Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

MEDICARE ADMINISTRATIVE 

CONTRACTORS’ PERFORMANCE 

Daniel R. Levinson 

Inspector General 

January 2014 

OEI-03-11-00740 
 

 

EXECUTIVE SUMMARY: Medicare Administrative Contractors’ Performance 

OEI-03-11-00740 

WHY WE DID THIS STUDY 

Given the billions of dollars awarded to Medicare Administrative Contractors (MACs) 

and the critical role they play in administering the Medicare program, effective oversight 

of MACs’ performance is important to ensure that they are adequately processing claims 

and performing other assigned tasks. 

HOW WE DID THIS STUDY 

We collected performance assessment information from the Centers for Medicare & 

Medicaid Services (CMS) and determined (1) the extent to which MACs met or did not 

meet performance requirements reviewed by CMS and (2) the extent of CMS’s 

performance assessment and monitoring of MACs. The study included 2 performance 

periods for 13 MACs. The performance periods began and ended between 

September 2008 and August 2011. 

WHAT WE FOUND 

MACs met the majority of quality assurance standards reviewed by CMS. However, 

MACs did not meet one-quarter of the standards reviewed, and MACs had not resolved 

issues with 27 percent of these unmet standards as of June 2012. MAC standards have 

stringent performance requirements; a number of standards require 100-percent 

performance compliance. CMS did not require action plans for 12 percent of unmet 

standards, and unmet standards without action plans were almost four times more likely to 

have issues go unresolved. MACs can earn award fees if their performance exceeds basic 

requirements, and metrics are included in MACs’ award fee plans to encourage improved 

performance. However, certain areas identified as problematic through quality assurance 

reviews were not always included as metrics in MACs’ award fee plans. Two MACs 

consistently underperformed across various CMS reviews, and CMS’s reviews of MACs, 

while extensive, were not always completed timely. 

WHAT WE RECOMMEND 

We recommend that CMS (1) require action plans for all quality assurance standards not 

met, (2) use the results of quality assurance reviews to help select award fee metrics for 

review, (3) meet timeframes for completing quality assurance reports, (4) meet 

timeframes for completing award fee determinations, (5) establish reasonable timeframes 

for issuing contractor performance reports, and (6) seek legislative change to increase the 

time between MAC contract competitions to give CMS more flexibility in awarding new 

contracts when MACs are not meeting CMS requirements. CMS concurred with all 

six recommendations. 
TABLE OF CONTENTS 

Objectives ....................................................................................................1 

Background..................................................................................................1 

Methodology................................................................................................7 

Findings......................................................................................................10 

MACs did not meet one-quarter of all quality assurance 

standards reviewed by CMS ..........................................................10 

MACs had not resolved issues with 27 percent of unmet 

standards ........................................................................................12 

Two MACs consistently underperformed across various CMS 

reviews ...........................................................................................13 

CMS’s performance reviews of MACs, while extensive, 

were not always completed timely .................................................14 

Conclusion and Recommendations ............................................................17 

Agency Comments and Office of Inspector General Response .....19 

Appendixes ................................................................................................20 

A: MACs’ Coverage Areas and Performance Periods Reviewed 20 

B: Performance Areas in Quality Assurance Surveillance Plans ..21 

C: Information on Award Fees ......................................................24 

D: Agency Comments ..................................................................28 

Acknowledgments......................................................................................31 
 

 

 

 

 

 

 

OBJECTIVES 

1.	 To describe the extent to which Medicare Administrative Contractors 

(MACs) met or did not meet performance standards reviewed by the 

Centers for Medicare & Medicaid Services (CMS). 

2.	 To determine the extent to which CMS assessed and monitored MACs’ 

performance. 

BACKGROUND 

Section 911 of the Medicare Prescription Drug, Improvement, and 

Modernization Act (MMA) of 2003 required CMS to implement Medicare 

contracting reform by replacing fiscal intermediaries and carriers with 

MACs.1 The MMA required that all MAC contracts be awarded through 

the Federal Acquisition Regulation (FAR) competitive bidding process. 

Additionally, the MMA required that MAC contracts be competed not less 

frequently than once every 5 years. CMS began awarding MAC contracts 

in 2006 and initially awarded contracts for all 15 Part A and B (A/B) MAC 

jurisdictions and all 4 Durable Medical Equipment (DME) MAC 

jurisdictions.2 However, award protests and consolidation of some 

jurisdictions have prevented some of the original jurisdictions from 

becoming operational. As of December 2013, 16 MACs (12 A/B MACs 

and 4 DME MACs) were operational and all Medicare claims were being 

processed by MACs. CMS awarded $4.3 billion over a 5-year period for 

these 16 contracts.3, 4 

Functions Performed by the MACs 

Through statements of work, CMS assigns specific functions to the MACs 

and outlines performance standards for those functions. The functions 

performed by the MACs include, but are not limited to, claims processing, 

1

 MMA, P.L. 108-173 § 911 (adding section 1874A of the Social Security Act, 42 U.S.C. 

§ 1395kk-1). 

2

 CMS originally planned to award 4 MAC contracts for processing home health and 

hospice claims, in addition to the 15 MAC contracts it awarded for Parts A and B and the 

4 it awarded for DME. However, in March 2007, CMS announced that it would 

consolidate the workloads of the home health and hospice jurisdictions into four of the 

A/B MAC contracts. 

3

 Each MAC contract consists of 1 “base year” (first year) with 4 “option” years. CMS 

can exercise its option to renew the MAC’s contract for each of these 4 years. Effective 

September 3, 2013, the contracting officer can exercise options only after determining 

that the “contractor’s performance on [the] contract has been acceptable, e.g., received 

satisfactory ratings.” 78 Fed. Reg. 46783, 46788 (Aug. 1, 2013) (adding FAR 

17.207(c)(7)). 

4 CMS intends to consolidate 10 of the original A/B MAC jurisdictions into 

5 jurisdictions over the next several years. The consolidation will result in a total of 

10 A/B MAC jurisdictions and 4 DME MAC jurisdictions. 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 1 
 

 

provider enrollment, provider customer service, medical review, and 

appeals.5 

CMS’s Oversight of MAC Performance 

Several divisions within CMS’s Medicare Contractor Management Group 

are involved in MAC performance assessment, oversight, and monitoring. 

The Division of Performance Assessment serves as the central point for 

MAC performance assessment activities. For each MAC contract, this 

division works with a contract administration team to carry out its 

performance assessment activities. This team includes a contracting 

officer, a Contracting Officer’s Representative (COR), a contract 

specialist, MAC program analysts, business function leads, and technical 

monitors.6 The team monitors MACs’ performance to ensure they are 

providing the quality of service their contracts require. 

CMS oversees MAC performance through a number of internal and 

external audits as well as by (1) reviewing quality control plans, 

(2) reviewing Quality Assurance Surveillance Plans (QASPs), 

(3) determining award fees, (4) monitoring performance, and 

(5) evaluating MACs through Contractor Performance Assessment 

Reporting System (CPARS) reviews. According to the MAC Contract 

Administration Guide, if CMS identifies deficient performance through its 

quality control plan reviews, QASP reviews, or performance monitoring, it 

requires the MACs to take corrective actions. CMS uses the results of 

numerous external audits and reviews—such as the 912 system security 

review, the Chief Financial Officer (CFO) audit, and the Statement on 

Standards for Attestation Engagements Number 16 (SSAE-16) audit—to 

assist it in overseeing MAC performance.7 

Reviewing Quality Control Plans 

According to the MAC statement of work, CMS requires each MAC to 

develop and implement a quality control plan. This plan specifies 

procedures to ensure that MAC services meet contract performance 

requirements. For example, a MAC must have in place an inspection and 

audit system, a mechanism to identify deficiencies in the quality of its 

services, and a formal system to implement any necessary corrective 

5

 The A/B MACs handle enrollment for non-DME providers. DME MACs do not handle 

enrollment for DME suppliers; instead the National Supplier Clearinghouse handles their 

enrollment. 

6

 CORs were previously known as Contracting Officer’s Technical Representatives. 7

 Section 912 of the MMA (adding subsection (e) to section 1874A of the Social Security 

Act, 42 U.S.C. § 1395kk-1) requires the annual evaluation of, testing of, and reporting on 

MACs’ information security programs. CMS uses the CFO audit to identify operational 

weaknesses and improve internal controls and financial management. CMS uses the SSAE-16 

audit to review MACs’ internal controls. 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 2 
 

 

 

action. The MAC is required to submit its quality control plan to CMS no 

later than 45 days after the contract is awarded. 

CMS policy requires a review of the quality control plan and verification 

of its implementation to ensure that the MAC is meeting the criteria 

provided in the statement of work.8 The business function lead for the 

quality control plan reviews the plan and recommends either acceptance or 

rejection of the plan. If the business function lead recommends rejection, 

he or she provides the COR with a statement of the reason(s) the plan is 

being rejected along with a recommendation to return the plan to the MAC 

for revision and resubmission by a specified date. This process continues 

until CMS deems the plan satisfactory. The COR’s acceptance of the 

MAC’s quality control plan is contingent on an onsite validation review. 

To ensure sufficient review data, this review may be scheduled 

approximately 3 to 4 months after the date the MAC becomes operational. 

The MAC is required to submit an updated version of the quality control 

plan annually at contract renewal, as well as when substantive changes 

occur to the plan or when changes occur in the MAC’s quality operations. 

According to CMS staff, when the MAC submits an updated plan after the 

first contract year, CMS performs a “desk review,” i.e.,—a review that 

does not involve a site visit. CMS performs an additional onsite review 

only if there is a quality assurance issue that warrants it. 

Reviewing Quality Assurance Surveillance Plans 

Medicare contracting reform provisions require CMS to adhere to the 

FAR, which requires agencies to develop QASPs when using 

performance-based acquisition methods.9

 CMS’s QASP for MACs 

contains specific standards and methods for evaluating MACs’ work 

against the performance requirements in the statement of work. All of the 

performance requirements are provided to MACs during procurement; 

however, the MACs do not know which specific standards will be 

assessed during the QASP review. According to CMS staff, CMS decided 

in May 2013 to begin providing QASP metrics to all MACs at the 

beginning of every fiscal year to promote transparency. 

CMS performs a QASP review for each MAC at the end of each 

performance period.10 CMS reviews standards within a core set of areas 

8

 CMS, Medicare Administrative Contractor Quality Control Plan Review Protocol, 

pp. 1–2, July 2011, and CMS, MAC Contract Administration Guide, p. 57, June 2011. 9

 Section 1874A(a)(6) of Social Security Act, 42 U.S.C. § 1395kk-1(a)(6) (requiring 

adherence to the FAR). 48 CFR § 37.601. 

10 We use the phrase “performance period” to refer to the time period that is being 

evaluated by CMS. The performance period is typically 1 year and generally corresponds 

to the contract award date. 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 3 
 

 

for all MACs. For example, within the “provider customer service” area, 

there are standards regarding the length of time it takes to answer calls and 

provide responses to inquiries. For each QASP performance standard, 

CMS determines whether the MAC met the standard. 

Within 30 days of the end of the performance period, CMS sends a draft 

QASP Summary Report to the MAC.11 This draft report includes each 

standard reviewed, a determination of whether each standard was met, and 

narrative support for the determination. The MAC is given 7 days for 

rebuttal, and CMS then has 14 days to respond to the rebuttal. For each 

rebuttal submitted, the technical monitor, the business function lead, and 

the COR must agree whether to accept or reject the rebuttal. CMS makes 

any necessary revisions to the draft QASP Summary Report, incorporates 

the MAC’s rebuttal and CMS’s response, and generates the final QASP 

Summary Report. 

MAC Action Plans. If an action plan is required for an unmet standard, 

CMS requests it when the final QASP Summary Report is sent to the 

MAC. CMS tracks the status of action plans through the MACs’ monthly 

status reports. CMS may consider a deficiency identified in an action plan 

to be corrected on the basis of self-reported or validated information in the 

monthly status reports, a subsequent review by a technical monitor or 

business function lead, or a subsequent QASP review. 

Determining Award Fees 

Medicare contracting reform provisions require CMS to provide MACs 

with incentives to promote efficiency and quality of services.12 CMS 

established MAC contracts as “cost plus award fee” contracts. According 

to the FAR, such contracts provide a monetary incentive that the MAC 

may earn in whole or in part on the basis of its performance.13 

CMS and each MAC negotiate the dollar amount allocated for the MAC’s 

award fee pool—i.e., the amount of the potential award fee. The MAC 

may earn this award fee amount if it exceeds requirements in the statement 

of work. The MAC is not guaranteed to earn a minimum amount of its 

award fee pool; therefore, the MAC may earn none, some, or all of its 

award fee. 

The FAR requires each contract with an award fee to have an award fee 

plan.14 This plan outlines (1) a list of metrics that will be reviewed, (2) the 

11 CMS, Quality Assurance Surveillance Plan, Standard Operating Procedure, p. 6,
 

May 2011. 

12 Section 1874A(b)(1)(D) of the Social Security Act, 42 U.S.C. § 1395kk-1(b)(1)(D). 

13 48 CFR § 16.405-2. 

14 48 CFR § 16.401(e)(3). 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 4 
 

 

distribution of the award fee pool across the metrics, and (3) an 

explanation of how each metric will be reviewed. 

The MAC reviews a draft of the award fee plan that includes the metrics 

that CMS will use to evaluate performance. CMS can include metrics in 

MACs’ award fee plans on the basis of past performance or other criteria. 

For example, if an area is deemed to be a critical function or is identified 

as a problem, an award fee metric can be included to encourage improved 

performance.15 

As well as determining which award fee metrics to include in a MAC’s 

award fee plan, CMS determines how to distribute the MAC’s award fee 

pool among metrics. CMS considers a variety of factors when 

determining how to distribute the award fee pool among metrics, such as a 

MAC’s current and past performance in a given area. 

Within 90 days of the end of the performance period, CMS sends the 

MAC a determination letter containing the amount of award fee earned. 

The total award fee amount that a MAC earns depends on the amount 

assigned to each award fee metric and the MAC’s performance on each 

metric. Depending on CMS’s assessment of the MAC’s performance, 

MACs may earn none, some, or all of the award fee for each metric. 

Beginning in July 2009, CMS included language in each award fee plan 

stating that a MAC must receive a CPARS rating of satisfactory or higher 

in all areas to be eligible to earn any award fee. 

Monitoring Performance 

In addition to reviewing quality control plans and QASPs and determining 

award fees, CMS policy requires other performance monitoring 

throughout the MACs’ performance period.16 Members of the contract 

administration team compile MAC performance information related to 

their specific areas of Medicare operations. The Division of Performance 

Assessment maintains the findings of MAC-monitoring activities that are 

conducted across CMS, such as the CFO financial audit, the 

Comprehensive Error Rate Testing program, the SSAE-16 and SAS 70 

audits, and the section 912 information security reviews.17 To identify any 

MAC performance issues, team members also review the monthly status 

reports that MACs submit to CMS. In addition, CMS may conduct the 

following types of reviews: 

15 CMS, MAC Contract Administration Guide, p. 61, June 2011. 16 Ibid., pp. 53–55.
 17 The Comprehensive Error Rate Testing program measures improper payments in the 

Medicare program. SAS 70 (Statement on Auditing Standards No. 70: Service 

Organizations) audits review an organization’s internal controls. 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 5 
 

 

 

 

 

Onsite Visits and Reviews. According to CMS policy, CMS staff typically 

visit a MAC for onsite reviews at least once every 2 months and 

participate in face-to-face meetings with MAC managers.18 Topics 

discussed during these meetings may include, but are not limited to, the 

most recent monthly status report, progress on significant and/or ongoing 

issues, new issues or concerns, and innovations. 

