Tennessee cancels contracts with Northop Grumman for Medicaid system

The state released a statement Tuesday saying the two mutually decided to part ways. Tennessee will be selecting a new vendor.

Officials with TennCare, Tennessee’s Medicaid program, have decided to part ways with Northrop Grumman Corp. on a project for the state’s Medicaid Eligibility Determination System after months of missed deadlines and benchmarks.

The state released a statement Tuesday saying the two mutually decided to part ways. Tennessee will be selecting a new vendor.

“After months of delays and missed benchmarks, the state hired an independent international consulting firm to perform an assessment of TEDS to review the project as it currently exists, identify project deficiencies, and identify potential risks to the TennCare program,” the statement says. “The assessment was also intended to provide the state with potential alternatives in order to successfully move forward with the development of the TEDS project.”

That assessment, conducted by consulting firm KPMG, was the basis for the state’s decision to restart the program. According to the report, the system has a 90 percent probability of failure in a number of key areas. The report denotes problems with the system’s architecture. It also says that the business operating model is incompatible with other parts of the system, and the infrastructure is “prone to crashes or significant degradation” when put under stress.


“The State has not developed a comprehensive, documented business operating model for the future state of Medicaid Member Services,” KPMG said in its report. As a result, the state may not be able to effectively align its new business processes with its Tennessee Eligibility Determination System, it continued.

It would be unfair, though, to fully blame Northrop Grumman for the project’s problems. Before deciding whether to cancel the contract, state officials compared their project to similar ones done in other states. They found their project came in at a much lower cost than the others – most states came in between $98 million and $184 million – giving reason to believe the project was not conceived at a scale that would be successful.

“It’s evident that our winning bid came in so far outside of the ball park that the approach envisioned by our vendor had likely little potential for success,” TennCare Chief Medical Officer Wendy Long told Gov. Bill Haslam during the agency’s budget presentation in December, according to a report in the Times Free-Press.

Tennessee has paid Northrop Grumman $4.6 million for the project so far with about 90 percent of that coming from federal grants. In total, the state has been on the hook for about $460,000, according to reports.

The project aims to give low-income residents in the state access to health care under the Affordable Care Act by linking with federal computers to verify if people qualify for the state’s version of Medicaid.

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