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From Health Law Daily, May 7, 2013

Selection of Medicare Administrative Contractor for Jurisdiction E upheld despite protest

By Michelle L. Oxman, JD, LLM

The selection of Noridian Administrative Services as the Medicare Administrative contractor (MAC) for Jurisdiction E was consistent with the requirements of the Federal Acquisition Regulations (FAR) and the Request for Proposals (RFP) and was not arbitrary, capricious, or inconsistent with the law (CGS Administrators, LLC v United States, May 6, 2013, Bush, L). The bid protests of CGS Administrators, LLC (CGS) and Palmetto GBA, LLC (Palmetto) were denied.

The competitive bidding process. CMS’ Request for Proposals (RFP) for the MAC for Jurisdiction E explained that the contractor’s work would include core claims processing functions, provider enrollment and education, the Medicare secondary payer program, appeals other than initial claims determinations, and provider oversight, and that the agency’s selection would be based on the best value, not necessarily the lowest price. The RFP listed specific factors that would carry more weight than price—the technical evaluation factors included the bidders’ past performance and technical understanding, each weighted at 40 percent, and their approach to implementation of the contract, which was weighted at 20 percent. A business evaluation panel (BEP) scored the bids for cost realism and provider enrollment productivity.

Technical evaluation. The TEP considered four aspects of performance with respect to each of the three factors, specifically: (1) customer service; (2) financial management; (3) operational excellence; and (4) innovations and technology. The TEP evaluated past performance in accordance with the process described in the RFP, which included a baseline score followed by adjustments for ratings under the contractor Performance Assessment Rating System (CPARS). Each bidder’s overall performance history was considered, with emphasis on the most recent years and trends.

The court found the scoring system “regrettably murky” because it was described in increments of 0.1, with a high score of 0.9, but the final scores were stated in increments of 0.01. However, it also found that the standards were objective, the justifications for the scores were well documented, and CMS followed the process as described in the RFP. It was not unreasonable for the TEP to consider Palmetto’s most recent completed year, which involved many problems during a transition, in the baseline score, and the following year in the adjusted score, because the second year’s reports were not available when the baseline scores were calculated and because the MAC would face a similar transition with the Jurisdiction E contract.

Business evaluation. The BEP considered price analysis, cost analysis, and “cost realism.” The protesters challenged the scoring for cost realism, especially with respect to their estimates of the time required for auditing and reimbursement. The court found that the bidders’ relative positions were unchanged from the initial bid through the baseline and adjusted scores. CGS’s bid was lowest in price. Noridian’s bid was somewhat higher, and Palmetto’s was significantly more expensive. The scoring and adjustments were consistent with both the RFP and the FAR, and the difference between Noridian’s and CGS’ adjusted cost scores was 0.49 percent.

Other aspects of the contract. Both protesters proposed to use the same subcontractor. The panels considered the bidders’ descriptions of the tasks to be performed as well as the estimated time required, and they found that Noridian’s analysis of the work demonstrated a better understanding and approach than the subcontractor’s. The court analyzed the parties’ relative scoring with respect to medical review, comprehensive error rate testing, and it found that the agency’s determination was rational.

Judicial review of competitive bid awards. The court has very limited authority to overrule an agency’s procurement decision after competitive bidding. It must affirm the award unless the agency’s decision violated regulations or procedure or lacked any rational basis. The individual who made the ultimate selection prepared a detailed 40-page memorandum analyzing the panels’ recommendations and the trade-off between price and quality; the court found the memorandum thorough and well reasoned. Therefore, the award was upheld.

The case numbers are 13-87C and 13-97 C.

Attorneys: Craig Alan Homan (Arnold & Porter, LLP) for CGS Administrators, LLC. Warren Jay DeVecchio (Jenner & Block, LLP) for Palmetto GBA, LLC. Tara K. Hogan, U.S. Department of Justice, for the United States. Paul Farid Khoury (Wiley Rein, LLP) for Noridian Administrative Services, LLC.

Companies: CGS Administrators, LLC; Palmetto GBA, LLC; Noridian Administrative Services, LLC

MainStory: TopStory CaseDecisions MedicareContractorNews CMSNews CtFedClaimsNews

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