Widespread, serious flaws in the state Department of Health and Human Services’ long-suffering NCTracks Medicaid computer system might jeopardize more than $9 million in anticipated annual cost savings, according to a stinging state performance audit released late Monday afternoon.

In addition, the audit said, since going live July 1 NCTracks has encountered more than 3,200 defects, of which more than 600 remained unresolved as of Nov. 6.

Among the negative findings: The number of new “high” and “medium” defects reported each month has not decreased; there is no contractual requirement related to the timely resolution of defects; and Medicaid providers are bypassing the call center for assistance.

In its agency response, DHHS said it was working to remedy the audit findings.

Bob Seligson, executive vice president/CEO of the North Carolina Medical Society, was quick to weigh in on the findings.

“The auditor’s report confirms our worst fears about NCTracks. This flawed system has been hurting patients and hurting doctors throughout the state since it went live on July 1,” Seligson said.

“We heard about the problems from our members then, and we continue to hear about them to this day,” Seligson said. “We hope definitive action will be taken now to fix NCTracks once and for all.”

The Medicaid Management Information System is designed to consolidate processing of more than $12 billion in health care claims for more than 77,000 medical providers serving 1.5 million people, among other functions. It has a checkered past dating to 2004.

Affiliated Computer Services had the initial contract for $171 million to launch in the summer of 2006. The start date was pushed back to August 2007. Another request for delay until November 2007 was denied, and the contract was terminated.

Computer Sciences Corporation was given a $265 million contract in December 2008 for the job. CSC received an 18- to 22-month extension after missing its August 2011 startup, and the contract price ballooned to $484 million. A subsequent contract amendment delayed the launch date to July 1, 2013.

NCTracks’ floundering history under Democratic administrations has not deterred Democratic lawmakers from highlighting continuing problems now that the Republican McCrory administration is in charge of the project, especially since there were indications the July 1 launch date was a rush job.

Two meetings of the Joint Legislative Oversight Committee on Health and Human Services in recent months have led to robust jousting between Democrats and Republicans over NCTracks.

At the Nov. 19 meeting, state Sen. Tommy Tucker, R-Union, acknowledged there was “much angst” about the system, but said his concerns had dropped markedly over the previous month.

“Things are moving, and NCTracks is getting a comfort level with me. As with any system there are hiccups,” Tucker said.

“From these numbers, and from what I’m hearing here today, I don’t think we’re fixing the problem,” state Sen. Martin Nesbitt, D-Buncombe, responded.

“I need to know how many people aren’t getting paid and why, and when that will be fixed,” Nesbitt said. “We’ve got to somehow quantify this problem so we can track it month to month.”

The state has until July 1, 2014, to get the bugs out and the system certified by the federal government. With certification, the federal government would begin picking up 75 percent of the costs of operating the system, rather than the current 50-50 cost-share between Washington, D.C., and Raleigh. Without it, the state stands to lose $9.6 million annually.

According to the audit, governance changes in the NCTracks system pose further budget risks and jeopardize system functions because federal and state mandates have not been implemented. Twelve of 14 government-mandated service change requests were not enacted by their required implementation dates.

The need for the changes in two phases occurred because the revisions were not complete was when the system launched on July 1.

As of Nov. 1, DHHS had estimated neither costs nor completion dates for the revisions, prompting an audit recommendation that a follow-up progress report be provided to the General Assembly.

In its response, DHHS said it would have a progress report by March 1, 2014. In the interim, the department sends weekly email notifications about changes to providers and to DHHS management and staff.

“The number of ‘critical’ NCTracks defects reported each month has decreased over time,” the audit stated. “However, the number of new defects reported each month for issues considered ‘high’ and ‘medium’ has not decreased and remains consistent.”

Critical defects indicate a systemwide failure. High reflects inconsistent results, and medium refers to work-arounds necessary to navigate the system.

Between Aug. 3 and Nov. 5, between 449 and 555 high defects were found monthly. Medium defects ranged between 144 and 230. High-level defects equate to 71 percent of all defects found. In all, 19 percent of defects reported are still open, and high-level defects account for 74 percent of those open issues.

DHHS “may not be managing all NCTracks defects efficiently,” the audit stated, partly due to “lack of formal goals to resolve defects in a timely manner.” Although DHHS has a “target response timeframe,” there was confusion within the department about what constituted a follow-up response from CSC. That hampers effective control of timely resolution of defects.

While there are more than 200 service level agreements on management and performance, none exists for timely resolution of defects.

Three categories accounted for 64 percent of all system defects.

There were 1,025 provider portal problems, or 31 percent of all system defects. Medicaid providers use that gateway for such actions as checking on eligibility and prior approvals, creating and checking status of claims, searching for payment history and consent forms.

Batch processing, which includes overnight reports, processing of claims, and check writes, accounted for 559 defects, or 17 percent of all system defects.

And there were 525 defects in the operations portal. That is the entry point for DHHS and CSC fiscal agent staff to work on claims; managed care; financial, provider, recipient, and administrative functions; and third-party liability. That equates to 16 percent of all system defects.

In its agency response, DHHS said it is impossible to predict how long it might take to fix unforeseen defects, so it would consider resolution times as guidelines for the vendor rather than contractual commitments.

The audit also faulted DHHS for failure to construct a single, comprehensive master action plan to remediate technical and operational issues. Instead, documentation is scattered around various sources. It recommended creating a master plan.

The absence of a master plan “increases the risk that NCTracks defect resolution processes are not being managed in the most effective and efficient way, and that strategic objectives may be misunderstood or misinterpreted by the business or IT personnel,” the audit stated.

In its response, DHHS said it was working on such a plan that includes a hierarchical “management framework” for setting priorities and approving work items.

Dan E. Way (@danway_carolina) is an associate editor of Carolina Journal.