On Friday, Jan. 21, 2005,the state of Maine cut the ribbon on its new, Web-based Maine Medicaid Claims System for processing $1.5 billion in annual Medicaid claims and payments. The new $25 million program, which replaced the state’s old Honeywell mainframe, was hailed as a more secure system that would clear claims faster, track costs better and give providers more accurate information on claims status.

But within days of turning on the new system, Craig Hitchings knew that something was seriously wrong.

There had been problems right from the start—an unusually high rate of rejected claims—but Hitchings, director of information technology for the state of Maine’s Department of Human Services (DHS), had assumed they were caused by providers using the wrong codes on the new electronic claim forms. By the end of the month, he wasn’t so sure. The department’s Bureau of Medical Services, which runs the Medicaid program, was being deluged with hundreds of calls from doctors, dentists, hospitals, health clinics and nursing homes, angry because their claims were not being paid. The new system had placed most of the rejected claims in a "suspended" file for forms that contained errors.

Tens of thousands of claims representing millions of dollars were being left in limbo.

Hitchings’ team—about 15 IT staffers and about 4 dozen employees from CNSI, the contractor hired to develop the system—were working 12-hour days, writing software fixes and performing adjustments so fast that Hitchings knew that key project management guidelines were beginning to fall by the wayside. And nothing seemed to help.

Day after day, the calls kept coming. The bureau’s call center was so backed up that many providers could not get through. And when they did, they had to wait on the phone for a half hour to speak to a human.

By the end of March, the number of Medicaid claims in the suspended bin had reached approximately 300,000, and the state was falling further and further behind in its ability to process them. With their bills unpaid, some of Maine’s 262,000 Medicaid recipients were turned away from their doctors’ offices, according to the Maine Medical Association. Several dentists and therapists were forced to close their doors, and some physicians had to take out loans to stay afloat. With the Medicaid program accounting for one-third of the entire state budget, Maine’s finances were in shambles, threatening the state’s financial stability and its credit rating. Yet Hitchings was at a loss to explain what was causing all the suspensions.