

So far, the state paid Xerox $9 million, according to California Healthline. As part of the settlement agreement, Xerox will pay DHCS approximately $123 million in cash, $15 million hardware and software costs as requested by DHCS and will dismiss $5 million worth of payment claims.

The state health agency said in a news release their decision to scrap the project was influenced by the quickening pace of technological change in the years since it first sought a bid to upgrade the system. "Many other states, as well as [CMS], have adjusted their strategies on modernizing Medicaid management information systems to embrace a modular approach to procurement, design and implementation. These changes have created an opportunity for DHCS to reevaluate the nearly decade-old design, development and implementation strategies of the replacement system and to reconsider the best course to ensure that California has a modern, robust and sustainable system."

The project was scheduled to for completion by the end of this year, according to the report. Xerox will continue working with DHCS to process Medi-Cal claims through September 2019, unless DHCS secures another contractor to meet its system modernization goals before then.

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