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[Medi-Cal] - Evaluation of Proposals - Statewide Medi-Cal Intermediary, March 1974 (1 of 4)
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[Medi-Cal] - Evaluation of Proposals - Statewide Medi-Cal Intermediary, March 1974 (1 of 4)
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Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual collections.
Collection: Reagan, Ronald: Gubernatorial Papers,
1966-74: Press Unit
Folder Title: [Medi-Cal] - Evaluation of Proposals -
Statewide Medi-Cal Intermediary,
March 1974 (1 of 4)
Box: P37
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Contact a reference archivist at: [email protected]
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State of California
Department of Health
Memorandum
To
:
William Mayer, M.D.
Date :
March 14, 1974
Director of Health
OB 8, Room 1250
Subject:
Statewide Medi-Cal
Intermediary Selection
From :
Wilcoxon
Program Manager
Financing Operations Program
VIA:
Deputy Jerry Health W. Director Financing Green Jerry Systems When
As you know, the Statewide Medi-Cal Intermediary Selection Committee has
recommended that if a contract is awarded, it should be awarded to Medi-Cal
Intermediary Operations. Alternatives of not awarding a contract or issuing
a new Request for Proposals (RFP) were also presented.
A new RFP would delay signing a new contract for at least a year, during
which time MIO would continue to operate and would incorporate the two
Medi-Cal Management System (MMS) counties upon termination of the Health
Care Systems Administrators (HCSA) contract. It appears that nothing could
be gained through this delay.
Therefore, the Health Financing Systems recommends that no contract be
awarded. If this recommendation is implemented, the Medi-Cal Management
System (MMS) prototype will cease operation on June 30, 1974, and providers
in the two counties it serves will begin submitting claims to MIO. MIO will
then serve as statewide intermediary under the current contract.
It is estimated that by not awarding a new contract, the costs to the State
would be less than would be incurred under a new contract (see attached cost
summary). MIO's system as bid is basically the system which they are now
operating. The cost difference between the existing system and the proposed
system is apparently justified by MIO to offset the financial risk required
by the RFP. The difference between the current cost and the bid cost over
the four-year term of the contract ($14.4 million) does not appear to be
economical in regard to the risk assumed.
Since most of the additional costs would be incurred during the first year
of a new contract, National Health Insurance (NHI) would have an especially
large impact if it came about during the term of the contract. When the RFP
was issued, this (NHI) did not appear to be a concern, as there were several
NHI plans under consideration and there was no sign of possible compromise.
Since that time, several legislators have expressed the willingness to negotiate
and pass compromise legislation. It is now expected that National Health
Insurance will become a reality within the next year to year and one-half.
William Mayer, M.D.
-2-
March 14, 1974
Subj: Statewide Medi-Cal
Intermediary Selection
Not awarding a contract is an alternative allowed for in the RFP and would
meet the legislative intent expressed in the 1973-74 Budget Act. One inter-
mediary system would operate statewide, reducing the higher costs associated
with dual systems. Increased Federal Financial Participation (FFP) can be
assured by making minor modifications to MIO's current system. MIO's sub-
contractor, EDS, has indicated willingness to take whatever steps are neces-
sary for California to obtain this increase in FFP (see attached letter).
While the current MIO contract and the proposed HCSA contract are both
basically open-ended contracts, the HCSA proposed contract would include
ten percent profit and would limit their risk should a cost overrun occur.
The estimated 1974-75 cost under the current MIO contract is $36.4 million.
HCSA's estimated 1974-75 cost, which includes implementation and profit is
$47.6 million, with a subsequent year normal cost of $34.3 million. It does
not appear that the system features proposed by HCSA justify the first year
estimated difference in costs of $11.2 million nor the estimated four-year
cost difference of $4.7 million.
In view of the considerations outlined above, it is my opinion and recommen-
dation that the most reasonable and responsible course of action for the
Department of Health to take is not to award a contract but to continue our
current contract with MIO as the statewide Medi-Cal intermediary.
Attachment
ESTIMATED MIO FOUR-YEAR COST
(Under Current Contract)
Estimated 1974/75 Costs
$ 31,182,900
Eligibility Subsystem (CID)
3,408,331
Benefits Review Function
104,982
Other Coverage Processing
235,000
Beneficiary Explantion of Medi-Cal Benefits
1,425,796
Total Normal Yearly Operation
$ 36,357,009
x 4 Years
Four-Year Cost
$145,428,036
FOUR-YEAR COST COMPARISON
MIO (Current Contract)
$145,428,036
MIO (As Proposed)
159,803 525
HCSA (HCSA Eligibility)
150,146,475*
LSL
151,527,408
*The figure shown reflects the costs estimated by HCSA based upon the con-
tract provisions submitted by HCSA.
ELECTRONIC DATA SYSTEMS CORPORATION
DALLAS, TEXAS 75235
MILLEDGE A. HART, III
PRESIDENT
January 31, 1974
Mr. Jerry W. Green
Deputy Director
State of California
Health and Welfare Agency
Department of Health
714 P Street
Sacramento, California 95814
Dear Jerry:
Now that the proposals for Medi-Cal are about to be sub-
mitted, I want to take the opportunity to thank you for
the courtesies extended by you and your staff in providing
some of the needed interpretations of the intent of the
procurement as it relates to data processing subcontractors.
