Two firms have dropped their protests of the award of a lucrative state contract for Medicaid claims processing to a Maryland company with ties to Louisiana’s health chief.

ACS State Healthcare and Molina Medicaid Solutions notified Commissioner of Administration Paul Rainwater they will not pursue further appeals of the contract award to Client Network Services Inc.

State health chief Bruce Greenstein is a former executive of Client Network Services Inc. Controversy surrounded its selection with which Greenstein said he had nothing to do.

Dropping the protests cleared the way for contract negotiations to start Monday between Client Network Services Inc. and the state Department of Health and Hospitals, DHH Undersecretary Jerry Phillips said.

“We are on target to meet the timeline” to transfer operations to Client Network Services Inc. by December 2014, state Medicaid Director Don Gregory said.

Contract negotiations must be completed within 30 days. It must be approved by the state Division of Administration and the federal Centers for Medicare and Medicaid Services.

The contract involves paying claims and acting as the fiscal intermediary for the state’s $6.7 billion Medicaid health insurance program for the poor.

“It was a relief,” said Steve Smith, Louisiana chief for Client Network Services Inc.

Smith said Client Network Services Inc. is recruiting employees and making job offers for its Baton Rouge operations.

In addition, three locations are being considered for local offices.

“We want to be on the ground immediately,” he said.

When fully phased in, there will be 142 employees dealing with the Louisiana project, most of them in Baton Rouge.

Client Network Services Inc. submitted the lowest bid of the three companies that met the cut on technical scoring of proposals: $184.9 million over the 10-year pact.

Molina Medicaid Solutions, of Long Beach, Calif., did not qualify to compete further.

ACS State Healthcare, of Fairfax, Va., came in second at $238 million while Hewlett Packard ES, of Plano, Texas, had the highest cost at $394 million.

The state’s chief procurement officer, Denise Lea, had earlier denied protests filed by ACS State Healthcare and Molina Medicaid Solutions.

“We hope that our actions assisted the state of Louisiana in its continued efforts to ensure fairness and transparency in its procurement process and to hold the winning proposer accountable to deliver the services proposed at the price it committed to,” wrote Amanda Brino, vice president and corporate counsel for ACS State Healthcare.

Brino added the company, if necessary, is ready to negotiate a contract with the state Department of Health and Hospitals to provide the services sought.

ACS State Healthcare had complained Client Network Services Inc. had low-balled its cost estimate and failed to account for certain expenditures that would be required to fulfill contract terms. It also said Department of Health and Hospitals staffers who reviewed the proposal cited some 70 incorrect assumptions.

Department of Health and Hospitals officials said they would hold Client Network Services Inc. to the cost estimate provided as they negotiated the contract.

Molina Medicaid Solutions has been the state’s Medicaid claims processor and fiscal intermediary for the past 28 years.

“Please be assured that we believe the best use of our resources is to continue to support the Department of Health and Hospitals in its mission to assist the state’s most vulnerable citizens, rather than expending resources in further protest actions and litigation,” Molina Medicaid Solutions President Norm Nichols wrote.

Molina Medicaid Solutions had alleged “consensus scoring” used to evaluate proposals allowed “great potential for human bias.”