CMS Is “Not Intercepted.”

“When you know what you’re doing, you’re not intercepted.” – Johnny Unitas

Johnny U. famously uttered those words in 1958, after leading the Baltimore Colts to victory in “The Greatest Game Ever Played.” Fifty-five years later the Baltimore-based Center for Medicare and Medicaid Services (CMS), demonstrating that they “knew what they’re doing,” were “not intercepted” in an OCI bid protest. [Disclaimer: on several occasions during the past two years the author has conducted OCI training for CMS contracting officers and program managers.]
In September 2012, CMS awarded a task order to CGI Federal to be a Medicare Secondary Payer (MSP) Recovery Audit Contractor (RAC). The function of an MSP-RAC is to identify and recover erroneous overpayments made by Medicare where an employer-sponsored Group Health Plan (GHP) had primary payment responsibility. The RAC uses “MSP leads,” posted by a different CMS contractor under CMS’ “Coordination of Benefits” program, to identify (and try to recover) Medicare claims that were incorrectly paid by Medicare.

Diversified Collection Services (DCS) protested the award, arguing (among other things) that CMS had improperly failed to identify and analyze CGI’s “impaired objectivity” OCI. (An impaired objectivity OCI arises where a firm’s ability to render impartial advice to the government would be undermined by the firm’s competing interests, for example by its relationship to the product or service being evaluated.) DCS argued that as an MSP-RAC, CGI would be required to evaluate coverage determinations and coordination of benefits determinations it had made on behalf of its commercial clients. [Note: A “coverage determination” specifies whether a claim is covered by a particular insurance policy, while a “coordination of benefits determination” specifies which payer (Medicare or a GHP) has primary coverage responsibility.] Specifically, DCS argued that CGI would be required to evaluate determinations it had made for its commercial clients in connection with post-payment audits to identify claims that were coded improperly or that were not medically necessary.
After a thorough review, GAO concluded that the contracting officer had meaningfully considered whether CGI had a significant impaired objectivity OCI, and denied the protest.
So – what did the contracting officer do right?

Conducted Independent Investigation
As required by the FAR and GAO protest decisions, the contracting officer conducted an independent investigation. Starting with information contained in CGI’s conflict of interest certificate, the contracting officer conducted her own internet search for potential unknown or undisclosed facts and consulted the agency’s program office to better understand the MSP RAC process.

Identified Potential OCIs
As a result of her investigation the contracting officer found that CGI had commercial healthcare payer customers, which raised several potential OCI issues.

Conducted Follow-up Research
The contracting officer then asked CGI a series of questions about its commercial activities. The contracting officer learned that in many of CGI’s commercial customer arrangements, CGI performed post-payment audits to identify claims that were coded improperly or that were not medically necessary – e.g., if they were experimental or cosmetic. Significantly, however, CGI did not review claims on behalf of payers to make initial private insurance coverage determinations, or to determine which payer should be primarily responsible for the claim – rather, when CGI provided audit services, the commercial client had already determined that the claim was one for which it was responsible.

Made OCI Determination
Since the role of the MSP RAC is to determine whether coverage is primary or secondary, not whether claims have been coded properly or were medically necessary, the contracting officer concluded that performance by CGI did not pose an OCI because CGI would not be reviewing its own work. Analyzing the various potential OCIs, she concluded that any potential conflict was not significant and could be adequately mitigated.

Assessed OCI Mitigation
With respect to CGI’s general business relationships, the contracting officer considered that any risk was insignificant, given the MSP RAC’s limited ability to manipulate individual recovery cases and the various oversight mechanisms that were in place. As an additional measure, however, she required CGI to provide, on a monthly basis, a list of all of its current business partners and to flag those identified as recovery leads in order to enable CMS and another contractor to audit those recovery efforts.

Addressed Protest Concerns
In its protest, DCS argued that CMS failed to consider marketing materials on CGI’s website (which identified the firm’s services as including “[c]oordination of benefits opportunities,” “[i]neligible members,” and “[n]on-covered services that were paid.”)
The contracting officer, however, discounted this CGI marketing material because she was interested not in what CGI advertised it could do, but in what it actually did. She relied on CGI’s express representations, supported by affidavit, that:

  • CGI does not review claims on behalf of payers to make private insurance coverage determinations;
  • CGI is not responsible for determining whether the medical procedure was covered under the particular benefit package, and does not know what the particular benefit packages are when performing its services;
  • Because CGI does not render decisions on whether a benefit is covered by the benefit package, CGI does not help payers decide whether that payer or another payer, including Medicare, should be primarily responsible for paying a given claim;
  • CGI’s commercial healthcare clients have already determined that the claim is one for which they are responsible under their contracts with providers and consumers.

GAO Decision
GAO agreed that CGI’s marketing materials raised questions, but agreed with CMS that CGI’s responses to the agency’s questions were satisfactory – i.e., that the fact that CGI had marketed these services did not contradict its express representation that it had not actually sold these services. GAO concluded that the contracting officer meaningfully considered whether CGI had a significant impaired objectivity OCI. “Given the considerable discretion afforded contracting officers, and the absence of any ‘hard facts’ to the contrary, we have no basis on which to find the CO’s determination unreasonable.” (Diversified Collection Services, Inc., B-406958.3; B-406958.4, January 8, 2013)


Does this case break new ground? No.  But it shows that:

  • If the contracting officer takes the actions required by the FAR and GAO protest decisions – i.e., conducts an independent investigation, identifies potential OCI’s, conducts follow-up research, makes an OCI determination, assesses OCI mitigation, and addresses protest concerns – the contracting officer “won’t be intercepted.”
  • GAO takes seriously the repeated admonitions from the Federal Circuit that a contracting officer’s reasoned OCI decision should not be overturned absent “hard facts.”

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