HHS awarded $170.6M for physical medicine services, with OptumServe Health Services securing the contract

Contract Overview

Contract Amount: $170,627,491 ($170.6M)

Contractor: Optumserve Health Services, Inc.

Awarding Agency: Department of Health and Human Services

Start Date: 2001-09-12

End Date: 2007-01-31

Contract Duration: 1,967 days

Daily Burn Rate: $86.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIXED PRICE

Sector: Healthcare

Official Description: PHYSICAL MEDICINE&REHABILITATION

Place of Performance

Location: WISCONSIN, UNITED STATES OF AMERICA

State: Wisconsin Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $170.6 million to OPTUMSERVE HEALTH SERVICES, INC. for work described as: PHYSICAL MEDICINE&REHABILITATION Key points: 1. The contract represents a significant investment in physical medicine and rehabilitation services. 2. OptumServe Health Services, a major player, was awarded this substantial contract. 3. The duration of the contract, spanning nearly 2000 days, indicates a long-term need for these services. 4. The fixed-price contract type suggests a defined scope and budget, potentially limiting cost overruns. 5. The award was made under full and open competition, implying a robust bidding process. 6. The contract's focus on physical medicine aligns with broader healthcare trends emphasizing rehabilitation and recovery.

Value Assessment

Rating: good

The total award amount of $170.6 million over a period of approximately 5.4 years suggests a substantial but not necessarily excessive annual spend for specialized healthcare services. Benchmarking against similar large-scale contracts for physical medicine and rehabilitation services would be necessary for a definitive value assessment. However, the fixed-price nature of the contract provides a degree of cost certainty for the government. The contract's duration and scope indicate a significant commitment to ensuring access to these critical health services.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple qualified bidders had the opportunity to submit proposals. The presence of two bids suggests a competitive environment, though the exact number of interested parties and the rigor of the evaluation process would provide further insight. A competitive award process generally leads to better price discovery and potentially more favorable terms for the government.

Taxpayer Impact: Taxpayers benefit from a competitive award process as it typically drives down costs and ensures that the government receives the best value for its investment. The open competition suggests that the selected contractor's pricing and proposed services were deemed the most advantageous among the available options.

Public Impact

Beneficiaries include individuals requiring physical, occupational, and speech therapy, as well as audiology services. The services delivered are crucial for patient recovery, rehabilitation, and improved quality of life. The contract is geographically focused on Wisconsin (WI), indicating a specific regional need. This contract likely supports a workforce of physical therapists, occupational therapists, speech-language pathologists, and audiologists.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in due to the long contract duration.
Ensuring consistent quality of care across the contract's term requires robust oversight.
The fixed-price nature might disincentivize innovation or exceeding basic service requirements.

Positive Signals

Awarded under full and open competition, suggesting a fair and transparent process.
The fixed-price contract type offers budget predictability.
The long duration indicates a sustained commitment to providing essential healthcare services.

Sector Analysis

The healthcare sector, particularly the sub-sector of physical medicine and rehabilitation services, is a critical component of the overall healthcare system. This contract falls under the NAICS code 621340 (Offices of Physical, Occupational and Speech Therapists, and Audiologists). The market for these services is substantial, driven by an aging population, increased awareness of rehabilitation benefits, and advancements in medical treatments. Comparable spending benchmarks would involve analyzing other large federal or state contracts for similar therapeutic services.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, the primary contractor, OptumServe Health Services, is likely a large business. There is no explicit information regarding subcontracting plans for small businesses within this data. The impact on the small business ecosystem would depend on whether OptumServe actively engages small businesses as subcontractors for specialized services or support functions.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of Health and Human Services (HHS), specifically the Office of the Assistant Secretary for Administration (OASASA), which awarded the contract. Accountability measures would be embedded in the contract's performance standards and reporting requirements. Transparency is generally facilitated through contract databases like FPDS. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Medicare and Medicaid Services
Veterans Affairs Healthcare Services
TRICARE Medical Services
Department of Defense Medical Support Contracts

Risk Flags

Limited competition (2 bidders)
Long contract duration
Potential for quality degradation in fixed-price contracts

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $170.6 million to OPTUMSERVE HEALTH SERVICES, INC.. PHYSICAL MEDICINE&REHABILITATION

Who is the contractor on this award?

The obligated recipient is OPTUMSERVE HEALTH SERVICES, INC..

Which agency awarded this contract?

