And every day brought hundreds more.

Today, more than a year later, it’s fair to say that the Maine Medicaid Claims System project has been a disaster of major proportions. Since the new system went live, it has cost the state of Maine close to $30 million. The fallout has been broad and deep. In December 2005, Jack Nicholas, the commissioner of the DHS who oversaw the project, resigned.

As of press time, Maine is the only state in the union not in compliance with the Health Insurance Portability and Accountability Act of 1996 (HIPAA)—a striking irony given that the new system was designed to facilitate that compliance. Although federal authorities have said they will work with the state in extending the deadline, the failure has been a black eye on Maine’s ability to manage the health of hundreds of thousands of its residents. And it has become an issue in this year’s race for governor.

State IT officials say they have fixed most of the bugs in the new Web services system and that it is now processing 85 percent of claims (although physician groups dispute this). With 20/20 hindsight, they can now look back and see where the project went wrong. Hiring a vendor, CNSI, that had no experience in developing Medicaid claims systems was the first mistake. And that was compounded by the decision to build a new and relatively unproven technology platform for the entire system rather than, as other states have done, integrating a Web-based portal with back-end legacy systems. Thirdly, IT switched over to the new system overnight with no backup system in case something went wrong. And making matters worse, no end-to-end testing or training was conducted before the switch over. Indeed, the story of the Maine Medicaid Claims System is a classic example of how not to develop, deploy and manage an advanced Web services system.

"By the first of March, it was clear that we were missing any sort of basic management of this project and were in complete defensive mode," recalls Dick Thompson, then head of procurement for the state of Maine and now its CIO.

"We could not see our way out of this."

Out with the Old

In the late 1990s, states were moving fast to overhaul their Medicaid claims processing systems. Driving the transformation was HIPAA, which required numerous changes in managing patient health and records, the most significant of which was protecting patient privacy. Maine, like other states, had to upgrade its systems to better secure Medicaid patient records. Under HIPAA, the state had until Oct. 1, 2002, to have a system in place that would secure and limit access to that information.