Medicare Part B claims processing contract awarded to Peraton Enterprise Solutions LLC for $95.9M over five years

Contract Overview

Contract Amount: $95,922,714 ($95.9M)

Contractor: Peraton Enterprise Solutions LLC

Awarding Agency: Department of Health and Human Services

Start Date: 2018-09-01

End Date: 2023-08-31

Contract Duration: 1,825 days

Daily Burn Rate: $52.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: IT

Official Description: MULTI CARRIER SYSTEM THE PRIMARY COMPONENT OF THE MEDICARE CLAIMS PROCESSING FUNCTION UNDER MEDICARE PART B USED TO PROCESS MEDICARE CLAIMS RELATED TO PHYSICIAN SERVICES, CERTAIN DURABLE MEDICAL EQUIPMENT, PROSTHETICS, ORTHOTICS, AND SUPPLIES (DMEPOS) SERVICES AND OTHER OUTPATIENT SERVICES.

Place of Performance

Location: WINDSOR MILL, BALTIMORE County, MARYLAND, 21244

State: Maryland Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $95.9 million to PERATON ENTERPRISE SOLUTIONS LLC for work described as: MULTI CARRIER SYSTEM THE PRIMARY COMPONENT OF THE MEDICARE CLAIMS PROCESSING FUNCTION UNDER MEDICARE PART B USED TO PROCESS MEDICARE CLAIMS RELATED TO PHYSICIAN SERVICES, CERTAIN DURABLE MEDICAL EQUIPMENT, PROSTHETICS, ORTHOTICS, AND SUPPLIES (DMEPOS) SERVICES AND OTHER OUTPATIEN… Key points: 1. The contract supports the critical Medicare Part B claims processing function, impacting physician services and DMEPOS. 2. Awarded under full and open competition, suggesting a robust market evaluation. 3. The contract type is Cost Plus Award Fee (CPAF), which incentivizes performance but requires careful oversight. 4. The duration of five years (1825 days) provides stability for system operations. 5. The contract value of $95.9M over five years averages approximately $19.2M annually. 6. The North American Industry Classification System (NAICS) code 541512 indicates Computer Systems Design Services. 7. The contract was awarded as a Delivery Order, implying it's part of a larger indefinite-delivery/indefinite-quantity (IDIQ) vehicle or framework.

Value Assessment

Rating: good

The contract value of $95.9M over five years for Medicare Part B claims processing appears reasonable given the critical nature of the service. Benchmarking against similar large-scale IT system contracts for government health programs suggests this is within expected ranges. The Cost Plus Award Fee (CPAF) structure allows for flexibility in managing costs while incentivizing contractor performance, though it necessitates diligent monitoring to ensure value for money. Without specific per-unit cost data for claims processed, a direct efficiency comparison is challenging, but the overall investment aligns with the scale of Medicare Part B operations.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all eligible responsible sources were permitted to submit offers. The presence of two bids suggests a competitive environment, though the exact number of potential bidders is unknown. Full and open competition generally leads to better price discovery and a wider range of technical solutions. The government's ability to select from multiple proposals implies a degree of market responsiveness and potential for cost savings.

Taxpayer Impact: Taxpayers benefit from full and open competition as it typically drives down prices and encourages innovation, ensuring that the government receives the best value for its investment in essential services like Medicare claims processing.

Public Impact

Beneficiaries of Medicare Part B, including patients receiving physician services and durable medical equipment. Healthcare providers who submit claims for services rendered under Medicare Part B. The Centers for Medicare and Medicaid Services (CMS) relies on this system for accurate and timely claims adjudication. The contract supports the operational integrity of a significant portion of the U.S. healthcare system. Potential indirect impact on the healthcare IT workforce involved in system maintenance and support.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The CPAF contract type requires robust oversight to ensure award fees are justified by performance and do not inflate costs unnecessarily.
Reliance on a single system for a critical function like Medicare claims processing presents a potential single point of failure risk.
The complexity of Medicare regulations and claims processing necessitates continuous adaptation and potential for scope creep if not managed tightly.

Positive Signals

Awarded under full and open competition, indicating a competitive bidding process.
The five-year duration provides system stability and allows for long-term planning and optimization.
The contract supports a core function of CMS, demonstrating its importance and the contractor's role in a vital public service.

Sector Analysis

This contract falls within the Computer Systems Design Services sector, a critical component of the broader IT services industry. The market for government IT services is substantial, with significant spending allocated to maintaining and modernizing legacy systems and developing new digital capabilities. Contracts like this, supporting essential government functions such as healthcare administration, are common. Comparable spending benchmarks would involve other large-scale IT system development and maintenance contracts within federal health agencies, often running into tens or hundreds of millions of dollars over several years.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). As a large-scale IT services contract for a core government function, it is typical for such awards to go to larger prime contractors. However, the prime contractor, Peraton Enterprise Solutions LLC, may utilize small businesses for subcontracting opportunities to fulfill specific technical requirements or meet socio-economic goals. Analysis of subcontracting plans would be necessary to determine the extent of small business participation.

Oversight & Accountability

Oversight for this Cost Plus Award Fee contract would primarily reside with the Centers for Medicare and Medicaid Services (CMS) contracting officers and program managers. They are responsible for monitoring contractor performance against established award fee criteria, ensuring compliance with contract terms, and approving costs. Transparency is facilitated through contract reporting requirements. While specific Inspector General (IG) jurisdiction isn't detailed, the HHS OIG typically has oversight over CMS programs and contracts to detect fraud, waste, and abuse.

Related Government Programs

Medicare Part A Claims Processing Systems
Healthcare IT Modernization Programs
Federal Health Data Exchange Initiatives
CMS Enterprise Data Warehouse
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Program

Risk Flags

Cost Plus Award Fee (CPAF) requires strong oversight
Cybersecurity risks for sensitive health data
Potential for system disruptions impacting beneficiaries
Complexity of Medicare regulations requires adaptability

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $95.9 million to PERATON ENTERPRISE SOLUTIONS LLC. MULTI CARRIER SYSTEM THE PRIMARY COMPONENT OF THE MEDICARE CLAIMS PROCESSING FUNCTION UNDER MEDICARE PART B USED TO PROCESS MEDICARE CLAIMS RELATED TO PHYSICIAN SERVICES, CERTAIN DURABLE MEDICAL EQUIPMENT, PROSTHETICS, ORTHOTICS, AND SUPPLIES (DMEPOS) SERVICES AND OTHER OUTPATIENT SERVICES.

Who is the contractor on this award?

The obligated recipient is PERATON ENTERPRISE SOLUTIONS LLC.

Which agency awarded this contract?

Awarding agency: Department of Health and Human Services (Centers for Medicare and Medicaid Services).

What is the total obligated amount?

The obligated amount is $95.9 million.

What is the period of performance?

Start: 2018-09-01. End: 2023-08-31.

What is the historical spending trend for Medicare Part B claims processing systems?

Historical spending on Medicare Part B claims processing systems has been substantial and ongoing, reflecting the continuous need to manage vast volumes of healthcare claims. Prior to this contract, similar functions were managed through predecessor systems and contracts. For instance, the Medicare Modernization Act of 2003 spurred significant IT investments. While specific year-over-year dollar amounts for this exact system are not provided in the summary data, CMS consistently allocates billions annually to its IT infrastructure, with claims processing being a core component. The $95.9M awarded over five years represents a significant but not unprecedented investment for such a critical national system, averaging around $19.2M per year. Understanding the full historical context would require examining prior contract awards for Medicare Part B claims processing and related IT modernization efforts over the past decade or more.

How does the performance of Peraton Enterprise Solutions LLC on this contract compare to industry benchmarks?

Assessing Peraton Enterprise Solutions LLC's performance against industry benchmarks requires access to detailed performance metrics and award fee determinations for this specific contract, which are not publicly available in the provided data. However, Peraton is a known entity in the government contracting space, often handling large and complex IT and mission support services. Their track record across various federal agencies can be reviewed through sources like the Federal Procurement Data System (FPDS) or agency performance reports. For this particular contract, the Cost Plus Award Fee (CPAF) structure implies that performance is formally evaluated, and award fees are tied to achieving specific objectives. Without these specific evaluations, a direct comparison to industry benchmarks for similar claims processing systems is speculative. Generally, successful execution involves high system uptime, accurate claims adjudication rates, timely processing, and effective cybersecurity.

What are the primary risks associated with this Medicare claims processing contract?

The primary risks associated with this Medicare claims processing contract include operational disruptions, cybersecurity threats, and potential cost overruns. Given that this system is central to Medicare Part B operations, any downtime or processing errors could have significant financial and patient care implications. Cybersecurity is a paramount concern, as the system handles sensitive health information (PHI) and financial data, making it a target for malicious actors. The Cost Plus Award Fee (CPAF) contract type, while offering flexibility, also carries a risk of cost escalation if not managed diligently, particularly if the scope expands or unforeseen technical challenges arise. Furthermore, changes in healthcare policy or regulations could necessitate system modifications, introducing complexity and potential delays. Ensuring adequate contingency planning and robust security protocols are critical risk mitigation strategies.

How effective is the Cost Plus Award Fee (CPAF) structure in ensuring value for money for this contract?

The Cost Plus Award Fee (CPAF) structure aims to balance cost control with performance incentives, making it potentially effective for complex IT services like Medicare claims processing where outcomes can be difficult to define precisely upfront. In a CPAF contract, the contractor is reimbursed for allowable costs plus a fee that consists of a fixed base fee and an award amount, the latter being contingent upon meeting or exceeding performance objectives. This incentivizes the contractor to perform well to maximize their fee. However, its effectiveness hinges on the clarity and measurability of the performance objectives and the rigor of the government's evaluation process. If objectives are poorly defined or the evaluation is subjective, it can lead to inflated fees without commensurate value, or conversely, discourage innovation if too restrictive. Diligent oversight by CMS contracting officers is crucial to ensure that award fees are earned and represent true value for taxpayers.

What is the potential impact of system modernization or replacement on future spending?

The potential impact of system modernization or replacement on future spending for Medicare claims processing is significant and multifaceted. Modernization efforts, like the one potentially undertaken or supported by this contract, often involve substantial upfront investment in new technologies, software development, and integration. While the goal is typically to improve efficiency, reduce long-term operational costs, and enhance capabilities (e.g., faster processing, better data analytics, improved security), the initial expenditure can be high. If this contract represents a phase of modernization, it could lead to reduced maintenance costs for legacy systems and potentially lower per-claim processing costs in the future. Conversely, if the system requires frequent updates or faces unforeseen technical debt, ongoing costs could remain elevated. A full replacement would likely involve even larger capital outlays but could yield greater long-term savings and operational benefits.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Computer Systems Design Services

Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › ADP AND TELECOMMUNICATIONS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: RFPCMS2016SPARC

Offers Received: 2

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Address: 13600 EDS DR A3S-B53, HERNDON, VA, 20171

Business Categories: Category Business, Limited Liability Corporation, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $95,922,714

Exercised Options: $95,922,714

Current Obligation: $95,922,714

Actual Outlays: $40,986,653

Subaward Activity

Number of Subawards: 50

Total Subaward Amount: $6,938,086

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HHSM500201600002I

IDV Type: IDC

Timeline