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Hewlett-Packard Company’s (HPQ - Analyst Report) Enterprise Services arm recently announced that the Wisconsin Department of Health Services has extended the Medicaid contract for another five years. The contract, settled at $221.0 million, builds on the 36-year relationship between the two units.

Per the contract terms, H-P will continue to act as a Medicaid fiscal agent to Wisconsin Department of Health Services. H-P’s services will 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 in a cost effective manner.

H-P acts as the fiscal agent or the IT provider for Medicaid programs and the immunization program it manages has been shared with 19 other states. The need for an efficient Medicaid program arises from the enactment of the U.S. Healthcare Reforms Bill which aims to make healthcare more affordable for Americans.

We believe that H-P, with its strong position, would be able to capitalize on these government initiatives. As per the contract, H-P will also manage call centers and provide support to the state’s drug refund and estate recovery platforms.

Additionally, H-P will also implement a system-wide technology refresh with Superdome 2 servers, featuring Intel Itanium 9500 processor series with low-voltage 16 GB memory modules, which help to increase memory capacity and connect the systems to any network on air.

H-P will implement a Medicaid Management Information System (MMIS), a 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.

H-P has to compete with Computer Sciences Corp. (CSC - Analyst Report) in the Medicaid service space. H-P’s growing focus on new business segments, such as electronic medical records, cloud computing and the recently-added analytics segment will help the company grow in the ensuing quarters.

The company is still reeling under pressure from the declining PC business and a sluggish macroeconomic environment. The company has also hinted at muted revenue growth in 2014. Moreover, competition from other technology bellwethers such as IBM (IBM - Analyst Report) and Salesforce.com (CRM - Analyst Report) makes it even more difficult for the company to gain market share in the cloud and security space.

Currently, H-P has a Zacks Rank #3 (Hold).

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