HHS awards $203M contract for Medicare services, with a significant portion allocated to Tennessee

Contract Overview

Contract Amount: $203,436,222 ($203.4M)

Contractor: CGS Administrators, LLC

Awarding Agency: Department of Health and Human Services

Start Date: 2006-09-30

End Date: 2012-06-30

Contract Duration: 2,100 days

Daily Burn Rate: $96.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: Healthcare

Official Description: DEPENDENT MEDICARE SERVICES TAS::75 0511::TAS

Place of Performance

Location: NASHVILLE, DAVIDSON County, TENNESSEE, 37228

State: Tennessee Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $203.4 million to CGS ADMINISTRATORS, LLC for work described as: DEPENDENT MEDICARE SERVICES TAS::75 0511::TAS Key points: 1. Contract awarded through full and open competition, suggesting a robust market. 2. The contract type, Cost Plus Award Fee, incentivizes performance but requires careful oversight. 3. A substantial portion of the contract value is tied to operations in Tennessee. 4. The duration of the contract (2100 days) indicates a long-term need for these services. 5. The contractor, CGS Administrators, LLC, has a significant role in Medicare operations. 6. The NAICS code 524114 points to the insurance carrier sector.

Value Assessment

Rating: good

The total award amount of $203,436,222 over approximately 5.75 years suggests a substantial investment in Medicare administration. Benchmarking this against similar contracts for fiscal intermediary services requires detailed analysis of scope and performance metrics. However, the Cost Plus Award Fee structure implies that the final cost could vary based on performance, making direct price comparisons challenging without knowing the award fees achieved. The provided data does not offer enough detail to definitively assess value-for-money against market rates.

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 (no: 2) suggests a competitive landscape, though the exact number of proposals received and the evaluation process are not detailed. A competitive process generally leads to better price discovery and potentially more favorable terms for the government.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it drives efficiency and potentially lower costs through market forces. It ensures that the government explores a wide range of solutions and pricing structures.

Public Impact

Beneficiaries of Medicare services across the nation will experience continuity in administrative support. The contract ensures the continued operation of essential Medicare administrative functions. Operations are significantly concentrated in Tennessee, impacting the local economy and workforce. The contract supports the administrative infrastructure necessary for the functioning of the Centers for Medicare and Medicaid Services (CMS).

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Award Fee contracts can lead to higher overall costs if award criteria are not strictly managed.
The long contract duration may reduce flexibility to adapt to changing healthcare regulations or technologies.
Concentration of services in a single state could pose geographic risks in case of localized disruptions.

Positive Signals

Awarded through full and open competition, indicating a competitive process.
The contractor has a established role in Medicare administration, suggesting experience.
The contract aims to ensure continuity of essential Medicare services.

Sector Analysis

This contract falls within the Health Insurance and Pharmaceutical Manufacturing sector, specifically related to health and medical insurance carriers. The market for Medicare administrative services is dominated by a few large, specialized firms. Spending in this area is driven by federal healthcare policy and the need to efficiently manage the vast Medicare program. Comparable spending benchmarks would involve analyzing other contracts for fiscal intermediary or Medicare Administrative Contractor (MAC) services.

Small Business Impact

The provided data indicates that small business participation (sb: false) was not a specific set-aside requirement for this contract. There is no information on subcontracting plans or their impact on the small business ecosystem. Without specific set-aside goals or reporting, it's difficult to assess the direct impact on small businesses.

Oversight & Accountability

Oversight for this contract would primarily fall under the Centers for Medicare and Medicaid Services (CMS), likely involving program managers and contracting officers. The Cost Plus Award Fee structure necessitates performance monitoring against defined metrics to determine award fees. Transparency is generally facilitated through contract databases like FPDS, but detailed performance reports and audit findings may not always be publicly accessible. The Inspector General for the Department of Health and Human Services would have jurisdiction for audits and investigations.

Related Government Programs

Medicare Administrative Contractor (MAC) services
Fiscal Intermediary contracts
Healthcare Claims Processing
Health Insurance Administration

Risk Flags

Cost Plus Award Fee structure requires careful performance monitoring.
Long contract duration may limit adaptability.
Geographic concentration of services in Tennessee could pose localized risks.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $203.4 million to CGS ADMINISTRATORS, LLC. DEPENDENT MEDICARE SERVICES TAS::75 0511::TAS

Who is the contractor on this award?

The obligated recipient is CGS ADMINISTRATORS, 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 $203.4 million.

What is the period of performance?

Start: 2006-09-30. End: 2012-06-30.

What is the historical spending trend for this specific contract or similar Medicare administrative services over the past decade?

Analyzing historical spending for this specific contract (DEPENDENT MEDICARE SERVICES TAS) requires accessing historical award data for CGS Administrators, LLC under CMS. Generally, spending on Medicare administrative services has been substantial and relatively stable, reflecting the ongoing operational needs of the program. However, specific contract values can fluctuate due to contract renewals, scope changes, and competition. For instance, CMS has consolidated its MAC jurisdictions over time, which could impact the size and value of individual contracts. Without direct historical data for this TAS, we can infer that spending on such services is a significant and consistent part of the federal healthcare budget, likely in the hundreds of millions annually across all similar contracts.

How does the per-unit cost of administering Medicare services under this contract compare to industry benchmarks or other federal contracts?

Determining a precise per-unit cost benchmark for this contract is challenging without more granular data on the specific services provided and the volume of beneficiaries or claims processed. The contract is a Cost Plus Award Fee (CPAF) type, which means the final cost is influenced by performance incentives, making direct price comparisons difficult. However, the total award of approximately $203 million over roughly 2100 days averages to about $35 million per year. This figure needs to be contextualized against the number of Medicare beneficiaries served and the complexity of administrative tasks performed. Industry benchmarks for health insurance administration vary widely based on the type of service (e.g., claims processing, customer service, provider enrollment). CMS often conducts market research and cost analyses during the procurement process to ensure competitive pricing, but these internal benchmarks are not typically public.

What is the track record of CGS Administrators, LLC in managing large federal healthcare contracts, particularly those with CMS?

CGS Administrators, LLC has a long-standing history of managing significant contracts with the Centers for Medicare and Medicaid Services (CMS). They have served as a Medicare Administrative Contractor (MAC) for various jurisdictions, handling claims processing, provider enrollment, and other administrative functions. Their experience includes managing complex operations and meeting stringent performance requirements set by CMS. While specific performance metrics and award fee outcomes are not publicly detailed for every contract, their continued selection for substantial contracts suggests a generally satisfactory performance history. However, like any large contractor, they may have faced reviews or audits related to specific contract periods or operational aspects, which would be documented by CMS or the HHS Office of Inspector General.

What are the primary risks associated with a Cost Plus Award Fee (CPAF) contract of this magnitude and duration?

The primary risks associated with a Cost Plus Award Fee (CPAF) contract of this magnitude ($203M) and duration (2100 days) revolve around cost control and performance alignment. For the government, the risk is that the contractor may incur higher costs than necessary if the award fee criteria are not sufficiently stringent or if oversight is lax, leading to inflated profits without commensurate value. Contractors are incentivized to perform well to earn the award fee, but the base cost reimbursement can still be substantial. Another risk is the potential for scope creep, where the contractor may expand the scope of work to increase costs and fees. Effective management requires robust performance metrics, clear communication, and diligent oversight from the contracting agency to ensure that award fees are earned based on genuine value and efficiency, not just on meeting minimum requirements.

How does the geographic concentration of services in Tennessee potentially impact the overall risk and efficiency of this contract?

The geographic concentration of services in Tennessee, as indicated by 'st': 'TN', could introduce specific risks and efficiencies. On the risk side, a localized event such as a natural disaster, major infrastructure failure, or significant regional economic downturn could disrupt operations. This concentration also means that a large portion of the contract's workforce and operational infrastructure is tied to a single state, potentially limiting redundancy. However, concentration can also lead to efficiencies through economies of scale, specialized local expertise, and streamlined management within that region. For CMS, managing operations in a concentrated area might simplify oversight compared to widely dispersed operations, provided robust business continuity plans are in place to mitigate localized risks.

Industry Classification

NAICS: Finance and Insurance › Insurance Carriers › Direct Health and Medical Insurance Carriers

Product/Service Code: MEDICAL SERVICES › DEPENDENT MEDICARE SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Blue Cross & Blue Shield of South Carolina

Address: 900 COTTAGE GROVE RD, HARTFORD, CT, 06152

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $211,832,353

Exercised Options: $210,950,618

Current Obligation: $203,436,222

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Timeline