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State demands mediation with Xerox over glitchy Medicaid payment system

Gov. Sean Parnell has called for mediation between the state of Alaska and Xerox Corp. in an effort to rectify a list of glitches with the state's new Medicaid billing system, including its failure to properly pay health care providers for their services, leaving some facilities financially strained.

In a statement Thursday, Parnell said the state has tussled with the Medicaid system -- operated by Xerox -- since its launch Oct. 1. He said the system has created hardships for Alaska's health care providers, threatened the medical care of Medicaid recipients and overtaxed the staff at the Alaska Department of Health and Social Services.

"We will work quickly and take all necessary steps to ensure Alaska health care providers are not impacted further by these defects," Parnell said in the statement. "Should formal dispute resolution fail under our contract with Xerox, the state is prepared to pursue all remedies available under the contract, including legal action."

The state entered into a contract with Xerox in 2007 to replace an antiquated Medicaid system that no longer met federal requirements. The new Medicaid Management Information System was supposed to be unveiled by 2010. It wasn't designed in time and the state debuted it three years later. It cost $32 million, and 90 percent of that was paid by the federal government.

At a legislative hearing in February, Bill Streur, DHSS commissioner, said issues with the Medicaid system weren't apparent until about three weeks after it went live. Health care providers complained at the hearing about payments not being made, frustration over having to submit claims repetitively and lengthy call times to Xerox.

Streur sent a letter to Xerox in March ordering the company to submit a corrective action plan by April. He wrote that Alaska providers had suffered thousands of dollars in losses from the faulty Medicaid system.

"Several times a week we receive notification that providers will no longer accept new Medicaid patients or are suspending a service until claims are adjudicated," he wrote. "We are left with no confidence we can provide assurance of a timeline for resolution."

In a letter to Xerox dated July 2, Assistant Attorney General Rachel Witty wrote that the state was requesting mediation because of Xerox's failure to provide a corrective action plan. The parties met on May 16 in Anchorage but did not resolve their dispute. Witty asked the company's attorneys to contact her with the names of three potential mediators.

Jennifer Wasmer, Xerox spokeswoman, said in an email to Alaska Dispatch on Thursday that the company was "cooperating fully with the state to find a resolution to address its concerns so we can achieve our mutual objective of providing the citizens and health care providers of Alaska with a system they can rely on."

Xerox is also involved in litigation in Nevada, according to a report by The Wall Street Journal. Xerox set up an online health insurance exchange in that state. But by June, thousands of residents said they remained uninsured even after paying premiums or completing enrollment. About 150 people in Nevada have filed a lawsuit against Xerox and the state's exchange.

Xerox performs Medicaid-related work for 12 states, Washington, D.C. and the U.S. Department of Labor. In six states, the company delivers service related to the Affordable Care Act from setting up health insurance exchanges to call centers, said Jennifer Wasmer, a company spokeswoman.

In Anchorage, Tom Chard, director of the Alaska Behavioral Health Association, described working with the new Medicaid system as a "continuous struggle with new errors."

He said providers receive error codes when submitting claims for some services. Then, once those problems are resolved, the error codes pop up from other claims that were once OK.

"It's become sort of a billing nightmare," he said.

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