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After millions in payouts, L.A. County to get $1.5-million settlement for bungled computer system

February 9, 2010 |  3:28 pm

After a bungled computer system caused Los Angeles County to lose millions of dollars, the information technology company that created the system is expected to pay the county $1.5 million under the terms of a settlement approved Tuesday by the Board of Supervisors.

The dispute stems from a computer system, created by Sierra Systems, that processes claims for reimbursement by mental health clinics. Once received by the Los Angeles County Department of Mental Health, the billing requests are supposed to be forwarded to the state of California, which oversees Medi-Cal, the government insurance program for the poor.

But when the system was turned on in 2004, problems started immediately. Mental health clinics complained they weren’t getting paid by the county and state. Billing problems continued through 2006.

Eventually, 18 mental health clinics sued the county and state, accusing them of owing $25 million. In the summer of 2009, a settlement was reached in which more than $12 million was paid to the mental health clinics. The county paid out $5.8 million and forgave outstanding debt the clinics owed to the county, and the state chipped in $3 million for the settlement.

The extensive litigation was costly, and the county paid more than $800,000 in attorney fees before the initial settlement with the clinics was reached.

Los Angeles County officials, in turn, sued Sierra Systems, resulting in the proposed $1.5 million payout to the county.

“County and Sierra have now successfully mediated the matter to their mutual satisfaction,” according to a document prepared by the County Counsel’s office.

In a corrective action plan, county officials blamed the problem on errors resulting from rushed implementation of the system to comply with federal law, design errors by Sierra Systems, problems with the state’s computer system to receive and process claims, and inaccurate data entry by healthcare providers.

Sierra Systems won a contract in November from Los Angeles County to create a new property tax system — eTax — that is designed to help manage and collect property taxes.

-- Rong-Gong Lin II at the L.A. County Hall of Administration