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Jan. 14, 2025 |  By: Clara Bates - Missouri Independent

Appeals court upholds $23M judgment against Missouri DSS in contract dispute

missouri department of social services letter

By Clara Bates - Missouri Independent

The Western District of Missouri Court of Appeals on Tuesday upheld a $23 million ruling against the Department of Social Services for breach of contract.

The appeals court sided with EngagePoint, a technology company that sued the state in 2016 alleging it was owed millions for work it conducted but was never paid for. The company was hired to help implement the state’s software system for managing public benefits cases, including Medicaid.

The state in 2017 countersued EngagePoint for breach of contract.

In 2022, Cole County Circuit Judge Jon Beetem ordered the state to pay a little over $4 million that the company argued it was owed, and a jury awarded $18.9 million on additional claims. 

The state filed an appeal. 

The state challenged the constitutionality of the award for extra work, along with the award for interest payments and a specific claim for repayment — arguing those were all outside the scope of the contract. The state also argued one of the jury instructions violated part of the contract and led the trial court to err in its decision.

On Tuesday the appeals court sided with EngagePoint on all four points, arguing the award was justified under Missouri law. 

“EngagePoint performed substantial additional work at the state’s direction,” the court noted.

Neither the Department of Social Services, attorney general’s office nor the Office of Administration responded to requests for comment. 

EngagePoint, a Florida-based firm, was hired by the state in 2013 as a vendor to implement the Missouri Human Services Eligibility, Enrollment and Case Management System, a comprehensive, fully-integrated system for Department of Social Services’ programs, like Medicaid.

EngagePoint was hired over competitors such as IBM, and alleged in its lawsuit that the state ignored the company’s advice and licensed a software known as Cúram directly from IBM. The state later held EngagePoint accountable for flaws with the software, which was “unstable and not functionally ready.”

The state directed EngagePoint to perform extra work to correct issues with Cúram and integrate it into the case management system, according to Tuesday’s decision.

IBM was eventually hired to complete the contract after EngagePoint was terminated by the state in May 2015. At least $37 million was owed to the company, EngagePoint argued in its 2016 lawsuit.

The state argued EngagePoint sought “money for work not performed” and that the company breached its contract and “repeatedly failed to deliver, and those failures cost the state tens of millions of dollars,” or a total of roughly $84 million.

As a result, the state was justified in terminating its contract and hiring IBM, it argued.

“From January of 2014 forward, EngagePoint’s failures brought the eligibility determination and enrollment operations of the State’s Medicaid program to the brink of dysfunction,” the state wrote in its 2017 counterclaim, arguing overtime work of temporary staff was one of the only reasons that operations remained in place for nearly 18 months through a manual by-pass system.

DSS and Office of Administration officials highlighted those issues and placed blame on EngagePoint in 2015 legislative hearings scrutinizing the backlog and delays in the Medicaid system, the Jefferson City News Tribune reported at the time.

The Missouri Eligibility Determination and Enrollment System that EngagePoint was hired to implement continued to come under scrutiny as part of the Department of Social Services’ delays in enrolling newly eligible participants under expanded Medicaid. The state cited updates to the state’s Medicaid system to make eligibility determinations as the reason applications wouldn’t be processed for 60 days after the state was court-ordered to implement expanded Medicaid in 2021.

In 2022, the federal government initiated a formal mitigation plan with the state to get the processing time of Medicaid applications down. Wait times improved then worsened: Last summer, Centers for Medicare and Medicaid Services again intervened, saying it was concerned the state was not doing enough to “achieve and sustain” compliance with federal rules on Medicaid. The federal government said in the May letter it was concerned “particularly given the prolonged period of the state’s noncompliance.” 

Medicaid applications for low-income Americans are required to be reviewed within 45 days, but early last year 72% of Missouri applications took more than 45 days to process, per federal data. 

The numbers appear to have improved: The average processing time for low-income Medicaid applications was down to 16 days in November, according to the most recent state data. According to the most recent federal data, which covers July 2024, 27% of applications in Missouri were processed in violation of the federal limit.

HHS Technology acquired EngagePoint’s claims for the contract dispute lawsuit and was substituted as the plaintiff. It sued DSS in another case in 2023, alleging the state violated Missouri’s Sunshine Law. Late last year, a judge sided with HHS, ordering the state to pay $120,000. According to online court records, Missouri filed its notice of appeal in that case in December.