Unrelenting cost and market challenges are creating new technology movement and opportunities in the US State Medicaid markets.  In 2009, a variety of technology models have emerged for the State Medicaid market, including vendors refreshing traditional legacy models and also introducing flexible COTS options. This week, Molina Healthcare announced a definitive agreement to acquire the Health Information Management (HIM) business of Unisys Corporation. This business unit provides technology solutions and services for the administration of State Medicaid programs.

With these recent announcements, fresh technology movement and new business models that parallel the US commercial market are now present in the State Medicaid market. The two most notable parallels are 1) new solutions, including Plexis Healthcare Systems with solutions based on service oriented architectures (supporting the MITA advocacy for service oriented applications and COTS products) and 2) the acquisition of a technology company by a healthcare organization, providing that organization with a new technology business opportunity in the Medicaid space. Similar instances over the past decade in the commercial market include over the past decade by United Healthcare, HCSC, Aetna, among others.

State Medicaid programs face even more severe cost, quality, information, ICD-10 compliance challenges that their commmercial counterparts.  The combined business challenges with the harsh economic times and State budget cuts seemingly creates in inflexion point at which State Medicaid programs must upgrade their technologies and applications. The drivers are clear; vendors are responding; commercial market healthcare organizations are positioning to take advantage through technology acquisitions.  Return on investment will likely be the key criteria for State Medicaid movement to new vendors, partners and technologies.  If case studies are proven, expect new responses by State Medicaid legacy vendors and additional vendor developments, if not mergers and acquisitions in 2010 and 2011.