Data Validation Reviews. The MAC is responsible for reporting to CMS 

certain performance information, such as data on the timeliness of claims 

and appeals. Occasionally, CMS will validate the data for accuracy and 

compliance with CMS instructions. The results are forwarded to the 

Division of Performance Assessment. 

Ad Hoc Reviews. CMS may conduct ad hoc reviews. Any irregularity 

identified through CMS’s performance monitoring and data validation 

may warrant an ad hoc review. Staff within the Division of Performance 

Assessment or members of the contract administration team can 

recommend initiation of such a review. However, each ad hoc review 

must be authorized and approved by the COR. 

According to CMS staff, if issues are identified through performance 

monitoring, staff work with the MAC to resolve the problems 

immediately. If the issues identified are long-term in nature, the COR may 

request a plan from the MAC to address the issues. These plans are 

documented separately from QASP action plans. 

Evaluating MACs through CPARS Reviews 

At the time of our review, the FAR required the preparation of 

performance evaluations at the completion of contracts.19 In addition, it 

required interim evaluations for contracts with a performance period, 

including option years, exceeding 1 year.20 Although the FAR did not 

specify the timing of these interim evaluations, Department of Health and 

Human Services (HHS) policy requires that for contracts of 3 years or 

more, agencies conduct interim assessments at 12-month intervals after the 

contract is awarded.21 CMS policy states that all MAC performance 

18 CMS, MAC Contract Administration Guide, p. 101, June 2011.
 19 After our review period, the requirements for contractor performance information at 

FAR subpart 42.15 were amended, effective September 3, 2013. 78 Fed. Reg. 46783
 

(Aug. 1, 2013). The amendments include requiring annual performance evaluations,
 

requiring all performance evaluations to be entered electronically into CPARS, requiring 

award-fee performance ratings to be entered into CPARS, and requiring use of 

standardized evaluation factors and performance rating categories. 20 48 CFR § 42.1502(a). 

21 HHS, Acquisition Policy Memorandum 2009-07, December 23, 2009, p. 5. Accessed 

at http://www.hhs.gov/asfr/ogapa/acquisition/policies/ on December 14, 2011. 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 6 
 

evaluations shall be retained in the CPARS system.22 CMS monitors its 

compliance with CPARS reporting requirements on a monthly basis. 

According to CMS staff, the agency has a very high compliance rate for 

completing MAC CPARS reports in comparison to the rates for other HHS 

agencies’ completion of CPARS reports. In addition, CMS’s Medicare 

Contractor Management Group has developed and implemented a CPARS 

template to ensure the consistency of CPARS evaluations across MAC 

contracts. 

For the CPARS evaluation, the COR considers all the different reports, 

information, and individual experience that he or she has with the MAC 

and condenses it into the CPARS report format. The COR rates the MAC 

on a five-point scale from “unsatisfactory” to “exceptional” in areas 

including quality of services, schedule, cost control, business relations, 

and management of key personnel. The COR uses various sources of 

information to rate the MAC’s performance. These include, but are not 

limited to, results from reviews of quality control plans and QASPs, 

monthly status reports, and performance monitoring information. 

According to CMS policy, the COR’s draft evaluation is due 90 days after 

the end of a MAC’s base year and each option year, but may take longer 

depending on the availability of necessary information.23 Once all reviews 

of the draft report are completed, the contracting officer enters the final 

report into the CPARS system. 

Related Work 

In March 2010, the Government Accountability Office (GAO) issued a 

report that described how CMS assessed MAC performance.24 According 

to this report, the MACs’ performance improved over time, but did not 

meet all standards. GAO analyzed CMS’s assessment of three MACs for 

which assessment results were available at the time. 

METHODOLOGY 

Scope 

We collected data for the 13 MACs (9 A/B MACs and 4 DME MACs) that 

had been operational for at least 2 years as of January 2012. For these 

13 MACs, we selected the 2 most recent performance periods for which 

the required performance reviews had been completed. Across the MACs, 

the earliest 2-year performance period reviewed was from September 2008 

22 CMS, MAC Contract Administration Guide, p. 23, June 2011. 23 Ibid., p. 114. 24 GAO, Medicare Contracting Reform: Agency Has Made Progress with 

Implementation, but Contractors Have Not Met All Performance Standards, GAO-10-71,
 

March 2010. 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 7 
 

 

 

 

to September 2010 and the latest 2-year performance period reviewed was 

from August 2009 to August 2011. CMS awarded $3.2 billion over a 

5-year period for these 13 contracts. Appendix A lists the MACs’ 

coverage areas and performance periods selected. 

Data Collection 

We requested all data from CMS. We collected the following information 

on CMS’s reviews of the 13 MACs’ performance for 2 performance 

periods: 

	 information on reviews of quality control plans, reasons for CMS’s 

rejection of any of these plans, and the dates of any onsite validation 

reviews conducted; 

	 final QASP Summary Reports; the dates the QASP reviews were 

conducted; and CMS’s determination of whether standards were met, 

action plans were required, and issues were resolved; 

	 letters containing award fee determinations and the dates these letters 

were sent to the MAC; 

	 information on performance monitoring, such as onsite reviews, 

ad hoc reviews, and data validation reviews; and 

	 CPARS evaluation reports and the dates the CPARS reports were 

finalized.25 

We followed up by telephone and email to clarify CMS’s responses. We 

collected data from March 2012 through November 2012. 

Data Analysis 

We reviewed the dates provided by CMS regarding its onsite validation 

reviews of MACs’ quality control plans to determine whether CMS 

conducted these reviews in the MACs’ base years. 

We reviewed the final QASP Summary Reports to identify the areas CMS 

reviewed, determine how many performance standards were evaluated, 

and calculate the number and percentage of standards that CMS 

determined were met and not met. We compared the numbers and 

percentages of standards not met across MACs, performance periods, and 

performance areas. We analyzed data provided by CMS to calculate the 

following for each MAC: (1) the time between the end of the performance 

period and the date CMS sent the draft QASP Summary Report,26 (2) the 

25 A CPARS evaluation report is considered finalized when the contracting officer enters 

it into the CPARS system.
 26 We used the end date of the QASP evaluation period in our calculation, but for
 

consistency, we use the phrase “performance period” in our report.
 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 8 
 

 

 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 9 

time between the date CMS submitted the draft version of this report and 

the date it completed the final version, (3) the number of action plans 

CMS required, (4) and the number and percentage of issues that CMS 

determined were resolved and not resolved. 

We reviewed the award fee determination letters to determine how many 

and which award fee plan metrics CMS assessed. We calculated (1) the 

number and percentage of award fee plan metrics for which each MAC 

earned none, some, or all of its award fee; (2) the total award fee pool and 

the total amount earned; and, (3) the time between the end of the 

performance period and the date CMS sent the award fee determination 

letter to the MAC.27 We compared the numbers and percentages of metrics 

for which MACs earned award fees across performance periods and across 

MACs. 

We determined the extent to which CMS conducted performance 

monitoring throughout the performance periods. We reviewed information 

on CMS’s performance monitoring to determine whether CMS conducted 

onsite visits, ad hoc reviews, and data validation reviews. 

For each MAC, we calculated the time between the end of the 

performance period and the date CMS finalized the CPARS report. For 

one CPARS evaluation, CMS was not able to provide the date the final 

report was entered into CPARS. 

To retain MACs’ anonymity, we randomly assigned a unique identifier 

(i.e., a letter) to identify each MAC throughout this report. 

Limitations 

Although we followed up with CMS to clarify information provided, we 

did not independently verify CMS’s responses regarding its reviews of 

MACs’ performance. 

Standards 

This study was conducted in accordance with the Quality Standards for 

Inspection and Evaluation issued by the Council of the Inspectors General 

on Integrity and Efficiency. 

27 We used the end date of the award fee evaluation period in our calculation, but for 

consistency, we use the phrase “performance period” in our report. 
 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 10 

 

FINDINGS 

MACs did not meet one-quarter of all quality

assurance standards reviewed by CMS 

There were 1,201 standards included in MACs’ QASP reviews for 

2 performance periods. Overall, MACs did not meet 26 percent, or 

310, of these standards. CMS conducts QASP reviews to ensure that 

MACs are providing the quality of services required in their contracts. 

