MO – Former state vendor awarded $23M in lawsuit over Missouri Medicaid system implementation

MM Curator summary

[MM Curator Summary]: A jury has vindicated EngagePoint after years the of systems vendor claiming unfair treatment by IBM and the state.


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The verdict comes as the Department of Social Services faces increased scrutiny for its handling of Medicaid application backlogs


EngagePoint first filed its lawsuit in August 2016, alleging the state owed the company millions for work it conducted but hadn’t been paid for (Getty Images).

A software integration company’s six-year legal saga against the state reached a resolution last week, when it was awarded a little over $23 million in its lawsuit alleging contract breaches over extra work to implement a Department of Social Services’ case management system.

On Wednesday, Cole County Circuit Judge Jon Beetem granted a directed verdict of a little over $4 million that the company argued it was owed, said Ken Barnes, an attorney representing EngagePoint. A day later, a jury sided with EngagePoint and awarded an additional $18.9 million out of the $31 million it had requested on additional claims, Barnes said.

Beetem also issued a directed verdict in the state’s favor and found EngagePoint did not meet its burden of proof on a claim regarding software maintenance.

EngagePoint first filed its lawsuit in August 2016, and Barnes said the verdict affirmed that EngagePoint’s conduct did not play a role in the case management system’s issues and that it delivered the software it promised.

He said he hopes the state sees “that it’s time to put this to rest.”

“It feels like vindication for my client after a really long and hard battle,” Barnes said, “that, I think candidly, the state had every opportunity to avoid.”

A signed judgment was not posted to the case’s docket as of Monday morning.

Asked if the Department of Social Services was considering appealing the verdict, Caitlin Whaley, a department spokeswoman, said, “the agency will consider all options open to the state moving forward.”

Chris Moreland, a spokesman for the Office of Administration, which handles state contracting, said the agency is evaluating the jury’s verdict and the trial.

“Because all stages of this litigation are not yet final,” Moreland said, “OA will not comment on pending litigation.”

Meanwhile, Chris Nuelle, a spokesman for the attorney general’s office, said the office plans to appeal the verdict, but refrained from commenting further.

EngagePoint, a Florida-based firm, was hired by the state in 2013 in response to a request for proposals for a vendor to implement the Missouri Human Services Eligibility, Enrollment and Case Management System, a comprehensive, fully-integrated system for Department of Social Services’ programs, like Medicaid.

EngagePoint was hired over competitors such as IBM, and alleged in its lawsuit that the state ignored the company’s advice and licensed a software known as Cúram directly from IBM and then later held EngagePoint accountable for flaws with the software, which was “unstable and not functionally ready.”

As a result, numerous change order requests were made which EngagePoint alleged the state denied without proper review and out of compliance with federal regulations. The company also alleged the state breached its contract by changing the methodology for determining completion of the project and refused to pay for additional work EngagePoint conducted in order to be compliant with federal mandates.

“Despite not getting paid, EngagePoint continued to service the needs of the citizens of the state and continued to endeavor (to) fix problems with the Curam system,” the 2016 lawsuit read.

In 2014, state employees threatened they “would put EngagePoint out of business,” the lawsuit alleges, and that the company was issued an ultimatum to turn the contract over to IBM or face termination. IBM, who had been passed over for the initial contract, was paid $2 million by the state as a consultant to assess EngagePoint’s performance — a conflict of interest, EngagePoint argues.

IBM was eventually hired to complete the contract after EngagePoint was terminated by the state in May 2015. At least $37 million was owed to the company, EngagePoint argued in its 2016 lawsuit, which the state had moved to dismiss.

The state argued EngagePoint sought “money for work not performed” and in January 2017 filed a counterclaim alleging that EngagePoint breached its contract and “repeatedly failed to deliver, and those failures cost the State tens of millions of dollars,” or a total of roughly $84 million.

As a result, the state was justified in terminating its contract and hiring IBM, it argued.

“From January of 2014 forward, EngagePoint’s failures brought the eligibility determination and enrollment operations of the State’s Medicaid program to the brink of dysfunction,” the state wrote in its 2017 counterclaim, arguing overtime work of temporary staff was one of the only reasons that operations remained in place for nearly 18 months through a manual by-pass system.

DSS and OA officials highlighted those issues and placed blame on EngagePoint in 2015 legislative hearings scrutinizing the backlog and delays in the Medicaid system, the Jefferson City News Tribune reported at the time.

Ultimately, the jury last week issued three verdicts in EngagePoint’s favor.

The verdict comes at a time when the Missouri Eligibility Determination and Enrollment System that EngagePoint was hired to implement has come under increased scrutiny as part of the Department of Social Services’ delays in enrolling newly eligible participants under expanded Medicaid. 

The delays — more than twice the limit allowed under federal regulations — have led to the Centers for Medicare and Medicaid Services stepping in and requiring a mitigation plan for improved processing of applications.

“The state of Missouri has had seven years since they terminated EngagePoint to get their act together,” Barnes said, “and they’re just not doing it.”

Updates to the state’s Medicaid system to make eligibility determinations were previously cited as the reason why applications wouldn’t be processed for 60 days after the state was court-ordered to implement expanded Medicaid last year.

DSS officials have since vowed to get delays below the 45-day maximum allowed under federal regulations by Sept. 30.

“At some point, you got to say, ‘Who’s the common denominator here?'” Barnes said. “It isn’t EngagePoint. It isn’t even IBM. It isn’t the other contractors. The common denominator here is the state and how they manage their business.”


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