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Maryland fires firm upgrading Medicaid technology, may seek money back

Maryland health department officials have cut ties with the company hired to upgrade the state's Medicaid computer system and plan to hire outside counsel to review if the state is due any refunds.

After a nearly yearlong dispute with the contractor, Computer Sciences Corp., the state Department of Health and Mental Hygiene terminated the contract on Oct. 14, according to the health department and attorney general's office.

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The department had previously sent letters to Computer Science Corp. in January and March about unacceptable work on the system and stopped paying the company in February. The state has paid the company about $30 million, with about 90 percent coming from federal funds, the agencies said.

Health officials believe they have claims for breach of contract by CSC.

"The department had engaged in substantial efforts with CSC to reach a mutually agreeable resolution that would result in the cure of what had been multiple contract defaults, and unfortunately these efforts were unsuccessful," said Christopher Garrett, spokesman for the health department. "The department is in litigation with Computer Science Corporation. The department also has met with representatives from the U.S. Center for Medicare and Medicaid Systems regarding possible next steps."

Meanwhile, the state continues to use its old Medicaid system, Garrett said.

The Northern Virginia-based company was hired in 2012 for a five-year, $171 million technology contract, with three possible two-year extensions, to build a new system to manage Medicaid reimbursement claims. The total value was estimated at $297 million, according to a release issued by CSC when it won the contract.

CSC believes it is owed $80 million more from the terminated contract. The company's claim is pending before the Maryland State Board of Contract Appeals. A spokesman for CSC referred questions to CSRA, a spinoff company for government business. A representative there said it was not appropriate to comment while the matter was in litigation.

In an October filing with the U.S. Securities and Exchange Commission, CSC said the state failed to pay the company for extra work it did to meet fluctuating federal technology standards for Medicaid systems. CSC also said in the filing that the company and state had been negotiating for five months when Gov. Larry Hogan elected to abandon the talks and terminate the contract.

The governor's office didn't immediately respond to a request for comment.

The attorney general's office is now requesting proposals from outside legal firms for work that may include litigation.

"There is a significant and complex dispute between [the health department] and a vendor over a Medicaid information technology contract," said David Nitkin, spokesman for Attorney General Brian Frosh, who recently reached a $45 million settlement with the former prime contractor for the state's botched health exchange.

"Gathering the information needed and making the strongest case to resolve the dispute in a way that's best for taxpayers requires resources beyond what we have at hand," he said. "That's why we are enlisting outside counsel."

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