HHS awards $322M contract for recovery audit services, with a 95% prime contractor performance rating

Contract Overview

Contract Amount: $32,200,487 ($32.2M)

Contractor: Performant Recovery, Inc.

Awarding Agency: Department of Health and Human Services

Start Date: 2022-03-24

End Date: 2031-07-01

Contract Duration: 3,386 days

Daily Burn Rate: $9.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: RECOVERY AUDIT CONTRACTOR REGION 2

Place of Performance

Location: LIVERMORE, ALAMEDA County, CALIFORNIA, 94551

State: California Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $32.2 million to PERFORMANT RECOVERY, INC. for work described as: RECOVERY AUDIT CONTRACTOR REGION 2 Key points: 1. The contract aims to identify and recover improper payments within Medicare and Medicaid. 2. A high prime contractor performance rating suggests satisfactory delivery on previous engagements. 3. The contract duration extends over nine years, indicating a long-term need for these services. 4. The fixed-price contract type provides cost certainty for the government. 5. The focus on collection agencies highlights the specialized nature of the services required.

Value Assessment

Rating: good

The contract value of $322 million over approximately nine years suggests a significant investment in payment recovery. Benchmarking this against similar recovery audit contracts is challenging without more specific service details. However, the high performance rating (95%) from the contractor, Performant Recovery, Inc., indicates a strong track record in fulfilling its obligations. The firm fixed-price structure helps manage costs, but the overall value is contingent on the effectiveness of the recovery efforts.

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 two bidders suggests a competitive environment, which generally benefits price discovery and can lead to more favorable terms for the government. The specific details of the bidding process and the number of proposals received would provide further insight into the intensity of the competition.

Taxpayer Impact: Full and open competition, with at least two bidders, suggests that taxpayers are likely receiving a fair price due to market forces driving efficiency and cost-effectiveness.

Public Impact

Beneficiaries include taxpayers who will see a return on investment through recovered improper payments. Services delivered include the identification and collection of overpayments made by Medicare and Medicaid. The geographic impact is national, as the contract covers the Centers for Medicare and Medicaid Services. Workforce implications may include specialized roles in auditing, data analysis, and collections within the contractor's organization.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration could lead to complacency if not actively managed.
Reliance on a single contractor for a critical function like payment recovery may pose risks if performance degrades.
Effectiveness of recovery efforts directly impacts the financial health of Medicare and Medicaid programs.

Positive Signals

High prime contractor performance rating (95%) indicates a history of successful service delivery.
Firm fixed-price contract provides budget predictability.
Full and open competition suggests a robust selection process.

Sector Analysis

The healthcare sector, particularly within government programs like Medicare and Medicaid, faces significant challenges with improper payments. Recovery audit contracts are a crucial mechanism for CMS to recoup these funds. The market for these services involves specialized firms with expertise in healthcare finance, data analytics, and regulatory compliance. This contract fits within the broader category of government administrative and support services, with a specific focus on financial integrity within healthcare.

Small Business Impact

The data indicates that this contract was not set aside for small businesses, and the prime contractor, Performant Recovery, Inc., is likely a larger entity. There is no explicit information on subcontracting plans for small businesses. The absence of a small business set-aside suggests that the primary focus was on securing the most capable provider through open competition, rather than specifically promoting small business participation.

Oversight & Accountability

Oversight for this contract would primarily fall under the Centers for Medicare and Medicaid Services (CMS), a division of HHS. The contract's performance is likely monitored through regular reporting, performance reviews, and potentially audits by the HHS Office of Inspector General (OIG). Transparency is facilitated through contract award databases, but detailed operational oversight mechanisms are internal to the agency.

Related Government Programs

Medicare Administrative Contractor (MAC) services
Medicaid Integrity Program
Healthcare Fraud and Abuse Control Program

Risk Flags

Long contract duration
Potential for contractor complacency
Dependence on single provider for critical function

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $32.2 million to PERFORMANT RECOVERY, INC.. RECOVERY AUDIT CONTRACTOR REGION 2

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 $32.2 million.

What is the period of performance?

Start: 2022-03-24. End: 2031-07-01.

What specific types of improper payments does this contract aim to recover, and what is the historical recovery rate for similar contracts?

This contract focuses on identifying and recovering improper payments within the Medicare and Medicaid programs. Improper payments can stem from various sources, including provider billing errors, beneficiary eligibility issues, and fraud. While the specific breakdown of payment types is not detailed here, recovery audit contractors typically analyze claims data to detect discrepancies. Historical recovery rates for similar contracts vary widely depending on the program, the audit scope, and the effectiveness of the contractor. Agencies often set recovery targets, but publicly available data on precise historical rates for this specific contract or comparable ones is limited. However, the high performance rating of the contractor suggests a positive trend in their recovery efforts.

How does the $322 million contract value compare to previous recovery audit contracts awarded by CMS?

Comparing the $322 million value requires context regarding the scope and duration of previous contracts. This contract spans over nine years, making its total value substantial. CMS has historically awarded significant contracts for recovery audit services. For instance, previous RAC (Recovery Audit Contractor) contracts have also been in the hundreds of millions of dollars over multi-year periods. The specific amount awarded can fluctuate based on program needs, legislative changes, and the competitive landscape. Without direct comparative data on contracts with identical scopes and durations, it's difficult to definitively state if $322 million is higher or lower, but it represents a significant commitment to payment recovery.

What are the key performance indicators (KPIs) used to measure the success of Performant Recovery, Inc. under this contract?

Key performance indicators for recovery audit contracts typically revolve around the effectiveness and efficiency of identifying and recovering improper payments. These often include metrics such as the dollar amount of improper payments identified, the dollar amount successfully recovered, the net savings to the government after contractor fees, the accuracy of recovery efforts (minimizing appeals and reversals), and timeliness of reporting and recovery actions. The contractor's 95% performance rating suggests they are meeting or exceeding expectations on these or similar KPIs established by CMS. Specific KPIs are usually detailed within the contract's statement of work.

What is the potential risk associated with a single contractor holding such a large and long-term contract for payment recovery?

A significant risk associated with a single contractor holding a large, long-term contract is potential over-reliance and a decrease in competitive pressure over time, which could lead to complacency or reduced innovation. If the contractor's performance falters, the government may face challenges in transitioning to a new provider, potentially disrupting recovery operations. Furthermore, a prolonged engagement could lead to the contractor developing an information advantage that is difficult for competitors to overcome. Robust oversight, clear performance standards, and contingency planning are crucial to mitigate these risks.

How does the 'Collection Agencies' North American Industry Classification System (NAICS) code influence the scope and nature of the services provided?

The NAICS code 561440, 'Collection Agencies,' indicates that the primary function of this contract is focused on the recovery of debts, specifically improper payments made by Medicare and Medicaid. This implies that the contractor's activities will likely involve identifying overpayments, notifying recipients or providers, and actively pursuing the collection of these funds. While recovery audit work often involves complex data analysis and auditing to *identify* the improper payments, the 'Collection Agencies' designation emphasizes the subsequent step of actively retrieving the funds, potentially involving negotiation, payment plans, or other debt collection strategies.

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: 75FCMC21R0018

Offers Received: 2

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: $32,200,487

Exercised Options: $32,200,487

Current Obligation: $32,200,487

Actual Outlays: $16,605,953

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline