Attachment1 - JOFOC 36C79119D0006 Redacted.pdf

JUSTIFICATION AND APPROVAL

FOR OTHER THAN FULL AND OPEN COMPETITION

PURSUANT TO FAR 6.302-1(a)(2)

(1) Identification of the agency and the contracting activity, and specific identification of the document as a "Justification for Other Than Full and Open Competition."

This Justification and Approval (J&A) for Other Than Full and Open Competition is executed by the Strategic Acquisition Center (SAC), on behalf of the Veterans Health Administration (VHA).

(2) Nature and/or description of the action being approved:

The purpose of this document is to obtain Senior Procurement Executive (SPE) approval for the use of Federal Acquisition Regulation (FAR) 6.302-1(a)(2) Only one responsible source and no other supplies or services will satisfy agency requirements, to increase the maximum contract value (ceiling), for the VHA, Office of Procurement & Logistics’ Community Care Network (CCN) Region 3 Indefinite Delivery Indefinite Quantity (IDIQ) contract. The CCN contract requires the Third-Party Administrator (TPA) to provide licensed healthcare providers, as well as healthcare practitioners, medical, surgical, Complementary and Integrative Health Services (CIHS), Durable Medical Equipment (DME), pharmacy, and dental services. Use of this authority allows VA to meet the healthcare network needs of the Department for the duration of the period of performance remaining under the CCN contract requirement.

CCN healthcare services are required on a national basis for Veterans located in the continental United States and its territories, to include: Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands. This justification includes only states and territories within Region 3 as follows: Oklahoma, Arkansas, Louisiana, Tennessee, Mississippi, Alabama, Georgia, South Carolina, Florida, Puerto Rico, and the U.S. Virgin Islands.

The maximum contract value (ceiling) for the base and all option periods was established at award under clause C.23 “Guaranteed Contract Minimum and Contract Maximum.” The original contract ceiling was determined through market research and cost modeling during pre-solicitation efforts prior to contract award in 2018. This research utilized assumptions including:

Veteran enrollee projections, active Veteran projections, inflation and labor rates, healthcare cost projections (e.g., ranges in Medicare reimbursement rates across submarkets), variable cost values (e.g., variability in contractor approach), insurance premium data sources, and other related healthcare data to support projections.

Due to the timing of the initial solicitation and award of the CCN Region 3 IDIQ contract, there was data that was not accounted for in the original projections that directly impacted the maximum contract value (ceiling) and the need for this increase to the ceiling. Major legislative changes including, but not limited to, the VA Maintaining Internal Systems and Strengthening Integrated Outside Networks (MISSION) Act of 2018, the Veterans Comprehensive Prevention, Access to Care and Treatment (COMPACT) Act of 2020, and the Honoring our Promise to Address Comprehensive Toxics (PACT) Act of 2021, all increased Veteran eligibility for VA and community care services. This resulted in an increased utilization of community care services that could not have been foreseen. The original projections used for the development of CCN showed an approximate increase between FY19 – FY23 in active Veterans. Recent data

(as of January 2024) has shown that from FY19 – FY23, VA has seen an increase of approximately of unique Veterans utilizing contracted (PC3, Choice, CCN) community care services. Additionally, there were industry-wide changes in healthcare generated by the international Coronavirus Disease (COVID-19) pandemic that impacted not only the VA, but community providers in how care was prioritized and delivered. This resulted in utilization of additional scheduling services to support VA during the pandemic, an increase in the utilization of Veterans receiving vaccinations to prevent the spread of the disease, and a shift in the care coordination activities between the VA and community providers.

The Region 3 CCN IDIQ contract, 36C79119D0006, was awarded on December 28, 2018, to Optum Public Sector Solutions, Inc. and is currently operating under Option Year 5, with a period of performance of October 1, 2023, through September 30, 2024. The total IDIQ ceiling for Region 3, Contract 36C79119D0006 is $21,503,984,500.00. The performance period outlined in the below table includes all option years if exercised.

Region/ Contract Number

Contractor/ Third Party Administrator

Date of Award Period of Performance Awarded Total IDIQ Ceiling

Region 3 36C79119D0006

Optum Public Sector Solutions, Inc.

December 28, Base Year: January 18, 2019 - September 30, 2019, plus seven (7) one-year option periods from October 1, 2019 - September 30, 2026.

$21,503,984,500.00

VA is proposing a ceiling increase total of $31,240,925,711.00 for Option Year 5, Option Year 6, and Option Year 7. The financial logic applied to the IGCE build-out demonstrates this ceiling increase will meet the higher burn rate generated by increased patient numbers and additional services offered through CCN. As such, the total IDIQ contract ceiling would be changing from $21,503,984,500.00 by $31,240,925,711.00 to $52,744,910,211.00. The table below captures the information as follows:

Region Current maximum contract value (ceiling)

Ceiling Increase New maximum contract value (ceiling)

Region 3 36C79119D0006

$21,503,984,500.00

$31,240,925,711.00 $52,744,910,211.00

(3) A description of the supplies or services required to meet the agency’s needs

(including the estimated value).

VHA is home to the United States' largest integrated healthcare system consisting of 152 medical centers, over 850 community-based outpatient clinics, community living centers, Vet Centers, and Domiciliaries. Together, these healthcare facilities and the more than independently licensed healthcare practitioners who work within them, provide comprehensive healthcare to more than Veterans each year. VHA provides methods to access community-based medical care to eligible Veterans when VA facilities are not available. Federal laws set forth eligibility criteria and govern the use of community-based medical care and other policies that specify when and why community care may be used. Prior approval for treatment in the community is required for community-based medical care unless the medical event is an emergency. VHA continues to purchase healthcare services in the community through a variety of methods including fee-for-service, individual provider agreements as authorized by law, local contracts, and national contracts.

The CCN Region 3 contract includes medical, surgical, complementary and integrative services, durable medical equipment, dental, and pharmacy services. The CCN Region 3 contract is a regional contract providing services to the states listed in Section 2 of this document. The CCN Region 3 contract provides Veterans coordinated and timely access to standardized, high-quality care through comprehensive networks of non-VA providers when VA Medical Centers (VAMCs) cannot provide the care in specified timeframes or within specified geographic distance of a Veteran’s residence.

During the solicitation phase of the CCN Region 3 contract, VA was governed by the Veterans Access, Choice, and Accountability (Choice) Act of 2014, and utilizing Patient-Centered Community Care (PC3) contracts to provide community care services. Given that the Choice Act was in place at this time, it was used as the basis supporting all requirements development and cost estimations for the CCN contract. This act authorized VA to provide improvement of access to care from non-department of Veterans Affairs providers. Specifically, the Choice Act required VA to provide hospital care and medical services to be furnished to Veterans through agreements with specified non-Department of Veterans Affairs (VA) facilities for Veterans which met certain appointment availability and geographical distance criteria.

MISSION Act of 2018:

In June of 2018, during solicitation of the CCN Region 3 IDIQ contract, the MISSION Act of 2018 law was passed to give Veterans greater access to healthcare in VA facilities and the community, provide expand benefits for caregivers, and improve VA's ability to recruit and retain the best medical providers. With the implementation of the MISSION Act came unpredicted increases to the contract costs to include, but not limited to:

Expanded eligibility for community care services resulting in increased administrative costs for contract modifications and per-member-per-month fees, and an increase in healthcare costs due to the increase in Veterans utilizing CCN services.

Expanded access to additional services, such as urgent care, thus creating a new benefit for the Veteran population to receive urgent care under CCN resulting in increased administrative costs for contract modifications and per-member-per-month fees and an increase in healthcare costs due to the increase in Veteran utilization of CCN services.

New authorization to pay for authorized care not subject to an agreement (out-of-network providers), thus resulting in increased administrative costs for contract modifications and an increase in healthcare costs due to the expanded services being authorized and paid under the CCN contract.

New training requirements that the TPA had to implement for contractor staff and providers, thus resulting in increased administrative costs for contract modifications and ongoing training oversight requirements.

Expanded benefits for live donor transplants being authorized thus resulting in increased administrative costs for contract modifications and per-member-per-month fees and an increase in healthcare costs due to the increased eligibility and services paid under the CCN contract.

Given the timeline of the CCN Region 3 IDIQ contract solicitation in comparison to the MISSION Act going into effect, VA determined it was in the best interest of the Veterans to continue with award and subsequently make the necessary changes to the contract post award through modifications to align with MISSION Act. Had VA canceled the requirement and/or delayed contract award during June 2018 to meet the MISSION Act, the risk of not having supporting community care service contracts in place would have been catastrophic - the operation of the United States' largest integrated healthcare system for Veterans would have been crippled.

COVID-19 Pandemic:

In response to the COVID-19 Pandemic in March 2020, resources under CCN were heavily used to support Veteran healthcare. VA has seen a wide fluctuation in the numbers of admitted patients, most notably during community surge events. In response, healthcare providers had to shift resources to meet the clinical demands (e.g., travel between facilities, provide direct inpatient care instead of strictly outpatient, etc.). This shift in resource allocation impacted VA operations and resulted in increased reliance on community care services, increasing expenditure under the CCN contract.

Due to the seriousness of the COVID-19 Pandemic, the CCN contracts were modified to expand required Veteran healthcare services, which impacted the contract costs and associated expenditure, to include:

Protecting Veterans from contracting COVID-19 by modifying the contracts to allow for COVID-19 vaccinations to be authorized and paid for under CCN. This resulted in administrative costs for the contract modification and recurring per-member-per-month fees and healthcare costs associated to the administration and dispensing of the vaccinations.

Providing scheduling support to Veterans by modifying the contracts to allow for contractor scheduling support. This increased both TPA administrative contract costs and recurring costs for the scheduling support.

PACT Act:

The PACT Act was established in 2022 and authorized VA to expand VA healthcare and benefits for Veterans exposed to burn pits, Agent Orange, and other toxic substances. This expansion is noted as the largest healthcare and benefits expansion in VA history.

The CCN contract did not require a modification to implement the PACT Act. However, data shows PACT Act increased Veteran eligibility by 60% or more for new Veteran enrollees to VA healthcare based on planning population data. This increase in new enrollees increases the number of Veterans eligible for community care, and thus increases CCN utilization. Increased utilization of CCN has and will continue to result in increased administrative costs for per-member-per-month fees and increases in healthcare costs associated to care delivered under

CCN.

COMPACT Act:

The COMPACT Act, implemented in 2023, aimed to avert Veteran suicide by increasing Veteran access to emergent suicide care for an acute suicidal crisis at a non-VA facility. As a result of this act, VA issued contract modifications to address Veteran eligibility and benefits, changes in since 2021 and intends to continue planning efforts throughout FY 2024. Another contract vehicle is not an option as it will result in duplication of efforts for other future contracts and would not be awarded and implemented timely to meet the needs of our Veterans. If the Government fails to increase the ceiling for this contract, the contract will end and Veterans in Region 3 will not receive services and, as a result, lose access to entitled benefits. This will preclude affected Veterans from accessing timely medical care and negatively impact their health.

At the time the CCN requirement was solicited, VA could not accurately estimate the volume of services that would be required, nor the conditions that would impact the volume of services needed in the future. Accordingly, VA established a ceiling of $21,503,984,500.00 for the 8-year CCN Region 3 IDIQ contract based upon market research and cost modeling. This research utilized assumptions including: Veteran enrollee projections, active Veteran projections, inflation and labor rates, healthcare cost projections (e.g., ranges in Medicare reimbursement rates across submarkets), variable cost values (e.g., variability in contractor approach), insurance premium data sources, and other related healthcare data to support projections. Some areas that were not included in the original projections, due to timing, that had an extreme impact to Veteran community care eligibility and other healthcare related projections include: implementation and changes related to the MISSION Act of 2018, impacts of the pandemic Coronavirus Disease (COVID) of 2019, implementation and changes related to the COMPACT Act of 2020, and implementation and changes related to the PACT Act of 2021.

