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Hewlett-Packard Company’s (HPQ - Analyst Report) Enterprise Services arm recently signed a 4-year service renewal deal with the Department of Vermont Health Access (DVHA). The contract price was settled at $48.0 million.

The department operates under the State of Vermont Agency of Human Services, which has been formed to develop and execute policy on Human Services for the state. DVHA is responsible for managing Vermont's publicly funded health insurance programs.

Per the contract terms, H-P will continue to act as a Medicaid fiscal agent or primary information technology provider to the DVHA. 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 health care providers and keep pace with nationwide healthcare reforms.

H-P shares a 31-year old relationship with the DVHA. The success of the Medicaid services can be gauged from the fact that H-P handled more than 9.6 million claims annually for over 12,000 health care providers last year.

The tech giant is already serving as a fiscal agent to 21 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 health care 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 help drive IT spending in the health care 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 - Analyst Report) in the Medicaid service space.

Currently, H-P has a Zacks Rank #2 (Buy). Investors may also consider technology stocks such as CIBER Inc. (CBR - Snapshot Report) and Lionbridge Technologies Inc. (LIOX - Snapshot Report), which have a Zacks Rank #1 (Strong Buy) and are worth buying.

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