HHS awards over $890M for Medicare claims processing in Jurisdiction H, covering 7 states

Contract Overview

Contract Amount: $889,970,439 ($890.0M)

Contractor: Novitas Solutions, Inc.

Awarding Agency: Department of Health and Human Services

Start Date: 2019-06-01

End Date: 2026-05-31

Contract Duration: 2,556 days

Daily Burn Rate: $348.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: COST PLUS AWARD FEE

Sector: Healthcare

Official Description: THE PURPOSE OF THIS CONTRACT IS TO OBTAIN SERVICES FOR THE JURISDICTION H (PART A AND B) MEDICARE ADMINISTRATIVE CONTRACTOR (MAC). THE CONTRACTOR WILL PROVIDE SPECIFIED HEALTH INSURANCE BENEFIT ADMINISTRATION SERVICES, INCLUDING MEDICARE CLAIMS PROCESSING AND PAYMENT SERVICES, IN SUPPORT OF THE MEDICARE PROGRAM (ALSO KNOWN AS THE MEDICARE FEE-FOR-SERVICE, OR FFS, PROGRAM) FOR JURISDICTION H. JURISDICTION H INCLUDES THE FOLLOWING STATES: ARKANSAS, COLORADO, LOUISIANA, MISSISSIPPI, NEW MEXICO, OKLAHOMA, AND TEXAS.

Place of Performance

Location: MECHANICSBURG, CUMBERLAND County, PENNSYLVANIA, 17050

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $890.0 million to NOVITAS SOLUTIONS, INC. for work described as: THE PURPOSE OF THIS CONTRACT IS TO OBTAIN SERVICES FOR THE JURISDICTION H (PART A AND B) MEDICARE ADMINISTRATIVE CONTRACTOR (MAC). THE CONTRACTOR WILL PROVIDE SPECIFIED HEALTH INSURANCE BENEFIT ADMINISTRATION SERVICES, INCLUDING MEDICARE CLAIMS PROCESSING AND PAYMENT SERVICES, IN… Key points: 1. Contract ensures continued administration of Medicare benefits for millions of beneficiaries. 2. The large scale of this contract suggests a critical function within the Medicare program. 3. Performance is tied to award fees, incentivizing quality service delivery. 4. The contract duration of nearly 7 years indicates a stable, long-term need. 5. This contract supports a significant portion of the national Medicare Fee-For-Service program. 6. The geographic scope covers a substantial population base across multiple states.

Value Assessment

Rating: good

The contract's total value of approximately $890 million over nearly seven years for Medicare claims processing in Jurisdiction H appears reasonable given the scope and complexity of administering benefits for millions of beneficiaries across seven states. Benchmarking against similar Medicare Administrative Contractor (MAC) contracts is challenging due to proprietary data and varying contract structures, but the per-beneficiary cost, if calculable, would be a key metric. The Cost Plus Award Fee (CPAF) structure allows for adjustments based on performance, which can drive value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded through full and open competition, indicating that multiple qualified bidders had the opportunity to submit proposals. The presence of multiple bidders generally fosters price discovery and encourages contractors to offer competitive pricing and innovative solutions to win the contract. The specific number of bidders is not provided, but the 'full and open' designation suggests a robust competitive process.

Taxpayer Impact: A full and open competition process is beneficial for taxpayers as it is designed to secure the best value by encouraging a wide range of offers and driving down costs through market forces.

Public Impact

Medicare beneficiaries in Arkansas, Colorado, Louisiana, Mississippi, New Mexico, Oklahoma, and Texas will continue to receive health insurance benefit administration services. The contract ensures the uninterrupted processing of Medicare claims and payments, crucial for healthcare providers. This contract supports the operational integrity of the Medicare Fee-For-Service program. It sustains jobs within the health insurance administration sector, particularly for the contractor's workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if award fee targets are not met or if contract scope expands without adequate oversight.
Risk of service disruptions if contractor performance degrades significantly, impacting beneficiary access to care.
Dependence on a single contractor for a critical function could pose systemic risk if not managed proactively.

Positive Signals

The full and open competition process suggests a strong market for these services, potentially leading to better value.
The Cost Plus Award Fee (CPAF) structure incentivizes high performance and quality service delivery.
The long contract duration provides stability and predictability for both the government and the contractor.
The established nature of Medicare claims processing suggests a mature operational environment for the contractor.

Sector Analysis

This contract falls within the Health Insurance Carriers sector, specifically focusing on the administration of government health programs. The Medicare Administrative Contractor (MAC) program is a critical component of the Centers for Medicare and Medicaid Services' (CMS) operations, responsible for processing claims and managing payments for the vast Medicare Fee-For-Service population. The market for these services is highly specialized, dominated by a few large players with the expertise and infrastructure to handle the scale and regulatory requirements of Medicare.

Small Business Impact

The provided data does not indicate any specific small business set-asides or subcontracting requirements for this contract. As a large-scale contract for essential government services, the primary focus is likely on the prime contractor's capabilities. Further investigation into the contractor's subcontracting plan would be necessary to assess the impact on the small business ecosystem.

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. As a Cost Plus Award Fee (CPAF) contract, performance is monitored against established criteria, and award fees are contingent upon meeting or exceeding these standards. Transparency is facilitated through contract awards databases, and while specific Inspector General (IG) reports related to this exact contract are not detailed here, the HHS OIG has broad jurisdiction over Medicare programs.

Related Government Programs

Medicare Administrative Contractor (MAC) Program
Medicare Fee-For-Service Claims Processing
Health Insurance Benefit Administration
Federal Health Insurance Programs

Risk Flags

Contract duration exceeds typical federal contract lengths, requiring sustained oversight.
Cost Plus Award Fee structure necessitates careful monitoring of performance metrics to ensure value.
Large geographic scope may introduce logistical and operational complexities.
Dependence on a single contractor for critical Medicare functions.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $890.0 million to NOVITAS SOLUTIONS, INC.. THE PURPOSE OF THIS CONTRACT IS TO OBTAIN SERVICES FOR THE JURISDICTION H (PART A AND B) MEDICARE ADMINISTRATIVE CONTRACTOR (MAC). THE CONTRACTOR WILL PROVIDE SPECIFIED HEALTH INSURANCE BENEFIT ADMINISTRATION SERVICES, INCLUDING MEDICARE CLAIMS PROCESSING AND PAYMENT SERVICES, IN SUPPORT OF THE MEDICARE PROGRAM (ALSO KNOWN AS THE MEDICARE FEE-FOR-SERVICE, OR FFS, PROGRAM) FOR JURISDICTION H. JURISDICTION H INCLUDES THE FOLLOWING STATES: ARKANSAS, COLORADO, LOUISIANA, MISSISSIPPI, NEW MEXICO, OK

Who is the contractor on this award?

The obligated recipient is NOVITAS SOLUTIONS, INC..

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 $890.0 million.

What is the period of performance?

Start: 2019-06-01. End: 2026-05-31.

What is the historical spending trend for Medicare claims processing in Jurisdiction H under previous contracts?

Analyzing historical spending for Medicare claims processing in Jurisdiction H requires accessing prior contract data, which is not directly provided in the current data extract. However, the Medicare program has seen consistent and significant spending growth over the years due to factors like an aging population, advancements in medical technology, and inflation. Previous MAC contracts for Jurisdiction H would likely show a steady increase in costs, reflecting these broader trends and potential changes in contract scope or service requirements. Understanding these historical patterns is crucial for evaluating the current contract's value and identifying any significant deviations or efficiencies.

How does the per-beneficiary cost of this contract compare to other Medicare Administrative Contractor (MAC) jurisdictions?

A direct per-beneficiary cost comparison is difficult without knowing the exact number of beneficiaries covered by Jurisdiction H under this contract and the specific cost drivers. MAC contracts vary in scope, geographic complexity, and the specific services required, influencing their per-beneficiary costs. Generally, costs are influenced by factors such as the prevalence of chronic diseases, the utilization of healthcare services, and the efficiency of claims processing systems. To perform a robust comparison, one would need to normalize for these variables across different MAC jurisdictions, looking at metrics like administrative cost per dollar of claims paid or per beneficiary served.

What are the key performance indicators (KPIs) tied to the award fee structure in this contract?

The Cost Plus Award Fee (CPAF) structure implies that specific performance metrics are defined within the contract that the contractor, Novitas Solutions, Inc., must meet to earn award fees. While the exact KPIs are not detailed in the provided data, typical metrics for Medicare Administrative Contractors include claims processing accuracy rates, timeliness of payments to providers, customer service responsiveness (for beneficiaries and providers), data security compliance, and adherence to program integrity guidelines. The 'award fee' component suggests that exceeding baseline performance expectations in these or other critical areas would result in additional compensation, incentivizing superior service delivery.

What is Novitas Solutions, Inc.'s track record in administering Medicare programs or similar large-scale health insurance contracts?

Novitas Solutions, Inc. has a significant track record in administering Medicare programs, particularly as a Medicare Administrative Contractor (MAC). They have been responsible for processing claims and managing benefits for Medicare beneficiaries in various jurisdictions, including Jurisdiction H. Their experience encompasses handling the complexities of Medicare regulations, ensuring accurate claims adjudication, and providing customer support. Evaluating their past performance, including any past issues or successes in managing similar contracts, would be essential for a comprehensive risk assessment. Their continued selection for such critical roles suggests a generally satisfactory performance history.

What are the potential risks associated with the long duration (nearly 7 years) of this contract?

The long duration of this contract, spanning from June 2019 to May 2026, presents several potential risks. Firstly, it could lead to contractor complacency if performance monitoring is not rigorous, potentially allowing service quality to decline over time. Secondly, it reduces the government's flexibility to adapt to rapidly changing healthcare landscapes or technological advancements, as switching contractors mid-term is complex and costly. Thirdly, long-term contracts can sometimes lock the government into pricing structures that may become unfavorable if market rates decrease. Continuous oversight and performance management are crucial to mitigate these risks and ensure sustained value throughout the contract's life.

How does the geographic scope of Jurisdiction H (7 states) impact the complexity and cost of this contract?

The extensive geographic scope of Jurisdiction H, encompassing seven states (Arkansas, Colorado, Louisiana, Mississippi, New Mexico, Oklahoma, and Texas), significantly increases the complexity and potential cost of this Medicare claims processing contract. Managing operations across such a wide area requires robust logistical capabilities, potentially multiple service centers, and the ability to navigate diverse state-specific healthcare provider networks and beneficiary demographics. The contractor must ensure consistent service delivery and compliance with federal regulations across all seven states, which can lead to higher administrative overhead and operational costs compared to a contract covering a smaller, more contiguous region.

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: 75FCMC18R0005

Offers Received: 4

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Address: 2020 TECHNOLOGY PKWY, STE 100, MECHANICSBURG, PA, 17050

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

Financial Breakdown

Contract Ceiling: $1,058,980,301

Exercised Options: $1,058,480,301

Current Obligation: $889,970,439

Actual Outlays: $605,148,221

Subaward Activity

Number of Subawards: 52

Total Subaward Amount: $124,959,520

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline