State officials sidetracked a $40 million change to a large state contract with a private company that will handle the processing of Medicaid claims.

The state health agency had proposed adding $40 million to a now nearly $194 million multiyear contract with CNSI, a Maryland-based firm.

The increase was approved by the state Department of Health and Hospitals and was pending approval by the state Division of Administration when the brakes were applied, DHH Undersecretary Jerry Phillips said.

Phillips said the contract amendment was scrapped after the agency received comments suggesting that the agency should put out a request of proposal on the additional work.

The amendment would have had CNSI do “up front” review of claims as well as monitor the practices of those who provides services through Medicaid — the government health insurance program for the poor.

CNSI won the initial $185 million contract, overcoming protests from unsuccessful bidders who claimed the firm “low balled” costs. Earlier, this year the contract was increased by $8.9 million for what state Department of Health and Hospitals officials termed “new work.”

DHH Secretary Bruce Greenstein is a former CNSI executive. He has denied any role in the firm’s selection.

Phillips said the Legislature could have called for a review of the $40 million amendment. Some legislators had voiced skepticism of the initial contract award and claims that CNSI could do the job for the price it quoted. CNSI assured the state that it could do the work for the price.

“We had gotten comment and even though we were in the final stage of this, we decided to do an RFP,” Phillips said, referring to the request for proposal, which is part of the procurement process asking businesses to submit proposals for how the task might be done and how much it might cost.

Phillips said Greenstein has been “frustrated” with the current “pay and chase” practices in the Medicaid system, in which claims are paid and then state has to go after those erroneously paid. Medicaid is the program, paid for by state and federal government, that provides health care to the poor and some elderly.

Greenstein favors and “up-front review” or “prepay review” of the claims, which was being sought as part of the CNSI contract.

The decision was made that “this new model required an RFP,” Phillips said.

Phillips said the agency is in the final stages of preparation of the request for proposals. “It’s a prediction model and prepay analysis,” said Phillips.

For instance, he said a new Medicaid provider that submits $1 million in claims during a month probably deserves a close look. He said the system should also be capable to identifying claims put in for individuals who do not live in Louisiana.

The earlier change to the original CNSI contract came as a result of a change in the federal deadline for implementation of new medical billing codes. The current Medicaid claims provider — Molina Medicaid Solutions — was doing the work but because of the delay into when CNSI takes over the work was shifted.

CNSI beat out three other firms for one of the most lucrative contracts in state government. Losing proposers and the state review team noted that CNSI made erroneous assumptions in its proposal.

Under the 10-year contract, CNSI will handle claims and pay the invoices for health care provided under Medicaid. The program serves more than one million of the state’s residents.