HHS awards $642.5M Medicare Administrative Contractor services contract to First Coast Service Options, Inc

Contract Overview

Contract Amount: $642,539,515 ($642.5M)

Contractor: First Coast Service Options, Inc.

Awarding Agency: Department of Health and Human Services

Start Date: 2014-02-14

End Date: 2022-08-31

Contract Duration: 3,120 days

Daily Burn Rate: $205.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: COST PLUS AWARD FEE

Sector: Healthcare

Official Description: IGF::OT::IGF JURISDICTION N A/B MEDICARE ADMINISTRATIVE CONTRACTOR SERVICES

Place of Performance

Location: JACKSONVILLE, DUVAL County, FLORIDA, 32202

State: Florida Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $642.5 million to FIRST COAST SERVICE OPTIONS, INC. for work described as: IGF::OT::IGF JURISDICTION N A/B MEDICARE ADMINISTRATIVE CONTRACTOR SERVICES Key points: 1. Contract awarded through full and open competition, suggesting a robust market for these services. 2. The contract type, Cost Plus Award Fee, incentivizes performance but requires careful oversight to manage costs. 3. A duration of 3120 days (approximately 8.5 years) indicates a long-term commitment and potential for significant contractor influence. 4. The contract's value places it among substantial federal IT and administrative service procurements. 5. Performance is benchmarked against similar MAC contracts, with a focus on efficiency and quality of service delivery. 6. Risk indicators include potential for cost overruns inherent in Cost Plus Award Fee contracts and the complexity of Medicare administration.

Value Assessment

Rating: good

The contract value of $642.5 million over approximately 8.5 years averages to roughly $75.6 million annually. This figure is within the expected range for Medicare Administrative Contractor (MAC) services, which are critical for processing claims and managing provider networks. Benchmarking against other MAC contracts reveals similar award values for comparable scope and duration, suggesting competitive pricing. The Cost Plus Award Fee structure allows for performance-based incentives, which can drive value if managed effectively, but also necessitates vigilance against potential cost creep.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple qualified vendors had the opportunity to bid. The presence of four bidders (no=4) suggests a healthy competitive environment for Medicare Administrative Contractor services. This level of competition is generally favorable for price discovery and ensures that the government receives proposals from a range of capable providers, potentially leading to better terms and services.

Taxpayer Impact: Full and open competition typically results in more favorable pricing for taxpayers by fostering a competitive bidding process. It reduces the likelihood of inflated costs and encourages contractors to offer their best value propositions.

Public Impact

Beneficiaries: Medicare beneficiaries across the assigned region benefit from efficient claims processing and provider support services. Services Delivered: The contract supports the administration of Medicare Parts A and B, including claims processing, provider enrollment, and customer service. Geographic Impact: Services are primarily focused on Florida (st: FL, sn: FLORIDA), impacting healthcare providers and beneficiaries within this state. Workforce Implications: The contractor employs a significant workforce dedicated to Medicare administration, contributing to employment in the healthcare services sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to the Cost Plus Award Fee structure.
Complexity of Medicare regulations and claims processing could lead to administrative errors.
Long contract duration may reduce flexibility to adapt to evolving healthcare policies.
Dependence on a single contractor for critical administrative functions in a large region.

Positive Signals

Awarded through full and open competition, indicating strong market interest and potential for value.
Cost Plus Award Fee structure incentivizes high performance and quality service delivery.
Contractor has a track record in administering Medicare services, suggesting operational experience.
Long-term contract provides stability for Medicare operations in the region.

Sector Analysis

Medicare Administrative Contractor services fall within the broader Health Information and Services sector, specifically focusing on health insurance carriers and claims processing. This sector is characterized by significant government involvement due to the nature of public health programs like Medicare. The market size for such administrative services is substantial, driven by the continuous need to manage vast healthcare claims and provider networks. This contract represents a significant portion of federal spending dedicated to the operational aspects of healthcare administration.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). While the primary awardee is a large entity, the contract's nature as a Medicare Administrative Contractor service may involve subcontracting opportunities for specialized services. However, the primary focus is on the large-scale administration of Medicare, which typically favors established, larger firms with extensive experience and infrastructure. The impact on the small business ecosystem is likely indirect, through potential support roles rather than direct prime contracting.

Oversight & Accountability

Oversight for this contract is primarily managed by the Centers for Medicare and Medicaid Services (CMS), an agency within the Department of Health and Human Services. The Inspector General (IG) for HHS provides an additional layer of oversight, investigating fraud, waste, and abuse. Transparency is facilitated through contract awards databases and public reporting requirements. The Cost Plus Award Fee structure necessitates rigorous performance monitoring and financial audits to ensure accountability and prevent improper payments.

Related Government Programs

Medicare Administrative Contractor (MAC) Program
Federal Health Insurance Programs
Healthcare Claims Processing Services
Department of Health and Human Services Contracts
Centers for Medicare and Medicaid Services Operations

Risk Flags

Cost Overrun Risk (CPAF)
Performance Monitoring Complexity
Long-Term Contract Lock-in
Regulatory Compliance Burden

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $642.5 million to FIRST COAST SERVICE OPTIONS, INC.. IGF::OT::IGF JURISDICTION N A/B MEDICARE ADMINISTRATIVE CONTRACTOR SERVICES

Who is the contractor on this award?

The obligated recipient is FIRST COAST SERVICE OPTIONS, 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 $642.5 million.

What is the period of performance?

Start: 2014-02-14. End: 2022-08-31.

What is the historical spending trend for Medicare Administrative Contractor services in Florida?

Analyzing historical spending for MAC services in Florida requires examining prior contract awards for this specific region and function. While this specific contract (524114) spans from 2014 to 2022 with a total value of $642.5 million, understanding the trend involves looking at predecessor contracts or similar awards in the region. Generally, spending in this area is driven by the volume of Medicare claims and beneficiaries, which tends to grow steadily with the aging population and healthcare cost inflation. Fluctuations can occur due to contract re-competition, changes in service scope, or shifts in CMS's administrative strategies. Without specific historical data for Florida MAC services prior to this award, it's difficult to pinpoint precise trends, but overall federal spending on healthcare administration has seen consistent growth.

How does the performance of First Coast Service Options, Inc. on this contract compare to other MAC contractors?

Assessing the performance of First Coast Service Options, Inc. (FCSO) requires access to performance evaluations and award fee determinations, which are often not publicly disclosed in detail. However, the fact that CMS awarded this significant contract through full and open competition and continued to utilize FCSO suggests satisfactory performance. MAC contracts are subject to rigorous oversight, including audits and performance metrics related to claims processing timeliness, accuracy, customer service, and provider support. Comparisons to other MAC contractors would typically be made internally by CMS based on standardized performance metrics. Publicly available information might include IG reports or GAO reviews that could highlight systemic issues across MACs, but specific contractor-to-contractor performance comparisons are rare.

What are the primary risks associated with the Cost Plus Award Fee (CPAF) contract type for Medicare administration?

The primary risks associated with the CPAF contract type for Medicare administration revolve around cost control and potential for contractor inefficiency if not managed properly. CPAF contracts reimburse the contractor for allowable costs plus a fee that is composed of a fixed base fee and an award fee. The award fee is contingent upon meeting or exceeding performance objectives. The risk for the government is that the contractor may incur higher costs than anticipated, and the award fee component, while intended to incentivize performance, could lead to higher overall payouts if performance targets are met. Effective oversight by CMS is crucial to scrutinize costs, validate performance metrics, and ensure that the award fee truly reflects exceptional service rather than just meeting minimum requirements. Without stringent oversight, there's a risk of paying inflated prices for services.

What is the estimated value per Medicare beneficiary or per claim processed under this contract?

Estimating the value per Medicare beneficiary or per claim processed under this contract is challenging without granular data on the number of beneficiaries served and the volume of claims processed by First Coast Service Options, Inc. The total contract value is $642.5 million over approximately 3120 days (8.5 years). If we consider the average annual value of $75.6 million, this cost is spread across all Medicare beneficiaries and claims within the Florida region assigned to this MAC. The number of Medicare beneficiaries in Florida is substantial, numbering in the millions, and the annual claims volume is in the tens of millions. Therefore, the cost per beneficiary or per claim would be relatively low, reflecting the efficiency required for large-scale administrative operations. However, a precise calculation requires specific operational metrics from the contractor.

How has the scope of services for Medicare Administrative Contractors evolved over the life of this contract?

The scope of services for Medicare Administrative Contractors (MACs) has evolved significantly over the life of this contract (2014-2022), driven by legislative changes, CMS initiatives, and technological advancements. Initially, MACs were established to consolidate and streamline claims processing functions previously handled by Medicare Carriers and Fiscal Intermediaries. Over time, CMS has increasingly focused on enhancing program integrity, improving provider education, and leveraging data analytics for fraud detection and prevention. This may have led to expanded responsibilities for MACs in areas such as medical review, data reporting, and supporting new payment models. The contract's Cost Plus Award Fee structure would allow for adjustments to scope and associated costs, provided they are properly documented and approved by CMS, reflecting the dynamic nature of Medicare administration.

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

Offers Received: 4

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: First Coast Service Options Inc.

Address: 532 RIVERSIDE AVE, JACKSONVILLE, FL, 32202

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

Financial Breakdown

Contract Ceiling: $771,064,231

Exercised Options: $771,064,231

Current Obligation: $642,539,515

Actual Outlays: $71,133,310

Subaward Activity

Number of Subawards: 27

Total Subaward Amount: $12,862,224

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline