Xerox to Pay California Over $100 Million for Scrapping Medicaid System Contract

In 2011, Norwalk-based Xerox took over operation of California’s existing Medicaid information system while setting out to design a new one, but because too many obstacles accrued, the company opted to forfeit the contract.

by Alexander Soule, The Advocate, Stamford, Conn. / April 20, 2016
Ursula Burns, Xerox CEO Flickr/Fortune Live Media

(TNS) -- Xerox is paying $123 million to the California Department of Health Care Services, after scrapping the company’s design efforts for a new Medicaid management information system.

In January, Xerox CEO Ursula Burns told investors the California contract termination was, in her words, “our decision … to reduce our financial risk.” Xerox also ended a Medicaid system replacement project in Montana.

In 2011, Norwalk-based Xerox took over operation of California’s existing Medicaid information system while setting out to design a new one, with Medi-Cal the main source of health insurance for more than 12 million people. The Department of Health Care Services stated that with technology rapidly evolving since it first set out in 2007 to procure a new system, it needed to reevaluate the design “to embrace a modular approach” in its words.

The settlement includes an additional provision for Xerox to transfer to the California Department of Health Care Services computer systems valued at $15 million.

Norwalk-based Xerox is in the process of carving out its business process outsourcing (BPO) operations as an independent company with the goal of saving at least $600 million in annual costs and focusing on its technology businesses, six years after bolstering its BPO capabilities with the acquisition of Affiliated Computer Services. Xerox is scheduled to release its first-quarter results on Monday, April 25.

©2016 The Advocate (Stamford, Conn.) Distributed by Tribune Content Agency, LLC.