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ACS Wins $1.6 Billion Medicaid Deal

Xerox outsourcing unit to manage California's healthcare IT systems under ten-year agreement.

ACS said it secured a ten-year contract to provide tech and business services to California's Medicaid program.

Under the deal, valued at $1.6 billion, ACS will manage Medi-Cal's Management Information System (MMIS). Among other things, ACS will provide upgrades to the system that are designed to reduce operational costs and boost efficiency.

IBM, a subcontractor to ACS on the work, will handle data center and application management and receive about 25% of the deal's total value, according to a source with knowledge of the arrangement.

Ultimately, ACS will migrate Medi-Cal's systems to the ACS Health Enterprise in a move designed to give the state's Department of Health Care Services added flexibility.

"The expertise that ACS brings to this project will strengthen the healthcare services the state of California offers its beneficiaries," said DHCS director David Maxwell-Jolly, in a statement. "Together we are reshaping the future of the Medi-Cal program in order to effectively serve Californians for years to come," said Maxwell-Jolly.

Beyond the IT work, ACS will provide Medi-Cal with a range of BPO, or back office, services—including provider claims payment, provider and stakeholder relations training, beneficiary relationship services, telephone service center, and security and privacy protection services.

"ACS has provided critical services to government agencies in California for more than 25 years," said ACS CEO Lynn Blodgett, in a statement. "Our partnership with Medi-Cal is the latest chapter in a history of innovation and service to the state," said Blodgett. "With more than 5,000 dedicated employees in California, the work of ACS, now a Xerox company, has a positive impact on the lives of residents every day," he added.

Xerox closed its $5.6 billion acquisition of Dallas-based ACS earlier this year in a move that further consolidated the tech services industry. It followed Hewlett-Packard's $13.9 billion buyout of ACS rival Electronic Data Systems in 2008.

Xerox shares were off 3.89%, to $10.62, in mid-morning trading Tuesday.

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