AUGUSTA — The state will begin testing a new Medicaid billing system at various sites next week as the Maine Department of Health and Human Services works to replace a troubled computer network.

Nursing homes, hospitals and others have agreed to be pilot sites for the system, which is scheduled to go live Aug. 1, department Commissioner Brenda Harvey said.

“Each one of those is critical to deciding we’re all set to go on Aug. 1,” she said.

The state delayed a planned April 1 switch until Aug. 1 after internal tests showed the system was not yet up to speed, she said.

The new software will replace a five-year-old system that failed just weeks after it launched. Hundreds of providers went weeks without being reimbursed by the state for Medicaid costs. That system never complied with federal regulations, something Harvey says will change with the new setup.

Complying with federal rules is important because it will allow the state to get reimbursed at a higher rate, she said.

The state Department of Health and Human Services spent $47.5 million on the failed system — 90 percent of which was paid by the federal government. So far, the state has spent $34.8 million on the new system; the federal government will also pick up 90 percent of that cost, according to the department.

Catholic Charities Maine, which relies on state Medicaid reimbursement for about half of its $26 million annual budget, agreed to be one of the test sites, Chief Executive Officer Stephen Letourneau said.

When the old system ran into problems, his agency was owed $2 million and had to take out a loan to pay its bills. This time around, he said the state has made improvements to the switchover process, so he’s hoping for far fewer problems.

By volunteering to be a test site, Letourneau said his agency will get the support it needs to make it through the transition.

“We’re going to recognize efficiencies we were hoping to realize years ago with technology,” he said.

Among the Medicaid services provided by Catholic Charities are dental care and mental health services for children and adults.

There are 3,800 providers in the state that rely on the system for payments, including physicians, dentists, nursing homes, hospitals and behavioral-health specialists.

In Augusta, Dr. Daniel Benson, a podiatrist, has had trouble with the old system. His wife, Paula Benson, who manages the billing for the office, said she’s worried about the change.

“I think we’re all going to be on alert that we’re not going to let it go months and months,” she said. “If we don’t get a check within two weeks, we’ll call.”

She said nearly half the patients who use her husband’s practice are Medicaid- or Medicare-eligible.

Over the past five years, she said it’s cost her time and money to work with the state to get the Medicaid claims processed properly. “From January 2005 to now, it’s cost us money. We’ve had to do thousands of claims by paper.”

Harvey said the state is still processing 30,000 lines of code in the old system, but that the number has dropped from “hundreds of thousands.”

“It’s still too many if you’re waiting to be paid,” she said.

The new system will be run by an outside contractor — Molina Healthcare, which is based in California but does work in nine states. That allows Maine DHHS to reduce its work force in the Office of MaineCare Services from 401 to 167, the department says, and save the state $1.25 million.

Harvey said the state and providers will need to work together to make sure the transition goes smoothly.

“There will be some glitches,” she said. “If providers do their part, we’ll be ready.”

Susan Cover — 620-7015

scover@centralmaine.com

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