HHS awarded $135M for Medicare administrative contract services, with a significant portion allocated to Indiana

Contract Overview

Contract Amount: $135,172,203 ($135.2M)

Contractor: National Government Services, Inc.

Awarding Agency: Department of Health and Human Services

Start Date: 2010-09-07

End Date: 2016-09-09

Contract Duration: 2,194 days

Daily Burn Rate: $61.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: Healthcare

Official Description: TAS::75 0511::TAS JURISDICTION B DURABLE MEDICAL EQUIPMENT MEDICARE ADMINISTRATIVE CONTRACTOR

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46250

State: Indiana Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $135.2 million to NATIONAL GOVERNMENT SERVICES, INC. for work described as: TAS::75 0511::TAS JURISDICTION B DURABLE MEDICAL EQUIPMENT MEDICARE ADMINISTRATIVE CONTRACTOR Key points: 1. The contract's cost-plus-award-fee structure incentivizes performance but can lead to higher overall costs if not managed tightly. 2. With two bidders, the competition level suggests a moderately competitive environment for this specialized service. 3. The contract duration of over 6 years indicates a long-term commitment to these services. 4. The services provided are critical for the functioning of Medicare, impacting beneficiaries nationwide. 5. This contract falls within the broader health insurance carrier sector, a significant area of federal spending.

Value Assessment

Rating: fair

The contract's total value of $135 million over approximately six years averages to about $22.5 million annually. Benchmarking this against similar Medicare Administrative Contractor (MAC) contracts is challenging without specific service details and performance metrics. However, the cost-plus-award-fee (CPAF) pricing structure suggests that while there's a base cost, significant portions are tied to performance, which can be a reasonable approach if performance targets are well-defined and achievable. Without more granular data on the specific services rendered and the award fee payouts, a definitive value-for-money assessment is difficult, but the scale of the contract suggests substantial operational requirements.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple qualified vendors had the opportunity to bid. With two bidders identified, the competition was present but not extensive. This level of competition can provide a reasonable baseline for pricing, but a larger number of bidders might have driven prices down further. The selection process likely involved a thorough evaluation of technical capabilities, past performance, and price.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it encourages multiple companies to vie for the contract, potentially leading to better pricing and service quality.

Public Impact

Medicare beneficiaries across the nation benefit from the efficient processing of claims and administrative services. The contract ensures the continuity of essential healthcare insurance operations for millions of Americans. Services delivered include claims processing, provider enrollment, and customer service for Medicare. The contract has a significant impact on the workforce within the health insurance and administrative services sector, particularly in Indiana.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in Cost Plus Award Fee contracts if performance targets are not rigorously managed.
Limited competition (two bidders) may have resulted in a higher price than a more robustly competed contract.
Long contract duration could lead to vendor complacency if oversight is not consistently applied.

Positive Signals

Awarded under full and open competition, ensuring a broad initial search for qualified contractors.
The Cost Plus Award Fee structure incentivizes high performance and efficiency.
The contract supports critical government functions related to healthcare administration.

Sector Analysis

This contract falls within the Health Care and Social Assistance sector, specifically the Health and Medical Insurance Carriers sub-sector. This is a large and complex area of federal spending, encompassing numerous contracts for managing government health programs like Medicare and Medicaid. The market includes large, established insurance providers and specialized administrative service companies. Benchmarking requires comparison to other large-scale government health insurance administration contracts, which often run into hundreds of millions or billions of dollars over their lifecycles.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). Given the scale and specialized nature of Medicare administrative services, it is common for such large contracts to be awarded to large corporations. There is no explicit information on subcontracting plans for small businesses, but it is a standard practice for large prime contractors to engage small businesses for specific services to meet diversity goals and leverage specialized expertise.

Oversight & Accountability

Oversight for this contract would primarily reside with the Centers for Medicare and Medicaid Services (CMS), a division of HHS. CMS is responsible for monitoring contractor performance, ensuring compliance with contract terms, and managing the award fee process. The Inspector General's office within HHS would have jurisdiction over audits and investigations related to potential fraud, waste, or abuse. Transparency is facilitated through contract award databases, but detailed performance reports and financial breakdowns are typically internal.

Related Government Programs

Medicare Administrative Contractor (MAC) Program
Centers for Medicare and Medicaid Services (CMS) Contracts
Federal Health Insurance Administration
Durable Medical Equipment (DME) Services

Risk Flags

Cost Overrun Potential
Limited Competition
Performance Metric Rigor

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $135.2 million to NATIONAL GOVERNMENT SERVICES, INC.. TAS::75 0511::TAS JURISDICTION B DURABLE MEDICAL EQUIPMENT MEDICARE ADMINISTRATIVE CONTRACTOR

Who is the contractor on this award?

The obligated recipient is NATIONAL GOVERNMENT SERVICES, 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 $135.2 million.

What is the period of performance?

Start: 2010-09-07. End: 2016-09-09.

What was the specific performance criteria used to determine the award fee for National Government Services, Inc.?

The provided data does not detail the specific performance criteria used for the award fee component of this Cost Plus Award Fee (CPAF) contract. Typically, CPAF contracts establish a set of measurable performance objectives related to service delivery, efficiency, cost control, and compliance. These objectives are evaluated periodically, and a portion of the fee is awarded based on the contractor's achievement against these targets. For a Medicare Administrative Contractor, criteria might include claims processing accuracy rates, timeliness of payments, beneficiary and provider satisfaction scores, and adherence to regulatory requirements. Without access to the contract's statement of work and performance work statement, the exact metrics remain unknown.

How does the annual spending on this contract compare to other Medicare Administrative Contractor contracts?

The total contract value is $135,172,203 over approximately 6 years (2010-2016), averaging roughly $22.5 million per year. Medicare Administrative Contractor (MAC) contracts are geographically divided, and their annual values can vary significantly based on the number of beneficiaries and providers in their jurisdiction, as well as the specific functions they perform. Some MAC jurisdictions, particularly those covering larger populations or more complex services, can have annual costs exceeding $50 million or even $100 million. Therefore, an average annual spend of $22.5 million for this contract appears to be within a moderate range for a MAC contract, but a precise comparison would require analyzing the scope and size of other MAC jurisdictions during the same contract period.

What are the primary risks associated with a Cost Plus Award Fee (CPAF) contract structure for this type of service?

The primary risk with a CPAF structure for Medicare administrative services is the potential for costs to escalate beyond initial projections if the award fee criteria are not sufficiently stringent or if the base cost component is not well-defined. While CPAF aims to incentivize performance, there's a risk that contractors may focus on achieving award fee targets at the expense of other critical, non-fee-incentivized aspects of service delivery or cost control. Furthermore, the government bears a significant portion of the cost risk, as it must reimburse allowable costs plus a fee that can increase based on performance. Effective oversight and clearly defined, measurable performance metrics are crucial to mitigate these risks and ensure value for money.

What is the historical spending trend for Medicare Administrative Contractor services by HHS?

Historical spending on Medicare Administrative Contractor (MAC) services by HHS has been substantial and generally increasing over time, reflecting the growth in the Medicare program and the complexity of its administration. The MAC program itself consolidated various legacy claims processing functions into a more standardized contract structure. Over the years, HHS has awarded numerous MAC contracts across different jurisdictions, with total annual spending often in the billions of dollars. Factors influencing spending include beneficiary enrollment growth, healthcare cost inflation, regulatory changes, and the introduction of new Medicare benefits or programs. The trend indicates a consistent and significant federal investment in the infrastructure required to manage the Medicare program.

How has National Government Services, Inc. performed on other federal contracts, particularly within the healthcare sector?

National Government Services, Inc. (NGS) has a history of performing significant government contracts, primarily related to Medicare administration. As a MAC contractor, they have been responsible for processing claims, managing provider services, and handling customer inquiries for specific Medicare jurisdictions. Their performance on these contracts is typically evaluated based on metrics related to accuracy, timeliness, efficiency, and customer satisfaction. While specific performance ratings are not publicly detailed in this summary, their continued selection for and execution of such large-scale, long-term contracts suggest a generally satisfactory performance record with the Centers for Medicare and Medicaid Services (CMS). However, like any large contractor, they may have faced challenges or areas for improvement that are addressed through contract management and oversight.

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: 2

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Elevance Health, Inc.

Address: 8115 KNUE RD, INDIANAPOLIS, IN, 46250

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

Financial Breakdown

Contract Ceiling: $135,172,203

Exercised Options: $135,172,203

Current Obligation: $135,172,203

Actual Outlays: $955,377

Subaward Activity

Number of Subawards: 3

Total Subaward Amount: $151,370

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline