Michigan Data Warehouse Spurs Medicaid Efficiency

By switching to a PC-based system, the Michigan Department of Social Services can better manage its programs.

by / May 31, 1997
Few state governments lack the data they need to run their programs. What they often lack is the ability to use that data to help improve program management. In order to better manage the programs they run, in the words of a former state chief information officer, many states work to "get their data out of jail," or the old stovepipe systems and databases where data currently resides.

Michigan and its Medicaid program's PC-based surveillance and review system is an example of how improved data access or data warehousing can lead to more responsive systems, reduced costs, reduced fraud and the agency's ability to proactively use the data to improve its performance.

Medicaid, a low-income medical assistance program, receives its primary funds from the federal government, but is administered by the states. Medicaid costs have increased more than any other state government program, doubling in about 10 years to become a $150 billion program nationwide.

Controlling the costs of this program has been a primary concern of both state and federal government. Medicaid claims processing is often outsourced by the states as a means to reduce costs and improve efficiency. Michigan's Medicaid program includes about 2.5 million registered individuals, of which about 1.1 million are eligible for aid at any given time.

In 1991, the state Department of Social Services faced a decision about replacing its surveillance and utilization review system (SURS). The system could not produce some its mandated reports in a timely manner. Some reports it couldn't produce at all. Although it was an option, the department decided against outsourcing an outdated system, and instead decided to upgrade to a relational database for SURS. In 1993, the department issued an RFP for PCSURS, representing a move to a system that uses personal computers instead of the existing dumb terminals.

In 1994, the state contracted with its sole bidder, Bull HN Information Systems. Because Bull was the only bidder, the U.S. Department of Health and Human Services had to ensure the solicitation was subject to "full and open competition" before the state could award the contract. The five-year, $12.6 million contract included the new database, a local area network, personal computers, software, implementation, maintenance and support.

The upgrade included the installation of an NCR/Terradata relational database platform and the development of a new managed care reporting system. In May 1995, Bull began implementation of the system, which was fully operational the following October. According to Monty Bieber of Bull, the system is designed to maintain five years of claims data -- it currently has about three plus years of data. The managed care system now has the ability to report to providers about how their charges and services compare in price to other providers.

While it may appear that the state could take on the role of Big Brother to force providers to lower their costs or change how they provide services, it is not the goal of the Medicaid agency. Since the inception of the project, the agency has moved from the Department of Social Services into a new agency, the Department of Community Health. The Department of Community Health consists of all health agencies in Michigan, including the former departments of Public Health and Mental Health and the Medical Services Administration.

In addition to better cost reporting, the new system allows Medicaid workers to obtain reports in a manner of minutes, where the old system took weeks, even months. According to Gary Swindon, director of the Office of Computing and Telecommunications -- the agency responsible for the state's data centers -- annual savings gained from ensuring that providers are not overpaid should exceed $1 million. In one case alone, the state recovered $5 million from a provider in a settlement over a claim of overpayment by the state.

While the primary use of the old system was to detect fraud and abuse, the new system is flexible enough to provide special case study reports, allowing the department to become proactive and provide more preventative care. Bieber cited one example