HHS awards $390M Medicare Administrative Contract to Cahaba Government Benefit Administrators for Alabama

Contract Overview

Contract Amount: $390,552,117 ($390.6M)

Contractor: Cahaba Government Benefit Administrators, LLC

Awarding Agency: Department of Health and Human Services

Start Date: 2009-01-07

End Date: 2014-07-11

Contract Duration: 2,011 days

Daily Burn Rate: $194.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: COST PLUS AWARD FEE

Sector: Healthcare

Official Description: JURISDICTION 10 PART A & B MEDICARE ADMINISTRATIVE CONTRACTOR

Place of Performance

Location: BIRMINGHAM, SHELBY County, ALABAMA, 35242

State: Alabama Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $390.6 million to CAHABA GOVERNMENT BENEFIT ADMINISTRATORS, LLC for work described as: JURISDICTION 10 PART A & B MEDICARE ADMINISTRATIVE CONTRACTOR Key points: 1. Contract awarded through full and open competition, suggesting a competitive bidding process. 2. The contract type is Cost Plus Award Fee, which incentivizes contractor performance. 3. The duration of the contract is over 5 years, indicating a significant long-term commitment. 4. The contract is for Medicare Administrative Contractor services, crucial for healthcare program operations. 5. The award amount of $390.5 million represents substantial federal investment in healthcare administration. 6. The contractor, Cahaba Government Benefit Administrators, LLC, has a track record in this sector.

Value Assessment

Rating: good

The contract value of $390.5 million over approximately 5.5 years averages to about $71 million annually. This figure needs to be benchmarked against other Medicare Administrative Contractor (MAC) contracts to fully assess value for money. Given the complexity and scope of administering Medicare benefits for a state, this annual figure appears within a reasonable range, but a direct comparison with similar MAC contracts in other states would provide a clearer picture of cost-effectiveness.

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 invited to submit proposals. The presence of 5 bidders, as suggested by the 'no' field, points to a healthy level of competition. This competitive environment generally encourages more favorable pricing and service offerings from contractors as they vie for the award.

Taxpayer Impact: Full and open competition typically benefits taxpayers by driving down costs through market forces and ensuring the government receives the best possible value for its investment in essential services.

Public Impact

Beneficiaries in Alabama receive essential Medicare administrative services, ensuring timely processing of claims and access to benefits. The contract supports the efficient operation of the Medicare program, a critical component of the U.S. healthcare system. The geographic impact is focused on the state of Alabama, ensuring localized support for Medicare beneficiaries and providers. The contract likely supports a workforce involved in claims processing, customer service, and program integrity within the contractor's organization.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns in Cost Plus Award Fee contracts if performance metrics are not tightly managed.
Reliance on a single contractor for a critical function like Medicare administration carries inherent operational risks.
The long-term nature of the contract could limit flexibility in adapting to future changes in healthcare policy or technology.

Positive Signals

Awarded through full and open competition, suggesting a robust selection process and potential for competitive pricing.
The Cost Plus Award Fee structure incentivizes contractor performance and efficiency.
The contractor has experience in administering Medicare benefits, indicating a level of established expertise.

Sector Analysis

This contract falls within the Healthcare sector, specifically the administration of government health insurance programs. The market for Medicare Administrative Contractors (MACs) is specialized, with a limited number of large firms capable of handling such extensive responsibilities. Federal spending in this area is substantial, reflecting the scale of the Medicare program. Comparable spending benchmarks would involve analyzing other MAC contracts awarded by CMS across different geographic regions.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). As a large-scale administrative contract, it is unlikely that significant subcontracting opportunities for small businesses would be mandated or prevalent, though specific subcontracting plans are not detailed here. The focus is on a prime contractor with the capacity to manage a large federal contract.

Oversight & Accountability

Oversight for this contract would primarily reside with the Centers for Medicare and Medicaid Services (CMS), a division of HHS. CMS would monitor performance against contract requirements, award fees, and budget adherence. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract. Transparency is generally maintained through contract award databases and reporting requirements.

Related Government Programs

Medicare Administrative Contractor (MAC) Program
Centers for Medicare and Medicaid Services (CMS) Contracts
Federal Health Insurance Administration
Department of Health and Human Services (HHS) Spending

Risk Flags

Contract duration exceeds 5 years.
Cost Plus Award Fee structure requires careful performance monitoring.
Potential for contractor performance issues impacting service delivery.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $390.6 million to CAHABA GOVERNMENT BENEFIT ADMINISTRATORS, LLC. JURISDICTION 10 PART A & B MEDICARE ADMINISTRATIVE CONTRACTOR

Who is the contractor on this award?

The obligated recipient is CAHABA GOVERNMENT BENEFIT 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 $390.6 million.

What is the period of performance?

Start: 2009-01-07. End: 2014-07-11.

What is the historical spending pattern for this specific Medicare Administrative Contractor (MAC) contract or similar contracts awarded by CMS?

The provided data shows an award of $390,552,117 for Jurisdiction 10 Part A & B Medicare Administrative Contractor (MAC) services from January 7, 2009, to July 11, 2014. This represents the total obligated amount over the contract's life. To understand historical spending patterns, one would need to examine annual obligations against this total, as well as compare this contract's total value and duration to previous MAC contracts for other jurisdictions or subsequent contracts awarded after 2014. CMS typically awards MAC contracts in multi-year increments, often with options, leading to significant but relatively stable annual spending for these essential administrative functions across different regions.

How does the pricing structure (Cost Plus Award Fee) compare to other contract types used for similar federal administrative services?

Cost Plus Award Fee (CPAF) contracts, like the one awarded to Cahaba Government Benefit Administrators, LLC, are designed to reimburse the contractor for allowable costs while providing an additional award fee based on meeting or exceeding performance objectives. This differs from fixed-price contracts, where the price is set regardless of costs incurred, or Cost Plus Incentive Fee (CPIF) contracts, which adjust profit based on cost targets. CPAF is often used when performance is difficult to define precisely upfront or when significant contractor discretion is needed, as in complex administrative services. Compared to other contract types, CPAF aims to balance cost control with incentivizing high performance, potentially offering better value than pure cost-reimbursement contracts but requiring robust performance metrics and oversight to prevent cost escalation.

What is the track record of Cahaba Government Benefit Administrators, LLC in managing large federal contracts, particularly within the healthcare sector?

Cahaba Government Benefit Administrators, LLC has a significant track record in managing federal contracts, particularly within the healthcare sector, as evidenced by this substantial Medicare Administrative Contractor award. Their role as a MAC involves complex tasks such as claims processing, provider enrollment, and beneficiary services for Medicare. Success in such a role requires robust operational capabilities, adherence to strict regulatory requirements, and effective program management. While specific details of past performance on this contract (e.g., award fee scores, audit findings) are not provided, the fact that they were awarded and performed under this large, competitively bid contract suggests they met the government's criteria for capability and reliability in administering critical healthcare functions.

What are the key performance indicators (KPIs) typically used to evaluate MAC contractors, and how might they impact the award fee for this contract?

Key Performance Indicators (KPIs) for Medicare Administrative Contractors (MACs) typically revolve around operational efficiency, accuracy, timeliness, and customer service. Examples include claims processing accuracy rates, timeliness of payments, call center response times and resolution rates, provider inquiry response times, and program integrity measures (e.g., fraud detection). For a Cost Plus Award Fee (CPAF) contract, these KPIs would be explicitly defined in the contract's performance work statement. The contractor's achievement against these metrics directly influences the 'award fee' portion of their compensation. High performance against stringent KPIs would result in a higher award fee, while failure to meet targets could lead to reduced or zero award fees, thereby incentivizing the contractor to excel in service delivery.

What is the potential impact of this contract on the overall federal spending for healthcare administration services?

This contract represents a significant portion of federal spending dedicated to the administration of the Medicare program in Alabama. The total value of $390.5 million over approximately 5.5 years highlights the substantial resources required to manage such a critical function. While this specific contract is for one jurisdiction, the aggregate spending across all MAC contracts nationwide constitutes a major component of the Centers for Medicare and Medicaid Services' (CMS) operational budget. Analyzing this contract provides insight into the cost structure and value proposition for federal healthcare administration, informing broader discussions about efficiency and resource allocation within the agency.

Industry Classification

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

Product/Service Code: SOCIAL SERVICES › SOCIAL SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 5

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Address: 300 CORPORATE PKWY, BIRMINGHAM, AL, 35242

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $390,552,117

Exercised Options: $390,552,117

Current Obligation: $390,552,117

Actual Outlays: $6,526,072

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Timeline