3M_HHSM-500-2016-00048C_J A_posting.docx

Justification for Other than Full and Open Competition

“Source Selection Information – see FAR 2.101 and 3.104”

1. Identification of the agency and contracting activity.

a. Federal agency and contracting activity. HHS. Centers for Medicare & Medicaid Services (CMS).

b. Sponsoring organization. Center for Medicare (CM) Provider Billing Group (PBG / Division of Institutional Claims Processing (DICP).

c. Contracting Officer Representative information:

· Contracting Officer Representative: Anita Antkowiak

· Mailing address:

7500 Security Boulevard Mailstop C4-10-07 Baltimore, MD 21244-1850

· E-mail address: anita.antkowiak2@cms.hhs.gov

· Telephone number: 410-786-6986

2. Nature and/or description of the action being approved.

a. Acquisition purpose and objectives. The Maintenance of the Grouper contract ensures the accurate payment and uninterrupted processing of Medicare claims and is currently performed by 3M Health Information Systems (3M HIS) under a cost sharing contract arrangement (HHSM-500-2009-00055C). The Government’s share of total costs for modifying 3M HIS’ software to meet Government needs is 52.5% and the total spent for the last 7 years is approximately $19,000,000. The period of performance for the current contract is 9/01/2009 through 8/31/2016. Although the contract is named Maintenance of the Grouper, it includes a variety of tasks that promote the systematic and uniform processing of Medicare claims that support Medicare payment policy analysis and development. For the purpose of this document, we will refer to this work as the Maintenance of the Grouper. The major functions in this contract are:

· Maintain and update software and editing programs and other supporting material for Medicare Severity Diagnosis Related Groups (MS-DRGs), the Medicare Code Editor (MCE), the Integrated Outpatient Code Editor (IOCE), and the Home Health Grouper (HHG);

· Maintain and update the completed ICD-10 code conversions for the MS-DRG grouper, MCE, IOCE and HHG;

· Maintain and update the ICD-10 Procedure Coding System (ICD-10-PCS) and the ICD-10/ICD-9 General Equivalence Mappings (GEMs) to support forward and backward mapping of claims data for use in policy development and analysis of the ICD-10 impacts and case mix changes;

· Compute the MS-DRG relative payment weights used in the inpatient Prospective Payment System and the Long Term Care Hospital Prospective Payment System;

· Maintain the ICD-10 code conversion of CMS National Coverage Determinations (NCDs); and

· Maintain the conversion of the International Classification of Disease (ICD)-10 Procedure Coding System (PCS) and the Crosswalk/Map of ICD-9-Clinical Modification (CM) and ICD-10-CM (both ways), both developed by 3M HIS.

b. Project background

The software modules developed and maintained in this contract are complex editing and algorithm programs which involve hundreds of thousands of code tables. These modules are pivotal to Medicare institutional claims processing and are interfaced within the Fiscal Intermediary Shared System (FISS).

The Medicare Code Editor (MCE) edits claims to detect incorrect billing data. Its main purpose is to improve the quality of information passed to the Grouper. In determining the appropriate Medicare Severity Diagnosis Related Group (MS-DRG) for a Medicare patient, the age, sex, discharge status, principal diagnosis, secondary diagnosis, and procedures performed must be reported accurately to the Grouper program. The Groupers are automated classification algorithms that determine the DRG from data elements reported by the hospital on the claim. Groupers are used for all inpatient discharge/transfer bills received from both PPS and non-PPS facilities, including those from waiver States, long-term care hospitals, and excluded units. Results of this are passed to “pricer” programs which are used to determine the payment amount of an inpatient claim.

The IOCE assures the accuracy of hospital outpatient surgery bills for Outpatient Prospective Payment System (OPPS) and Non-OPPS hospitals and it also contains pricing logic and tables needed for the Federally Qualified Health Center (FQHC) PPS claims processing. In order to process outpatient claims under the OPPS, the IOCE software module was developed to combine groups of outpatient services into Ambulatory Payment Classifications (APCs) and to edit the claims to detect errors in coding and/or reporting of services. The IOCE edits a claim for accuracy of submitted data, assigns APCs, assigns payment indicators, computes discounts (if applicable), determines if packaging is applicable, and determines any necessary payment adjustment. Depending on the type of bill processed, the outputs from the IOCE are passed to either the OPPS or FQHC “pricer” programs which are used to determine the payment amount of the claim.

Updates to these modules are made quarterly (in the case of the MCE, annually) and represent a critical component of the Medicare claim payment system. Errors in the software modules and/ or failure to deliver the software on schedule will have a substantial negative impact on the Medicare program and the hospital industry. Failure to produce and distribute the MS-DRG, MCE, and the IOCE software on time could result in delays in payments to providers. Errors in the software could require claims reprocessing and mass adjustments which both increase the total cost of claims processing and extends the wait time for final claim payment amounts to become available for data analysis projects. Thus, the ability of the contractor to deliver on time, error free software is critical to the functioning of Medicare institutional claims processing.

Another critical component of this contract is the work on the ICD-10 conversion. 3M HIS has completed the initial ICD-10 conversion of the software and editing programs mentioned above. It is essential that the integrity this initial conversion be maintained through quarterly, bi-annual, and quarterly updates.

Over the past seven years 3M HIS, working in concert with CMS, the Centers for Disease Control (CDC) and the National Committee on Vital and Health Statistics (NCVHS), developed the ICD-10 coding system of crosswalks/maps (forwards and backwards) which allows for the conversion from ICD-9 to ICD-10. As a result, 3M HIS’ continued support to these agencies is vital to the on-going maintenance of this complex conversion.

3. Description of the supplies or services required to meet the agency’s needs (including the estimated value).

a. Project title. Maintenance of the Groupers

b. Project description:

As the Medicare program evolves, so has the complexity and scope of the software programs developed and maintained by 3M HIS. The contractor shall continue the maintenance and enhancement of the grouping and editing programs listed below and maintain these programs in line with the recent, complex ICD-10 implementation which include:

· Maintain and update software and editing programs and other supporting material for MS-DRGs, the MCE, the IOCE, and the HHG;

· Maintain the completed ICD-10 code conversion of the MS-DRG grouper, MCE, IOCE and HHG grouper;

· Maintain and update the ICD-10-PCS and the ICD-10/ICD-9 GEMs;

· Compute the MS-DRG relative payment weights used in the inpatient Prospective Payment System and the Long Term Care Hospital Prospective Payment System;

· Maintain the ICD-10 code conversion of CMS NCDs; and

· The ICD-10 PCS and the Crosswalk/Map of ICD-9-Clinical Modification (CM) and ICD-10-CM (both ways), both developed by 3M HIS.

In addition to maintaining the grouping and editing software above, the contractor will:

· Participate in the planning and pre-development for all of the major payment programs listed above to ensure accurate payment and uninterrupted claims processing.

· Implement changes to editing and logic for the above products in response to multiple annual legislative mandates. This includes non-anticipated legislative mandates thus requiring analysis and implementation within a very short timeframe.

· Continue value added improvements and expansion of remotely accessible web based interfaces for the IOCE, MS-DRG Groupers and the MCE. CMS requires this support to ensure these mandated software systems are up-to-date and operational.

· Continue updates of the ICD-10-CM, ICD-10 PCS mappings and the gathering of trend data.

· Assist CMS with the analysis of and implementation of National Coverage Determinations (NCDs) as well as the development of contractor instructions on coding claims related to the NCDs.

Requirement type.

Research & development (R&D) R & D support services Support services (non-R&D) Supplies/equipment Information technology (IT) Construction Architect-engineer (A & E) services Design-build Other (specify): Professional, administrative, and management support services

· Type of action.

New requirement Follow-on Other (specify): Continuation of this work

· Proposed contract/order type.

Firm-fixed-price Other fixed-price (specify, e.g., fixed-price award-fee, fixed-price incentive-fee): __________ Cost-plus-fixed-fee Other cost reimbursement (specify, e.g., cost-plus-award-fee, cost-plus-incentive-fee): ___________ Time and materials Indefinite delivery (specify whether indefinite quantity, definite quantity, or requirements): ___________ Other (specify): Cost-sharing Completion Form Term form

· Acquisition identification number. 160413

1. Total estimated dollar value and performance/delivery period.

The total estimated value of this acquisition is $15,000,000 over a 5 year period of performance. The proposed period of performance for the resulting contract is a Base Year and Four (4) 12-month Option Years.

4. Identification of the statutory authority permitting other than full and open competition.

This acquisition is conducted under the authority of 41 United States Code (U.S.C.) 253(c)(1) as set forth in Federal Acquisition Regulation (FAR) 6.302- 1.

This acquisition is conducted under the authority of section 4202 of the Clinger-Cohen Act of 1996.

This acquisition is conducted under the authority of the Services Acquisition Reform Act of 2003 (41 U.S.C. 428a).

5. Demonstration that the proposed contractor(s) unique qualifications or the nature of the acquisition requires use of the authority cited.

a. Name and address of the proposed contractor(s).

3M Health Information Systems 100 Baines Road Wallingford, CN 06492

b. Nature of the acquisition and proposed unique qualifications of the contractor(s):

In order to meet the requirements of this contract, the contractor must have a diverse set of resources including a clinical staff to evaluate the clinical merits of any proposed modification, statisticians to analyze millions of Medicare discharges to identify the impact of any proposed modifications, health care economist to evaluate the payment system design issues associated with any modifications, computer programming staff to produce the required software across a range of platforms from mainframes to PCs including Assembler and JAVA computer languages and a support staff to provide support to CMS that utilize the software in the administration of the Medicare claims payment system. 3M HIS has been the maintenance contractor for CMS since the inception of the original Medicare inpatient PPS in 1983 and is uniquely qualified for the maintenance contract. 3M HIS has staff that has directly participated in all aspects of DRG developments and modifications since the inception of the DRG concept, established clinical staff with extensive experience in DRG development and refinements, and economic and statistical staff with experience in payment weight development and payment system design. They have consistently produced MS-DRG, MCE, APC and IOCE software within the time frames required by CMS, and have direct involvement in research, development and implementation of APCs for the outpatient PPS.

Along with the above, 3M HIS is exclusively qualified to meet CMS’ need to continue the maintenance of the recent ICD-10 conversion for all of the software and editing program as well as the ICD-10-PCS designed to facilitate the timely processing and accurate editing and payment of Medicare claims. Development of the ICD-10-PCS was initiated by 3M HIS in accordance with final rule making and legislative requirements. This new procedure coding system has almost 180,000 codes compared to ICD-9 which has approximately 18,000 codes. CMS and 3M HIS worked closely with the CDC and the NCVHS, an advisory committee to the Secretary, on the implementation of ICD-10-PCS. This was a long and arduous task involving public hearings with participants representing diverse medical specialties of the healthcare industry. 3M HIS developed this coding system, and their familiarity of the new system is widely acknowledged throughout the medical community.

3M HIS developed a detailed, precise coding structure and displayed it in tabular form. They also developed an advanced computerized index which is automatically updated when modifications are made to the base system. This enhancement has streamlined this process, therefore, reducing the labor intensive effort required by previous coding systems to make annual updates. The introduction of a new contractor at this point would result in higher implementation costs as there will be a significant learning curve. Also, this contract is a cost-sharing contract which has significantly reduced the government’s investment. 3M HIS is the only contractor with the level of intimate knowledge and expertise needed to maintain the ICD-10 conversion. Relying on a contractor with less experience and expertise in ICD-9 and ICD-10 coding significantly increases the probability of errors, interruption of claims processing, increased complications, and overall risk to the Medicare program.

As the developer and maintainer of ICD-10-PCS mappings and crosswalks, 3M HIS has the most technical knowledge for maintaining this system. 3M HIS also performs complex analysis on each inpatient code to ensure the appropriate MS-DRG is assigned. In doing so, they are in a unique position to map ICD-10-PCS codes into the complicated MS-DRGs.

It is critical that CMS have a contractor with the technical skills and knowledge to maintain and update the national ICD-10-PCS and keep the Grouper software and editing programs in sync. 3M HIS has the unique knowledge and experience coupled with the necessary advanced computer skills needed making them uniquely qualified to continue the maintenance of the grouping and editing systems. They developed these programs so they understand the logic and editing required to meet CMS’ claims processing needs.

6. Description of the efforts made to ensure that offers are solicited from as many potential sources as practicable. Indicate whether a FedBizOpps notice was or will be publicized as required by FAR Subpart 5.2 and, if not, which exception under FAR 5.202 applies.

This action will not be competed among other potential sources. While FAR 6.302-1 states that agencies shall request offers from as many potential sources as is practicable under the circumstances, CMS has determined that, for the reasons previously cited, only 3M HIS has the necessary capabilities to successfully perform this work. In accordance with FAR 5.201, CMS posted a notice of intent to continue contracting on a sole source basis to 3M HIS on the www.FBO.gov website (the Government-wide point of entry) on October 22, 2015 to the appropriate time of notification, for the Agency to evaluate and consider any responses received (see Sections 8 and 10).

7. Determination by the Contracting Officer that the anticipated cost/price to the Government will be fair and reasonable.

Upon receipt of the Request for Contract, the CMS Contracting Officer will ensure that the anticipated cost to the Government is fair and reasonable by comparing the proposed cost to the independent government cost estimates for the Base and (four) Option Years.

Additionally, a cost realism analysis will be performed to ensure that the proposed costs are reasonable and are commensurate with the technical approach.

8. Description of the market research conducted (see FAR Part 10) and the results, or a statement of the reasons market research was not conducted.

A notice of intent to contract on a sole source basis with NCQA was posted on www.FBO.gov on October 22, 2015. Organizations that wanted to challenge the sole source designation were given until November 6, 2015 to reply to the notice (see Section 10).

9. Any other facts supporting the use of other than full and open competition.

Other factors that support the use of other than full and open competition include:

· 3M HIS extensive technical knowledge of the computer logic of the Groupers and their advanced expertise is unmatched in the industry. Relying on another contractor with less experience and expertise significantly increases the probability of errors, interruption of claims processing, increased complications and overall risk to the Medicare program.

· 3M HIS is a leader in the health care industry for Grouper development and maintenance for health encounters. Any new contractors will not possess the knowledge and skills necessary to accurately and timely take over the ICD-9-CM to ICD-10-CM analysis and maintenance.

· 3M HIS prepared and laid the ground work for the recent complex implementation of ICD-10-PCS over the past seven years. During this time, 3M HIS performed the initial ICD-10 conversion of the Groupers as well as all of the Prospective Payment Systems. In doing so, they have the unique ability, experience and technical knowledge to maintain this conversion going forward for all of the Groupers, each PPS and the ICD-10-PCS.

· 3M HIS understands CMS' methodology concerning changes making them well equipped to analyze current standards and provide clinical, as well as payment recommendations.

· 3M HIS currently understands and dissects Medicare laws on various outpatient and inpatient issues without outsourcing or subcontracting for staff. They have their finger on the pulse of new legislation affecting Medicare claims and proactively pinpoint new updates for the grouping and editing programs. They also interact with Hospital Associations and participate in the resolution of CMS inquiries in an effort to gather software maintenance updates. In collaboration with CMS, all coding and software coding updates are presented and agreed upon for the next release cycle.

· The Grouper and MCE have been important to pricing inpatient claims since 1983. Changing contractors at this point will make it difficult for a new contractor to assume this project and perform seamlessly.

· 3M HIS developed web based tools for the MS-DRG, IOCE, and Groupers which are proprietary to 3M HIS. These web based tools provide information that CMS policy components and the Medicare Administrative Contractors rely heavily upon. These tools allow for the look up of past and present Grouper versions, displaying appropriate diagnosis and procedure codes valid for the selected version, help determine future payment policy decisions used to create reports published in the Federal Register, and ensure proper editing of outpatient Medicare claims. Due to their proprietary nature CMS has no rights to these tools making them unique and 3M HIS is the only source capable of maintaining these tools to guarantee they are up to date and accurate.

· Due to their unmatched knowledge of the various software products they have developed and maintained, 3M has the ability to react quickly to late policy direction and deliver updated software in less than expected timeframes, when necessary. This allows CMS to react quickly to new legislation and policy direction. A new contractor would not be likely to have this same flexibility.

10. Listing of sources, if any, that expressed, in writing, an interest in the acquisition.

In reply to the www.FBO.gov notice posted on October 22, 2015, CMS did not receive any challenges to the sole source nature of this requirement.

11. Statement of the actions, if any, the agency may take to remove or overcome any barriers to competition before any subsequent acquisition for the required supplies or services.

Upon expiration of this contract and if this requirement still exists, CMS will conduct market research to see if there are any companies capable of doing this work.