HHS awards $203M contract to Noridian Healthcare Solutions for Medicare claims processing

Contract Overview

Contract Amount: $203,308,093 ($203.3M)

Contractor: Noridian Healthcare Solutions, LLC

Awarding Agency: Department of Health and Human Services

Start Date: 2015-12-16

End Date: 2025-06-30

Contract Duration: 3,484 days

Daily Burn Rate: $58.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS AWARD FEE

Sector: Healthcare

Official Description: IGF::CT::IGF JA PROCUREMENT

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 $203.3 million to NORIDIAN HEALTHCARE SOLUTIONS, LLC for work described as: IGF::CT::IGF JA PROCUREMENT Key points: 1. Contract value of $203.3 million over its potential duration. 2. Awarded through full and open competition, indicating a competitive bidding process. 3. The contract type is Cost Plus Award Fee, which incentivizes performance. 4. Noridian Healthcare Solutions has a significant role in Medicare claims processing. 5. The contract spans multiple years, suggesting a long-term need for these services. 6. The North Dakota location may indicate a specific regional focus or operational base.

Value Assessment

Rating: good

The contract's value of $203.3 million over approximately 9.5 years suggests a substantial investment in Medicare claims processing. Benchmarking this against similar contracts for Medicare administrative contractors (MACs) is crucial for a precise value-for-money assessment. However, the Cost Plus Award Fee structure allows for performance-based adjustments, which can lead to better value if the contractor meets or exceeds targets. Without specific performance metrics and award fee payouts, a definitive value assessment is challenging, but the competitive nature of the award provides a baseline for fair pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit a bid. The presence of 3 bidders indicates a moderate level of competition for this significant Medicare administrative contract. A higher number of bidders generally leads to more competitive pricing and a wider range of innovative solutions. However, the complexity and specialized nature of Medicare claims processing may limit the pool of qualified bidders.

Taxpayer Impact: The full and open competition suggests that taxpayers likely benefited from a more competitive pricing structure compared to a sole-source or limited competition award. This process helps ensure that the government is obtaining services at a fair and reasonable price.

Public Impact

Beneficiaries of Medicare services will experience continued claims processing. The contract ensures the operational continuity of Medicare administrative functions. Services are likely delivered nationwide, supporting the broader Medicare program. The contract supports jobs within the healthcare administration and insurance sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in Cost Plus Award Fee contracts if not managed tightly.
Dependence on a single contractor for a critical function like Medicare claims processing carries inherent risk.
The long duration of the contract could lead to vendor lock-in and reduced flexibility for future technological advancements.

Positive Signals

Awarded through full and open competition, suggesting a robust selection process.
The Cost Plus Award Fee structure incentivizes contractor performance and efficiency.
Noridian Healthcare Solutions' established presence in Medicare processing indicates experience and potential for reliable service delivery.

Sector Analysis

This contract falls within the broader Health Information Services sector, specifically focusing on health insurance and claims administration. The Centers for Medicare and Medicaid Services (CMS) is a major procurer in this space, managing vast sums for healthcare services. Comparable spending benchmarks would involve analyzing other MAC contracts awarded by CMS, which often run into hundreds of millions of dollars over several years due to the scale of the Medicare program.

Small Business Impact

The contract details do not indicate a specific small business set-aside. Given the nature of Medicare claims processing, which requires significant infrastructure and specialized expertise, it is less common for such large-scale contracts to be exclusively set aside for small businesses. However, Noridian Healthcare Solutions may engage small businesses as subcontractors, contributing to the small business ecosystem.

Oversight & Accountability

Oversight for this contract is likely managed by the Centers for Medicare and Medicaid Services (CMS) contracting officers and program managers. The Cost Plus Award Fee structure implies performance monitoring to determine award fees. Transparency is generally maintained through contract awards databases, though specific performance metrics and detailed financial breakdowns may be less publicly accessible. The Department of Health and Human Services Office of Inspector General (HHS-OIG) would have jurisdiction for audits and investigations related to potential fraud, waste, or abuse.

Related Government Programs

Medicare Administrative Contractor (MAC) contracts
Healthcare Claims Processing Services
Health Insurance Carrier Services
Centers for Medicare and Medicaid Services (CMS) IT and Support Services

Risk Flags

Cost Overruns
Performance Monitoring
Vendor Lock-in
Contract Complexity

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $203.3 million to NORIDIAN HEALTHCARE SOLUTIONS, LLC. IGF::CT::IGF JA PROCUREMENT

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 $203.3 million.

What is the period of performance?

Start: 2015-12-16. End: 2025-06-30.

What is Noridian Healthcare Solutions' track record with federal contracts, particularly with CMS?

Noridian Healthcare Solutions has a substantial history of federal contracting, primarily with the Centers for Medicare and Medicaid Services (CMS). They have served as a Medicare Administrative Contractor (MAC) in various jurisdictions for many years, processing claims and providing customer service for Medicare beneficiaries and providers. Their experience includes managing large volumes of claims, handling complex billing rules, and adapting to program changes. Past performance reviews and contract histories available through federal procurement databases would offer more granular detail on their performance, including any past issues or commendations. This long-standing relationship suggests a level of established capability and familiarity with CMS requirements.

How does the $203.3 million contract value compare to similar Medicare claims processing contracts?

The $203.3 million contract value for Noridian Healthcare Solutions is in line with the scale of other Medicare Administrative Contractor (MAC) awards. CMS typically awards multi-year contracts to multiple MACs covering different geographic regions or specific Medicare functions. These contracts often range from tens to hundreds of millions of dollars, reflecting the immense volume of claims processed annually for millions of beneficiaries. For instance, other MAC contracts for similar services have been awarded in the same order of magnitude. The specific value is influenced by factors such as the geographic area covered, the number of beneficiaries served, and the scope of services required, including customer service, provider support, and claims adjudication.

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

The primary risks associated with a Cost Plus Award Fee (CPAF) contract, like this one, revolve around cost control and performance incentivization. While CPAF aims to motivate contractors to exceed performance standards by offering award fees, there's a risk that costs could escalate if the base cost projections are inaccurate or if the contractor incurs higher-than-expected expenses. The government must diligently monitor costs and performance to ensure that award fees are justified and that the overall contract remains cost-effective. Another risk is the potential for subjective interpretation of performance standards when determining award fees, which could lead to disputes. Ensuring clear, objective performance metrics is crucial to mitigate this risk.

How effective is the full and open competition process in ensuring value for this type of contract?

The full and open competition process is generally considered the most effective method for ensuring value in federal contracting, including for complex services like Medicare claims processing. By allowing all responsible sources to compete, it fosters a competitive environment that drives down prices and encourages innovation. In this case, with 3 bidders, there was a degree of competition, which likely helped the government secure a fair price. However, the effectiveness is also dependent on the clarity of the solicitation requirements and the evaluation criteria. If the market for such specialized services is limited, even full and open competition might result in fewer bidders than desired, potentially impacting the degree of price pressure.

What is the historical spending trend for Medicare claims processing contracts awarded by CMS?

Historical spending trends for Medicare claims processing contracts awarded by CMS show a consistent and significant investment over the years. As the Medicare program serves millions of beneficiaries and processes billions of claims annually, the associated administrative costs are substantial. CMS regularly procures services through Medicare Administrative Contractors (MACs) and their predecessors, with contract values typically in the hundreds of millions of dollars, often awarded as multi-year, indefinite-delivery indefinite-quantity (IDIQ) or definitive contracts. Spending has generally remained high and stable, reflecting the ongoing need for these essential services. Fluctuations may occur due to program expansions, legislative changes, or consolidation of contract vehicles, but the overall trend indicates sustained, large-scale federal expenditure in this area.

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: HHSM5002015RFP0102

Offers Received: 3

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

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: $222,728,106

Exercised Options: $222,228,106

Current Obligation: $203,308,093

Actual Outlays: $93,575,920

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline