Two for the price of one

Responding to challenging new demands on their Medicaid information technology systems, Illinois and Michigan have become the first two states to form a partnership to share a cloud-based IT system, which will replace their decades-old systems and save each state tens of millions of dollars.

The two states announced in August that they had formed the Illinois Michigan Program Alliance for Core Technology (IMPACT) project, which they touted as the first collaboration where one Medicaid management information system (MMIS) will carry out all Medicaid administrative operations for two states using cloud-based technology. Under the agreement, Illinois will use Michigan's new MMIS, with each state paying half the operating cost.

For Illinois, not having to buy its own system is projected to save the state $10 million upfront, plus an additional $57 million over the next five years in operating and maintenance costs. Michigan stands to save roughly $10 million over five years as its share of operation, and its maintenance costs are likely to be reduced by 20%.

The federal government also will save money as a result of the collaboration because it's paying 90% of the cost. With a price of about $190 million for implementation of a new stand-alone MMIS compared with $85 million for the shared cloud-based model, the feds estimate savings of as much as $76 million in startup costs and another $196 million in operating costs over five years as a result of the interstate collaboration.

“It's time to move into modern technology,” says Stephen DePooter, chief information officer for the Illinois Department of Healthcare and Family Services. “And as the healthcare arena changes so rapidly around us, it necessitates the need to be a little more nimble.” The agency has been using an outdated mainframe computer-based system that dates back more than 30 years. “We really need to leverage some of the newer technology and tools to be able to accommodate all the changes that are happening,” he says.

Nick Lyon, chief deputy director of the Michigan Department of Community Health, says he hopes a successful partnership between Michigan and Illinois will open the door for more sharing of other common technology platforms between the two states. In time, other state-run programs could be added to the system to perform duties such as the processing of unemployment insurance payments, or determining eligibility for people receiving aid through either the Supplemental Nutrition Assistance Program or the Temporary Assistance for Needy Families. Such integration between state health and social service programs would eliminate much of the redundancy users face when trying to access multiple services.

Other states likely will watch the Illinois-Michigan partnership in hopes of establishing similar types of projects, raising the possibility of the formation of a regional or even a centralized national MMIS model. “I do think other states will be interested in doing this either with us or joining up with another vendor and doing it with states with common vendors,” Lyon says. “I think people will see this as a really unique way to try and solve a problem.”

State Medicaid programs face a lot of new challenges with their aging MMIS. These include the expansion of Medicaid eligibility in about half the states to adults earning up to 138% of the federal poverty level—a provision of the Patient Protection and Affordable Care Act that is expected to add nearly 9 million Americans to state Medicaid programs. In addition, state Medicaid systems must communicate with federally facilitated and state-run health insurance exchanges to enable the exchanges to determine eligibility for and sign people up for coverage in exchange health plans and approve them for federal premium subsidies.

Exchanges have reported trouble communicating with the outdated data systems used by many states. Plus, Medicaid programs must implement the new ICD-10 diagnostic and procedural coding system by next October.

For a number of states, such demands will mean modernizing their existing management information technology systems, some of which have not upgraded since their initial implementation in the 1970s. A 2012 report from the University of Minnesota's State Health Access Data Assistance Center found that among the 30 states studied, 12 reported their Medicaid IT systems were between 20 and 40 years old, while 13 states reported using systems that were between 10 and 20 years old.

CMS officials, in a presentation given in September, said the technological changes required by the healthcare reform law would make it difficult for current MMIS in many states to support Medicaid operations.

The push away from old mainframe IT system to a more flexible, integrated type of model is one of the goals the CMS established through its Medicaid Information Technology Architecture initiative, which the agency defined as a “national framework to support improved systems development and healthcare management for the Medicaid enterprise.” The federal government has offered to fund 90% of the cost for states to develop or enhance their MMIS by December 2015. According to the CMS, the agency has received 453 MMIS requests from all 50 states and the District of Columbia for funding for projects to make changes to existing systems at a total cost of about $3.9 billion.

In spite of the opportunity for states to upgrade their systems, only 20 of the 26 states surveyed in June by the National Association of State Chief Information Officers say they expected to have their health IT systems modernized by next year.

Federal guidelines require every state to operate their own technology to support the administrative functions—such as claims processing from providers and eligibility verification of Medicaid enrollees. It means the use of large stand-alone mainframe computers that usually take years and millions of dollars to upgrade or replace.

Illinois had been looking for a way to upgrade its system for 10 years, DePooter says. But his agency could not find a viable way of moving forward that wouldn't cost the cash-strapped state millions for a new system. The solution for Illinois came in 2011 when Michigan received certification from the CMS for implementation of its new Community Health Automated Medicaid Processing System (CHAMPS), a cloud-based service developed and operated by CNSI, an IT firm based in Maryland. Over the course of 18 months, the two states worked on integrating the two Medicaid IT systems to service the distinctive needs of each state's Medicaid program.

“Michigan was pretty cutting edge in terms of looking toward cloud technology and shared services from a regional and state perspective,” DePooter says. “It was looking toward sharing some cloud-based shared services with other states, so we started talking about whether we could do something like that for the MMIS system.”

The first phase of the Illinois-Michigan shared MMIS project is scheduled to launch in March 2014, according to Lyon, with the system expected to be fully up and running by the end of 2015.

CMS spokeswoman Emma Sandoe says the two states' shared MMIS model is consistent with the agency's standards and regulations. The CMS has pushed for more similar types of collaborations where states utilize modern technology to address their program demands. “It's definitely encouraging that states are working together to find answers that best suit the needs of both of their populations,” she said.

Cost savings aside, for Illinois, the partnership reduces the amount of time and staffing the state has to devote to implementing a new system. Since the CMS has already certified Michigan's system, Illinois will not have to go through the federal certification process, which normally takes up to nine months. Another benefit of the partnership for Illinois is that the state can use the transition process Michigan went through to update its system as a guide as it phases out its own MMIS over the coming months, reducing the risk for potential problems with implementation.

The updated system model also promises to provide better security than MMIS mainframe computers, many of which were built before the advent of the Internet and offer Web access that is often easier to hack than systems with security measures built in with their design.

Lyon notes that having a shared model does not mean the two states are forever linked when it comes to their Medicaid information systems. The cloud-based MMIS is designed so that the two states can separate if needed, allowing Illinois to partner with another state or run its own system with little difficulty. Such an option presents a rather painless way of dissolving the partnership if policy differences between the two states make sharing a Medicaid IT system untenable.

While Democratic-led Illinois has opted to expand its Medicaid program under the ACA, Republican-led Michigan has approved an alternative Medicaid expansion plan that will require federal approval before it can be implemented. But Lyon says he's confident the system will be able to accommodate both programs. “Each state has a unique Medicaid program that might cover different populations and different services based on the federal law,” Lyon says. “And I think that's a challenge we all believe can be overcome.”

CNSI Senior Vice President Arvinder Singh says the system his firm developed for Michigan could be configured for different states' Medicaid policies. “The beauty of the cloud system is to be able to give the different states the feeling that they still have their own system by giving them their own business rules and their own user experience,” Singh says.

According to Singh, the CMS recommended CNSI hold talks with health IT staff for the state of South Carolina about adding their Medicaid program to the shared program involving Michigan and Illinois. The two states turned down that offer because officials said they wanted to observe how the partnership worked in practice before inviting other states to join.

“I think the natural progression that we see is that maybe the regional model will be natural byproduct of this, because the proximity between neighboring states facilitates collaboration,” Singh says.

Follow Steven Ross Johnson on Twitter: @MHSjohnson