The inner workings of a state Medicaid system form a moving piece of machinery. The cogs represent a ratchet work of state and federal policies, of health-care providers, clients and a complex code of unique coverage plans. What is critical to the componentry is a claim processing system that acts as the oil, keeping everything moving.

It’s a system the state of Colorado has put faith in, which it showed in April when officials signed a $116 million contract with Hewlett Packard to improve its Medicaid Management Information System (MMIS), the official title of the state's patient and provider processing network. Colorado’s MMIS is a derivation of HP’s interChange Healthcare platform in Wisconsin, a cloud based system that's meant to be an evolving solution for states as they look to cut labor costs, increase access to information, and engage with providers and patients.

Colorado will be the 15th state to implement HP’s platform, which has been deployed and federally certified in 13 states in the past decade. The system will assist the state Department of Healthcare Policy and Financing in managing and processing its Medicaid and Child Health Plan PLUS benefits -- a hefty load, considering the department’s more than 44 million claims, roughly 39,000 providers and its 950,000 patients requesting care.

"Now we are getting to the point where Medicaid and health care are advancing and where we need more flexibility in our systems, more ability to set up individual programs based on the characteristics of the client,” said Chris Underwood, deputy director at the Finance Office for the Colorado Department of Health Care Policy and Financing.

The state is two months into its 32-month development cycle for the project that, when finished, will house a system with client and provider portals to support real-time access to benefit and claim information. The new MMIS also will equip the state’s staff to nimbly alter regulations against incoming policy and regulatory adjustments — as opposed to employing a team of programmers to do it. No slight to Xerox, the state’s previous provider, Underwood said; the transition to HP was an update well needed and Xerox's solution had accomplished what it had been designed for.

"This in no way should be held as a negative viewpoint of our current vendor Xerox," he said. "This is a system that we asked for and that we bought 20 years ago. It's just that technology has changed, and the state has made no significant investment since to get us up to where we should be."

And Colorado is not alone in this. Many states are expected to invest in Medicaid systems and IT projects to meet regulatory standards presented by the Affordable Care Act and to keep pace with today’s digital advancements. According to the Center for Digital Government (the research and advisory division of e.Republic Inc., publisher of Government Technology), an estimated $23.3 billion will be invested in Health and Human Services IT in 2014 alone -- and Medicaid expansion and ACA compliance are the chief drivers. In the Center’s 2014 Digital States Survey, state CIOs also listed health care as the fifth top priority for IT investments.

One such example is Michigan and Illinois, which announced in fall 2013 a partnership in which both states share —  and benefit from — Michigan’s MMIS. Instead of purchasing its own system, Illinois will access Michigan’s MMIS as a cloud-based shared service, which is expected to save both states millions of dollars in implementation and maintenance costs.

Notwithstanding these propelling forces, states grapple with a daunting procurement and RFP process to update Medicaid systems. Underwood said that anyone who takes time to research attempted MMIS RFPs will see how administrative and logistical land mines can hamper the process.

“You will see a lot of failed RFPs, you will see a lot of RFPs that have gone to court, you will see a lot of RFPs that have been overturned in the middle of implementation by a judge who said, 'Your RFP process was flawed,’ or where something has happened,” he said.

Blame can be placed with both vendors and governments. It’s not uncommon, Underwood explained, for vendors to be blamed by government for their inefficiencies or lack of follow through; however, government isn’t immune to faults. Colorado’s RFP, he said, was successful largely due to the state’s directed vendor engagement efforts that date back to mid-2011 when the idea first gained traction. Without vendor input, governments are not likely to provide enough resources, time or communication. A fixed budget for the contract also helped Colorado focus vendors on offerings instead of getting tangled in attempts to underbid the competition.

“Vendors can't just make these systems happen overnight," Underwood said. "They need states there telling them, ‘This is how my system works, this is how I want to pay these claims and this is how I want it to look.'"

And in Colorado, resources, time and communication were all present, leading to a smooth process from the outset -- when discussions began in 2011 to 2012 when the state officials requested vendor input within two draft RFPs, to when the final RFP was released in 2013 and a contract was formally awarded late October, said HP Sales Executive Brett Barton, who represents Enterprise Services for State and Local Healthcare.

“We're all working together now to improve that health outcome,” Barton said. “Everybody has some accountability and responsibility to ensure that health care is being delivered appropriately and we're getting those right results for healthier citizens. It's more than just processing claims that we're bringing to Colorado."

As a cloud platform provider, Barnes said HP is ensuring its own accountability by meeting Health Insurance Portability and Accountability Act standards to secure sensitive information and security standards set by the National Institute of Standards and Technology. Likewise, background checks of HP employees will be conducted, and an on-site third-party audit to HP servers will be performed annually.

Commending Colorado, Barton noted the state's optimism toward the initiative, especially in light of the sweeping health-care reforms.

"They looked at it and said, 'This is an opportunity for change.' They embraced it, and hats off to Colorado for doing that," he said.

Going forward, 2015 is likely to be an intensive year for both Colorado and HPs team of developers and programmers. Of the total $116 million funding, $80.3 million is estimated to be spent in roughly the first year of the project, with last touches and special features to be added later. Underwood said it's a major undertaking, but a project that may not have to be repeated for some time.

A primary reason the state chose HP over the three other proposals — submitted by IT providers Molina Medicaid Solutions, Xerox and Meridian — was for its adaptability. The intent, he said, is for the cloud platform to evolve with technology year after year.

"Hopefully in the future we don't have to do a big bang implementation like converting from Xerox to HP,” Underwood said. “Hopefully we can keep modern without a new system, but of course, no guarantees.”

Government Technology Staff Writer Jason Shueh Jason Shueh  |  Staff Writer

Jason Shueh is a staff writer for Government Technology magazine. His articles and writing have covered numerous subjects, from minute happenings to massive trends. A San Francisco Bay Area native, Shueh grew up in the east bay and Napa Valley, where his family is based. His writing has been published previously in the Tahoe Daily Tribune, Amazon Publishing, Bike Magazine, Diablo Magazine, The Sierra Sun, Nevada Appeal, The Union and the North Lake Tahoe Bonanza.