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Xerox's Loss is Accenture's Gain in Texas Medicaid

In a case that has been unfolding for several years now, and which heated up in early May, Accenture on August 1 assumed responsibility for administering Medicaid claims in the state of Texas. Accenture’s first award as a state’s primary fiscal agent was announced in the wake of a dispute between Texas and  Xerox over its process for reviewing Medicaid dental claims.

On May 9, the Texas Health and Human Services Commission (HHSC) announced that the state was terminating its Medicaid claims administration contract with the Texas Medicaid and Healthcare Partnership (TMHP), a coalition of contractors led by Xerox.  Cited for cause is that Xerox staff approved tens of thousands of prior-authorization (PA) requests for braces and other dental interventions for poor children that were not medically necessary.  Texas Medicaid payments for orthodontic services grew from $6.5m in 2003 to $220.5m in 2010 (over 3,300%), while enrollment over the same period grew by just 33%.

The termination was followed by moves to agree a contract with Accenture (the largest TMHP subcontractor under Xerox) to assume TMHP's role in processing claims until a bidding process could determine a new lead vendor.  The new contract has a three-year base period with two one-year extension options, with responsibility for processing over 12m claims per month.  NelsonHall estimates the base-period contract value at just over $500m.  Accenture has been involved as a subcontractor in the operation of the state's Medicaid claims payment system since 2004, when ACS started operations as prime contractor for fiscal agent services to the state.

In the re-bidding process, Texas is expected to divide the contracted work a few more ways across the vendor base to minimize the potential for disruption of Medicaid services, should additional conflicts surface in the future.  Specifically, the state is targeting the following services: collection and analysis of managed-care transactions, staffing call centers and collecting drug-manufacturer rebates.  All of these key services were previously provided by Xerox.

The damage to Xerox Services is substantial, in

  • Revenues
  • Its work to improve margins 
  • Reputation: more grist for competitors HP and CSC as they contest the MMIS system build at New York State (though the two activities are essentially different: one about the  PA adjudication process, the other a new platform build)


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