Highmark Loses $250 Million Federal Contract

July 15--A Highmark Inc. subsidiary has been stripped of a five-year, $250 million federal contract that would have created hundreds of jobs for the company, mostly near Harrisburg.

The Pittsburgh-based health insurer's government contracting arm, Highmark Medicare Services, was awarded a contract in January 2009 to process hospital and physicians' claims for the U.S. Centers for Medicare and Medicaid Services.

That contract, covering a geographical jurisdiction including Ohio and Kentucky, was contested by National Government Services, a subsidiary of WellPoint, and later by Cigna Government Services.

As a result, Highmark never began work on the contract, which also would have required the servicing of home hospice claims in more than a dozen states. In total, it would have meant handling an additional 78 million claims annually, requiring 480 or so new jobs.

In May 2009, three months after Nashville-based Cigna contested the contract, the U.S. Government Accountability Office upheld the protest and sent the issue back to CMS.

Since then, Highmark has been waiting to see what corrective action Medicare would take.

Last week, it learned that CMS had instead awarded that five-year contract to Cigna -- barring a protest from Highmark.

"We are very disappointed with the decision," said Leilyn Perri, a Highmark spokesman. "We need to understand why this decision was made. Once we know that, we could protest or simply walk away from this one. Obviously, a protest costs money and takes time."

In a statement, CMS said it had "conducted a thorough evaluation of the revised final proposal revisions in accordance with the terms of the solicitation, and determined [Cigna] represented the best value to the government."

Highmark already does Medicare processing locally, part of a contract awarded in October 2007 for handling claims in Pennsylvania, New Jersey, Delaware, Maryland and Washington, D.C.

Medicare is in the midst of an overhaul of its claims-processing system, replacing Medicare "intermediaries," which process hospital claims, and "carriers," which handle physicians' claims, with all-purpose contractors responsible for both types of claims within certain geographic regions.

Had it kept the "jurisdiction 15" contract, Highmark would have been one of the largest Medicare intermediaries in the country.

Jurisdiction 12 -- the one covering Pennsylvania and its neighbors -- is larger than jurisdiction 15 in terms of the number of claims processed, and Highmark remains a major government player, even after losing this contract.

Bill Toland: [email protected] or 412-263-2625.

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