Computer Sciences Corp. agrees to $81M settlement with Maryland AG after failed Medicaid IT overhaul

Judge banging gavel on stack of money
Computer Sciences Corporation will pay $81 million three years after its contract with the state was canceled. (Getty/AndreyPopov)

Computer Sciences Corporation has agreed to pay Maryland $81 million after a contract to rebuild the state’s Medicaid claims processing system went sour.

The settlement, announced (PDF) by Maryland Attorney General Brian Frosh on Friday, comes three years after the state canceled a $170 million contract awarded to the Virginia-based IT company. Awarded in 2012 by the Maryland Department of Health, the contract required CSC to replace the state’s outdated claims processing system built in 1992. The company was also tasked with operating the new system that could process approximately $10 billion in Medicaid claims each year.

But that contract quickly went off the rails. Within a year, the company “refused to perform contractually required work necessary to meet the requirements of the Affordable Care Act,” according to the Maryland Attorney General’s office.

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“This settlement compensates the State for the damages it suffered from the failure of CSC to live up to its obligations under its contract with MDH,” Frosh said.

According to a September Securities and Exchange Commission filing by CSRA, Inc., which was litigating the case on behalf of CSC, the company made three claims totaling $83 million and alleged the state caused the project to break down. But a decision issued by the Maryland Department of Health awarded $521 million to the state, prompting an appeal from CSRA. The settlement resolves claims from both parties, according to the AG’s announcement.  

Meanwhile, the state is still using the decades-old computer system to process claims.