The State Worker

Audit: New $1.7 billion Medi-Cal system risks delays

State Auditor Elaine Howle speaks at a legislative hearing.
State Auditor Elaine Howle speaks at a legislative hearing. The Sacramento Bee

If history is a guide, the $1.7 billion case management computer system that Xerox is rolling out for California’s Medi-Cal program is in trouble.

A new report from State Auditor Elaine Howle about the California Medicaid Management Information System notes that similar Xerox projects in much smaller states have encountered lengthy delays. Howle also flagged concerns that the project is unorganized.

The first of the project’s five phases, or “releases” is up and running. But “Release 2 is far more complex than Release 1 and is expected to address over 1,300 functional requirements, which is significantly more than the 27 functional requirements addressed by Release 1,” Howle wrote in her report to lawmakers on Tuesday. The project is supposed to roll out in five releases.

Without some quick changes, Howle expects the project will overshoot its June 2015 planned release of the second phase.

The state in 2010 awarded Xerox with the contract to develop the system, which will replace a 30-year-old system that processes payments to physicians, pharmacies, hospitals, and other health care providers in Medi-Cal’s fee-for-service program. Medi-Cal is California’s version of the federally-funded Medicaid program.

The Xerox agreement expires June 30, 2016, although the contract provides for a five-year extension.

Xerox has encountered delays when it has installed similar systems in other states according to Howle’s report. New Hampshire’s program launched more than five years late in 2013. The company finished Alaska’s program three years behind schedule (and was sued by that state for the delay). Montana anticipates its Xerox system will be running in 2017, two years late.

And Xerox is still working on a similar management system for North Dakota that is now six years overdue.

The project it’s developing for California is much larger that any of those, and is “one of the state’s largest and most complex information technology projects,” according to Howle’s report.

“The continued delays and other problems encountered by these other states with much smaller Medicaid programs strongly suggest that Health Care Services has a high risk of experiencing more delays and problems before its new system is fully implemented,” Howle wrote.

The auditor also is concerned that a shift to a new project management method will only make matters worse. The project team lacks documentation to guide the process, she stated, which “can result in inefficiencies and rework that negatively impact the schedule and consume resources needlessly.”

Independent assessors on the Xerox project told auditors that its not clear how the new system will work with other programs and that tracking progress is difficult because of poor documentation.

Howle recommended that Health Care Services “should ensure that Xerox addresses all (those) concerns in a timely manner” and develop a satisfactory road map for the project going forward.

Call Jon Ortiz, Bee Capitol Bureau, (916) 321-1043.