Hewlett-Packard Company’s (HPQ) Enterprise Services arm recently signed a 6.5-year service renewal deal with Indiana’s Department of Administration. The contract price was settled at $220.0 million. The Indiana agency supervises administrative processes of the state’s bureaus and departments, including procurement, travel, maintenance of public buildings, and others.

Per the contract terms, H-P will continue to act as a Medicaid fiscal agent or primary information technology provider to the Indiana Department of Administration. H-P will implement a Medicaid Management Information System (:MMIS), which is a mechanized claims processing and information retrieval system within the department. This will help the agency to quickly adapt to regulatory changes and provide better healthcare to citizens.

Moreover, as a fiscal agent, the tech giant will review and process all medical claims, manage finances, provide call center support and upgrade call center technology. H-P’s services will also help the state to improve Medicaid programs, deliver more critical health information to a larger number of healthcare providers and keep pace with nationwide healthcare reforms.

H-P shares a 20-year old relationship with the agency. The success of the Medicaid services can be gauged from the fact that H-P handled more than 85 million claims annually for over 46,000 healthcare providers last year.

The tech giant is a fiscal agent to 20 other states’ Medicaid programs. The need for an efficient Medicaid program arises from the enactment of the U.S. Healthcare Reforms Bill. The goal of the reform is to make healthcare more affordable for Americans. The basic objectives of the reform were presented in the Patient Protection and Affordable Care Act. Per the Act, beneficiaries are expected to join Medicaid through a registration process, which requires exchange of information regarding health. Medicaid is a joint endeavor of the states and Federal governments, designed to provide medical care to those under the federal poverty level, including expectant mothers and children.

The U.S. government's endeavor to expand the information technology industry to become a major player in health reform will drive IT spending in the healthcare segment over the coming years. We believe that H-P, with its strong position, would be able to capitalize on government initiatives.

However, H-P has to compete with Computer Sciences Corp. (CSC) in the Medicaid service space.

Currently, H-P has a Zacks Rank #3 (Hold). Investors may also consider technology stocks such as SanDisk Corp. (SNDK) and Pega Systems Inc. (PEGA), which have a Zacks Rank #1 (Strong Buy) and are worth buying.

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