Unfortunately, the use of the research data used to develop the maximum volume for the healthcare contract was not predictive of the unprecedented volume of services that would be processed through the contract from external, unforeseen events, stemming from the impacts of the COVID-19 pandemic and increasing impacts resulting from the passage of the MISSION Act, COMPACT Act, and PACT Act. The original projections used for the development of CCN showed an approximate Veteran patient increase between FY19 – FY23 of unique Veterans utilizing contracted community care services. Recent data (as of January 2024) has shown that from FY19 – FY23, VA has seen an increase of approximately of unique Veterans utilizing contracted community care services. The rapid exhaustion of the available ceiling, coupled with the timeline required to recompete and award a new vehicle, has led to a highly urgent need to act and increase the contract maximum ceiling rate for Region 3 contract via contract modification. Therefore, unless the ceiling is increased, the current contract ceiling is anticipated to be reached by March 2024, at which time contract usage would be required to stop.

Considering the Procurement Administrative Lead Time (PALT) for a multi-billion-dollar procurement, including industry engagement, solicitation, and mandatory reviews and approvals, there is not sufficient time to competitively award a new contract prior to exhausting the current ceiling. Re-establishing the current IDIQ contract maximum ceiling value will enable continued use of the current contract until a new contract is in place. Consequently, only the current IDIQ contract and associated contractor are situated to meet the immediate need for Region 3 community healthcare services.

(6) A description of efforts made to ensure that offers are solicited from as many potential sources as is practicable, including whether a notice was or will be publicized as required by subpart 5.2 and, if not, which exception under 5.202 applies:

VHA Office of Integrated Veteran Care (IVC) started the development of requirements for the next generation of the Community Care Network (CCN Next Generation) in 2021.

Industry feedback has been solicited to date through contractor site-visits, Requests for

Information (RFIs) posted publicly on SAM.gov, and virtual industry days. Industry will continue to be sought as a partner in the development of the CCN Next Gen structure through competitive solicitation and award. At this time, the estimated implementation time for this requirement is . The estimated time from award to availability of service is

. As such, a competitive action is not practicable to meet the immediate need to continue community medical services to Veterans from . The need for mandatory CCN Veteran medical services is immediate and a lack of comparable services would cause irreparable harm to VA’s mission and mandate to provide Veteran care.

The Government will publicly post this justification in accordance with 6.305(a): “The justification shall be made publicly available within 14 days after contract award.” VA will post a notice to SAM.gov as required by FAR 5.2 to share the details of the parallel courses of action. No posting exceptions apply.

(7) A determination by the contracting officer that the anticipated cost to the Government will be fair and reasonable:

Contract prices were negotiated and determined fair and reasonable. Although there have been changes and modifications due to the factors considered above to include congressional mandates, COVID-19, and medical practice changes or necessities, the contract prices remain fair and reasonable. The proposed ceiling increase identified in Section 2 above is based on current contract service demands from the current option period (Option Year 5), with a projected per month growth rate. The projected per month growth rate is based upon historical contract service demands that resulted from the passage of the previously mentioned legislations identified in Section 2. The projected growth rate includes projections for increased veteran enrollments within the region to receive care for the remaining option periods (Option Year 6 & 7).

(8) A description of the market research conducted and the results or a statement of the reason market research was not conducted:

The NAICS code for this acquisition is 524114 Direct Health and Medical Insurance Carriers. The small business size standard for NAICS code 524114 is $38.5 million. There are contractors who would be able to provide these, or similar, services; however, no other offeror would be able to provide services in the short timeframe needed to ensure continuity of services. In efforts to increase competition in the future procurement of CCN Next Generation, market research has and will continue to include: contractor site-visits, Requests for Information (RFIs) posted publicly on SAM.gov, industry days, and publication of draft documents to include Performance Work Statements for industry comment.

(9) Any other facts supporting the use of other than full and open competition:

Federal laws, which set forth eligibility criteria, govern the use of community-based medical care and other policies that specify when and why care may be used. Prior approval for treatment in the community is required for community-based medical care unless the medical event is an emergency. Because this is an indefinite-delivery/Indefinite-quantity (IDIQ) type contract vehicle, failure to increase the ceiling budget would create an end to the contract before the contract period of performance end date. As such, this would greatly impact the quality and continuity of medical care and services throughout the CCN Region 3 VA network.