Awarding agency: Department of Health and Human Services (Office of the Assistant Secretary for Administration).

What is the total obligated amount?

The obligated amount is $170.6 million.

What is the period of performance?

Start: 2001-09-12. End: 2007-01-31.

What is the historical spending pattern for physical medicine and rehabilitation services by the Department of Health and Human Services?

Analyzing historical spending patterns for physical medicine and rehabilitation services by HHS is crucial for understanding trends and identifying potential anomalies. While this specific contract awarded $170.6 million, a broader analysis would involve examining previous contract awards, task orders, and direct expenditures related to NAICS code 621340 and similar service categories over several fiscal years. This would reveal whether spending has been consistent, increasing, or decreasing, and whether it aligns with shifts in healthcare policy, patient demographics, or service utilization. Understanding these patterns helps in forecasting future needs and budgeting effectively, as well as identifying if current spending represents a significant deviation from historical norms, which might warrant further investigation into the drivers of such changes.

How does the per-unit cost of services under this contract compare to market rates for physical, occupational, and speech therapists?

A detailed comparison of per-unit costs under this contract to prevailing market rates for physical, occupational, and speech therapists is essential for assessing value for money. This would involve identifying the specific services procured (e.g., hourly rates for therapy sessions, specific procedure costs) and benchmarking them against data from industry surveys, state licensing boards, and other government contracts. Factors such as geographic location (Wisconsin, in this case), the level of therapist specialization, and administrative overhead included in the contract pricing must be considered. If contract rates are significantly higher than market averages, it could indicate potential overpricing or a lack of sufficient competition. Conversely, rates below market might suggest efficiency or a strategic advantage in the bidding process, but could also raise concerns about service quality or contractor viability.

What is OptumServe Health Services' track record with federal healthcare contracts, particularly those of similar scope and value?

Evaluating OptumServe Health Services' track record with federal healthcare contracts is vital for assessing performance risk and reliability. This involves reviewing their past performance evaluations (e.g., Contractor Performance Assessment Reporting System - CPARS), any history of contract disputes, timely delivery of services, and adherence to quality standards on previous HHS or other agency contracts. Specifically, examining their experience with large, fixed-price contracts for rehabilitation services would provide relevant insights. A history of successful contract execution suggests a lower risk of performance issues. Conversely, a pattern of underperformance, cost overruns (though less likely with fixed-price), or quality deficiencies would raise significant concerns about their ability to meet the requirements of this current $170.6 million award.

What are the potential risks associated with a fixed-price contract of this magnitude and duration?

Fixed-price contracts, while offering budget certainty, carry specific risks, especially for large, long-duration awards like this $170.6 million contract. One primary risk is that the contractor may cut corners on quality or service delivery to maximize profit if the initial pricing was too aggressive or if unforeseen cost increases occur. Scope creep, if not managed meticulously, can also become a significant issue, potentially leading to disputes or the need for contract modifications. For the government, there's a risk of paying for services that are not fully utilized or are less efficient than they could be if the contractor lacks incentives to optimize. Furthermore, if the contractor experiences severe financial distress or operational challenges during the contract's extended period, it could lead to service disruptions. Robust performance monitoring and clear communication channels are critical to mitigating these risks.

How does the competition level (2 bidders) for this contract potentially impact pricing and service innovation?

A competition level with only two bidders for a contract of this size ($170.6 million) presents a mixed picture regarding its impact on pricing and service innovation. While 'full and open competition' was utilized, a limited number of bids suggests that the pool of qualified and interested contractors might be constrained, potentially due to high barriers to entry (e.g., specialized expertise, bonding requirements, past performance). With only two bidders, the government has less leverage to negotiate aggressively on price compared to a scenario with numerous competing offers. This could lead to prices that are higher than they might be in a more crowded marketplace. Similarly, the incentive for significant service innovation might be reduced if the bidders perceive less pressure to differentiate themselves beyond meeting the minimum requirements to secure the contract.

Industry Classification

NAICS: Health Care and Social Assistance › Offices of Other Health Practitioners › Offices of Physical, Occupational and Speech Therapists, and Audiologists

Product/Service Code: MEDICAL SERVICES › MEDICAL, DENTAL, AND SURGICAL SVCS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 1319 SAINT ANDREW ST, LA CROSSE, WI, 54603

Business Categories: Category Business, HUBZone Firm, Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $1,454,157,123

Exercised Options: $808,382,725

Current Obligation: $170,627,491

Timeline