HELENA — State officials have resolved a contract issue with Xerox Corp. over developing a new computer program for Medicaid payments.

Montana Department of Health and Human Services Director Richard Opper sent a letter to Xerox on July 18 saying the company is no longer in breach of the $70 million state contract awarded in 2012. 

“It has been a difficult process, but in the past month, we have been encouraged by the cooperation that Xerox has demonstrated,” Opper said in the letter.

He said his department has accepted a revised work plan, which if successfully executed, should create a system that lasts 20 years.

The Medicaid Management and Information System to handle payments to thousands of Medicaid providers is supposed to replace a system that is more than 30 years old. The old system is unable to keep up with increasingly complex payment rules and parameters.

The state sent a letter to Xerox in June saying the company was in breach of contract due to missed project deadlines and unfulfilled contract obligations. 

Xerox spokeswoman Jennifer Wasmer said in an email the new agreement will keep the project moving forward.

“Xerox is committed to delivering the citizens of Montana a high-quality system that will enhance the processes related to health care services under the state’s Medicaid program, and we’re delighted to be back on track,” she said.

Opper said Montana is committed to working with Xerox on the new system, and officials will be vigilant in monitoring every task and deadline in the revised work plan.

“The results that we observe through our monitoring over the next few months will determine how serious Xerox is about delivering the solution for Montana Xerox has committed to produce,” he told in the letter.

The federal government is picking up the tab on 90 percent of the project.

The state doesn’t have to pay Xerox until the program is finished and working, according to the contract. But, if the project is abandoned, the federal government may seek a return of the money it has spent so far, which could be several million dollars.

Last year Xerox successfully completed Medicaid software projects in Alaska and New Hampshire — although the one in New Hampshire was six years late.