A computer server is seen in this file photo tile.

NASHVILLE - TennCare officials and contractor Northrop Grumman Corp. have agreed to part ways over a troubled $37.5 million computer system that was supposed to be making Medicaid eligibility determinations a year ago this month.

In a statement, the TennCare Bureau says that after receiving detailed findings on problems from a report by its independent consulting firm, KPMG LLC,  "the state and current vendor have mutually decided it to be in their respective best interests to terminate the current contract early.

"The state will be moving forward with the process to select a new vendor," the statement adds.

TennCare spokeswoman Kelly Gunderson said in response to questions that "some" of Northrop Grumman's work "is usable. Once we have a new vendor they will also be able to perform an assessment to determine the extent to which the current technology could be integrated with the new technology."

No time table was provided.

The state has already paid Northrop Grumman $4.6 million on development of its Tennessee Eligibility Determination System (TEDS). Because 90 percent of the project was funded by the federal goverment, the state is out about $460,000.

According to a recent Tennessee Comptroller's performance audit of TennCare operations, Northrop project managers provided two explanations for delays. One was the bureau requested the eligiblity system be fully tested before becoming available for public use. 

"Therefore, complex testing on Release 1 must be conducted before work on Release 2 can begin," the audit says.

The company also blamed federal regulation changes for some delays in testing. When the regulations change, project staff "must make adjustments to the system and test all of the changes," auditors noted.

Tennessee embarked on developing a new system because its current eligibility computer system, ACCENT, doesn't meet determination changes required by the federal Affordable Care Act. 

Since the state has no functioning system, it has been relying on the ACA's federal insurance marketplace to process applications. That hasn't worked well and led last summer to federal officials chastising the state over lengthy delays affecting would-be enrollees.

That was followed by a federal lawsuit by advocates for the poor. A federal judge in September ordered Tennessee's state Medicaid program to take responsibility for the long-delayed applications, calling for the agency to hold hearings for people who had waited months to find out whether they will receive coverage.

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