VA awards $510M contract to Optum for direct health and medical insurance carriers in Q2 FY24

Contract Overview

Contract Amount: $509,946,647 ($509.9M)

Contractor: Optum Public Sector Solutions, Inc.

Awarding Agency: Department of Veterans Affairs

Start Date: 2024-01-01

End Date: 2024-01-31

Contract Duration: 30 days

Daily Burn Rate: $17.0M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT: R2 FY24 2ND QTR JAN

Place of Performance

Location: ROCKVILLE, MONTGOMERY County, MARYLAND, 20850

State: Maryland Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $509.9 million to OPTUM PUBLIC SECTOR SOLUTIONS, INC. for work described as: EXPRESS REPORT: R2 FY24 2ND QTR JAN Key points: 1. The contract value of $510M represents a significant investment in healthcare services. 2. Full and open competition was utilized, suggesting a robust market for these services. 3. Potential risks include service delivery continuity and ensuring cost-effectiveness over time. 4. The IT sector is indirectly impacted through the need for robust data management and systems.

Value Assessment

Rating: good

The award amount of $510M for a 30-day period (January 2024) suggests a high per-diem cost or a large patient volume. Benchmarking against similar large-scale health insurance contracts is necessary for a definitive assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded through full and open competition, indicating that multiple vendors had the opportunity to bid. This method generally promotes competitive pricing and allows the agency to select the best value offering.

Taxpayer Impact: The competitive nature of the award is expected to yield fair pricing, ensuring taxpayer funds are used efficiently for essential healthcare services.

Public Impact

Veterans will receive direct health and medical insurance services, improving access to care. The contract supports the Department of Veterans Affairs' mission to provide comprehensive healthcare. Efficient contract management will ensure timely and quality healthcare delivery to beneficiaries.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if not closely monitored.
Dependence on a single vendor for critical services.
Ensuring data privacy and security for sensitive health information.

Positive Signals

Awarded through full and open competition.
Supports a critical government mission.
Utilizes a firm fixed-price contract type.

Sector Analysis

This contract falls under the healthcare services sector, specifically focusing on direct health and medical insurance carriers. Spending in this area is substantial across government agencies, driven by the need to provide comprehensive benefits to beneficiaries.

Small Business Impact

While the contract was awarded to Optum Public Sector Solutions, Inc., it is unclear if any subcontracting opportunities exist for small businesses. Further analysis would be needed to determine the extent of small business participation.

Oversight & Accountability

The Department of Veterans Affairs is responsible for overseeing this contract. Robust oversight mechanisms are crucial to ensure service delivery meets quality standards and contractual obligations are fulfilled.

Related Government Programs

Direct Health and Medical Insurance Carriers
Department of Veterans Affairs Contracting
Department of Veterans Affairs Programs

Risk Flags

High contract value.
Potential for service disruption.
Data security and privacy concerns.
Dependence on a single large provider.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $509.9 million to OPTUM PUBLIC SECTOR SOLUTIONS, INC.. EXPRESS REPORT: R2 FY24 2ND QTR JAN

Who is the contractor on this award?

The obligated recipient is OPTUM PUBLIC SECTOR SOLUTIONS, INC..

Which agency awarded this contract?

Awarding agency: Department of Veterans Affairs (Department of Veterans Affairs).

What is the total obligated amount?

The obligated amount is $509.9 million.

What is the period of performance?

Start: 2024-01-01. End: 2024-01-31.

What is the projected long-term cost-effectiveness of this contract for the VA?

The long-term cost-effectiveness hinges on Optum's ability to manage healthcare costs efficiently while maintaining service quality. Regular performance reviews and market analysis will be critical to ensure the VA receives value. The firm fixed-price nature provides some cost certainty, but potential for scope creep or unforeseen healthcare trends could impact overall expenditure.

What are the primary risks associated with relying on Optum for these critical healthcare services?

Key risks include potential service disruptions if Optum faces operational challenges, data breaches compromising sensitive veteran health information, and the possibility of escalating costs if not managed proactively. The VA must maintain strong oversight and contingency plans to mitigate these risks and ensure continuity of care for veterans.

How effectively does this contract align with the VA's broader healthcare modernization goals?

This contract's effectiveness in aligning with modernization goals depends on Optum's technological capabilities and integration with existing VA systems. If Optum can provide innovative solutions for claims processing, data analytics, and patient engagement, it can significantly contribute to modernization. However, if it merely maintains the status quo, its alignment will be limited.

Industry Classification

NAICS: Finance and Insurance › Insurance Carriers › Direct Health and Medical Insurance Carriers

Product/Service Code: MEDICAL SERVICES › GENERAL HEALTH CARE SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Unitedhealth Group Incorporated

Address: 3237 AIRPORT RD, LA CROSSE, WI, 54603

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

Financial Breakdown

Contract Ceiling: $509,946,647

Exercised Options: $509,946,647

Current Obligation: $509,946,647

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 36C79119D0005

IDV Type: IDC

Timeline