California has decided to scrap a $179 million computer modernization project for its Medi-Cal program and start over, reports California Healthline.
It reached a legal settlement Monday in which project contractor Xerox Corp. will pay the state approximately $120 million. The state had paid Xerox $9 million so far, $8.1 million of it with federal funds.
Xerox, however, will continue to operate the patched-together legacy system until 2019.
The department noted that other states have experienced problems with updating their Medicaid IT systems and have adjusted their strategies to "embrace a modular approach to procurement, design and implementation."
"These changes have created an opportunity for [the California Department of Health Care Services] to re-evaluate the nearly decade-old design, development and implementation strategies … and to reconsider the best course" of action, according to an announcement.
The project, which started in 2007, was an overhaul of the system to process claims for California's version of Medicaid. The state Department of Health Care Services entered a contract with Xerox in 2010 for the work, but the project was in trouble by 2012. The project missed its June 2015 deadline and remains unfinished.
The state and Xerox signed the massive contract just five days before President Barack Obama signed the Affordable Care Act into law, which heralded sweeping changes in the Medicaid program and the project requirements.