MACs are expected to comply with stringent performance requirements 

for QASP standards; a number of standards require 100-percent 

performance compliance. 

QASP reviews include standards in eight areas.28 Each area and examples 

of standards within each area are listed in Appendix B. For example, 

QASP reviews evaluate whether MACs’ processes meet all CMS 

requirements in areas such as processing claims, managing appeals, 

handling claims for which Medicare is the secondary payer, and enrolling 

providers. The number of QASP standards CMS reviewed varied by 

MAC and by performance period. 

Of the 13 MACs in our review, 7 did not meet 25 percent or more of their 

QASP standards. The percentage of unmet standards ranged from 

13 percent to 48 percent. One MAC did not meet one or more standards in 

all eight areas. 

Most MACs’ (10 of 13) performance improved over the two performance 

periods. Of the 534 standards included in QASP reviews for the first 

performance period, 158 (30 percent) were not met. Of the 667 standards 

included in QASP reviews for the second performance period, 

152 (23 percent) were not met. However, five MACs (38 percent) still did 

not meet over one-quarter of their QASP standards reviewed in the second 

performance period. The percentage of standards not met in the second 

performance period ranged from 6 percent to 50 percent. 

MACs did not meet over 40 percent of QASP standards in 

three areas 

For three of eight QASP performance areas, MACs did not meet over 

40 percent of standards. Overall, MACs did not meet 51 percent of 

standards in the area of provider enrollment. In this area, CMS evaluated 

MACs’ accuracy and timeliness in processing provider enrollment 

applications and revocations. For example, some MACs did not meet the 

requirement to accurately process 98 percent of provider applications in 

28 Two of the eight areas—“audit and reimbursement” and “provider enrollment”—are 

included only in QASP reviews of A/B MACs. 
 

 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 11 

 

accordance with instructions in CMS’s Medicare Program Integrity 

Manual. Additionally, five of nine MACs did not meet one or more 

standards in this area for two performance periods.29
 

Overall, MACs did not meet 45 percent of the standards in the “Medicare 

secondary payer” area. In this area, CMS evaluated MACs’ timeliness 

and accuracy in processing claims for which Medicare is not the primary 

payer. For example, some MACs did not meet the requirement to respond 

to 95 percent of inquiries regarding Medicare secondary payer claims 

within 45 days from receipt of the inquiry. Additionally, 12 of 13 MACs 

did not meet 1 or more standards in this area for 2 performance periods. 

Overall, MACs did not meet 43 percent of standards regarding their 

appeals processes. In this area, CMS evaluated MACs’ timeliness and 

accuracy in managing appeals. For example, some MACs did not send 

100 percent of appeal decision notices within 60 days of receipt of appeals 

as required. Additionally, 12 of 13 MACs did not meet 1 or more 

standards in this area for 2 performance periods. Table 1 shows the 

number and percentage of standards MACs did not meet in each area CMS 

reviewed. 

Table 1: Number and Percentage of Unmet QASP Standards in Each 

Performance Area 

 Performance Area 

Number of 

Standards 

Reviewed 

Number of 

Standards 

Not Met 

Percentage of 

Standards 

Not Met 

Provider Enrollment 90 46 51% 

Medicare Secondary Payer 186 84 45% 

Appeals 183 79 43% 

Audit and Reimbursement 207 36 17% 

Medical Review 42 7 17% 

Provider Customer Service Program 196 32 16% 

Financial Management 178 23 13% 

Claims Processing 119 3 3%

 Total 1,201 310 26% 

Source: OIG analysis of final QASP Summary Reports, 2012. 

29 As noted in the previous footnote, “provider enrollment” is one of the two areas 

included only in QASP reviews of A/B MACs. 
 

 

 

CMS did not always include areas identified as problematic 

through QASP reviews as metrics in MACs’ award fee plans 

MAC contracts include an award fee that a MAC may earn if its 

performance exceeds basic requirements, and metrics can be included in a 

MAC’s award fee plan to encourage improved performance. The purpose 

of an award fee is, in general, to differentiate performance that is merely 

satisfactory from performance that demonstrates that a MAC has exceeded 

the requirements in its statement of work. As a result of changes that 

CMS made beginning in July 2009, MACs cannot earn any award fee if 

they do not attain a CPARS rating of satisfactory or higher in all areas. 

From an overall award fee pool of $39 million across two performance 

periods, MACs earned two-thirds, or $26 million. 

Regarding QASP reviews, MACs did not meet 45 percent of the QASP 

standards in the “Medicare secondary payer” area. However, CMS did not 

include any metrics from this area in any MACs’ award fee plans. 

Additionally, although issues with provider enrollment were identified 

through QASP and other reviews, CMS included provider enrollment 

metrics in the award fee plan for only one MAC. Moreover, although 

MACs did not meet 51 percent of QASP standards regarding provider 

enrollment, metrics in this area made up less than 1 percent of award fee 

metrics that CMS assessed. Appendix C describes the award fee metrics, 

the award fees earned by MAC, and the award fees earned by metric. 

MACs had not resolved issues with 27 percent of

unmet standards 

For the 310 QASP standards that MACs did not meet, CMS determined 

that, as of June 2012, MACs had not resolved issues with 83, or 27 percent, 

of the unmet standards. MACs had not resolved issues with 18 standards 

that were not met in the first performance period and issues with 

65 standards that were not met in the second. Of the 83 standards not met, 

over half involved provider enrollment (18), appeals (13), or audit and 

reimbursement (13). 

CMS did not require action plans for 12 percent of unmet 

standards, and unmet standards without action plans were 

almost four times more likely to have issues go unresolved 

When MACs do not meet a standard, CMS can—but does not always— 

require the MAC to submit an action plan to resolve issues related to that 

standard. For example, according to CMS staff, if the MAC had one error 

that caused it to not meet a standard but the MAC was in compliance for 

the rest of the performance period, CMS may choose not to require an 

action plan. Additionally, CMS may not require an action plan if it has 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 12 
 

waived a contract requirement because of an issue beyond the MAC’s 

control, such as a CMS system failure. 

CMS did not require action plans for 37 of the 310 standards MACs did 

not meet. When CMS did not require MACs to have action plans for 

unmet standards, the issues with those standards were almost four times 

more likely to go unresolved. Of the 37 standards for which CMS did not 

require action plans, issues with 76 percent were not resolved. In contrast, 

of the 273 standards for which CMS required action plans, issues with 

20 percent were not resolved. 

Two MACs consistently underperformed across 

various CMS reviews 

Two MACs, designated as V and Y in this report, consistently 

underperformed across various CMS reviews. MAC V’s quality control 

plan was initially rejected because the document it submitted was not 

deemed a quality control plan. Additionally, CMS’s onsite validation 

review of MAC Y’s quality control plan uncovered flaws regarding the 

MAC’s inspection and audit system, as well as its procedures for 

corrective action. 

Both MACs did not meet a high percentage of QASP standards. MAC V 

had the highest percentage of unmet standards (48 percent) and MAC Y 

had the third-highest percentage of unmet standards (31 percent). For 

MAC V, over half of the issues identified through its QASP reviews had 

not been resolved. 

CMS awarded the lowest percentage of award fees to these two MACs— 

35 and 40 percent of their respective award fee pools. For MAC V, CMS 

reduced the overall percentage of the MAC’s award fee earned to 

40 percent in one performance period because of its poor performance in 

key areas. CMS noted MAC V’s failure to make system changes; a high 

volume of complaints regarding its customer service program for 

providers; and its failure to meet basic performance requirements, such as 

those regarding appeals processing. Additionally, MACs V and Y were 

the only two MACs that did not earn any award fee for the contract 

administration metric during one performance period. This metric 

evaluates a MAC’s overall ability to manage its contract, specifically in 

areas such as communication, flexibility, staffing, and cost management. 

For MAC Y, concerns regarding a backlog in provider enrollment led 

CMS to increase oversight and monitoring activities, including putting the 

MAC under an ad hoc review for an entire performance period. As part of 

this review, the MAC was required to send daily reports of provider 

enrollment to CMS and to have biweekly update calls with CMS 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 13 
 

 

 

 

management. MAC Y received onsite visits nearly twice a month in both 

performance periods we reviewed. 

When the contract for MAC Y’s jurisdiction was recompeted, the contract 

was awarded to a different contractor. As of December 2013, MAC V’s 

contract was still in effect and the recompete for the jurisdiction had not 

yet been completed. 

According to CMS staff, the agency has considered not renewing contract 

option years for MACs performing at substandard levels. However, it 

takes approximately 1 year for CMS to solicit and award a new contract. 

With only 4 option years for each contract, CMS reported that the 

resources and risk involved in conducting an unforeseen procurement to 

replace a poorly performing MAC made such a decision impractical. 

CMS’s performance reviews of MACs, while 

extensive, were not always completed timely 

Overall, CMS conducted extensive activities to review MACs’ 

performance. Because MAC reviews provide important performance 

information and can be used to support future award decisions, it is 

important that CMS complete these reviews timely. However, CMS did 

not always do so. 

Quality Control Plan Reviews. CMS policy requires it to conduct an 

onsite review to determine whether MACs have implemented their quality 

control plans.30 This onsite review may be conducted within 3 to 4 months 

of the date the MAC becomes operational.31 According to CMS staff, 

CMS strives to complete the review during the MAC’s base year. The 

performance periods we reviewed included the base year for three MACs. 

For one of the three, the onsite validation review was conducted in the 

base year. For the remaining two MACs, there was no onsite validation 

review in the base year. However, both of these MACs had an onsite 

validation review in the next year of the contract. According to CMS 

staff, some onsite validation reviews that should have been conducted in 

the base year may not have been conducted because of a lack of travel 

funds or staff. 

QASP Reviews. As required, CMS completed a QASP review for each of 

the 13 MACs’ performance periods in our review. CMS’s QASP Standard 

Operating Procedure (SOP) establishes an internal timeframe of 51 days 

30 CMS, Medicare Administrative Contractor Quality Control Plan Review Protocol, 

pp. 1–2, July 2011.
 31 Ibid., p. 2.
 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 14 
 

 

 

for completing final QASP reports.32 However, none of the QASP reviews 

met that timeframe. On average, final QASP reports were sent more than 

5 months after the end of the QASP performance period. 

According to the QASP SOP, the draft QASP Summary Report must be 

sent to the MAC within 30 days of the end of the performance period. 

CMS sent draft QASP reports between 34 and 155 days after the end of 

the performance period, with an average of 99 days after. 

The QASP SOP also states that once the draft report has been sent, the 

MAC has 7 days to provide a rebuttal and CMS has 14 days to respond to 

the rebuttal and generate the final QASP Summary Report. However, 

CMS sent 24 of the 26 final QASP Summary Reports more than 21 days 

after the draft reports were sent. The average number of days between the 

date of the draft report and the date of the final QASP Summary Report 

was 62 days. 

CMS reported that, to improve timeliness, it revised QASP procedures in 

July 2012 so that all QASP reviews are begun 30 days before the end of 

the performance period. In addition, CMS staff reported that in 

October 2012, the agency instituted a strategy to ensure compliance with 

internal due dates for QASP reports. 

Award Fee Determinations. According to CMS staff, award fee 

determinations are completed through an extensive process involving 

numerous staff, including members of the contract administration team, 

CMS managers, and an award fee determining official. As required, CMS 

made award fee determinations for each of the 13 MACs’ performance 

periods in our review. According to timeframes set forth in the MAC 

Contract Administration Guide, CMS must send award fee determination 

letters to MACs within 90 days of the end of the performance period. 

However, CMS sent only one such letter to a MAC within 90 days. The 

number of days between the end of the performance period and the date 

the award-fee determination letter was sent ranged from 89 to 214. On 

average, award fee determination letters were sent to MACs 135 days after 

the end of the performance period. According to CMS staff, as of 

July 2013, CMS was in the process of updating the MAC Contract 

Administration Guide and intended to revise the award fee determination 

timelines in accordance with best practices. 

CPARS Evaluations. As it does with award fee determinations, CMS goes 

through an extensive process to finalize MACs’ CPARS reports. CPARS 

32 CMS must submit the draft QASP Summary Report to the MAC within 30 days of the 

end of the performance period. The MAC then has 7 days to provide a rebuttal, and CMS 

has 14 days to respond and generate the final QASP Summary Report. 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 15 
 

 

evaluations provide summaries of CMS’s various performance reports and 

experiences with the MACs. According to CMS guidelines, draft CPARS 

reports should be submitted for review to the Program Management 

Division Director within 90 days of the end of the performance period.33 

However, during our review timeframe, CMS did not track the submission 

date of the draft reports. CMS guidelines for completing CPARS 

evaluations do not include timeframes for finalizing reports. CMS staff 

reported that in October 2012, the agency instituted a procedure to track 

the status of all CPARS evaluations. 

If CPARS reports are not completed timely, the information they contain 

cannot be used to support future award decisions. For the 25 CPARS 

evaluations that had a final report date in CPARS, the time between the 

end of the performance period and the date the report was finalized ranged 

from 8 months to over 2 years. The average amount of time between the 

end of the performance period and the date the CPARS report was 

finalized was over 14 months. 

33 CMS, MAC Contract Administration Guide, p. 114, June 2011. 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 16 
 

 

 

CONCLUSION AND RECOMMENDATIONS 

Given the billions of dollars awarded to MACs and the critical role they 

play in administering the Medicare program, effective oversight of these 

contractors by CMS is important to ensure that they are carrying out their 

assigned tasks. 

Although MACs met the majority of quality assurance standards reviewed 

by CMS, they did not meet one-quarter of them. Additionally, CMS did 

not require action plans for some unmet standards, and unmet standards 

without action plans were almost four times more likely to have issues go 

unresolved. Moreover, certain areas identified as problematic through 

QASP reviews were not always included as metrics in MACs’ award fee 

plans. 

While CMS’s performance reviews of MACs were extensive, they were 

not always completed timely. If performance reviews are not completed 

timely, the information they contain may not be available to support future 

award decisions. Additionally, two MACs consistently underperformed 

across various CMS reviews. However, the 5-year timeframe under which 

CMS must recompete MAC contracts limits CMS’s ability to solicit and 

award new contracts when MACs are not meeting the agency’s 

requirements. 

It is important that CMS effectively oversee MACs to ensure that it is 

obtaining the level of performance expected. Therefore, we recommend 

that CMS: 

Require action plans for all unmet QASP standards 

Unmet QASP standards that did not have an action plan were almost 

four times more likely to have issues go unresolved. CMS should require 

action plans for all QASP standards not met to help ensure that MACs 

resolve the issues. 

Use QASP results to help select award fee metrics for review 

and to establish award fee metrics for the “Medicare 

secondary payer” area 

CMS should ensure that MACs’ QASP performance informs the metrics it 

selects for MACs’ award fee plans. The areas in which the MACs had the 

greatest percentage of unmet QASP standards were “provider enrollment,” 

“Medicare secondary payer,” and “appeals.” Although there were award 

fee metrics for the “provider enrollment” and “appeals” areas, there were 

no award fee metrics for the “Medicare secondary payer” area. 

Additionally, provider enrollment metrics were included in only one 

MAC’s award fee plan. 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 17 
 

Seek legislative change to increase the time between MAC 

contract competitions to give CMS more flexibility in awarding 

new contracts when MACs are not meeting CMS requirements 

MAC contracts are awarded for a base year and 4 option years. The 

current law requires CMS to recompete MAC contracts at least every 

5 years. MAC contracts are awarded by jurisdiction, and the periods of 

performance for MAC contracts are staggered such that MAC contracts do 

not end at the same time. According to CMS staff, this puts them in a 

perpetual procurement cycle and makes it impractical to recompete a 

MAC contract earlier than the mandatory 5-year recompete. 

