J8 A/B MAC contract awarded to Wisconsin Physicians Service Insurance Corp. for over $318M

Contract Overview

Contract Amount: $318,888,537 ($318.9M)

Contractor: Wisconsin Physicians Service Insurance Corp.

Awarding Agency: Department of Health and Human Services

Start Date: 2018-11-01

End Date: 2026-10-31

Contract Duration: 2,921 days

Daily Burn Rate: $109.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: COST PLUS AWARD FEE

Sector: Healthcare

Official Description: J8 A/B MAC

Place of Performance

Location: MONONA, DANE County, WISCONSIN, 53713

State: Wisconsin Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $318.9 million to WISCONSIN PHYSICIANS SERVICE INSURANCE CORP. for work described as: J8 A/B MAC Key points: 1. The contract's cost-plus-award-fee structure incentivizes performance but requires robust oversight to ensure value. 2. Full and open competition suggests a potentially competitive pricing environment, though specific benchmarks are needed. 3. The contract duration of nearly 8 years indicates a long-term need for these services. 4. The awardee's established presence in health insurance suggests relevant experience for this type of contract. 5. The contract's focus on direct health and medical insurance carriers aligns with core government healthcare functions.

Value Assessment

Rating: fair

The contract's total value of over $318 million over nearly eight years suggests a significant investment. Without specific performance metrics or comparable contract data, a precise value-for-money assessment is challenging. The cost-plus-award-fee (CPAF) pricing model allows for cost reimbursement plus a performance-based fee, which can incentivize efficiency but also necessitates careful monitoring of costs and performance to ensure fair pricing. Benchmarking against similar large-scale health insurance administration contracts would be necessary for a more definitive assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders had the opportunity to submit proposals. This competitive process is generally expected to drive down costs and improve the quality of services offered. The presence of four bidders, as indicated by the 'no' field, suggests a reasonable level of competition for this significant contract. The specific details of the bidding process and the number of proposals received would provide further insight into the intensity of the competition.

Taxpayer Impact: A competitive bidding process for this contract is beneficial for taxpayers as it increases the likelihood of securing services at a fair market price and encourages innovation among contractors.

Public Impact

Beneficiaries of Medicare and other federal health programs administered by CMS are indirectly impacted through the efficient processing of claims and services. The contract supports the operational functions of the Centers for Medicare and Medicaid Services (CMS) in managing health insurance programs. The geographic impact is national, as CMS programs serve beneficiaries across the United States. Workforce implications include the employment of personnel by the contractor to manage and execute the contract's requirements.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The cost-plus-award-fee structure requires diligent oversight to prevent cost overruns and ensure the award fee is justified by performance.
Long contract durations can sometimes lead to complacency or reduced incentive for innovation if not actively managed.
The broad nature of 'Direct Health and Medical Insurance Carriers' could encompass a wide range of services, requiring clear scope definition to avoid ambiguity.

Positive Signals

Awarded under full and open competition, suggesting a robust selection process and potential for competitive pricing.
The contractor, Wisconsin Physicians Service Insurance Corp., likely possesses significant experience in health insurance administration, aligning with the contract's objectives.
The contract's alignment with CMS's core mission indicates a strategic importance and potential for positive impact on federal healthcare programs.

Sector Analysis

This contract falls within the Health Information and Services sector, specifically focusing on health insurance and medical carrier services. This is a critical area for government operations, particularly for agencies like CMS that manage large-scale healthcare programs. The market for such services is substantial, with numerous private sector entities capable of providing administrative and claims processing functions. Benchmarking would involve comparing this contract's value and structure to other large federal contracts for similar administrative services, as well as private sector equivalents, to gauge its relative cost-effectiveness and scope.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications specifically mandated by a small business set-aside. However, the prime contractor may still engage small businesses as subcontractors to fulfill certain aspects of the contract, which would be a positive indicator for the small business ecosystem. Analysis of the contractor's subcontracting plan, if available, would be necessary to determine the extent of small business participation.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Health and Human Services, specifically the Centers for Medicare and Medicaid Services (CMS). As a Cost Plus Award Fee (CPAF) contract, CMS would be responsible for monitoring the contractor's costs, evaluating performance against established criteria, and determining the award fee. Transparency would be enhanced through regular reporting requirements and potentially through public contract databases. Inspector General jurisdiction would apply to any potential fraud, waste, or abuse related to the contract.

Related Government Programs

Medicare Administrative Contractors (MACs)
Federal Health Insurance Programs
Healthcare Claims Processing
Health Insurance Carrier Services

Risk Flags

Cost-Plus-Award-Fee (CPAF) structure requires diligent oversight.
Long contract duration necessitates ongoing performance monitoring.
Potential for scope creep in broad 'Direct Health and Medical Insurance Carriers' services.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $318.9 million to WISCONSIN PHYSICIANS SERVICE INSURANCE CORP.. J8 A/B MAC

Who is the contractor on this award?

The obligated recipient is WISCONSIN PHYSICIANS SERVICE INSURANCE CORP..

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 $318.9 million.

What is the period of performance?

Start: 2018-11-01. End: 2026-10-31.

What is the historical spending pattern for the J8 A/B MAC contract and similar contracts managed by CMS?

The provided data shows a total award value of $318,888,537.37 for the J8 A/B MAC contract, with an award date of November 1, 2018, and an expected completion date of October 31, 2026. This indicates an average annual spending of approximately $40 million over the contract's duration. To assess historical spending patterns, one would need to examine prior contract awards for the same or similar MAC jurisdictions, as well as track the annual expenditure against the ceiling for this specific contract. CMS manages numerous MAC contracts across different geographic jurisdictions, and analyzing the aggregate spending across all MACs would provide a broader context for understanding the scale of investment in these services. Comparing the spending on this contract to previous iterations or to other MAC jurisdictions could reveal trends in cost efficiency and program evolution.

How does the per-unit cost of services under this contract compare to industry benchmarks or other federal contracts?

Determining the per-unit cost for this contract is challenging without specific details on the units of service being provided (e.g., number of claims processed, beneficiaries served, or specific administrative tasks completed). The contract type, Cost Plus Award Fee (CPAF), means that costs are reimbursed, and a fee is added based on performance. To benchmark per-unit costs, one would need to identify the key performance indicators (KPIs) and associated cost metrics defined in the contract. For instance, if a primary unit is 'claims processed,' the cost per claim could be calculated and compared to other MAC contracts or industry averages for claims administration. Given the contract's broad scope as a Medicare Administrative Contractor, it likely involves a complex array of services, making a single per-unit cost difficult to establish. A detailed analysis would require access to the contract's statement of work and performance metrics.

What is the track record of Wisconsin Physicians Service Insurance Corp. in managing large federal contracts, particularly within healthcare?

Wisconsin Physicians Service Insurance Corp. (WPS) has a significant history of managing federal contracts, particularly in the healthcare sector. They have served as a Medicare Administrative Contractor (MAC) for various jurisdictions for many years, processing claims and providing administrative services for Medicare beneficiaries. Their experience extends to other federal programs as well. A thorough assessment of their track record would involve reviewing past performance evaluations, any past performance issues or awards, and their financial stability. Given their long-standing role in administering Medicare, it suggests a demonstrated capability to handle the scale and complexity required for contracts like J8 A/B MAC. However, specific details on their performance on this particular contract or others would be needed for a comprehensive evaluation.

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

The primary risks associated with a Cost Plus Award Fee (CPAF) contract structure for a service like the J8 A/B MAC revolve around cost control and the objective measurement of performance. For the government, there's a risk that costs could escalate beyond initial projections, as the contractor is reimbursed for allowable costs. The 'award fee' component, while intended to incentivize high performance, can be subjective and may lead to disputes if performance metrics are not clearly defined or if the evaluation process is perceived as unfair. For the contractor, the risk lies in not meeting the performance targets required to earn the maximum award fee, thereby reducing their overall profit. Effective risk mitigation requires robust government oversight, clear and measurable performance standards, and transparent communication between the contracting agency and the contractor.

How has the competition level for this contract (full and open with 4 bidders) impacted its pricing and overall value?

A 'full and open competition' with four bidders suggests a healthy level of market interest and potential for competitive pricing. This scenario typically allows multiple qualified contractors to vie for the contract, driving down proposed costs as each bidder seeks to offer the most attractive proposal. The presence of four bidders indicates that the market is not overly concentrated, and the government had a reasonable selection pool. While this competitive environment is generally favorable for taxpayers, the ultimate impact on pricing and value depends on the specifics of the proposals submitted and the evaluation criteria used. Without access to the bid details, it's difficult to definitively state the exact price reduction achieved through competition, but the process itself is a positive indicator for value for money.

What is the strategic importance of the J8 A/B MAC contract within the broader Medicare administrative framework?

The J8 A/B MAC contract is strategically vital as it directly supports the operational backbone of the Medicare program. Medicare Administrative Contractors (MACs) are responsible for crucial functions such as processing Medicare fee-for-service claims, managing provider enrollment, and detecting and preventing fraud, waste, and abuse. The J8 A/B MAC jurisdiction covers a specific geographic region, ensuring that Medicare beneficiaries and providers within that area receive timely and accurate administrative support. The efficient and effective execution of this contract is essential for the smooth functioning of Medicare, impacting beneficiary access to care and provider reimbursement. Its performance directly influences the overall integrity and efficiency of one of the nation's largest healthcare programs.

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: HHSM5002017RFP0016

Offers Received: 4

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Address: 1717 W BROADWAY, MADISON, WI, 53713

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

Financial Breakdown

Contract Ceiling: $485,546,336

Exercised Options: $407,842,134

Current Obligation: $318,888,537

Actual Outlays: $202,379,578

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline