A quick look at Calif.’s botched Medicaid IT modernization project

A quick look at Calif.’s botched Medicaid IT modernization project

Years of delay, frequently changing rules, government red tape eventually forced California to junk a $179 million computer modernization project with Xerox.

The Medicaid IT modernization project went to bid in 2007 and launched in 2010 after Xerox won the bid. But by the year of 2012, the project slipped into trouble. Long delays forced the state to impose a “corrective action plan” on Xerox.

The project was designed to process claims for Medi-Cal, California’s health-payment program for low-income inhabitants. But more than half a decade after the launch of the project, it is still far from completion.

It was finally put to rest recently when the California Department of Health Care Services hit a legal settlement with the project contractor, under which Xerox will pay nearly $120 million to the state.

The amount is significantly bigger than what California had paid to Xerox. The Golden State paid Xerox $9 million, and $8.1 of that amount came through federal funds.

Xerox itself is struggling to gain ground. Its shares have been lagging far behind those of its competitors. In addition, it is under pressure from investor activist Carl Icahn. Last year, the company decided to close its Medicaid computer systems business, taking a $385 million charge against its already depleting earnings.