The new system will be under the California Department of Health Care Services (DHCS).
"CA‑MMIS is the computer system originally developed in the late 1970s and still used to process payments to health care providers who participate in the Medi‑Cal fee-for-service program, including physicians, pharmacies, hospitals, and other providers," the letter reads. "In 2010 DHCS awarded Xerox State Healthcare LLC (Xerox), formerly known as ACS State Healthcare LLC, a $1.7 billion contract to assume operational responsibility for CA‑MMIS and provide services such as processing provider claims for payment and providing certain other services to providers and beneficiaries."
DHCS leaders believed that the system needed to be replaced since it is over 40 years old and has "a high risk of system failure." The system is also not compliant with federal Medicaid Information Technology Architecture and, because the system is partially funded by Medicaid, it needs to be.
The auditor's letter highlights the following topics:
- "DHCS is pursuing a modular implementation approach to replacing CA-MMIS that partitions the complex functions of CA-MMIS into discrete, scalable components, or modules, that can be procured or built and implemented independently.
- DHCS has decided to take on the responsibility for integrating the various components of the replacement system ensuring those components function together, despite having limited experience in such a role.
- Independent oversight by the State and consultants must examine closely several projects to procure or build individual modules, as well as the integration of individual modules into a functioning system."
This means DHCS has taken over trying to replace the system.
"DHCS is working to replace Conduent as the fiscal intermediary by contracting separately for its CA-MMIS maintenance and operations services and for business operations services, such as a call center, provider services, and claims processing," the report states.
Those procurements will happen in the last half of 2018, and fiscal operations will return to DHCS before August 2019.
This is an example of the modular approach DHCS will take in the overall replacement, the audit letter says.
"This approach partitions the complex functions of CA-MMIS into discrete, scalable components, or modules, that DHCS can procure or build and implement independent from one another. The change is intended to more quickly replace components of the system and allow CMS to certify modules as they are completed rather than waiting for the entire system’s completion. According to the U.S. Office of Management and Budget, this approach can reduce overall investment risk as agencies plan for smaller projects and increments—each project has a greater likelihood of achieving cost, schedule, and performance goals than a larger all-inclusive development effort. CMS provides federal funding for 90 percent of state spending for the design, development, and implementation of modular replacement projects whose plans it approves," the letter states.
However the letter also expresses concern that there is not enough experience overseeing agile system replacement projects.
"For example, the State’s Information Technology Project Oversight Framework (the criteria that CDT uses to assess the risk, level of criticality, and oversight for IT projects) does not offer detailed guidance for modular projects. Furthermore, state IT approval processes have historically expected the entire project to be planned and budgeted at the outset, whereas under the modular approach the agency incrementally contracts for, and manages individual components of the program," it reads.
Furthermore, the Auditor is concerned about DHCS' shift from overseeing the system to overseeing the replacement as well.
"In particular, the CA-MMIS division of DHCS is now responsible for day-to-day management of the system replacement, for merging the various functional components of the system into an integrated solution, and for ensuring that all those components will function effectively together," the letter says. "This will involve selecting and managing vendors, managing multiple contracts, implementing each individual new module, and managing associated risks. The deputy director of DHCS’s CA-MMIS division said that it has reorganized the division to be able to perform its new role, that it is hiring additional staff with specific expertise, and that it is contracting for integration services and project management support services. However, as our IT expert attests, the work of systems integration is highly specialized and is not a role with which the CA-MMIS division has direct experience, and it will be a significant and critical task for DHCS to appropriately manage risk."
Two modules are being planned and will be subject to the California Department of Technology (CDT) Project Approval Lifecycle.
"The Federal Draw and Reporting and Cal-ARM modules are currently in Stage 2 and CDT expects them to complete that stage during the summer of 2018. DHCS anticipates beginning the selection process for prospective vendors in the summer of 2018 for Federal Draw and Reporting and expects to award a contract for Cal-ARM by spring of 2019," the document reads.
More modules are anticipated in fiscal year 2018-19, contingent on approval of the Department of Finance and CDT.
"DHCS estimates the combined state and vendor costs for CA-MMIS replacement to be roughly $500 million, plus or minus 20 percent, over as many as 10 years," the letter reads.
