A Discussion of Medicaid’s $5 Billion/Year IT Infrastructure Transformation

David PeraraMedicaid is a public service health systems that provides healthcare for over 73 million people in the United States.  Medicaid is a system that is run jointly by the Federal and state governments. It is administered by individual states. Each state is responsible to provide staff and IT services to meet the needs of the public which it services.States contract out a very large portion of the IT infrastructure to the vendor community resulting in contracts that range from tens of millions of dollars to hundreds of millions of dollar.

Operation of state Medicaid Management Information Systems (MMIS) is supported at the Federal level by The Center for Medicaid & Medicaid Services (CMS). CMS provides funding to the tune of 5 billion dollars per year to support the Medicaid information technology platforms run by the states. In December 2015, CMS issued a final rule, Mechanized Claims Processing and Information Retrieval Systems (90%  Federal/10% State), to assist states to update Medicaid Management Information Systems (MMIS) in over 20 states. These changes will allow states to improve customer service and support the dynamic nature of Medicaid eligibility, enrollment, and delivery systems. Also within this rule was language directing the Medicaid Enterprise towards an open, modular architecture.

Open Health News interviewed Verbus Counts an expert MMIS consultant to provide deeper insights into the opportunities available for innovative companies.

David: Hello, Verbus thank you for taking the time to discuss this topic with Open Health News. Please take a moment to provide a brief background on your experience.

Verbus: I am glad to have this opportunity. I've been in the Information Technology industry (IT) for over 45 years now. Primarily implementing large back end solutions for enterprise system at large corporations. Also, I have supported several different agencies and the Department of Defense. For the last 10 years, I've been involved with states implementing Medicaid IT infrastructure. Currently, I am working with EMR Technical Solutions, LLC.

The core Medicaid IT platform is called a Medicaid Management Information System (MMIS). Each state implements very large and complicated systems with funding supported by the Federal Government. I've been involved with about a half a dozen states with replacing their infrastructure. Many of these states are using very, very old technology. The time has come for replacement of these systems and I specialize in helping states replace their MMIS systems.

Verbus CountsDavid: Where do you see the current opportunities for companies to increase their revenue by participating in the MMIS transformation?

Verbus: First of all, we live in an exciting time right now because we are going through a transition phase. Up to this point, the way states procured the MMIS systems has been one large contract to one large company, including all the infrastructure, services, and software in a large combined solution; typically, a generic, monolithic solution, which vendors customized specifically for that state. Four primary vendors dominated the market. The technology has not kept up to date with recent technology improvements.

This model has not worked well in the past. It's not working well now. So, the states are moving toward a different model, they're moving to what's called a modular approach. This means they're going to be engaging multiple vendors with each vendor providing a best in class software applications. All the applications must work together as part of the Medicaid infrastructure to provide the overall solution. We're moving very much into an open enterprise type of structure, Service Oriented Architecture (SOA) using Internet technologies and other products all playing together. This is going to allow opportunities for new companies to enter the market and allow continued innovation moving forward. Again, we live in exciting times in terms of Medicaid replacement projects or Medicaid technology upgrades.

David: I recall reading that CMS has called for disruptive technology also. Could you comment more on this?

Verbus: I think in the context of the term disruptive technology means technology that replaces the technology in the past to make things better. We don't disrupt for the sake of disrupting or not providing services. We're saying the technology is not evolutionary, it's more revolutionary technology. Like moving in terms of hardware two or three generations. We call it disruptive technology, so, you have to completely take out the old servers and put in the new servers.

The same thing applies on the software side. We're completely taking out a monolithic solution and in its place, we're going to develop a modular solution with interchangeable components provided by multiple vendors. I think CMS was referring to this technology as disruptive or not a continuation of the previous technology. They're saying we need to take advantage of current innovation. It's going to be disruptive, because everything must change.

David: Are they looking at changing the vendors which they have done business with in the past also?

Verbus: Yes, the concept implies changing of vendors because the old vendors still have the old monolithic solution. They're looking for new technology and that new technology will come from new innovative companies that are more like what we have in the internet and mobile technology space. Companies that use technology like Facebook, Netflix or Google. These tend to be smaller companies, younger companies having technology and solutions that are based on current technologies. Again application oriented services and service oriented architecture. The CMS vision includes using open source, Commercial-off-the-Shelf Software (COTS), Software as a Service (SaaS), and cloud based solutions working with the State's’ health information exchanges. These are used by newer companies entering the Medicaid space.

David: What do you think the key components that will drive success for the Medicaid transformation will be?

Verbus: I think one major component is going to be how well the states are able to adapt to managing and governing the new landscape. Where in the past they had to deal just with one company and that was one connection point, but in the future they'll have to manage a collection of vendors, and have to orchestrate them all working together to provide a homogeneous solution for their Medicaid system. I think it's going to be a management and governance challenge and the states are going to have to step up. This will be the number one factor that's going to dictate success or not - moving forward.

I think the other part is going to be getting familiar with new and emerging technologies. States are moving in some cases two generations in terms of hardware and software. Each state must get familiar with the current technologies and be aware of new technologies that are coming down the pipe so that they can have a system that's modular.

Being modular means each application is a discrete component interacting and communicating independently with other applications. When a new module comes along that's better than the current module, they can just take the old part out and put the new part in and move forward in a better more efficient manner. This is something they could not do in the past because they had monolithic solutions, they couldn't replace parts.

Currently, it's like having a car where you can't replace the engine, you must replace the entire car if it needs a new one. Moving forward with the analogy, you have to design a car that has parts that can be replaced. It's going to be understanding the new technologies, understanding that parts are now plug and play, removable, changeable. You can imagine how different managing this sort architecture will be from a single monolithic architecture. From the state's point of view, its governance, managing multiple vendors as opposed to one vendor, and managing those vendors using new technologies that they may or may not be familiar with.

David: As part of this, I've looked at the Request for Information(RFI's) and Request for Proposals (RFP's) coming out so the vision is becoming reality. Could you explain in broad terms like the schedule and the structure of how these systems will be purchased by the states?

Verbus: Sure, moving forward again we will see multiple RFP's in contrast to a single RFP. It is a new way of procurement. We will see states that will issue say 4,5,6 RFP's. There will be one RFP that will be for the Systems Integration (SI) vendor, and that vendor's job is putting the infrastructure in place based on an Enterprise Service Bus (ESB) architecture and the main database that will be used by all applications. This will be one vendor; the SI vendor, which is precluded from bidding on the other RFPs. Then, there will be other RFPs for vendors that will provide other solutions and modules as part of the solution such as provider enrollment, project management, member eligibility enrollment and management, claims processing, third party reliability and others. Those will be coming from separate vendors and those will have RFP's on their own and separate schedules will apply to each of these.

Typically, a state would issue their SI RFP first so you get your infrastructure in place. Then following that will be the RFP's related to the various modules. The business opportunity for companies now to get it into this space would be to engage with these RFP's. Do a deep dive as to what each state is actually asking for and understanding the system landscape. Understand that they'll have to interact with other vendors and specifically, the SI vendor. Determining how to put their architecture in place and their solution in place for that moving forward. That's how it's going to be different from the past and that's what the opportunity is moving forward.

David: Looking at this from a single state perspective, what's the timeline you would expect for the complete transformation to occur?

Verbus: We have four states now that are sort of leading the pack, being the pioneers in the modular world. These are Wyoming, Virginia, South Carolina, and Florida. The roadmaps released by these states indicate two to three-year transition periods from current monolithic systems to having the completed modular systems implemented.

David: What steps can the smaller vendors take to take advantage of this opportunity?

Verbus: There are several steps. First, smaller vendors must have competency with current technologies. As mentioned before, web based technologies similar to those being used by the likes of Facebook, Netflix, and Google. Second, becoming comfortable with integrating technologies, using system oriented architecture and databases that are both relational and non-relational. There is a steep learning curve to become comfortable integrating these technologies with the state infrastructure.

The third part is going to being able to manage all the moving parts for an enterprise solution. Which means there must be user acceptance testing environments, there must be multiple development environments, there has to be environments to make sure that the system provides continuous operation. Now states are requiring 7 by 24 operations. There is no scheduled downtime. The systems need to be available 7/24, 365 days a year. There's challenges in what we call the Devops (Development Operations) space to make sure that the systems are functional all the time. The systems are what we call agile, which means that they're able to be updated as new requirements come into being and to be implemented by their vendors. The companies have a challenge of their own from the technology space to the enterprise solution space, mobility, maintainability, and continuous improvements.

David: How would I as a small to midsize business owner know about RFP's coming out?

Verbus: Well most states have a website where they list all their procurements and that information can be gathered by doing some basic searching on the web. States usually make that public and easily accessible because that's how they publish their solicitations is on the state's website for procurements. Businesses can contact the local state Medicaid offices to be sure updates are provided. Additionally, market research is available to track opportunity. Along with my support, Open Health News is putting together an ongoing newsletter specifically tracking the MMIS transformation. 

David: I recall reading about pre-certification of modules and this term seems to be used a few different contexts. So, for the Medicaid modular approach, how do you view precertification?

Verbus: For Medicaid in the past, the context is that CMS required certification after a state implemented a new solution, the state with the vendor would go through a CMS certification process to make sure the solution met all the requirements. Because CMS assists states in what's called a matching fund scenario whereas CMS reimburses states 90% of their cost of their Medicaid replacement project. To get those matching funds, states have to have your systems certified by CMS. Sometimes this has not been done in a timely manner. CMS wants to expedite the certification process so states can get the matching funds in a timelier manner. This is a big change in the new procurement process. CMS is developing a voluntary pre certification process for the various modules by the various vendors.

The pre-certification is currently being discussed by CMS with vendors and the state Medicaid offices to develop a finalized approach. Right now, there is not a procedure in place for the pre-certification. The states think it a good idea because they should get their money sooner; they're on board with it. Now the ball is in CMS's court to go ahead and put in the procedures and processes in place for modular precertification. There is not a finalized time frame set to provide the pre-certification process.

David: Okay, great. Is there anything else you would like to add that I may not have asked?

Verbus: I would just like to reiterate that we're living in some exciting times now. I think there's huge opportunities for new players, huge opportunities for innovation, huge opportunities to offer Medicaid. Which is a public service that provides healthcare for over 73 million people in this country. I think there are opportunities to improve the systems and make a real difference in people’s lives.