Noridian Healthcare Solutions contract for durable medical equipment services exceeds $155 million over five years

Contract Overview

Contract Amount: $155,251,491 ($155.3M)

Contractor: Noridian Healthcare Solutions, LLC

Awarding Agency: Department of Health and Human Services

Start Date: 2011-03-01

End Date: 2016-02-29

Contract Duration: 1,826 days

Daily Burn Rate: $85.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: COST PLUS AWARD FEE

Sector: Healthcare

Official Description: DURABLE MEDICAL EQUIPMENT MEDICARE ADMINISTRATIVE CONTRACT JURISDICTION D

Place of Performance

Location: FARGO, CASS County, NORTH DAKOTA, 58103

State: North Dakota Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $155.3 million to NORIDIAN HEALTHCARE SOLUTIONS, LLC for work described as: DURABLE MEDICAL EQUIPMENT MEDICARE ADMINISTRATIVE CONTRACT JURISDICTION D Key points: 1. Contract value indicates significant investment in durable medical equipment administration. 2. Full and open competition suggests a robust market for these services. 3. Contract duration of five years allows for sustained service delivery. 4. The contract type (Cost Plus Award Fee) incentivizes performance and cost control. 5. This contract supports a critical function within the Medicare program. 6. The specific jurisdiction (North Dakota) highlights regional focus of the services.

Value Assessment

Rating: good

The contract's total value of over $155 million for five years suggests a substantial investment in managing durable medical equipment for Medicare beneficiaries in North Dakota. Benchmarking this against similar Medicare Administrative Contracts (MACs) for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) would provide a clearer picture of value for money. However, the Cost Plus Award Fee structure implies that performance metrics are tied to the fee, potentially driving efficiency and quality.

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. This competitive process is designed to foster price discovery and ensure that the government receives the best possible value. The number of bidders (4) suggests a healthy level of interest and capability within the market for administering Medicare DMEPOS services.

Taxpayer Impact: Full and open competition generally leads to more favorable pricing for taxpayers by encouraging multiple companies to offer competitive bids, driving down costs.

Public Impact

Medicare beneficiaries in North Dakota receive access to necessary durable medical equipment. The contract ensures the efficient administration and processing of claims for DMEPOS. Healthcare providers in North Dakota benefit from streamlined processes for DMEPOS services. The contract supports the operational infrastructure of the Centers for Medicare and Medicaid Services (CMS) in a specific region. Potential for job creation within the contractor's organization to manage these services.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns given the Cost Plus Award Fee structure if performance targets are not met or are poorly defined.
Ensuring consistent quality of service delivery across the entire contract duration.
Monitoring contractor performance to ensure adherence to Medicare regulations and beneficiary needs.

Positive Signals

Awarded under full and open competition, suggesting a competitive market and potential for good value.
The Cost Plus Award Fee structure incentivizes the contractor to meet performance objectives.
The contract duration allows for stability in service provision for beneficiaries.

Sector Analysis

The Durable Medical Equipment (DME) sector within healthcare is a significant market focused on providing equipment like wheelchairs, walkers, and oxygen to beneficiaries. This contract falls under the broader category of healthcare administration and claims processing, specifically for Medicare. Comparable spending benchmarks would involve looking at other MAC contracts for DMEPOS services across different jurisdictions, which can vary based on regional costs and beneficiary populations.

Small Business Impact

The provided data does not indicate any specific small business set-aside provisions for this contract. As a large-scale administrative contract, it is likely that the prime contractor, Noridian Healthcare Solutions, LLC, is a large business. Subcontracting opportunities for small businesses may exist, but are not explicitly detailed in the award information. The primary impact on the small business ecosystem would depend on whether the prime contractor actively seeks small business subcontractors.

Oversight & Accountability

Oversight for this contract would primarily fall under the Centers for Medicare and Medicaid Services (CMS), the awarding agency. CMS is responsible for monitoring contractor performance, ensuring compliance with program regulations, and managing the award fee structure. Transparency is generally maintained through contract awards databases and performance reports, though specific details of operational oversight may not be publicly disclosed. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Medicare Administrative Contracts (MACs)
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)
Healthcare Claims Processing
Federal Health Insurance Programs

Risk Flags

Contract duration is substantial, requiring ongoing performance monitoring.
Cost Plus Award Fee structure necessitates careful oversight of performance metrics and fee determination.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $155.3 million to NORIDIAN HEALTHCARE SOLUTIONS, LLC. DURABLE MEDICAL EQUIPMENT MEDICARE ADMINISTRATIVE CONTRACT JURISDICTION D

Who is the contractor on this award?

The obligated recipient is NORIDIAN HEALTHCARE SOLUTIONS, 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 $155.3 million.

What is the period of performance?

Start: 2011-03-01. End: 2016-02-29.

What is the historical spending trend for Durable Medical Equipment Medicare Administrative Contracts?

Historical spending on Durable Medical Equipment Medicare Administrative Contracts (MACs) has shown a consistent increase over the years, reflecting the growing demand for medical equipment and services among the Medicare population. These contracts are crucial for managing the costs and ensuring the appropriate utilization of DMEPOS. While specific figures for all MAC jurisdictions are vast, the overall Medicare spending on DMEPOS has trended upwards, driven by factors such as an aging population, advancements in medical technology, and policy changes. Analyzing past contract awards and their values provides insight into the scale of investment required for effective program administration. For instance, the aggregate value of MAC contracts, including those for DMEPOS, represents a significant portion of the Centers for Medicare and Medicaid Services' (CMS) operational budget, underscoring the importance of competitive bidding and efficient oversight to control costs and ensure value for taxpayer dollars.

How does the Cost Plus Award Fee (CPAF) structure typically impact contractor performance and costs in federal contracts?

The Cost Plus Award Fee (CPAF) contract structure is designed to incentivize contractor performance by allowing for a base fee plus an additional award fee determined by the government's evaluation of the contractor's performance against specific criteria. This structure aims to balance cost control with the achievement of high-quality outcomes. For contractors, the potential for an award fee provides a strong motivation to exceed minimum performance standards, leading to better service delivery. However, it also requires robust government oversight to ensure that the award fee criteria are objective, measurable, and fairly applied. From a cost perspective, CPAF contracts can sometimes lead to higher overall costs compared to fixed-price contracts if the award fees are consistently high. Conversely, if performance is subpar, the award fee can be significantly reduced, acting as a cost-containment mechanism. The effectiveness of CPAF hinges on well-defined performance metrics and diligent government evaluation.

What are the key performance indicators (KPIs) typically used to evaluate contractors administering Durable Medical Equipment services for Medicare?

Key Performance Indicators (KPIs) for contractors administering Durable Medical Equipment (DME) services for Medicare typically focus on efficiency, accuracy, beneficiary satisfaction, and compliance. Common KPIs include claims processing timeliness (e.g., average time to process a claim), claims accuracy rate (percentage of claims processed without errors), denial rates for DMEPOS claims, and the rate of appeals against claim denials. Beneficiary satisfaction surveys are often used to gauge the ease of access to services and the quality of interaction with the contractor. Compliance metrics, such as adherence to Medicare regulations, fraud detection rates, and audit findings, are also critical. For contracts with an award fee component, these KPIs are directly tied to the contractor's ability to earn the maximum award fee, ensuring a strong alignment between government objectives and contractor efforts.

What is the typical market size and competitive landscape for Durable Medical Equipment Medicare Administrative Contracts?

The market for Durable Medical Equipment Medicare Administrative Contracts (MACs) is substantial, reflecting the significant expenditure on DMEPOS within the Medicare program. While specific market size figures fluctuate with contract cycles and policy changes, the aggregate value of these contracts runs into billions of dollars annually across all jurisdictions. The competitive landscape is generally characterized by a limited number of large, specialized healthcare administration companies that possess the expertise, infrastructure, and financial capacity to manage such complex contracts. These companies often have established relationships with CMS and a proven track record in managing government healthcare programs. Competition for these MAC contracts is typically intense when they are up for recompete, as demonstrated by the four bidders in this case, indicating a healthy, albeit concentrated, market.

How does the geographic jurisdiction of a MAC contract influence its value and operational complexity?

The geographic jurisdiction of a Medicare Administrative Contract (MAC) significantly influences its value and operational complexity due to variations in beneficiary populations, healthcare provider density, state-specific regulations, and local cost of living. Larger jurisdictions with higher Medicare beneficiary enrollment typically command higher contract values to cover the increased volume of claims processing and customer service demands. Operational complexity can also increase with geographic scope; managing services across multiple states or diverse regions requires adapting to different healthcare landscapes and potentially different state laws that may interact with federal Medicare policies. Furthermore, the density of healthcare providers and the prevalence of specific medical needs within a jurisdiction can shape the types of DMEPOS services most in demand, influencing the contractor's operational focus and resource allocation. Therefore, contract values are often tailored to reflect these regional differences.

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

Solicitation ID: CMSRFP20100016

Offers Received: 4

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Noridian Mutual Insurance Company

Address: 900 42TH ST S, FARGO, ND, 58108

Business Categories: Category Business, Limited Liability Corporation, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $169,563,384

Exercised Options: $169,563,384

Current Obligation: $155,251,491

Actual Outlays: $4,394,734

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline