CMS's Medicare Claims Processing System contract awarded to Peraton Inc. for $63.9M over 3 years
Contract Overview
Contract Amount: $63,907,822 ($63.9M)
Contractor: Peraton Inc.
Awarding Agency: Department of Health and Human Services
Start Date: 2023-09-01
End Date: 2026-08-31
Contract Duration: 1,095 days
Daily Burn Rate: $58.4K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 2
Pricing Type: TIME AND MATERIALS
Sector: Healthcare
Official Description: THE MCS SYSTEM IS THE PRIMARY COMPONENT OF THE MEDICARE CLAIMS PROCESSING FUNCTION UNDER MEDICARE PART B USED TO PROCESS MEDICARE CLAIMS RELATED TO PHYSICIAN SERVICES AND OTHER OUTPATIENT SERVICES. THE PRIMARY GOALS OF THIS MCS ACQUISITION, UNDER TH
Place of Performance
Location: WINDSOR MILL, BALTIMORE County, MARYLAND, 21244
State: Maryland Government Spending
Plain-Language Summary
Department of Health and Human Services obligated $63.9 million to PERATON INC. for work described as: THE MCS SYSTEM IS THE PRIMARY COMPONENT OF THE MEDICARE CLAIMS PROCESSING FUNCTION UNDER MEDICARE PART B USED TO PROCESS MEDICARE CLAIMS RELATED TO PHYSICIAN SERVICES AND OTHER OUTPATIENT SERVICES. THE PRIMARY GOALS OF THIS MCS ACQUISITION, UNDER TH Key points: 1. Contract focuses on critical Medicare Part B claims processing for physician and outpatient services. 2. The acquisition aims to maintain and enhance the Medicare Claims Processing System (MCS). 3. The contract duration is 1095 days, indicating a significant, long-term commitment. 4. The contract type is Time and Materials, which can pose cost control challenges. 5. The awarded amount of $63.9M represents a substantial investment in healthcare IT infrastructure. 6. The system is central to Medicare's financial operations and beneficiary services.
Value Assessment
Rating: good
The contract value of $63.9 million over three years for a critical IT system like MCS appears reasonable given its scope. Benchmarking against similar large-scale government IT procurements for claims processing systems suggests this falls within expected ranges. The Time and Materials pricing structure, while common for evolving IT needs, warrants close monitoring to ensure cost efficiency and prevent scope creep. Without specific performance metrics or detailed cost breakdowns, a precise value-for-money assessment is challenging, but the strategic importance of MCS suggests a necessary investment.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
This contract was awarded under full and open competition, indicating that multiple vendors had the opportunity to bid. The presence of two bidders (implied by 'no': 2) suggests a competitive landscape, though the exact number of proposals received and the evaluation process details are not provided. A competitive award process is generally favorable for price discovery and ensuring the government receives the best value. However, the specific details of the competition, such as the number of proposals and the evaluation criteria, would offer a clearer picture of the competitive intensity.
Taxpayer Impact: A full and open competition process is beneficial for taxpayers as it encourages multiple vendors to offer competitive pricing and innovative solutions, potentially leading to cost savings and improved service delivery.
Public Impact
Beneficiaries of Medicare Part B will continue to receive timely processing of their claims for physician and outpatient services. Healthcare providers submitting claims will experience continued operational support for their billing processes. The contract supports the operational integrity of the Centers for Medicare and Medicaid Services (CMS). The geographic impact is nationwide, as Medicare serves beneficiaries across the United States. The contract ensures the continued employment of IT professionals and support staff involved in maintaining the MCS.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Time and Materials contract type can lead to cost overruns if not managed tightly.
- The complexity of Medicare claims processing presents inherent risks to system performance and data integrity.
- Dependence on a single system (MCS) creates a single point of failure risk for a critical function.
- Potential for vendor lock-in if future enhancements are heavily reliant on Peraton's proprietary knowledge.
Positive Signals
- Awarded under full and open competition, suggesting a robust selection process.
- The contract duration of three years provides stability for a critical system.
- Peraton Inc. is an established government contractor with experience in complex IT systems.
- The system's continued operation is vital for millions of Medicare beneficiaries and providers.
Sector Analysis
The healthcare IT sector, particularly within government agencies, is characterized by large, complex systems requiring specialized expertise. The Medicare Claims Processing System (MCS) falls under custom computer programming services (NAICS 541511) and is a critical component of the U.S. healthcare infrastructure. Spending in this area is substantial, driven by the need for secure, reliable, and efficient processing of vast amounts of healthcare data. Comparable contracts often involve significant dollar values and long-term commitments due to the intricate nature of healthcare regulations and the scale of operations.
Small Business Impact
This contract does not appear to have a specific small business set-aside component, as indicated by 'sb': false. The primary award is to Peraton Inc., a large business. While there is no direct set-aside, large federal contracts often include subcontracting requirements that can benefit small businesses. The extent to which Peraton Inc. will utilize small business subcontractors for specialized services or support roles will determine the indirect impact on the small business ecosystem. Further analysis of subcontracting plans would be needed to fully assess this impact.
Oversight & Accountability
Oversight for this contract will primarily reside with the Centers for Medicare and Medicaid Services (CMS), the contracting agency. As a Time and Materials contract, CMS will need robust mechanisms to monitor labor hours, material costs, and project scope to ensure cost-effectiveness and prevent overruns. Transparency is expected through regular reporting requirements from the contractor. The Department of Health and Human Services Office of Inspector General (HHS-OIG) would have jurisdiction for audits and investigations related to potential fraud, waste, or abuse within this contract.
Related Government Programs
- Medicare Part A Claims Processing
- Medicaid Information Technology
- Federal Health Insurance Marketplace Systems
- Healthcare Data Analytics Platforms
- Electronic Health Records (EHR) Systems
Risk Flags
- Time and Materials contract type requires close monitoring for cost control.
- System criticality implies significant impact from any performance degradation or failure.
- Dependence on a single system for a core government function.
- Potential for scope creep with T&M contracts.
Tags
healthcare, cms, medicare, it-services, custom-computer-programming, full-and-open-competition, time-and-materials, large-business, federal-contract, health-it, maryland, peraton-inc
Frequently Asked Questions
What is this federal contract paying for?
Department of Health and Human Services awarded $63.9 million to PERATON INC.. THE MCS SYSTEM IS THE PRIMARY COMPONENT OF THE MEDICARE CLAIMS PROCESSING FUNCTION UNDER MEDICARE PART B USED TO PROCESS MEDICARE CLAIMS RELATED TO PHYSICIAN SERVICES AND OTHER OUTPATIENT SERVICES. THE PRIMARY GOALS OF THIS MCS ACQUISITION, UNDER TH
Who is the contractor on this award?
The obligated recipient is PERATON 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 $63.9 million.
What is the period of performance?
Start: 2023-09-01. End: 2026-08-31.
What is the historical spending trend for the Medicare Claims Processing System (MCS) prior to this award?
Historical spending data for the MCS is crucial for understanding the long-term investment in this critical system. While the provided data focuses on the current award of $63.9 million over three years (2023-2026), understanding previous contract values, durations, and awarded vendors would provide context. For instance, if previous contracts were significantly lower or higher, it could indicate changes in system scope, technological needs, or market pricing. Analyzing historical spending patterns allows for the identification of trends in IT modernization efforts, potential cost efficiencies achieved or missed, and the overall lifecycle cost of maintaining such a vital system. Without specific historical figures, it's difficult to assess if the current award represents an increase, decrease, or stable level of investment relative to past expenditures.
How does the per-unit cost or cost per beneficiary processed compare to industry benchmarks for similar claims processing systems?
Benchmarking the per-unit cost of the MCS contract against industry standards is essential for evaluating value for money. Given the contract's focus on processing Medicare Part B claims for physician and outpatient services, a relevant benchmark could be cost per claim processed, cost per provider served, or cost per beneficiary. Comparing Peraton's pricing structure (Time and Materials) and the total contract value ($63.9M over 3 years) to similar systems managed by other large government agencies (e.g., VA, DoD) or even large private health insurers can reveal cost efficiencies or potential overspending. Factors such as system complexity, required security protocols, integration with other systems, and the volume of claims processed will influence these comparisons. A detailed analysis would require access to specific metrics on claims volume and operational costs, which are not fully detailed in the provided data.
What are the key performance indicators (KPIs) and service level agreements (SLAs) associated with this contract, and how is contractor performance being measured?
The effectiveness and value of the MCS contract are heavily dependent on the defined Key Performance Indicators (KPIs) and Service Level Agreements (SLAs) that govern Peraton Inc.'s performance. These metrics typically include system uptime, claims processing accuracy rates, turnaround times for claim adjudication, data security compliance, and response times for system issues. Robust measurement and reporting of these KPIs are critical for CMS to ensure the contractor is meeting its obligations and delivering the expected level of service. Without insight into these specific KPIs and the mechanisms for performance monitoring (e.g., regular reviews, audits, performance scorecards), it is challenging to definitively assess the contractor's track record and the overall success of the contract in maintaining the integrity and efficiency of Medicare claims processing.
What is Peraton Inc.'s track record with similar large-scale government IT system maintenance and development contracts, particularly within the healthcare sector?
Peraton Inc.'s experience and past performance on contracts of similar scale and complexity are vital indicators of their capability to manage the MCS. As a significant government contractor, Peraton likely has a portfolio of IT service contracts across various agencies. Evaluating their history with systems involving sensitive data, high transaction volumes, and critical operational functions, especially within the healthcare domain (e.g., other CMS systems, VA healthcare IT), would provide valuable context. Key aspects to review include their success in meeting deadlines, staying within budget, managing system upgrades, ensuring cybersecurity, and their overall client satisfaction ratings. A strong track record suggests a lower risk of performance issues, while a history of challenges might indicate potential concerns for this specific MCS contract.
What are the potential risks associated with the Time and Materials (T&M) contract type for a system as critical as MCS, and what mitigation strategies are in place?
The Time and Materials (T&M) contract type, while offering flexibility for evolving IT requirements, inherently carries risks for cost control on a critical system like MCS. The primary risk is the potential for cost overruns if the contractor's labor hours or material costs are not diligently managed and scrutinized by the government. Scope creep can also be a significant issue, leading to unplanned increases in effort and expenditure. To mitigate these risks, CMS must implement stringent oversight, including detailed tracking of all billable hours and materials, regular progress reviews, and clearly defined ceilings or limits on T&M expenditures. Establishing robust change control processes and ensuring that task orders are well-defined before work commences are also crucial mitigation strategies to maintain cost predictability and ensure value for taxpayer money.
Industry Classification
NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Custom Computer Programming Services
Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › IT AND TELECOM - DATA CENTER
Competition & Pricing
Extent Competed: FULL AND OPEN COMPETITION
Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY
Offers Received: 2
Pricing Type: TIME AND MATERIALS (Y)
Evaluated Preference: NONE
Contractor Details
Address: 12975 WORLDGATE DR, HERNDON, VA, 20170
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $108,226,546
Exercised Options: $63,907,822
Current Obligation: $63,907,822
Actual Outlays: $50,315,043
Subaward Activity
Number of Subawards: 9
Total Subaward Amount: $8,802,927
Contract Characteristics
Commercial Item: COMMERCIAL PRODUCTS/SERVICES
Parent Contract
Parent Award PIID: GS35F694GA
IDV Type: FSS
Timeline
Start Date: 2023-09-01
Current End Date: 2026-08-31
Potential End Date: 2028-08-31 00:00:00
Last Modified: 2025-09-16
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