HHS awards $55M contract for Medicare recovery audit services in Region 1

Contract Overview

Contract Amount: $54,927,525 ($54.9M)

Contractor: Performant Recovery, Inc.

Awarding Agency: Department of Health and Human Services

Start Date: 2021-03-26

End Date: 2029-09-25

Contract Duration: 3,105 days

Daily Burn Rate: $17.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: RECOVERY AUDITOR CONTRACTOR (RAC) REGION 1 2021- ACQUIRE A RAC TO IDENTIFY UNDERPAYMENTS AND RECOUP OVERPAYMENTS ASSOCIATED WITH SERVICES FOR WHICH PAYMENT IS MADE UNDER MEDICARE INCLUDING PART A OR B OF TITLE XVIII OF THE SOCIAL SECURITY ACT.

Place of Performance

Location: LIVERMORE, ALAMEDA County, CALIFORNIA, 94551

State: California Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $54.9 million to PERFORMANT RECOVERY, INC. for work described as: RECOVERY AUDITOR CONTRACTOR (RAC) REGION 1 2021- ACQUIRE A RAC TO IDENTIFY UNDERPAYMENTS AND RECOUP OVERPAYMENTS ASSOCIATED WITH SERVICES FOR WHICH PAYMENT IS MADE UNDER MEDICARE INCLUDING PART A OR B OF TITLE XVIII OF THE SOCIAL SECURITY ACT. Key points: 1. Contract aims to identify and recoup Medicare overpayments, enhancing fiscal stewardship. 2. Competition was full and open, suggesting a robust market for these specialized services. 3. The contract duration of over 8 years indicates a long-term need for recovery auditing. 4. Performance is critical for ensuring the integrity of Medicare payments. 5. This contract falls within the broader health services and debt collection sector. 6. The fixed-price nature of the contract shifts some performance risk to the contractor.

Value Assessment

Rating: good

The contract value of approximately $55 million over its potential duration appears reasonable for a multi-year recovery audit engagement. Benchmarking against similar Recovery Auditor Contractor (RAC) contracts is challenging due to variations in region, scope, and contract terms. However, the fixed-price structure provides cost certainty for the government. The contractor, Performant Recovery, Inc., has experience in this domain, which is a positive indicator for value delivery.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely considered. The presence of four bidders suggests a competitive market for recovery audit services. This level of competition is generally favorable for price discovery and ensures that the government can select a contractor based on both technical merit and cost-effectiveness.

Taxpayer Impact: Full and open competition helps ensure that taxpayer dollars are used efficiently by driving down costs and encouraging high-quality service delivery through market forces.

Public Impact

Beneficiaries: Ensures the long-term solvency of Medicare, indirectly benefiting all beneficiaries. Services Delivered: Identification and recoupment of improper Medicare payments (Parts A & B). Geographic Impact: Region 1, covering specific states within the Medicare administrative structure. Workforce Implications: Supports specialized jobs in auditing, data analysis, and healthcare compliance.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for disputes over identified overpayments.
Contractor performance is critical to achieving desired financial recoveries.
Complexity of Medicare billing and coding can lead to audit challenges.

Positive Signals

Contractor has prior experience in recovery auditing.
Full and open competition suggests a strong pool of qualified bidders.
Long-term contract provides stability for service delivery.

Sector Analysis

The healthcare sector, particularly the area of healthcare claims auditing and revenue recovery, is a significant market. Government contracts for Medicare and Medicaid auditing are crucial for maintaining program integrity and financial accountability. This contract fits within the broader landscape of government efforts to combat healthcare fraud, waste, and abuse. Comparable spending benchmarks are difficult to establish precisely due to the specialized nature and regional focus of RAC contracts.

Small Business Impact

The provided data does not indicate any specific small business set-asides or subcontracting requirements for this contract. Given the specialized nature of recovery auditing, it is possible that larger, experienced firms dominate this market. Further analysis would be needed to determine if small businesses have opportunities to participate in subcontracting roles.

Oversight & Accountability

Oversight is likely provided by the Centers for Medicare and Medicaid Services (CMS) through contract management and performance monitoring. The contract's fixed-price nature provides a degree of financial oversight. Transparency is generally maintained through public contract databases, though specific audit findings and recoupment details may be sensitive. Inspector General jurisdiction would apply to investigations of fraud or abuse related to the contract.

Related Government Programs

Medicare Administrative Contractor (MAC) contracts
Program Integrity Contracts
Healthcare Fraud Prevention Partnership

Risk Flags

Long contract duration may require adaptive performance management.
Effectiveness hinges on the contractor's ability to navigate complex Medicare regulations.
Potential for provider disputes over identified overpayments.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $54.9 million to PERFORMANT RECOVERY, INC.. RECOVERY AUDITOR CONTRACTOR (RAC) REGION 1 2021- ACQUIRE A RAC TO IDENTIFY UNDERPAYMENTS AND RECOUP OVERPAYMENTS ASSOCIATED WITH SERVICES FOR WHICH PAYMENT IS MADE UNDER MEDICARE INCLUDING PART A OR B OF TITLE XVIII OF THE SOCIAL SECURITY ACT.

Who is the contractor on this award?

The obligated recipient is PERFORMANT RECOVERY, INC..

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 $54.9 million.

What is the period of performance?

Start: 2021-03-26. End: 2029-09-25.

What is the historical spending on Recovery Auditor Contractor (RAC) services by CMS?

Historical spending on RAC services has varied significantly year over year, influenced by program changes, contractor performance, and the specific regions or types of claims being audited. While the current contract is valued at approximately $55 million over its duration, previous RAC contracts have seen annual expenditures ranging from tens of millions to over a hundred million dollars depending on the scope and number of active contracts. CMS aims to ensure that the costs associated with RACs are significantly less than the amounts recovered, demonstrating a positive return on investment. Analyzing past spending patterns helps in understanding the long-term financial commitment to recovery auditing and setting realistic expectations for future expenditures and savings.

How does the pricing structure of this contract compare to other federal collection agency contracts?

This contract utilizes a Firm Fixed Price (FFP) structure. FFP contracts are generally preferred when the scope of work is well-defined, as they provide cost certainty to the government. Comparing this FFP to other federal collection agency contracts requires examining the specific services rendered and the risk allocation. Collection agency contracts can vary widely, with some using contingency fees (a percentage of recovered debt) or cost-plus arrangements. The FFP here suggests that Performant Recovery, Inc. has estimated its costs and risks associated with identifying and recouping Medicare overpayments, and the government is paying a set amount for these services. This differs from contingency-based contracts where the contractor's payment is directly tied to the success of collections, which might offer a different value proposition depending on the predictability of the recovery process.

What are the key performance indicators (KPIs) for this Recovery Auditor Contractor (RAC) contract?

While specific KPIs are not detailed in the provided data, typical performance indicators for RAC contracts include the accuracy and timeliness of identifying overpayments and underpayments, the total dollar amount of net recoveries (recoveries minus contractor fees and costs), the rate of successful appeals by providers, and adherence to audit protocols and timelines. CMS closely monitors these metrics to ensure the contractor is effectively fulfilling its mission to protect Medicare Trust Funds. Performance is crucial, as the contract's value is ultimately measured by its ability to generate net savings for the Medicare program. Failure to meet performance standards could lead to contract modifications or termination.

What is the track record of Performant Recovery, Inc. in similar government contracts?

Performant Recovery, Inc. has a significant track record with government contracts, particularly in areas related to healthcare claims recovery and debt collection. They have previously held contracts with CMS and other federal agencies for similar recovery audit functions. Their experience includes managing large-scale data analysis to identify improper payments within complex healthcare systems like Medicare and Medicaid. This established presence suggests a familiarity with the regulatory environment, the technical requirements of auditing healthcare claims, and the processes involved in recouping funds. Past performance data, often available through sources like the Federal Procurement Data System (FPDS), would provide more granular insights into their success rates, contract compliance, and overall effectiveness in prior engagements.

What is the potential risk associated with the long duration (over 8 years) of this contract?

The long duration of this contract, spanning from March 2021 to September 2029, presents several potential risks. Firstly, the healthcare landscape, including billing practices and regulations, can evolve significantly over such a period. The contractor must remain adaptable to these changes to maintain effectiveness. Secondly, there's a risk of 'contractor inertia' where performance might decline over time if not actively managed and incentivized. Thirdly, the fixed-price nature, while offering cost certainty, could become disadvantageous if unforeseen complexities arise that drastically increase the contractor's costs, potentially impacting their motivation or ability to perform optimally. Continuous oversight and performance management are essential to mitigate these risks and ensure sustained value delivery throughout the contract's life.

Industry Classification

NAICS: Administrative and Support and Waste Management and Remediation Services › Business Support Services › Collection Agencies

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › MANAGEMENT SUPPORT SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: 75FCMC2021R0001

Offers Received: 4

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Performant Financial Corporation

Address: 333 N CANYONS PKWY STE 100, LIVERMORE, CA, 94551

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $54,927,525

Exercised Options: $54,927,525

Current Obligation: $54,927,525

Actual Outlays: $35,301,157

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline