Hewlett-Packard Company’s (HPQ) Enterprise Services arm recently signed a 3-year service renewal deal with the Delaware Division of Medicaid & Medical Assistance (:DMMA). The contract price was settled at $50.0 million.
The state of Delaware is situated in the Mid-Atlantic region and the population is relatively low but dense. The DMMA came into being in July 2005 to provide health care coverage to citizens with low income and physical disability. The prime motto of the institution is to ensure fast, appropriate and cost effective medical care and support services.
Per the contract terms, H-P will continue to act as a Medicaid fiscal agent or primary information technology provider to the DMMA. As a fiscal agent, the tech giant will review and process all medical claims, manage the inventory of the pharmacy and provide call-center support. H-P’s services will also help the state to improve Medicaid programs and deliver more critical health information to a larger number of health care providers. In addition to making claim transactions smoother, H-P’s services will reduce the extent of fraud with prior detection, thereby eliminating risks and costs associated with the state’s Medicaid program.
H-P shares a long-standing relation with the state of Delaware, which dates back to 1989. The success of the Medicaid services can be well inferred from the fact that H-P handles more than 17 million claims annually for over 8,800 health care providers in Delaware.
The tech giant is already serving as a fiscal agent to 21 other states’ Medicaid programs. The need for an efficient Medicaid program arises from the enactment of the U.S. Healthcare Reforms Bill. The goal of the reform is to make health care more affordable for Americans. The basic objectives of the reform were presented in the Patient Protection and Affordable Care Act. Per the Act, beneficiaries are expected to join Medicaid through a registration process requiring exchange of information regarding health. Medicaid is a joint endeavor of the states and Federal governments, designed to provide medical care to those under the federal poverty level, including expectant mothers and children.
The U.S. government's endeavor to expand the information technology industry to become a major player in health reform will help drive IT spending in the health care segment over the coming years. We believe that H-P, with its strong position, would be able to capitalize on government initiatives.
However, H-P has to compete with Computer Sciences Corp. (CSC) in the Medicaid service space.
Currently, H-P has a Zacks #3, implying a short-term Hold recommendation.
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