Strayhorn releases audit of Accenture

Remember back in May, after the Texas Health and Human Services Commission (THHSC) had to bring back workers it had let go to keep things from completely falling apart on Accenture, when three lawmakers (Democratic Sen. Eliot Shapleigh of El Paso, Democratic state Rep. Carlos Uresti of San Antonio, and Republican state Rep. Carter Casteel of New Braunfels) asked Comptroller Strayhorn to do an audit on Accenture's contract and performance? Well, yesterday she released the results of that audit. (Never let it be said that Carole Keeton Strayhorn lacks a sense of timing.) And it's brutal.

Dear Senator Shapleigh, Chairman Uresti and Representative Casteel:

In May 2006, you requested my assistance in researching the Integrated Eligibility and Enrollment contract between the Health and Human Services Commission (HHSC) and Accenture LLP. I have completed this research.

At this writing, the project is behind schedule and $100 million over budget, without a revised plan to get the project back on course. Accenture has not met its performance requirements and has not been held accountable for its failure. Clients are still reporting delays and inaccuracies in processing their applications. HHSC has proven it cannot manage Accenture and the contract.

My conclusion is that this project has failed the state and the citizens it was designed to serve. The contract with Accenture must be ended. I recommend the Legislature pass emergency legislation that removes HHSC’s direct management of the project and places the responsibility with a turnaround team composed of experts who can effectively manage state resources and stop the drain on tax dollars. And, most importantly, make sure children receive the health insurance for which they are eligible. In addition, the Legislature should review this administration’s 27 major policy changes that have resulted in even more children losing health insurance.

[...]

The state’s automated eligibility determination system, the Texas Integrated Eligibility Redesign System (TIERS), has cost taxpayers $279 million to date, and despite this expenditure, is being used in just four state offices in Travis and Hays counties after three years. Both HHSC and Accenture have hired hundreds of additional personnel to address a myriad of costly problems with TIERS.

As of August 31, 2006, HHSC has paid Accenture more than $123 million to process eligibility for a fraction of Texas’ applicants, and the project that was intended to save the state’s budget will end up costing the budget $100 million more. This project is over budget and under performing.

There's quite a bit more - the whole report is 171 pages. I've got a summary document here and a statement from Rep. Garnet Coleman about this report here (both Word docs).

There is one more thing that needs to be highlighted:

Some of the key fi ndings that my staff uncovered in their exhaustive review of the program include the following:

[...]

2. The contract provides Accenture with perverse incentives to process applications inefficiently.

• Accenture’s payments are based on a complex combination of more than 70 prices for transactions processed per application. This payment structure gives Accenture the incentive to process as many paper-based “touches” to the client as possible, when the intention of the call center model is to make the process simpler, more customer-friendly and cost-effective.


• Accenture is paid when applications are completed and ready for the state’s final determination. Accenture also is paid, however, when applications “time out” because clients have not submitted sufficient information for processing. These applications are sent to the state for denial, and Accenture is paid the same rate as for completed applications. This payment structure does not provide Accenture with any incentive to seek necessary information from clients before their applications time out.


• The contract specifies that Accenture is to be paid only for completed and “appropriate” transactions, but HHSC has not established any effective mechanism to determine whether transactions are appropriate before paying Accenture. It can only recoup inappropriate payments after the fact, not prevent them.

In other words, the structure of Accenture's contract along with the needless and punitive eligibility requirements for CHIP combine to create a strong mechanism for reducing CHIP's enrollment numbers. You want a good argument against privatization of this sort of government activity, there it is.

The bottom line is that the whole reason to privatize THHSC was to save money. That hasn't happened, it isn't going to happen, and along the way the people who need the services that THHSC provides are getting hurt. What more do you need to know? It's way past time to fire Accenture and fix THHSC while we still can.

UPDATE: Almost forgot to include this SEIU-produced ad about CHIP that's running in the D/FW media market right now. Check it out.

UPDATE: Here's the Chron story on Strayhorn's report. I'll highlight some of the responses, none of which are surprising to me.

The comptroller's report found that since Accenture took over the CHIP eligibility program in December, enrollment had fallen by 8.5 percent, or 27,567 children, through August.

CHIP enrollment began to rise this month, and HHSC officials cited more and better trained call center workers, as well as policy changes that allow families to provide some missing data over the phone instead of requiring documentation to be mailed or faxed.

Stephanie Goodman, a spokesman for HHSC, said Strayhorn's report is based on outdated information.

"It's pretty clear the report is based on a lack of understanding about the contract. The findings don't appear very relevant," Goodman said.

As we saw before, this is tinkering at the edges. It's policy that is mostly responsible for the CHIP enrollment reductions, policy that was specifically designed to reduce that enrollment. Accenture's incompetence helped, to be sure, but firing Accenture will only get you so far. The policies have to be changed so that a competent implementer of those policies can make a real difference.

Kathy Walt, a spokeswoman for Gov. Rick Perry, said the governor expects "Health and Human Services Commissioner Albert Hawkins to give the report all the attention it merits."

Goodman said the commission's legal staff is preparing a recommendation to Hawkins that could include fines against Accenture for not performing to some contract standards.

[...]

An Accenture spokeswoman echoed the commission's criticism of Strayhorn's report.

"We have worked diligently for months in areas such as staff training, application processing and call center operations and have seen significantly improved performance," Jill Angelo said. "Unfortunately, the comptroller's report ignores the progress we have made."

[...]

Strayhorn's report said that instead of saving money in this biennium, the contract will cost the state almost $100 million more than budgeted.

The costs include expenses related to the state hiring more than 1,000 temporary workers to help process applications.

But Goodman said that $100 million will be offset by reductions in payments to Accenture due to the delayed rollout of the integrated eligibility centers.

[...]

Goodman said Accenture is paid based on its workload.

"The contractor has no motive to either approve nor deny" benefits, Goodman said.

I'm sure there will be more on this, and I'm sure the subject will come up again in the 80th Lege. If we cut CHIP to help fix a $10 billion deficit in 2003, and we have a "so friggin' big" $15 billion surplus now, we have no excuses for not fully restoring what was lost.

Posted by Charles Kuffner on October 26, 2006 to Budget ballyhoo | TrackBack