Maintenance of the Groupers JA FBO.docx

1. Identification:

JUSTIFICATION AND

FOR OTHER THAN FULL AND OPEN COMPETITION

Acquisition Title: Maintenance of the Groupers Agency: Centers for Medicare & Medicaid Services (CMS) Acquisition Year: 2021 Author: Malissa Shin

2. Description of Action:

Nature

_X _ Other: Continuation of the current work

Contract Type

_X_ Other: Cost Sharing Contract

Projected Cost / Price of contract (Base & All Options): The total estimated value of this acquisition is $15,954,699.14 over a 5 year period of performance. The proposed Period of Performance for the resulting is a Base Year and Four (4) 12-month option years.

The total estimated value of the proposed sole source action (for modifications only): N/A Funding Source (s): N/A

Name of Proposed Contractor(s): 3M Health Information Systems, Inc.

Street Address: 575 W. Murray Blvd.

City, State, Zip: Murray, UT 84123

3. Description of Services or Supplies:

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-500-2016-00048C). The period of performance for the current contract is 9/01/2016 through 8/31/2021. 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), and the Integrated Outpatient Code Editor (IOCE);

· Provide analytical and programming support to CMS in maintaining, supporting and updating all of the groupers;

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

· Evaluate CMS National Coverage Decisions (NCDs) that contain International Classification of Disease (ICD-10) codes for the appropriate updates.

· Conversion of the antiquated programming language (Assembler) to JAVA as part of the Medicare modernization effort.

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 MS-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 Integrated Outpatient Code Editor (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, Rural Health Center (RHC) PPS, and End Stage Renal Disease (ESRD) 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 typically 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.

In addition to the above, the contractor not only supports the PPS but also is responsible for the routine updates and maintenance to the Groupers and the associated editing programs as follows:

· Research and analysis of data that is internal and external to CMS to provide updates and enhancements to the Medicare Severity Diagnosis Related Groups (MS-DRG) Grouper and the PPS systems maintained for CMS. The contractor’s data and research shall be used to determine the inpatient MS-DRGs for Medicare and to ensure the accuracy of inpatient and outpatient hospital claims processing. In addition, the contractor shall provide computation of the relative weights for the proposed and final rules under each PPS.

· Provide technical assistance and maintenance of the electronic version of the implementation of the procedure coding system known as the International Classification of Diseases, tenth revision, (ICD-10-PCS).

· Provide analytical and programming support to CMS in maintaining, supporting and updating the Home Health (HH) Grouper.

· Provide analytical and programming support to CMS in maintaining, supporting and updating the Skilled Nursing Facility (SNF) Grouper.

· Provide analytical and programming support to CMS in maintaining, supporting and updating the Inpatient Rehabilitation Facility (IRF) Grouper.

· Maintain and update the Integrated Outpatient Code Editor (IOCE).

· Provide computation of the LTCH PPS and the IPPS MS-DRG Relative Weights on an annual basis for the proposed and final rules under each PPS.

· Maintain End Stage Renal Disease (ESRD) PPS and maintain diagnosis codes used to define individuals with Acute Kidney Injury (AKI) that receive dialysis in and ESRD facility.

· Provide CMS with recommendations for modifications to the Inpatient Psychiatric Facility (IPF) PPS code lists, including any updates, transitions, conversions, or maintenance.

· Update and maintain the Federally Qualified Health Centers (FQHCs) PPS.

· Update and maintain the Rural Health Centers (RHC) PPS.

· Evaluate CMS National Coverage Decisions (NCDs) that contain ICD-10 codes for the appropriate updates.

· Conversion of the antiquated programming language (Assembler) to JAVA as part of the modernization effort.

4. Authority and Rationale:

Identify the statutory authority, FAR title and FAR citation permitting other than full and open competition. It may be one of the following most commonly used citations by the operating divisions of the Department of Health and Human Services (HHS), but other exceptions may apply per FAR Subpart 6.3.

Actions other than simplified acquisition procedures (select only one and provide an explanation):

_X_ : FAR 6.302-1: Only one responsible source and no other supplies or services will satisfy agency requirements, 41 U.S.C. 253(c)(1)

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 grouper, MCE, HH grouper, SNF grouper, IRF grouper, APC grouper and IOCE software and maintained ESRD and IPF code lists and the FQHC PPS 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 modernization of the grouping and editor software. Medicare processes all Original Medicare institutional claims through one of three sub-systems within the Fiscal Intermediary Shared

System (FISS). These sub-systems are built with antiquated programming languages (e.g, Assembler, COBOL) that are difficult to extend, maintain, support and test. Modernizing these programs will protect CMS from future quality and integration risks. Currently, CMS posts these programs on its website as both COBOL source code and in a COBOL-based PC format. Over the next 2 years, CMS will convert these COBOL-based products to Java versions. 3M HIS is currently in Phase 3 of the six phases of conversion for these systems to Java versions.

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. In addition, 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 groupers and editor software. Relying on a contractor with less experience and expertise will significantly increase the probability of errors, interruption of claims processing, increased complications, and overall risk to the Medicare program.

It is critical that CMS have a contractor with the technical skills and knowledge to maintain and update the national ICD-10-Procedure Coding System (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.

: FAR 6.302-2: Unusual and compelling urgency, 41 U.S.C. 253(c)(2)

N/A : FAR 6.302-5: Authorized or Required by Statute, 41 U.S.C. 253(c)(5)

N/A : Other (See FAR Subpart 6.3 for additional authority):

N/A

5. Bridge Contracts:

N/A

6. Actions to Increase Competition:

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.beta.SAM.gov website (the Government-wide point of entry) on March 23, 2021 to the appropriate time of notification, for the Agency to evaluate and consider any responses received (see Section 10).

7. Market Research:

A notice of intent to contract on a sole source basis with 3M was posted on www.beta.SAM.gov on March 23, 2021. Organizations that wanted to challenge the sole source designation were given until April 7, 2021 to reply to the notice (see Section 10).

8. Procurement History:

Purchase order or contract number: Current Contract No. HHSM-500-2016-00048C Was Action Competed? Yes X No

If action was not competed, state the cited authority, summarize rationale, and describe the actions that were supposed to be taken to increase competition and the results thereof:

The current contract was conducted under the authority of 41 USC 253(c)(1) as set forth in FAR 6.302-1 for the same reasons stated in section 4. A notice of intent to contract on a sole source basis with 3M HIS 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. However, no responses were received.

9. Additional Information to support the justification

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-10-CM analysis and maintenance.

· 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 Groupers 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.

· The total estimated value is based on historical costs. Therefore, on this basis and the facts provided for this procurement in this document, the Contracting Officer determines that total estimated value of this procurement is fair and reasonable.

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

In reply to the www.beta.SAM.gov notice posted on March 23, 2021, CMS did not receive any challenges to the sole source nature of this requirement.

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