Medicare Administrative Contract for North Dakota awarded to Noridian Healthcare Solutions for over $409 million

Contract Overview

Contract Amount: $409,652,741 ($409.7M)

Contractor: Noridian Healthcare Solutions, LLC

Awarding Agency: Department of Health and Human Services

Start Date: 2011-08-22

End Date: 2018-08-31

Contract Duration: 2,566 days

Daily Burn Rate: $159.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS AWARD FEE

Sector: Healthcare

Official Description: JURISDICTION F PART A/PART B MEDICARE ADMINISTRATIVE CONTRACTOR

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 $409.7 million to NORIDIAN HEALTHCARE SOLUTIONS, LLC for work described as: JURISDICTION F PART A/PART B MEDICARE ADMINISTRATIVE CONTRACTOR Key points: 1. Contract value represents significant investment in healthcare administration for Medicare beneficiaries. 2. Full and open competition suggests a robust bidding process, potentially leading to better pricing. 3. The contract's duration of over 7 years indicates a long-term commitment to service delivery. 4. Noridian Healthcare Solutions has a substantial contract history, suggesting established performance. 5. The cost-plus award fee structure incentivizes performance but requires careful oversight. 6. This contract is a key component of Medicare's operational infrastructure in North Dakota.

Value Assessment

Rating: good

The total award amount of $409,652,740.84 over approximately 7 years for Medicare administrative services in North Dakota appears reasonable given the scope of work. Benchmarking against similar Medicare Administrative Contractor (MAC) awards across different jurisdictions is complex due to varying beneficiary populations and service areas. However, the per-beneficiary cost can be estimated. The contract's cost-plus award fee (CPAF) structure allows for flexibility and performance incentives, which can be a value driver if managed effectively, but also necessitates diligent oversight to ensure costs remain controlled and aligned with performance objectives.

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 considered. The presence of three bidders (as suggested by 'no': 3) suggests a competitive environment. This level of competition is generally favorable for price discovery and can lead to more cost-effective solutions for the government. The specific details of the bidding process, including the evaluation criteria and the winning proposal's advantages, would provide further insight into the effectiveness of the competition.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it typically drives down costs through market forces. A competitive process increases the likelihood that the government secures services at a fair market price, minimizing potential overspending and maximizing the value of taxpayer dollars.

Public Impact

Beneficiaries: Over 1 million Medicare beneficiaries in North Dakota are directly impacted by the services provided under this contract, ensuring access to healthcare services and claims processing. Services Delivered: The contract facilitates essential Medicare administrative functions, including claims processing, provider services, and beneficiary support, ensuring the smooth operation of the Medicare program in the region. Geographic Impact: The contract specifically covers North Dakota, ensuring dedicated administrative support for healthcare providers and beneficiaries within that state. Workforce Implications: Noridian Healthcare Solutions employs a workforce to manage these administrative functions, contributing to local employment in North Dakota.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus award fee structure requires robust monitoring to ensure cost efficiency and prevent scope creep.
Long contract duration necessitates ongoing performance evaluation to ensure continued value and adaptation to evolving healthcare needs.
Dependence on a single contractor for a critical function like Medicare administration in a region presents a concentration risk.

Positive Signals

Awarded under full and open competition, suggesting a competitive process that likely yielded a fair price.
Contractor has a long history with Medicare administration, indicating experience and established processes.
The contract aims to ensure continuity of essential Medicare services for beneficiaries in North Dakota.

Sector Analysis

This contract falls within the Health Care Services sector, specifically focusing on health insurance and administrative services for government programs. The market for Medicare Administrative Contractors (MACs) is highly specialized, with a limited number of large firms capable of managing such extensive operations. 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 jurisdictions, considering variations in beneficiary populations and service requirements.

Small Business Impact

The data indicates that small business participation was not a primary focus for this contract, as 'sb' is false. There is no explicit mention of small business set-asides or subcontracting requirements. This suggests that the primary contractor, Noridian Healthcare Solutions, likely handles the majority of the work in-house or through large-scale partnerships, with limited direct impact on the small business ecosystem within this specific contract's scope.

Oversight & Accountability

Oversight for this contract is primarily managed by the Centers for Medicare and Medicaid Services (CMS), a division of the Department of Health and Human Services. The cost-plus award fee (CPAF) structure necessitates rigorous performance monitoring and financial auditing to ensure accountability and value for money. Transparency is generally maintained through contract awards databases and reporting requirements, though specific performance metrics and audit findings may not always be publicly disclosed. The Inspector General for HHS would have jurisdiction over any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Medicare Administrative Contractor (MAC) Program
Medicare Part B Claims Processing
Health Insurance Carrier Contracts
Federal Health IT Spending
CMS Program Management

Risk Flags

Cost-Plus Award Fee (CPAF) structure requires diligent oversight.
Long contract duration may lead to complacency if not actively managed.
Dependence on a single contractor for regional Medicare administration.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $409.7 million to NORIDIAN HEALTHCARE SOLUTIONS, LLC. JURISDICTION F PART A/PART B MEDICARE ADMINISTRATIVE CONTRACTOR

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 $409.7 million.

What is the period of performance?

Start: 2011-08-22. End: 2018-08-31.

What is Noridian Healthcare Solutions' track record with Medicare contracts prior to this award?

Noridian Healthcare Solutions has a significant and long-standing track record with Medicare administration. Prior to this specific definitive contract, the company has been involved in various Medicare administrative functions, often serving as a Medicare Administrative Contractor (MAC) or a similar role for different regions or parts of the Medicare program. Their experience typically includes claims processing, provider enrollment, beneficiary inquiries, and medical review. This extensive history suggests a deep understanding of Medicare regulations, operational requirements, and the complexities of managing large-scale healthcare administration contracts for the Centers for Medicare and Medicaid Services (CMS). Their prior performance would have been a key factor in their selection for this substantial contract.

How does the total contract value compare to other Medicare Administrative Contractor awards?

The total contract value of over $409 million for this North Dakota MAC contract is substantial, reflecting the significant administrative responsibilities involved in managing Medicare operations for a state. To compare it accurately, one would need to analyze other MAC awards across different jurisdictions. MAC contracts vary widely based on the number of beneficiaries, the complexity of the healthcare market within the jurisdiction, and the specific services required (e.g., Part A, Part B, Durable Medical Equipment). Generally, contracts for larger states or those with more complex healthcare systems tend to have higher total values. This $409 million figure appears to be within the expected range for a statewide MAC contract, especially considering its duration of over seven years.

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

The primary risks associated with a Cost Plus Award Fee (CPAF) contract of this magnitude include potential for cost overruns and challenges in objectively measuring performance to determine award fees. While CPAF incentivizes contractors to perform well by offering award fees based on meeting or exceeding performance objectives, it requires robust government oversight to ensure that costs are reasonable and allocable. There's a risk that the government may pay more than necessary if performance metrics are not clearly defined or if the contractor inflates costs to maximize profit. Additionally, the government must have the expertise and resources to effectively monitor the contractor's performance against the established criteria to ensure fair and accurate determination of award fees, preventing both underpayment and overpayment.

How effective is the 'full and open competition' process in ensuring value for money for Medicare administration?

Full and open competition is generally considered the most effective method for ensuring value for money in federal contracting, including for Medicare administration. By allowing all responsible sources to submit bids, it fosters a competitive environment that drives down prices and encourages innovation. For Medicare Administrative Contractor (MAC) services, this process allows CMS to solicit proposals from multiple qualified entities, evaluate them based on defined criteria (technical approach, past performance, price), and select the offer that provides the best overall value. The presence of multiple bidders, as indicated by 'no': 3 in this case, suggests that the competition was meaningful. This competitive pressure incentivizes bidders to offer competitive pricing and efficient service delivery models to win the contract, ultimately benefiting taxpayers.

What are the implications of this contract's duration (over 7 years) on service continuity and potential for contractor complacency?

A contract duration of over seven years (2566 days) for Medicare administrative services provides significant stability and continuity for beneficiaries and healthcare providers in North Dakota. This long-term commitment allows the contractor, Noridian Healthcare Solutions, to invest in infrastructure, technology, and workforce development, leading to more efficient and reliable service delivery. However, such extended periods also carry the risk of contractor complacency. Without regular re-competition or strong performance management, the contractor might become less responsive to evolving needs or less motivated to seek cost efficiencies. CMS mitigates this risk through ongoing performance monitoring, contract modifications, and the potential for award fee adjustments, ensuring the contractor remains accountable throughout the contract's life.

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: RFPCMS20100050

Offers Received: 3

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: $505,782,657

Exercised Options: $505,782,656

Current Obligation: $409,652,741

Actual Outlays: $-34,402

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline