State fights against the clock to complete more than $200 million in health IT projects

Department of Vermont Health Access Commissioner Mark Larson. VTD File Photo/Josh Larkin

On Dec. 14, after this story published, the state contracted out to a vendor for Vermont’s new health insurance exchange. To learn more, click here.

Over the next four to six years, the state will shell out more than $200 million to construct and implement information technology systems aimed at improving health care access.

Combined, these health IT projects make up the greater part of what amounts to about $350 million in state IT spending over a 13-year period.

The major health projects include: a $118 million insurance exchange, a $112 Medicaid system and a $21.5 million eligibility and enrollment system for economic services.

These projects are kicking into high gear during a tough time for state IT initiatives. This past year, three IT projects have stalled or gone belly up: a new Department of Motor Vehicles system, a judiciary case management program and a Department of Children and Families system.

For the most expensive of these projects, the $18 million DMV system, the state recently recouped $8.37 million from Hewlett-Packard.

The health care IT projects carry an added pressure. In addition to big price tags, these projects put the state in a race against time for federal dollars.

Fighting the clock

Since the lion’s share of Vermont’s health IT construction is funded by the Centers for Medicare and Medicaid Services, the state has tight spending deadlines and, in some cases, even tighter turnaround time frames.

For the health benefit exchange, the state needs to spend a $104.4 million grant by the end of 2014. The web-based system, however, is supposed to be up and running by Oct. 1, 2013, so that Vermonters can purchase insurance on the exchange starting Jan. 1, 2014, when the federal mandate to buy insurance via the exchange kicks in.

Funds for the health care portion of the Agency of Human Services’ new eligibility system must be spent by Dec. 31, 2014, if the state is to receive a 90 percent federal match for the project. The state hopes to have the health care portion of the project in full swing by Jan. 1, 2014, which would enable Vermonters to check their Medicaid eligibility and enroll in the program on one website.

The state has a four- to six-year window to build and implement a new Medicaid system. That’s when the state’s contract with Hewlett-Packard — which now operates the state’s system — runs out.

Each of these IT projects will undergo a formal bidding process. Although the state has requested some proposals from bidders, the state has yet to hire vendors to build and implement these major health care systems.

Top officials in the Shumlin administration have said the state is on track to complete the necessary IT systems to support the new $118 million health exchange project over the next 11 months. Much smaller IT projects under the state’s purview, with price tags of less than $20 million, have taken three to seven years to complete.

Vermont is one of only 18 states creating its own exchange. This task, conceded Mark Larson, commissioner of the Department of Vermont Health Access, is massive.

“It’s like a marathon where you’re in the front of the pack and you’re trying to learn from people just in front of you or next to you, but it’s not like you can watch people run the whole race,” he said.

Jennifer Tolbert, director of state health reform at the Kaiser Family Foundation, said although the federal deadlines are tight, Vermont has a leg up on other states because it already owns the software that the state is building the exchange on.

“The timing is challenging, but Vermont is starting from a better place than many other states with an existing platform,” she said. “Putting Vermont into context with the other states, it is possible to get this up and rolling for open enrollment in October.”

To meet deadlines set by the Affordable Care Act, states must innovate on the fly.

“Much of the technology and infrastructure is being built as we go,” said Tolbert.

Risks and oversight

The state’s venture into uncharted IT territory with hundreds of millions of dollars propping up unprecedented systems is far from infallible, numerous state officials acknowledged.

“Any time you have large funds being spent in a short period of time, the risks are increased,” said incoming state auditor Doug Hoffer. The American Recovery and Reinvestment Act had similar restrictions, he said.

“There is no question this will be of interest to the auditor’s office,” he said. “But you can’t review it until the money’s been spent.”

So, who will be watching the money?

House Speaker Shap Smith, D-Morrisville, has floated the idea of creating a legislative committee to oversee IT projects and Secretary of Administration Jeb Spaulding has said heightened scrutiny might be necessary.

But Spaulding also pointed to the elevated level of oversight that has been put in place since the Shumlin administration took over in 2011.

Shumlin mandated that all new IT project proposals be approved by Richard Boes, commissioner of the Department of Information and Innovation. In the last legislative session, the Legislature gave the department the power to oversee the entire life cycle of projects that cost more than $100,000.

Richard Boes, former head of IT at California’s Fresno State University, took over as commissioner of the Department of Information and Innovation in June. VTD/Taylor Dobbs

To mitigate future IT headaches, Boes, who was appointed by Shumlin in 2011, said the state must draw up agreements that better define a contractor’s responsibilities.

“Some of our IT projects in the past have not had contracts that clearly assigned accountability,” he said. “Some did, but they may not have fully addressed accountability.”

Hewlett-Packard, the longtime vendor for the state’s Medicaid billing system, failed to meet the state’s needs for a more recent DMV project. Boes said that’s because the contract wasn’t clear enough.

“DMV did an excellent job of identifying the functions in the system, but what they didn’t do was identify the performance requirements. So, lo and behold, the reason HP did not succeed was one of performance, not one of functionality.”

Project managers have been assigned to each of the health IT projects, and Boes said he’ll keep his eyes peeled “for any indicators of anything going astray.”

The administration also formed an executive committee to work across agencies on these projects. It’s comprised of Boes, Larson, Agency of Human Services Secretary Doug Racine, Department of Children and Families Commissioner David Yacavone and Director of Health Care Reform Robin Lunge.

“There is nothing that can ever ensure a project’s success,” said Boes. “There are some projects that, even when appropriately managed, may end up not meeting the IT goals of the project. But we’ll make sure the risks are well known so we can plan for issues that may crop up.

“I think we can do better than we’ve done in the past.”

The projects and how they’re funded

The major IT projects fall under two main categories for financing: the exchange and the “jumbo” IT proposal, as state officials call it.

The health benefit exchange, also called Vermont Health Connect, is meant to act as an online marketplace for buying health insurance — much like Orbitz, an online marketplace for booking plane tickets and making travel reservations.

It will run on a virtual platform called Siebel, which is created by the software giant Oracle. This is the same foundation from which Oregon is building its exchange.

The primary source of funding for the project’s construction and implementation is a federal “level two establishment grant” worth $104.4 million, which is for states establishing their own exchanges. The other $14 million the state calculates it needs for the exchange, Larson said, will come from a combination of Medicaid and state payments at federal match rates of 90 percent and 55 percent.

The technology part of the budget is slated to cost $79.5 million, and other line items include $6.3 million for a call center, $7.4 million for outreach, $10.4 million for consulting, $7 million for staff and $7.7 million for other expenses.

The state is in negotiations with a bidder, and officials will not talk about the status of the talks for legal reasons. Before a contract is signed, the Centers for Medicare and Medicaid must review and approve the allocation.

The remaining health IT infrastructure falls under the jumbo grant. All of these projects will receive a 90 percent federal match if the funds are spent by set deadlines. Most of these project costs would stem from software licenses, Larson said.

The $21.5 million eligibility and enrollment system will replace the bulk of the state’s current system, called ACCESS. The new system will have an interface for Vermonters who want to learn what benefits they qualify for and/or enroll in the programs. Programs range from health care to heating assistance.

The first part of the system is slated to come online just before 2014, and the rest is scheduled to follow in 2015 and 2016. A later project will integrate a child support component into the system, Lunge said.

One major part of the system is called the Master Person Index, which will verify that a given person who receives benefits for heating assistance and Medicaid is the same person. Right now the state doesn’t have a program that performs this function automatically.

The state has received dozens of proposals from interested vendors who want to build the system. Larson’s department recently held a conference to discuss the project with bidders.

In fiscal year 2012, the state estimated it would spend $10 million on the ACCESS replacement, but a financial analysis of those funds has not yet been completed, said Larson.

The new $112 million Medicaid IT project — called Medicaid Management Information Systems or the Medicaid Enterprise Solution — will become the state’s new Medicaid claims processing system. It will facilitate state payments to doctors for subsidized care and will connect to the state’s pharmacy benefit program. It is also supposed to help the state reduce waste and investigate fraud. In FY 2012, the state planned to spend $35 million on preliminary elements of this project.

Larson plans to send out a request for proposals from vendors in about six months.

Another component of the health IT system is the “Health Information Exchange.” This project aims to strengthen the state’s clinical registry and health records capacity. The state is building this system to help providers better share electronic information, and many parts of it are up and running today.

In FY 2012 and FY 2013, the state planned to spend $7.2 million on this system. One of the main contractors for the project is VITL, or Vermont Information Technology Leaders. In FY 2012, the state paid $3.5 million to VITL.

At the root of these systems, explained Larson and Lunge, is the Health Service Enterprise, which is the digital platform that connects the systems and functions like a computer operating system in which each of the IT projects is an application.

Funding for the enterprise is earmarked in the costs of the other projects, which is one of the reasons that the major IT projects — aside from the insurance exchange  — fall under one massive grant umbrella.

Larson said the goal is to make Vermont’s health care system more efficient by building capacity the state has never had.

“We’re not fixing a technology,” he said. “We’ve never had this technology.

“As people want us to be as efficient as we can in running the human services systems they access and rely on, some of that isn’t about people working harder or more people working. It’s about making sure that information is correct and can be connected across systems, so that what people experience is a more efficient service with greater accuracy.”