HHSC Cancels Xerox Medicaid Contract

Date: May 9, 2014
Contact: Stephanie Goodman, 512-424-6951

The Texas Health and Human Services Commission (HHSC) today notified Xerox Corp. that the state is terminating the company’s Medicaid claims administration contract for cause after Xerox staff approved thousands of requests for braces that weren’t medically necessary.

“Xerox failed to perform the medical reviews that our contract required and taxpayers deserved,” said Health and Human Services Executive Commissioner Kyle Janek, M.D. “I want to thank Attorney General Abbott for the months of hard work his staff have devoted to holding the company accountable. Our Medicaid staff also spent countless hours to make sure we can move this work to another contractor without disrupting the care of almost 4 million Texans who rely on Medicaid.”

HHSC is finalizing an agreement with Accenture, the largest subcontractor under Xerox, to take over as the lead vendor until the state can competitively rebid the work. Accenture has been operating the Medicaid claims payment system under the contract since 2004.

Xerox employees handle business operations under the contract, including processing requests for services that require prior authorization, or advance approval, before Medicaid will pay for the treatment. Services that require prior authorization include braces, which Medicaid will cover only when the alignment of the teeth is so bad that a child has trouble eating or breathing. Audits by HHSC’s Office of Inspector General and the federal government found that Xerox failed to properly review requests for braces, leading to hundreds of millions of dollars in fraudulent Medicaid claims.

“We are committed to recovering the money from these fraudulent claims from all parties involved,” Janek said. “Dentists were putting braces on children who clearly didn’t meet the Medicaid standard for that care, and Xerox didn’t have the processes in place to review those cases before paying them.”

Accenture will take over the work performed by Xerox on August 1 after a transition period during which improvements are made to the prior authorization process and other functions are reviewed.

About 900 Xerox employees and contract staff work on the contract, known as the Texas Medicaid and Healthcare Partnership. Most frontline staff will have the opportunity to continue working on the contract, but key Xerox managers will be replaced and the prior authorization process will be stricter. HHSC has assembled a team of senior state staff to oversee the transition, including some who are moving into the contractor offices today to closely monitor the situation and enforce the terms of the transition.

HHSC is finalizing an agreement with Accenture for the transition period and negotiating the details of a three-year contract while the agency goes through a comprehensive process to rebid the work.

During the competitive rebid process, HHSC will be breaking the large contract into as many as five contracts to make it easier to take action against a vendor without disrupting medical care for people with Medicaid. In addition to processing Medicaid claims and requests for prior authorization of services, the current contract covers several other tasks, including maintaining data on Medicaid managed care transactions, collecting drug manufacturer rebates and staffing call centers for Medicaid providers. In fiscal year 2013, HHSC paid $168 million to Xerox for those services.

Texas Health and Human Services: News Release.