HHS awards over $709M to Noridian Healthcare Solutions for Medicare Administrative Contract services in North Dakota

Contract Overview

Contract Amount: $709,292,463 ($709.3M)

Contractor: Noridian Healthcare Solutions, LLC

Awarding Agency: Department of Health and Human Services

Start Date: 2012-09-20

End Date: 2022-09-08

Contract Duration: 3,640 days

Daily Burn Rate: $194.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS AWARD FEE

Sector: Healthcare

Official Description: IGF::OT::IGF A/B MAC JURISDICTION E CONTRACT AWARD

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 $709.3 million to NORIDIAN HEALTHCARE SOLUTIONS, LLC for work described as: IGF::OT::IGF A/B MAC JURISDICTION E CONTRACT AWARD Key points: 1. Contract value exceeds $709 million over its lifetime, indicating a significant investment in healthcare administration. 2. The contract was awarded through full and open competition, suggesting a robust bidding process. 3. Noridian Healthcare Solutions has a long-standing relationship with CMS, managing MAC jurisdictions. 4. The contract type, Cost Plus Award Fee, incentivizes performance but requires careful oversight to manage costs. 5. This award represents a substantial portion of federal spending within the health insurance carriers sector for North Dakota. 6. The duration of the contract (over 9 years) points to the long-term nature of essential government services.

Value Assessment

Rating: good

The contract's total value of over $709 million for a nearly 10-year period suggests a substantial investment. Benchmarking this against similar Medicare Administrative Contracts (MAC) is complex due to varying jurisdictions and service scopes. However, the Cost Plus Award Fee (CPAF) structure implies that pricing is tied to performance, which can be a value-for-money indicator if performance targets are met and costs are managed effectively. Without specific cost breakdowns per service or comparison to other MAC contracts, a definitive value assessment is challenging, but the competitive award process provides some assurance.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple qualified bidders had the opportunity to submit proposals. The presence of three bidders (no=3) suggests a reasonable level of competition for this significant Medicare Administrative Contract. A competitive process generally leads to better price discovery and potentially more innovative solutions, benefiting the government.

Taxpayer Impact: The full and open competition ensures that taxpayer dollars are likely being used more efficiently by fostering a competitive environment that drives down costs and improves service quality.

Public Impact

Beneficiaries: Millions of Medicare beneficiaries in North Dakota receive services facilitated by this contract, ensuring access to healthcare providers and claims processing. Services Delivered: The contract supports essential administrative functions for Medicare Part A and Part B, including provider enrollment, claims processing, and customer service. Geographic Impact: The contract specifically covers North Dakota, ensuring localized support and administration for Medicare services within the state. Workforce Implications: Noridian Healthcare Solutions employs a significant workforce to manage these complex administrative tasks, contributing to local employment in North Dakota.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Award Fee (CPAF) structure requires diligent oversight to ensure costs remain reasonable and award fees are justified by performance.
The long contract duration (over 9 years) necessitates ongoing monitoring to ensure continued relevance and efficiency of services.
Potential for vendor lock-in given the specialized nature of MAC contracts and long-term relationship.

Positive Signals

Awarded through full and open competition, indicating a competitive bidding process.
Noridian Healthcare Solutions has extensive experience managing MAC contracts, suggesting operational stability.
The CPAF structure incentivizes high performance, potentially leading to better service delivery.

Sector Analysis

This contract falls within the Health Insurance Carriers sector, specifically focusing on government administration of healthcare programs. The market for Medicare Administrative Contracts is dominated by a few large, experienced companies capable of handling the scale and complexity of these operations. Spending in this area is driven by federal healthcare policy and the need to efficiently manage the Medicare program. Comparable spending benchmarks would involve analyzing other MAC contracts across different jurisdictions, which often run into hundreds of millions of dollars over their lifespans.

Small Business Impact

This contract does not appear to have specific small business set-aside provisions (ss=false, sb=false). As a large, complex administrative contract, the primary contractor, Noridian Healthcare Solutions, is likely responsible for managing subcontracting opportunities. The scale of the contract suggests potential for significant subcontracting, which could benefit small businesses if actively pursued by the prime contractor. However, without explicit subcontracting goals or reporting, the direct impact on the small business ecosystem is difficult to quantify.

Oversight & Accountability

Oversight is primarily conducted by the Centers for Medicare and Medicaid Services (CMS), the awarding agency. The Cost Plus Award Fee (CPAF) structure inherently includes performance metrics that CMS monitors to determine award fees. Transparency is facilitated through contract award databases and public reporting requirements. The Inspector General for the Department of Health and Human Services (HHS) would have jurisdiction over audits and investigations related to potential fraud, waste, or abuse within the contract.

Related Government Programs

Medicare Administrative Contractor (MAC) Program
Federal Health Insurance Programs
Centers for Medicare and Medicaid Services Contracts
Healthcare Claims Processing
Government Health IT Services

Risk Flags

Contract Duration
Cost Plus Award Fee Structure
Potential for Cost Overruns
Performance Monitoring Complexity

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $709.3 million to NORIDIAN HEALTHCARE SOLUTIONS, LLC. IGF::OT::IGF A/B MAC JURISDICTION E CONTRACT AWARD

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 $709.3 million.

What is the period of performance?

Start: 2012-09-20. End: 2022-09-08.

What is Noridian Healthcare Solutions' track record with CMS and other federal agencies prior to this award?

Noridian Healthcare Solutions has a substantial history of working with the Centers for Medicare and Medicaid Services (CMS) on Medicare Administrative Contracts (MACs). Prior to this specific award, the company had been managing MAC jurisdictions for many years, demonstrating a long-standing relationship and accumulated expertise. Their experience includes processing claims, managing provider services, and handling beneficiary inquiries for various Medicare regions. This extensive background suggests a deep understanding of CMS requirements, regulations, and operational needs. While this specific award covers North Dakota, Noridian's broader experience across multiple MAC jurisdictions indicates a proven capability in fulfilling complex government healthcare administration contracts, making them a well-established incumbent in this space.

How does the Cost Plus Award Fee (CPAF) structure compare to other contract types used for MACs in terms of value for money?

The Cost Plus Award Fee (CPAF) structure used for this contract is designed to incentivize high performance by allowing the contractor to recover allowable costs plus a base fee, with the potential for an additional award fee based on meeting or exceeding performance objectives. Compared to fixed-price contracts, CPAF offers more flexibility for services where costs are difficult to predict precisely, like complex administrative functions. However, it requires robust oversight from the government to ensure costs are reasonable and award fees are justified. Other MAC contracts might use different incentive structures or even fixed-price elements, but CPAF is common for services where performance quality is paramount and can be objectively measured. The value for money hinges on CMS's ability to effectively define and measure performance metrics and manage the contractor's costs.

What are the key performance indicators (KPIs) typically monitored under a MAC contract like this one?

Key Performance Indicators (KPIs) under a Medicare Administrative Contractor (MAC) contract typically focus on operational efficiency, accuracy, and customer service. These often include metrics such as claims processing timeliness (e.g., percentage of claims processed within a certain number of days), claims accuracy rates (e.g., error rates in adjudication), call center wait times and resolution rates for beneficiary and provider inquiries, provider enrollment processing times, and compliance with program integrity requirements. For a Cost Plus Award Fee (CPAF) contract, these KPIs are crucial as they directly influence the 'award fee' portion of the contractor's compensation. CMS establishes specific targets for these KPIs, and the contractor's performance against these targets determines the extent of the award fee earned, thereby linking contractor compensation directly to service quality and efficiency.

What is the historical spending trend for Medicare Administrative Contracts in North Dakota or similar jurisdictions?

Historical spending trends for Medicare Administrative Contracts (MACs) can be analyzed by looking at previous contract awards for specific jurisdictions. For North Dakota, this contract represents a significant, long-term investment, exceeding $700 million over nearly a decade. While direct historical data for North Dakota alone might be limited as a single MAC jurisdiction, broader trends show that MAC contracts are substantial, multi-year agreements often valued in the hundreds of millions of dollars. Spending is influenced by factors such as the number of Medicare beneficiaries in the region, the volume of claims processed, and the scope of services required. Federal budgets allocated to CMS for administrative functions dictate the overall spending capacity. The trend is generally towards stable, long-term contracts due to the critical nature of Medicare administration, with annual spending fluctuating based on workload and program changes.

How does the competition level (3 bidders) impact the potential for cost savings or innovation for this contract?

A competition level of three bidders for a contract of this magnitude suggests a moderately competitive environment. While more bidders could potentially drive prices lower or foster greater innovation, three qualified bidders indicate that the market is not overly concentrated and that multiple entities possess the capability to perform these complex services. This level of competition provides a basis for price discovery, allowing the government to assess whether the proposed costs are reasonable relative to the services offered. It also encourages bidders to differentiate themselves through proposed technical solutions or management approaches, potentially leading to innovation. However, the specialized nature of MAC contracts means the pool of eligible bidders is inherently limited, making three bidders a reasonable outcome that likely balances competition with the need for proven expertise.

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: RFPCMS20110026

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: $838,975,686

Exercised Options: $838,975,686

Current Obligation: $709,292,463

Actual Outlays: $4,330,195

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline