HHS awards $369M contract for Medicare administrative services in Jurisdiction 5

Contract Overview

Contract Amount: $369,229,590 ($369.2M)

Contractor: Wisconsin Physicians Service Insurance Corp.

Awarding Agency: Department of Health and Human Services

Start Date: 2019-09-30

End Date: 2026-08-31

Contract Duration: 2,527 days

Daily Burn Rate: $146.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: Healthcare

Official Description: MEDICARE ADMINISTRATIVE CONTRACTOR JURISDICTION 5

Place of Performance

Location: MADISON, DANE County, WISCONSIN, 53701

State: Wisconsin Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $369.2 million to WISCONSIN PHYSICIANS SERVICE INSURANCE CORP. for work described as: MEDICARE ADMINISTRATIVE CONTRACTOR JURISDICTION 5 Key points: 1. Contract awarded through full and open competition, suggesting a robust bidding process. 2. The contract type is Cost Plus Award Fee, which incentivizes performance but requires careful oversight. 3. The duration of the contract is over 6 years, indicating a long-term need for these services. 4. The contractor, Wisconsin Physicians Service Insurance Corp., is a significant player in health insurance. 5. The contract value of $369 million over its term represents substantial federal investment in Medicare administration. 6. The contract is for direct health and medical insurance carriers, a critical function for Medicare operations.

Value Assessment

Rating: good

The contract value of $369 million over approximately 7 years (2527 days) averages to roughly $48 million annually. Benchmarking this against other Medicare Administrative Contractor (MAC) awards requires specific data on the scope of services and geographic region. However, the Cost Plus Award Fee structure allows for flexibility in payment based on performance, which can be a value-driver if managed effectively. The presence of two bidders suggests a competitive environment that likely influenced pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit a bid. The fact that there were two bidders suggests a competitive landscape for this type of service. A higher number of bidders generally leads to better price discovery and potentially lower costs for the government, though the specific dynamics depend on the complexity and market size.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it increases the likelihood of obtaining the best value through a competitive bidding process, driving down prices and improving service quality.

Public Impact

Beneficiaries of Medicare in Jurisdiction 5 will experience continued administrative support for their healthcare claims and services. The contract ensures the ongoing operation of critical Medicare administrative functions, including claims processing and provider services. The geographic impact is focused on Jurisdiction 5, which includes Wisconsin. The contract supports jobs within the health insurance and administrative services sector, particularly at Wisconsin Physicians Service Insurance Corp.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Award Fee contracts require diligent oversight to ensure the award fees are justified by performance and do not inflate costs unnecessarily.
The long-term nature of the contract (over 6 years) necessitates ongoing monitoring to ensure continued value and adaptation to evolving healthcare needs.
The limited number of bidders (two) could indicate potential barriers to entry or a concentrated market, which warrants attention.

Positive Signals

Awarded through full and open competition, suggesting a fair and transparent procurement process.
The contractor, Wisconsin Physicians Service Insurance Corp., has experience in health insurance, potentially leading to efficient service delivery.
The contract structure includes award fees, which can incentivize high performance and quality service delivery.

Sector Analysis

This contract falls within the broader Health Insurance and Managed Care sector, specifically focusing on the administration of government healthcare programs. The market for Medicare Administrative Contractors (MACs) is specialized, with a limited number of large, experienced firms capable of handling the scale and complexity of these operations. Spending in this area is substantial, reflecting the government's commitment to managing the Medicare program effectively. Comparable benchmarks would involve analyzing other MAC contracts awarded by CMS.

Small Business Impact

The data indicates that small business participation was not a specific set-aside for this contract (ss: false, sb: false). While the primary contractor is a large entity, there may be opportunities for small businesses to participate as subcontractors. Further analysis would be needed to determine the extent of small business subcontracting and its impact on the small business ecosystem within the healthcare administration sector.

Oversight & Accountability

Oversight for this contract is likely managed by the Centers for Medicare and Medicaid Services (CMS), a division of HHS. As a Cost Plus Award Fee contract, performance metrics and financial reporting will be critical components of oversight. Transparency is generally maintained through contract awards databases and agency reporting. The Inspector General for HHS would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Medicare Administrative Contractor Program
Centers for Medicare and Medicaid Services Contracts
Health Insurance Administration
Federal Health IT Contracts

Risk Flags

Potential for cost overruns in Cost Plus Award Fee contracts if not closely monitored.
Risk of data breaches due to the sensitive nature of health insurance information.
Dependence on contractor performance for critical Medicare administrative functions.
Potential for regulatory changes impacting contract scope or requirements.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $369.2 million to WISCONSIN PHYSICIANS SERVICE INSURANCE CORP.. MEDICARE ADMINISTRATIVE CONTRACTOR JURISDICTION 5

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 $369.2 million.

What is the period of performance?

Start: 2019-09-30. End: 2026-08-31.

What is the historical spending pattern for Medicare Administrative Contractor services in Jurisdiction 5?

Historical spending data for Medicare Administrative Contractor (MAC) services in Jurisdiction 5 prior to this award would provide crucial context. This contract, valued at $369 million over its term, represents a significant investment. Analyzing previous contract awards for this jurisdiction, including their duration, value, and awarded contractors, would reveal trends in spending, potential cost increases or decreases over time, and the stability of the contractor base. Without specific historical data for Jurisdiction 5, it's difficult to ascertain if this award represents an increase, decrease, or stable level of spending compared to prior periods. However, the consistent need for MAC services suggests ongoing, substantial federal expenditure in this area.

How does the performance of Wisconsin Physicians Service Insurance Corp. on previous contracts compare to industry benchmarks?

Assessing the performance of Wisconsin Physicians Service Insurance Corp. (WPS) on previous contracts is key to understanding the value proposition of this award. A thorough review would involve examining past performance evaluations, any incurred penalties or awards, and client feedback from prior government contracts, particularly those with CMS. Benchmarking WPS's performance against other MACs or similar health insurance administrators would highlight areas of strength or weakness. For instance, if WPS has consistently met or exceeded performance metrics in areas like claims processing timeliness, accuracy, and customer service in prior roles, it suggests a lower risk and potentially higher value for this new contract. Conversely, a history of performance issues would raise concerns about the effective use of taxpayer funds.

What are the specific performance metrics tied to the 'Award Fee' component of this contract?

The 'Award Fee' component of this Cost Plus Award Fee (CPAF) contract is designed to incentivize high performance by allowing the government to award additional fees beyond the cost reimbursement, based on achieving specific performance objectives. The exact metrics are typically detailed in the contract's Performance Work Statement (PWS) and are often categorized. Common metrics for MAC contracts include timeliness and accuracy of claims processing, effectiveness of provider outreach and education, efficiency in handling beneficiary inquiries, adherence to regulatory compliance, and innovation in service delivery. The government's Contracting Officer's Representative (COR) would be responsible for evaluating WPS's performance against these metrics and determining the amount of the award fee. Transparency around these metrics and the evaluation process is crucial for ensuring fairness and accountability.

What is the potential impact of this contract on the overall Medicare administrative cost structure?

This contract represents a significant portion of the administrative costs for Medicare in Jurisdiction 5. The total value of $369 million over approximately seven years contributes to the overall administrative overhead of the Medicare program. The efficiency and effectiveness of Wisconsin Physicians Service Insurance Corp. in performing its duties directly influence this cost structure. If WPS can process claims accurately and efficiently, manage provider relations effectively, and minimize errors, it can help keep administrative costs down. Conversely, inefficiencies or performance issues could lead to increased administrative burdens and potentially higher costs for the program. The CPAF structure aims to align contractor incentives with cost-effective performance, but rigorous oversight is necessary to realize this potential.

Are there any known risks associated with the contractor, Wisconsin Physicians Service Insurance Corp., or the nature of Medicare administrative services?

Risks associated with this contract can be categorized into contractor-specific and service-specific risks. For Wisconsin Physicians Service Insurance Corp. (WPS), potential risks might include financial stability, past performance issues on similar contracts (if any), or cybersecurity vulnerabilities, although the award suggests these were deemed acceptable. Service-specific risks inherent in Medicare administration include the complexity of constantly evolving regulations, the potential for fraud and abuse within the system, data security breaches of sensitive beneficiary information, and the challenge of maintaining high levels of accuracy and timeliness in claims processing. The CPAF structure itself introduces a risk if award fee criteria are not clearly defined or objectively measured, potentially leading to disputes or unjustified fee payments. Robust risk mitigation strategies and continuous monitoring by CMS are essential.

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: 75FCMC18R0040

Offers Received: 2

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: $440,687,720

Exercised Options: $440,187,720

Current Obligation: $369,229,590

Actual Outlays: $258,437,396

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline