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Sending Medicaid to the Cloud

Led by Wyoming, states are ready to pioneer MMIS as a service.

The Wyoming state government already has considerable experience with cloud-based services. It uses Google Apps for Government, NEOGOV for human resources and is looking at for customer relationship management. But as its Department of Health prepares to issue an RFP to replace its Medicaid Management Information System (MMIS), all eyes in the Medicaid IT sector are on Wyoming because it will be the first time a state has tried to move away from an expensive custom-developed system to an MMIS-as-a-service approach.

The project is called WINGS (for Wyoming Integrated Next Generation System). “When you look at the overall costs of traditional MMIS to the federal government and the states, it is a little on the insane side,” said Teri Green, senior administrator and state Medicaid agent in the Wyoming Department of Health’s Division of Healthcare Financing. “It is time to take a hard look at what we want and need.”

An April 2015 Government Technology story detailed the difficulties states face with the ever-changing federal and state requirements for what MMIS platforms must do. Because there are just 50 such systems in the country, only a handful of software vendors respond to procurements for new systems. Cost overruns, critical audits, lawsuits and finger pointing between states and IT vendors are commonplace.

But the embrace of a service-oriented architecture (SOA) by the federal Centers for Medicare and Medicaid Services (CMS), which funds most MMIS development work, has set the stage for states to finally start breaking up big procurements into smaller chunks, which should also allow new vendors to enter the market.

Although large geographically, Wyoming’s relatively small Medicaid organization is an advantage as it tries to innovate. “We are small enough that we are more intimately involved with projects, contracts and systems at almost every level of our organization,” Green said. “We have an awareness of what it means to procure a system. The larger an organization is, the further away the levels of management are from those details. For us, we are aware of the pros and cons of the current system and models available to us going forward.”

Replacing a traditional MMIS, which is like trying to do enterprise resource planning system replacements in other industries, has a lot of risk and costs associated with it, said Jesse Springer, an IT project manager for the Wyoming Medicaid organization. “Generally that model hasn’t worked well in the last decade. We don’t have the risk tolerance to do that kind of project.”

Wyoming considered sharing an MMIS with another state, like the partnership developed between Michigan and Illinois Medicaid agencies, but ultimately decided against it. “Those models are interesting, but the state loses a lot of flexibility, and it depends on who you are partnering with,” Springer noted.

Wyoming also explored modernizing the user interfaces and portals of its current system but continuing to use the core claims engine, which is a COBOL-based legacy system. “That would be the lowest cost but wouldn’t be a long-term solution,” he said. “It would be putting a Band-Aid on it for another decade or so.”

Finally, the state considered both a pure software-as-a-service (SaaS) model  and a hybrid model where some MMIS components would be hosted and others would be state owned and operated. In the end, the hybrid approach won out. “Just because of the state of the industry, we think we are going to have to do some type of hybrid model, but we are going to try to take SaaS as far as we can go with it,” said Springer.

One goal for Wyoming and other innovative state Medicaid organizations is to broaden the number of vendors competing in the MMIS space. Jim Plane, a partner with consulting firm Public Knowledge, which has helped Wyoming with the planning phase of its project, noted that many of the largest health-care claims processors in the country are not present in the Medicaid space. “For a long time, federal regulations around MMIS procurement led to the market shrinking rather than expanding,” he said, “but I think CMS is showing great leadership in trying to maintain the existing marketplace of MMIS vendors while encouraging states to innovate and bring in new vendors, and we are starting to see that.”

Plane said Wyoming realized that in order to meet state and federal requirements on the horizon, it needs to get services up and running more quickly than the five to seven years an MMIS replacement typically takes.



Modular in Arkansas

If Wyoming is the first state to take a serious look at MMIS-as-a-service, Arkansas is credited as one of the first to launch the modular approach that CMS is pushing the states toward. The approach is designed to break MMIS projects into multiple smaller, less risky deployments. But it comes with its own set of new questions.

For instance, CMS has not defined what “modular” actually means, so each state has its own interpretation and must decide how many pieces to break its MMIS project into, said Victor Sterling, IT director of Arkansas Medicaid. “Some states broke it up into 10 different pieces; we considered 23 different pieces at one point in our history,” he added, “but the industry at the time just wasn’t ready for that many pieces. The technology pieces need to talk to each other, so the more pieces you have, the more complexity.”

