The State Auditor released a scathing audit Wednesday questioning whether the state’s new Medicaid claims system, the priciest contract in the history of state government, will be ready to go live in 40 days as scheduled.
The audit found a host of problems: The state Department of Health and Human Services did not provide adequate oversight during the testing. Hundreds of critical tests have not been done or have failed. An independent overseer did no independent work. The system, known as NCTracks, has no criteria to determine whether it should go live July 1.
In the dry language of auditing and accounting, the report practically shouts that a shipwreck may be ahead.
“If user acceptance testing is accepted without addressing these issues, a high risk exists that critical NCTracks functions could have major errors on go-live,” the audit said.
That could lead to a delay in getting federal approval for the system, which could cost the state millions in federal dollars.
The system processes more than 88 million claims a year from hospitals, doctors, pharmacies and other health care providers. That means receiving, verifying, auditing and paying about 250,000 claims each day.
EDS, as it was known before being acquired by Hewlett-Packard, has been processing the claims since 1988. In 2004, the state awarded the contract to another company, but that one was quickly canceled. The contract then went to CSC, a company in Northern Virginia.
The replacement project has gone in fits and starts since. The contract was amended and extended. Costs have kept rising, so much so that the expense of setting up the new system and running it for seven years, plus maintaining the old system, now adds up to $851 million.
The new system is largely written in COBOL, a computer language developed in the 1950s that is scarcely taught in North Carolina. CSC has imported workers from India to fill the jobs in Raleigh.
An ‘inherited’ project
Previous audits for the system have revealed poor documentation and problems in tracking unauthorized changes that CSC made in the system. The McCrory administration blamed problems on the previous administration of Gov. Bev Perdue.
“This administration inherited this project, and over the past five months, our team has been working around the clock to push NCTracks over the finish line by July 1,” DHHS spokesman Ricky Diaz said in a statement Wednesday. “We have already corrected many of the findings in the auditor’s report since field work ended in March, and our team will continue to test the system to find and address as many issues as possible before the launch date.”
The audit found that the system must pass 834 critical tests. Of those, it has failed 123 so far, and an additional 285 are “not executed/not scheduled.”
The audit also found that CSC began testing in August before DHHS put in place criteria for accepting the system. In fact, CSC proposed the criteria and the department accepted them in March.
The audit labeled this a conflict. Normally, users – either the department or providers – would develop the acceptance criteria, not the vendor.
The audit also criticized Maximus, a company hired to perform independent verification and evaluation. Maximus “relied exclusively on the test result reports of other vendors to conduct its own test case analysis,” the audit said.
State Rep. Nelson Dollar, a Raleigh Republican, said it’s crucial for the new system to get it right once the switch is flipped from Hewlett-Packard to CSC.
“We want to see the administration succeed, but we need to have a system that will go live and pay appropriately,” Dollar said. “If they need additional time to make sure it will work, they need to let the General Assembly know.”
Hewlett-Packard and its subsidiaries have processed the state’s Medicaid claims since 1988. In February, the department gave the company notice that its contract will end July 7.