HHS Awards Medicaid Contract To ACS In Spite Of Controversy

The same company that has been criticized time and time again for its inept handling of Texas’ Medicaid program has been awarded a $230 million contract extension through 2009.
Affiliated Computer Services (ACS) was given the contract extension Monday. The extension extends a deal originally signed in 2004 that gives ACS the task of handling Medicaid claims processing, operations support, and primary health care case management for the Texas Health and Human Services Commission.

ACS, which is based in Texas, is has been the brunt of serious criticism because of the way it has handled the contract in the past.

In addition ACS has received a ton of negative ink in recent weeks because of controversy surrounding the company’s stock:

Last week, ACS said CEO Mark King and CFO Warren Edwards improperly backdated the price of options grants during a period from 1994 to 2005. During that time, ACS said the executives deliberately chose days on which ACS’s stock took a dip as the effective date for the options, making them more valuable when exercised. ACS said King and Edwards would resign their positions.
ACS said the SEC and the U.S. Attorney’s Office in New York are continuing their investigations of the company’s stock options practices. ACS said it estimates the backdating cost the company $51 million in unrecorded expenses.

While ACS has retained its contract with the Texas Health and Human Services Commission, other deals could be in jeopardy as a result of the stock options scandal. Some city officials in Edmonton, Alberta, are calling for the cancellation of the city’s contract with ACS for photo radar enforcement services. “I just think it’s not very palatable to hear of a company that’s having all these problems holding a contract with our city,” Edmonton city councilor Ron Hayter said in an interview last week with the Edmonton Sun.

Experts say Texas Medicaid administrators may have felt bound to extend ACS’s contract despite the options scandal, given the complexity of handing off the work to a new vendor. Said Doug Brown, a consultant and co-author of The Black Book Of Outsourcing, “The real impact will be felt by ACS via a likely halt in new business signings, not renegotiations.”

Not exactly the type of company the state should be

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