Arkansas settled on a three-part system, and three different vendors: the data warehouse and analytics (Optum Government Solutions), pharmacy benefit management (Magellan Health) and core MMIS (HP).

The RFP required that the vendors demonstrate they had application programming interfaces and SOA methodologies to connect their system to those of other vendors. “Previously, for MMIS, that was foreign to these companies like HP and Accenture,” Sterling said. “They never had to do anything like that before, so it took some time for CMS to push out that message about modularity and for the vendors to react. But we were recently at a CMS conference and every vendor now has a way to connect to other vendors’ systems.”

One of the benefits of breaking up the project is that it allowed for a staggered implementation. State resources need to be involved as well as vendor resources, so you don’t want to do them all at once, Sterling said. Arkansas implemented the data warehouse in February 2015 and the pharmacy system in March, both on time and on budget, Sterling said. The core MMIS is scheduled to go live in May 2017.

With the modular system in place, Arkansas can replace pieces as required going forward. “The concept is, I don’t need to buy a new car if I just need new tires,” Sterling said. “We have a three-part system now. I imagine that in seven years, when we are required by state law to re-procure, we would break up those three systems into even more pieces and become even more modular at that point.”

Sterling said Arkansas would pay attention to Wyoming’s experience with MMIS as a service. “When we released our RFP in 2012, the cloud-based concept was new on CMS’ radar,” he noted. “We were working under the requirement at the time that the state had to own the system. I believe CMS is pushing toward that cloud-based service level where you just pay for what you use. It is more cost-efficient. It is like leasing a car instead of buying. I imagine when we re-procure we will definitely be looking at cloud-based solutions.”



A New Approach in South Carolina

Jim Coursey has only been the deputy director for the Office of Information Management and CIO for the South Carolina Department of Health and Human Services since July, yet he has a clear idea of the approach he wants to take. Two years ago the department created an RFP that envisions the components of an MMIS would be dispersed among multiple systems and that “the very notion of a single system to ingest claims and encounters and pay claims will not exist.”

“I think we are going to continue with that strategy,” Coursey said. “Doing MMIS as a service is an appropriate way for an agency like ours to proceed. We need to be able to put product out on the street faster than you would do with a big-bang approach.”

The hope is that this will allow not only major integrators but also mid-tier companies with strong offerings to be able to compete because they are just biting off one chunk instead of having to handle an entire enterprise, he said.

Coursey said that although the state’s existing MMIS is stable, South Carolina is interested in meeting CMS’ expectations. “CMS is highly committed to purchasing MMIS as a service and the concept of modularity for information systems,” he added. “A lot of our funding is contingent on their approval of our broad plan.”

The state is currently focusing on provider management, with plans to complete that module by mid-2016, followed by the other modules by the end of 2018 or beginning of 2019.

Coursey isn’t concerned that vendors won’t be ready to play in the new modular space. Some of the current trend was driven by vendor recommendations over the last decade, he said. “The big system integrators embraced the SOA idea and the opportunity to break up monolithic systems into smaller solutions as a better way to be able to compete,” Coursey said, adding that vendors have helped states understand that they didn’t have to do IT maturity model planning in terms of decades. “States can start to think in a more granular fashion and look at opportunities to roll in technologies. The vendor community may have been in the lead, and states such as ours have come around to take advantage of that.”



Making Claims Processing a Commodity

Public Knowledge’s Plane said the unifying vision of Wyoming and other states trying to innovate is to turn claims processing into a commodity. “The problem with Medicaid claims processing, especially in fee-for-service states, is that it is not a commodity; it is a highly customized task and they are paying dearly for it. In the commercial space, claims processing is close to a commodity right now, and states have to streamline policies and procedures to force this to become a commodity.”

Meanwhile, Wyoming is working through the requirements for three RFPs. One is for a systems integrator to develop enterprise shared services, such as an enterprise service bus. The next would be data warehouse/business intelligence, to work on elements such as fraud, waste and abuse. Third is the benefits management/claims processing.

The state is waiting on a clarification from CMS that the 90/10 rule applies to services and commercial-off-the-shelf (COTS) software. “The proposed rule supports a 90 percent federal [funding] match for COTS and potentially for services, so we asked them to clarify that,” Springer explained. “That will open the doors to a lot of other models, because from the state perspective we think we could save everybody involved, including the federal government, a lot of money if we were allowed to pursue COTS and SaaS.”