CMS should seek legislative change to allow more time between MAC 

contract competitions. The intent of this recommendation is not to extend 

the length of a contract for a poorly performing MAC. Instead, because of 

the resources, time, and effort it takes to compete a contract, such a change 

would allow CMS to use its time and resources effectively in soliciting 

and awarding new contracts. By extending the overall contract term, the 

time and resources that would have been used for the mandatory 5-year 

recompete of a well-performing MAC’s contract could be used to conduct 

an unforeseen procurement to replace a poorly performing MAC. 

Meet timeframes for completing draft and final QASP summary 

reports 

CMS’s procedures for QASP reviews state that the draft QASP Summary 

Report will be completed within 30 days of the end of the performance 

period (i.e., evaluation period); however, none of the draft reports in our 

review were completed within that timeframe. The procedures also state 

that the final QASP Summary Report should be generated within 21 days 

from the issuance of the draft report; however, almost none of the final 

summary reports were issued within that timeframe. 

Meet timeframes for completing award fee determinations 

CMS’s MAC Contract Administration Guide states that award fee 

determination letters will be sent to MACs within 90 days of the end of the 

performance period (i.e., evaluation period); however, CMS sent only one 

award fee determination letter within this timeframe. 

Establish reasonable timeframes for issuing final CPARS 

reports 

CMS guidelines for completing CPARS evaluations do not include 

timeframes for submitting the final reports; however, the average amount 

of time between the end of the performance period and the date of the final 

CPARS report was 428 days. Without a timely CPARS report, award 

decisions may be made without comprehensive performance information. 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 18 
 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with all six of our recommendations. Regarding our first 

recommendation, CMS stated that effective June 19, 2013, it began 

requiring action plans for all QASP standards that were not met. 

However, CMS noted that a request for an action plan may change as the 

QASP report goes through the rebuttal process. For example, CMS stated 

that sometimes corrective actions have already been taken after the issue 

has been identified. 

Regarding our second recommendation, CMS stated that it will continue 

to examine the feasibility of developing award fee metrics for provider 

enrollment and any other functional areas as warranted. However, CMS 

added that when basic statement of work standards are not met, as for 

example, in the case of Medicare secondary payer, it focuses its resources 

on MACs’ achievement of basic standards prior to creating award fee 

metrics. 

Regarding our third recommendation, to increase the time between MAC 

contract competitions, CMS stated that it will consider this 

recommendation when it develops the next President’s budget proposal. 

Regarding our fourth, fifth, and sixth recommendations, CMS stated that 

effective July 26, 2013, it has revised its timeframes for completing QASP 

summary reports, award fee determinations, and final CPARS reports. 

QASP summary reports are now due 60 days after the end of the contract 

year, award fee determinations are due 150 days after the end of the 

contract year, and CPARS reports are due 120 days after the end of the 

contract year. CMS noted that while it agrees with the importance of 

meeting timeliness goals, it believes that the accuracy and completeness of 

performance documents take precedence over timeliness. OIG agrees that 

accuracy and completeness are important, but also stresses the importance 

of timeliness. If performance reviews are not completed timely, the 

information they contain may not be available to support future award 

decisions. 

For the full text of CMS’s comments, see Appendix D. 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 19 
 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 20 

 

 

 

APPENDIX A 

MACs’ Coverage Areas and Performance Periods Reviewed 

Table A-1 provides the 13 MACs’ coverage areas and the associated performance periods 

used for this review. These MACs had been operational for at least 2 years as of 

January 2012. Performance periods ranged from 2008 to 2011. 

Table A-1: MACs’ Coverage Areas and Performance Periods Reviewed 

MAC MAC Coverage Area Performance 

Period 1 

Performance 

Period 2 

Base Contract Amount 

for Two Performance 

Periods1 

Palmetto GBA, LLC Parts A and B for CA, HI, NV 1/25/09 –1/24/10 1/25/10 –1/24/11 $155,753,377 

Noridian Healthcare Solutions, LLC 

(formerly Noridian Administrative 

Services, LLC) 

Parts A and B for AZ, MT, ND, 

SD, UT, WY 7/31/09 – 7/30/10 7/31/10 – 7/30/11 $79,288,901 

TrailBlazer Health Enterprises, LLC Parts A and B for CO, NM, OK, 

TX 8/6/09 – 8/5/10 8/6/10 – 8/5/11 $170,778,910 

Wisconsin Physicians Services 

Insurance Company Parts A and B for IA, KS, MO, NE 9/10/08 – 9/9/09 9/10/09 – 9/9/10 $93,295,705 

First Coast Service Options, Inc. Parts A and B for FL, PR, VI 9/16/08 – 9/15/09 9/16/09 – 9/15/10 $115,227,545 

Cahaba Government Benefit 

Administrators, LLC Parts A and B for AL, GA, TN 1/12/09 – 1/11/10 1/12/10–1/11/11 $104,328,164 

Novitas Solutions, Inc. (formerly 

Highmark Medicare Services, Inc.) 

Parts A and B for DC, DE, MD, 

NJ, PA 3/01/09 – 2/28/10 3/01/10 – 2/28/11 $196,705,470 

National Government Services, Inc. Parts A and B for CT, NY 3/18/09 – 3/17/10 3/18/10 – 3/17/11 $138,793,917 

NHIC, Corp. 

Parts A and B for MA, ME, NH, 

RI, VT; 

Home Health and Hospice for CT, 

MA, ME, NH, RI, VT 

11/14/08 – 11/13/09 11/14/09 – 11/13/10 $53,550,221 

NHIC, Corp. 

Durable Medical Equipment for 

DC, DE, CT, MA, MD, ME, NH, 

NJ, NY, PA, RI, VT 

12/30/08 – 12/29/09 12/30/09 – 12/29/10 $24,389,200 

National Government Services, Inc. Durable Medical Equipment for IL, 

IN, KY, MI, MN, OH, WI 12/30/08 – 12/29/09 12/30/09 – 12/29/10 $38,102,255 

CGS Administrators, LLC (formerly 

CIGNA Government Services, LLC) 

Durable Medical Equipment for 

AL, AR, CO, FL, GA, LA, MS, NC, 

NM, OK, PR, TN, SC, VA, TX, 

WV 

12/1/08 – 11/30/09 12/1/09 – 11/30/10 $57,278,148 

Noridian Healthcare Solutions, LLC 

(formerly Noridian Administrative 

Services, LLC) 

Durable Medical Equipment for 

AK, AZ, CA, HI, IA, ID, KS, MO, 

MT, ND, NE, NV, OR, SD, UT, 

WA, WY 

12/30/08 – 12/29/09 12/30/09 – 3/31/11 $41,690,071 

Source: Documentation collected from CMS on MAC performance periods and contract amounts, 2012. 1

 Base contract amount does not include the MAC’s award fee pool. 
 

 

 

APPENDIX B 

Performance Areas in Quality Assurance Surveillance Plans 

Table B-1 provides the QASP performance areas evaluated and a description of selected 

standards within those areas for the MACs in our review. QASP standards are used to 

evaluate MACs’ performance against statement of work requirements. 

Table B-1: QASP Performance Areas Reviewed and Description of Selected Standards 

Performance Area Description of Selected Standards Within Each Area 

The MAC shall reopen an initial determination or a redetermination to review a decision per 

regulation, the Medicare Claims Processing Manual, and statement of work requirements. 

Appeals Administrative Law Judge hearing decisions and Qualified Independent Contractor decisions 

must be effectuated by the MAC within appropriate timeframes. 

Redeterminations are successful when all redetermination notices are processed and mailed 

within 60 calendar days. 

Cost report acceptance is timely if it is completed within 30 days from the receipt date of the 

provider’s cost report. 

Audit and 

Reimbursement 

Cost reports are settled accurately when a CMS review determines compliance with Medicare 

payment policy as defined in the Medicare Provider Reimbursement Manual. 

Cost reports that do not require an audit are settled timely when the Notice of Program 

Reimbursement is issued within 12 months of the acceptance of a cost report. 

Claims are processed timely when 95 percent of claims are processed within the claims 

payment floor and ceiling specified in the Medicare Claims Processing Manual. The contractor 

must meet this standard on a monthly basis. 

Claims Processing 

Communication is timely when CMS receives notification within 24 hours or within the same 

business day of identification, if the problem may cause disruption of benefit payments beyond 

a single provider. 

Medicare Summary Notice (MSN) management is successful when the contractor accurately 

generates and mails 98 percent of MSNs in accordance with Medicare Claims Processing 

Manual instructions. 

Continued on next page 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 21 
 

 

 

 

Table B-1: QASP Performance Areas Reviewed and Description of Selected Standards 

(Continued) 

Performance Area Description of Selected Standards Within Each Area 

The contractor’s use of trust fund dollars is successful when it will not cause CMS to be cited for 

financial-management-related deficiencies on the CMS annual CFO audit. 

Financial 

Management 

The contractor’s debt referral procedures are successful when its eligible delinquent debt has 

been referred by the 180th day of delinquency. 

The contractor is able to obtain an unqualified opinion (no material weakness) on annual 

SAS 70 reviews. 

Medical Review 

The contractor’s medical review strategy is successful when problems targeted in the strategy 

are addressed during the fiscal year using the Progressive Corrective Action process and the 

contractor can demonstrate a change in billing behavior. 

The contractor’s review is successful when it meets CMS’s requirement that demand bills from 

skilled nursing facilities be processed accurately as referenced in the Medicare Program 

Integrity Manual. 

For Medicare secondary payer prepayment, 95 percent of all inquiries regarding Medicare 

secondary payer claims shall be responded to within 45 calendar days of receipt of the inquiry. 

Medicare 

Secondary Payer 

Upon receipt of an incomplete primary payer notification, the contractor shall send a Medicare 

secondary payer inquiry or assistance request transaction to the Coordination of Benefits 

Contractor within 1 business day of processing the claim. 

For Medicare secondary payer postpayment, 95 percent of all Medicare secondary payer 

supplier inquiries shall be acknowledged or responded to within 45 days of receipt. 

All eligible debts are referred to the Department of the Treasury for cross-servicing when the 

debt becomes 180 days delinquent. 

Of all calls monitored for the quarter, the number of customer service representatives scoring as 

"Achieves Expectations" or higher for Knowledge Skills shall be no less than 93 percent. This 

standard shall be measured quarterly and shall be cumulative for the quarter. 

Provider Customer 

Service Program 

Telephone inquiries are successful when the corporate quarterly call completion rate is 

95 percent for interactive voice responses and 80 percent for customer service representatives. 

The contractor shall maintain an average speed of answer of 60 seconds or less measured on a 

quarterly basis. 

Continued on next page 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 22 
 

 

Table B-1: QASP Performance Areas Reviewed and Description of Selected Standards 

(Continued) 

Provider 

Enrollment 

The paper enrollment applications described in the statement of work shall be considered timely 

processed when 80 percent of applications are processed within 60 calendar days of receipt or 

sooner, 90 percent within 120 calendar days of receipt or sooner, and 99 percent within 

180 calendar days of receipt. 

The contractor shall process 100 percent of all revocation actions in full accordance with all 

revocation instructions in the Medicare Program Integrity Manual. 

The contractor shall process 100 percent of all provider enrollment appeals in full accordance 

with all appeals instructions in the Medicare Program Integrity Manual. 

Source: OIG’s review of MACs’ final QASP Summary Reports, 2012. 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 23 
 

APPENDIX C 

Information on Award Fees 

MAC contracts include an award fee that a MAC may earn if its performance exceeds 

basic requirements, and CMS can include metrics in MACs’ award fee plans to encourage 

MACs to improve their performance. This appendix provides a description of the award 

fee metrics reviewed, the award fees earned by MAC, and the award fees earned by 

metric. 

Table C-1 shows the types of award fee metrics evaluated for the MACs in our review. 

Table C-1: Award Fee Plan Metrics and Description 

Metric Description 

Appeals 

Measures timeliness in processing and sending 100 percent of redetermination notices 

within 60 calendar days of receipt. 

Measures the accuracy of Medicare Redetermination Notices issued by the contractor, 

fully or partially affirming denials of claims. 

Audit Quality Measures the quality of desk reviews, audits, and/or reopenings. 

Beneficiary Inquiries Measures the timeliness of responses to complex inquiries forwarded from the 

Beneficiary Contact Center or CMS regional offices. 

Claims Processing 

Timeliness 

Measures the timeliness of processing clean electronic claims within the statutorily 

specified timeframes. 

Comprehensive Error 

Rate Testing 

Measures the contractor’s ability to reduce its error rate for improper Medicare payments. 

Measures the contractor’s ability to achieve the Government Performance and Results 

Act goal for Comprehensive Error Rate Testing. 

Contract Administration Measures overall contract management. When evaluating this metric, CMS considers 

cost, timeliness, staff, flexibility, deliverables, and communication. 

Decrease in Paper 

Remittance 

Measures the contractor’s ability to decrease the number of paper remittance advices 

sent to providers in its jurisdiction. 

Increase in Electronic 

Funds Transfer 

Measures the contractor’s ability to increase the use of electronic funds transfer 

payments to existing Medicare providers. 

Medical Review Evaluates the probe findings letter sent to the provider/supplier as a result of medical 

review. 

Medicare Provider 

Satisfaction Survey 

Measures the contractor’s overall provider satisfaction as calculated by the Medicare 

Contractor Provider Satisfaction Survey. 

Continued on next page 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 24 
 

 

 

 

Table C-1: Award Fee Plan Metrics and Description (Continued) 

Metric Description 

Program Integrity Support 

Measures the timeliness of submitting overpayment information to the Program 

Safeguard Contractors (PSCs) or Zone Program Integrity Contractors (ZPICs). 

Measures the contractor’s responsiveness to PSC or ZPIC requests for information. 

Measures the timeliness of adding a new provider to an established 

payments-suspension flag at the request of the PSC or ZPIC. 

Provider Customer 

Service 

Measures the accuracy with which customer service representatives responded to 

Medicare policy questions. 

Measures the contractor’s ability to actively market and promote the benefits of being a 

member of the provider listserv(s). 

Measures the contractor’s rating on the Medicare Contractor Website Customer 

Satisfaction Survey. 

Provider Enrollment 

Measures timeliness of processing paper applications for provider enrollment. 

Measures timeliness of processing Web-based applications for provider enrollment. 

Qualified Independent 

Contractor Support Measures timeliness of Qualified Independent Contractor support. 

Systems Security Measures the contractor’s compliance with CMS’s system security standards. 

Source: OIG’s review of MACs’ award fee determination letters, 2012. 

Award Fees Earned by MACs 

From an overall award fee pool of $39 million across two performance periods, MACs 

earned two-thirds, or $26 million. MACs earned between 35 percent and 86 percent of 

their respective award fee pools. MACs can earn none, some, or all of the award fee 

associated with each metric. As shown in Table C-2, of the 314 award fee metrics CMS 

assessed across 2 performance periods, MACs did not earn any award fee for 22 percent 

of metrics. MACs earned all of the award fee for 51 percent of metrics and some award 

fee for 27 percent of metrics. 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 25 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table C-2: Award Fees Earned by MAC 

MAC1 

Number of 

Metrics 

Assessed 

Percentage of 

Metrics Not Met 

(No Award Fee 

Earned) 

Percentage of 

Metrics 

Partially Met 

(Some Award 

Fee Earned) 

Percentage of 

Metrics Fully Met 

(All Award Fee 

Earned) 

V 27 22% 59% 19% 

Y 29 55% 14% 31% 

R 31 23% 39% 39% 

X 17 29% 29% 41% 

Z 17 24% 35% 41% 

Q 17 12% 41% 47% 

U 26 19% 23% 58% 

P 34 24% 18% 59% 

T 25 20% 20% 60% 

S 18 6% 33% 61% 

N 22 14% 23% 64% 

W 26 19% 12% 69% 

O 25 4% 20% 76% 

Total 314 22% 27% 51% 

Source: OIG analysis of award fee determination letters, 2012. 1 We randomly assigned a unique identifier (i.e., a letter) to each MAC in our review. Percentages across 

some rows do not total 100 percent because of rounding. 

Amount and Percentage of Award Fees Earned by Metric 

As shown in Table C-3, MACs did not earn any award fee for 68 of 314 metrics. Over two 

performance periods, the award fee pool for metrics ranged from $20,546 to over 

$14 million. The metrics assessed varied by MAC and performance period (i.e., not all 

MACs were assessed on every metric). The $39 million total award fee pool represented 

3 percent of the $1.3 billion in MAC contracts for the two performance periods reviewed.34 

The metric associated with systems security represented 25 percent of all metrics (17 of 68) 

for which MACs earned no award fee. All 13 MACs in our review did not earn any award 

fee for the systems security metric in at least 1 performance period. Overall, MACs did not 

earn $2.4 million of the $2.9 million of the available award fee pool for this metric. Appeals 

represented 22 percent of the metrics (15 of 68) for which MACs earned no award fee. 

Overall, MACs did not earn $2.4 million of the $4.7 million of the available award fee pool 

for this metric. Two additional metrics—audit quality and Medicare provider satisfaction 

survey—had a high percentage of award fees not earned; however, they were reviewed less 

often and were associated with smaller potential award fees. Audit quality was assessed 

twice and had an award fee pool of $46,065; MACs did not earn any award fee for this 

34 The $1.3 billion represents the MACs’ base contract amounts (i.e., it excludes any award fees). 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 26 
 

 

 

 

 

 

 

 

 

metric. The metric associated with the Medicare provider satisfaction survey was assessed 

eight times and had an award fee pool of $357,081; MACs did not earn $299,541 of the 

available award fee pool for this metric. 

The contract administration metric is always included in MACs’ award fee plans and 

represented over one-third of the total award fee pool ($14 million of $39 million) for the 

performance periods reviewed. Overall, MACs did not earn 31 percent of the available 

award fee pool for contract administration. 

Table C-3: Amount and Percentage of Award Fees Earned by Metric 

Metric 

Number 

of Times 

Metric 

Assessed 

Number of 

Times 

Award Fee 

Not Earned 

Award Fee 

Pool 

Award Fee 

Not 

Earned 

Percentage 

of Award 

Fee Earned 

Audit Quality 2 2 $46,065 $46,065 0% 

Medicare Provider Satisfaction Survey 8 5 $357,081 $299,541 16% 

Systems Security 23 17 $2,917,288 $2,441,707 16% 

Appeals 43 15 $4,735,906 $2,438,800 49% 

Contract Administration 26 2 $14,174,547 $4,326,992 69% 

Decrease in Paper Remittance 5 1 $304,808 $92,356 70% 

Provider Customer Service 51 10 $6,453,814 $1,864,434 71% 

Comprehensive Error Rate Testing 12 4 $750,599 $187,432 75% 

Program Integrity Support 47 6 $4,722,686 $733,245 84% 

Claims Processing Timeliness 22 0 $1,201,600 $182,850 85% 

Beneficiary Inquiries 43 4 $1,670,911 $161,458 90% 

Qualified Independent Contractor Support 27 2 $1,375,315 $115,250 92% 

Provider Enrollment 2 0 $164,757 $0 100% 

Medical Review 1 0 $20,546 $0 100% 

Increase in Electronic Funds Transfer 2 0 $128,602 $0 100%

 Total 314 68 $39,024,523 $12,890,130 67% 

Source: OIG analysis of award fee determination letters, 2012. 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 27 
APPENDIX D 

Agency Comments 

r""'"".._ ( t DEPARTMENT OF HEALTH & HUMAN SERVICES Cen1ers for Medicare & Medicaid Services 

~s~ Administrator 

Washington. DC 20201 

DATE: NOV Z 1 2013 

TO: 	 Daniel R . Levinson 


!nspect.or General 


FROM: 	 Mar'flyn lta~nncr 

Administrator 


SlJBJECT: 	Office of Inspector General (OIG) Draft Report: "Medicare Administrative 

Contractors' Performance" (OEI-03-11-00740) 

Thank you for the opportunity to review and respond on the above subject OIG Draft Report. 

Given the billions of dollars awarded to Medicare Administrative Contractors (MACs) and the 

critical role they play in the administration of the Medicare program, effective oversight of these 

contractors' performance is important to ensure that they are adequately processing claims and 

performing other assigned tasks. 

The OIG recommendations and CMS responses to those recommendations are discussed below. 

OIG Recommendation 

The OIG recommends that CMS require action plans for all unmet QASP standards. 

CMS Response 

'!be CMS concurs with the recommendation. Effective June 19, 2013, C!\IS began requiring 

action plans for all Quality Assurance Surveillance Plans (QASP) standards that were not met. 

However, we note that a request for an action plan may change as the QASP report goes through 

the rebuttal process. For example, sometimes corrective actions have already been taken after 

the issue has been identified. Moreover, the CMS works closely with the Business Function 

Leads, Technical Monitors, and the Contracting Officer's Representative to determine if an 

action plan is needed based on specific circumstances. For example, if the contractor did not 

meet a I 00 percent standard in only one month in a period of performance, an action plan may 

not be required for that period of performance. In those instances, CMS makes a determination 

if an action plan is needed. 

OIG Recommendation 

The OIG recommends that CMS use QASP results to help select award fee metrics for review 

and to establish award fee metrics for the " Medicare secondary payer" area. 

Medicare Administrative Contractors' Performance (OEl-03-11 -00740) 28 
 

 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 29 
 

 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 30 
 

ACKNOWLEDGMENTS 

This report was prepared under the direction of Robert A. Vito, Regional 

Inspector General for Evaluation and Inspections in the Philadelphia 

regional office, and Linda M. Ragone, Deputy Regional Inspector General. 

Tara Bernabe served as the team leader for this study. Other Office of 

Evaluation and Inspections staff from the Philadelphia regional office who 

conducted the study include Nancy J. Molyneaux and Sunil Patel. Central 

office staff who provided support include Scott Manley and 

Christine Moritz. 

Medicare Administrative Contractors’ Performance (OEI-03-11-00740) 31 
Office of Inspector General

http://oig.hhs.gov 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 

amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

investigations, and inspections conducted by the following operating components: 

Office of Audit Services 

The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 

audits with its own audit resources or by overseeing audit work done by others. Audits 

examine the performance of HHS programs and/or its grantees and contractors in carrying 

out their respective responsibilities and are intended to provide independent assessments of 

HHS programs and operations. These assessments help reduce waste, abuse, and 

mismanagement and promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on significant 

issues. These evaluations focus on preventing fraud, waste, or abuse and promoting 

economy, efficiency, and effectiveness of departmental programs. To promote impact, OEI 

reports also present practical recommendations for improving program operations. 

Office of Investigations 

The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 

of fraud and misconduct related to HHS programs, operations, and beneficiaries. With 

investigators working in all 50 States and the District of Columbia, OI utilizes its resources 

by actively coordinating with the Department of Justice and other Federal, State, and local 

law enforcement authorities. The investigative efforts of OI often lead to criminal 

convictions, administrative sanctions, and/or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support for OIG’s internal operations. OCIG represents OIG in all civil and 

administrative fraud and abuse cases involving HHS programs, including False Claims Act, 

program exclusion, and civil monetary penalty cases. In connection with these cases, OCIG 

also negotiates and monitors corporate integrity agreements. OCIG renders advisory 

opinions, issues compliance program guidance, publishes fraud alerts, and provides other 

guidance to the health care industry concerning the anti-kickback statute and other OIG 

enforcement authorities.