In May, Louisiana's health secretary Bruce Greenstein resigned amid federal and state probes into possible conflicts of interests in a Medicaid IT contract awarded to CNSI, where he briefly worked in 2005.

Now, after Governor Bobby Jindal’s Administration cancelled the 10-year, $185 million Medicaid information systems contract (several months before the system was to be deployed), the Gaithersburg, Md.-based CNSI is challenging the termination, arguing that it was unfair and will end up costing Louisiana taxpayers more in the long-run.

“With the cancellation of our contract, Louisiana now faces the stark reality of continued use of an antiquated system that will cost three times more to operate, maintain and bring into federal compliance, and the reality that this system will remain in place for a significant period of time pending the state's re-procurement of a new system,” wrote CNSI President and co-founder Adnan Ahmed in a media release.

CNSI is also challenging the contract termination in Lousiana state court, seeking compensation for all services performed to date and “damages owing to the reputation and business damage suffered by the company.” Founded in 1994, the company was an early proponent of web-based business and government IT solutions and consumer-facing portals going back to the mid-2000s

When the contract was terminated in late March, after news broke of federal subpoenas for documents related to the contract, CNSI was 14 months into development and implementation of the system and had released a Medicaid beneficiary portal and provider enrollment system. Ahmed argued that it will cost the state about $5 million for another company to redo those two portals, and that re-awarding the contract will add an extra $75 million to the project over the next three years.

The existing system does not support ICD-10, among other functions, and it could take another five years to get a new one up and running, Ahmed said, adding that it is also prone to improper and flawed payments.

“Louisiana has one of the worst Medicaid fraud recovery rates in the country,” he said. “The processes and programs we were putting in place in terms of identifying Medicaid fraud alone would have been historic for Louisiana.” (It’s hard to gauge just how common Medicaid fraud is in Louisiana; no organization compiles fraud rates for the states, it seems, and the Louisiana Department of Health and Hospitals’ most recent annual report on Medicaid does not include fraud statistics.)

As Louisiana health officials try to recoup the roughly $17 million already paid to CNSI since the contract was awarded in 2012, the fate of a new Medicaid IT system remains in limbo. Molina Healthcare, which assumed the contract when it acquired Unisys' Medicaid business (the company that ran Louisiana's Medicaid IT for nearly 30 years), challenged the award to CNSI along with another competitor, ACS State Healthcare.

Molina and ACS maintained that CNSI had low-balled the costs of the system in initial bids, and said the project would end up costing between $230 to $240 million, around what ACS bid. After the award, CNSI requested an additional $9 million for the project, and earlier this year, requested an additional $40 million which would have brought the total cost to $234 million.

Early on at least, CNSI had a somewhat mixed record in Medicaid IT. Maine experienced some claims problems with a system that went live in 2005, after a three year delay and with cost overruns from an initial $15 million bid to more than $50 million. The project was “less than successful,” as a CMS spokesperson said at the time, and the state ended up switching to Molina.

Other states have used CNSI’s MMIS. Michigan signed a contract with CNSI for a new Medicaid system in 2009, and providers and Medicaid officials in Washington State have used CNSI to fair success since 2010, said a Washington Health Care Authority spokesperson, despite a handful of complaints from some providers that led to a later-discredited Seattle Times article. (See correction.)

The Louisiana healthcare community is still waiting for more details of state and federal probes into whether the contract was wrongfully awarded or included any conflict of interest on the part of former Department of Health and Hospitals Secretary Bruce Greenstein, who worked as CNSI’s VP of healthcare from 2005 to 2006, between stints as a Centers for Medicare & Medicaid Services regional administrator and a director at Microsoft’s healthcare division.

Meanwhile, another potential conflict of interest controversy has entered the fray. A state judge recently denied a request by the Louisiana assistant attorney general to remove district judge Tim Kelley from presiding over CNSI’s wrongful termination lawsuit against the state.

Kelley was recently represented in court by a New Orleans attorney, Lewis Unglesby, who also works for CNSI, in a case described to Louisiana media only as involving “personal matters.” And Kelley’s wife Angele Davis, the former Louisiana Commissioner of Administration overseeing state financial management, is set to be called as a witness in the case.

Correction: A previous version of this article misstated Molina Healthcare's acquisition of Unisys. Molina acquired Unisys' Medicaid business, a small part of the overall company. An earlier version of this story also cited a Seattle Times article reporting on significant claims problems for providers with Washington State’s Medicaid system, as it was going live in 2010. The Washington Health Care Authority said those problems were limited to several providers that did not adequately train for the system.

See also: 

Audit finds flaws in NC MMIS transition