Black marks hover over firm Illinois taps for part of Medicaid program

Illinois is outsourcing part of its Medicaid program to a company that is under a federal grand jury investigation in Louisiana, was disqualified from bidding in Arkansas, was ushered out of Maine and has been the subject of complaints in Utah.

The black marks against the company, including its firing in Louisiana in March, haven't deterred Illinois officials, who say they are confident of their recently announced plan to use the company's services through a partnership with Michigan.

Client Network Services Inc., an information technology company based in Gaithersburg, Md., will help Illinois set up an estimated $85 million system to handle processing and other administrative tasks for the state's Medicaid program, the state-federal health program that covers about 2.8 million people.

The deal was not put out for bid. Instead, Illinois signed an intergovernmental agreement with Michigan, which had an existing contract with CNSI, for the company to begin providing services in 2014.

Both states hailed the novel partnership as an innovative alliance that would save them and the federal government tens of millions of dollars over five years.

Illinois officials said they were aware of CNSI's well-documented problems in other states, but they made the decision to press on — with reassurance from federal regulators. They added that those issues are not applicable to the company's performance in Michigan, where it has worked with the state since 2006 without incident.

"We are aware of all of those" problems, said Stephen DePooter, chief information officer for the Illinois Department of Healthcare and Family Services, which manages the state's Medicaid program. "We talk to Michigan daily, and they do not have any of the issues that other states have incurred."

Illinois projects that the cost to implement the CNSI-developed system in the partnership with Michigan will be about $85 million, less than half the $190 million price tag estimated to start from scratch.

While the state has not finalized the amount it will pay Michigan each year in maintenance and operation costs, it projects that the venture will reduce its annual spending on those items by 63 percent, or about $60 million, over the next five years and shave as much as 18 months off the time it would spend building a new system on its own.

The federal government, meanwhile, which pays about 90 percent of the costs to implement new Medicaid management systems, stands to save about $196 million, according to state figures.

"This is an opportunity for (Illinois) to get access to a state-of-the-art system that meets our three primary goals: speed, saving money and mitigating risk," said Julie Hamos, Healthcare and Family Services director.

Under terms of the Michigan agreement, Illinois expects to begin the transition in 2014 by moving two programs onto the new Web-based system, including health care provider enrollment. State officials said the switch will allow for new providers to earn certification in as little as 24 hours, compared with up to six months under the legacy system.

The state would then outsource the major portion of its Medicaid management information system starting in 2016, allowing the CNSI system to process all Medicaid claims submitted by hospitals, doctors and other health care providers to the state for reimbursement.

The pact with Michigan complies with state procurement regulations — deals between governments do not require the state to solicit multiple bids.

Federal regulators confirmed that the partnership adhered to regulations. A spokeswoman for the federal Medicaid program said the agency supports states seeking partnerships and sharing information to save money for taxpayers.

Jennifer Bahrami, a CNSI spokeswoman, called the partnership "a bipartisan effort between Republican and Democratic governors to streamline Medicaid services and bring them into the 21st century." She added that it also "is fulfilling the vision that (the Centers for Medicare and Medicaid Services) has to encourage collaboration amongst states and will help shape the future of Medicaid."

Michigan's contract with CNSI began in 2006, at $51.5 million, and has expanded to $227.2 million, according to state data. The growth was tied to several contract extensions and an increasing scope of work, which the state expected, said Angela Minicuci, a Michigan spokeswoman.

She characterized CNSI as "an excellent partner" with the state, helping to save more than $100 million with a system that gained full federal certification and has experienced no defects or implementation delays.

CNSI, founded in 1994, offers consulting services, project management and other services, mostly related to information technology. Its clients include the Defense Department, the Census Bureau and Fortune 500 companies.

It began providing systems to handle Medicaid processing in 2005, when it was awarded a contract with Maine. CNSI provides similar services in five states: Utah, Michigan, Washington, South Dakota and Maryland.