We fully understand the necessity of complying with Federal
law and regulations, particularly in view of the impact of
Federal funding, and once again you have our assurance that
EDS and its subsidiaries will comply with the Federal re-
quirements. The recent interpretation which you made
available to me was most helpful in this regard.
Your explanation that it was not the intention of the pro-
curement to take rights to the use of a system developed
by a subcontractor at its own expense (except that at the
end of the contract's four-year term the State reserved
the right to use whatever system was then in place for the
Medi-Cal program) is certainly a fair approach. It is also
Jerry Green
Page 2
consistent with the Federal requirements. Similarly, we fully
appreciate the State's need for full and continuous access to
systems information. We have no problems in that regard in
view of your assurance that this will be done in a manner which
will protect a subcontractor's proprietary information.
We hope that we will have the opportunity through MIO to further
serve the State of California in this program.
Sincerely,
WHat
Milledge A. Hart, III
President
MAH,III/ch
cc: Charles W. Stewart
State of California
Department of Health
Memorandum
To
:
William Mayer, M.D.
Date :
March 14, 1974
Director of Health
OB 8, Room 1250
Subject: Statewide Medi-Cal
Intermediary Selection
From :
Richard P. Wilcoxon Chairman
Statewide Medi-Cal/Intermediary
Selection Committee
The Statewide Medi-Cal Intermediary Selection Committee has reviewed the
comparative evaluation of the proposals submitted by Health Care Systems
Administrators (HCSA), Medi-Cal Intermediary Operations (MIO), and Lone
Star Life Insurance Company, PAID Prescriptions, and Health Application
Systems (LSL). The recommendations of the Committee are as follows:
1. Contract negotiations should not be entered into with
Lone Star Life Insurance Company. The proposal submitted
by LSL did not adequately demonstrate that the offeror
possesses the capability to administer the Medi-Cal pro-
gram statewide.
Although the overall proposal met the minimum require-
ments, the implementation plan did not appear feasible,
and the proposed system was judged unacceptable in the
areas of processing claims for services rendered bene-
ficiaries with a liability, file maintenance, and com-
munication between the State and the intermediary.
2. Contract negotiations should not be entered into with
Health Care Systems Administrators.
HCSA has indicated an unwillingness to agree to the con-
tractual provisions specified in the Request for Proposals.
As the cost presented is only an estimate and not a fixed
price as required, the actual cost of the HCSA proposal
cannot be determined. The contract as proposed would limit
HCSA's liability to 100 percent of its profits plus $500,000
in any contract year, in the event of a cost overrun. Accep-
tance of the HCSA contract modifications would require the
Department to assume all costs in excess of HCSA's liability
defined above.
William Mayer, M.D.
-2-
March 14, 1974
Subj: Statewide Medi-Cal
Intermediary Selection
In view of the foregoing discussion, if a contract is to be negotiated, the
proposal submitted by Medi-Cal Intermediary Operations is the only viable
alternative. The MIO system as proposed is capable of effectively adminis-
tering the Medi-Cal program. Statewide implementation could be accomplished
quickly and with minimal disruptive effects. Also, MIO has agreed to the
contract provisions required by the Department.
However, at least two alternatives to the selection of the MIO proposal exist:
1. Reject all proposals and continue with the current MIO
operation in the 56 counties and incorporate San Diego
and Santa Clara Counties upon termination of the HCSA
contract June 30, 1974.
2. Reject all proposals and prepare a new Request for
Proposals.
It is the Committee's understanding that departmental staff will prepare a
detailed analysis of these suggested alternatives for your review.
This memo has been reviewed and approved by the following SMISC members:
Richard P. Wilcoxon
Tom Warriner
Program Manager
Deputy Director
Financing Operations Program
Legal Affairs
Department of Health
Department of Health
Fulton Smith
Tom Elkin
State Data Processing Officer
Health Assistant to the
Department of Finance
Secretary
Health and Welfare Agency
Chuck Farrell, Chief
Data Processing Division
Stewart Barnes
Employment Development Department
Senior Data Processing Systems
Analyst
Jack R. Brown, Chief
Department of Finance
Program Implementation Section
Department of Health
Winston Hickox
Program Manager
Management Systems and Computer Services
Department of Health
Sam W. Jennings
Legal Counsel
Department of General Services
EVALUATION OF PROPOSALS
STATEWIDE MEDI-CAL INTERMEDIARY
Prepared By
Program Implementation Section
Health Financing System
Department of Health
March , 1974
PREF PREFACE ACE
PREFACE
Preface
I. The California Medicaid (Medi-Cal) program was established in 1966, based
upon Title XIX of the Social Security Act which had been passed by Congress
the previous year. The Department of Health Care Services contracted with
California Blue Shield, Hospital Service of California (Blue Cross-North),
and Hospital Service of Southern California (Blue Cross-South) to act as
the Department's fiscal intermediary in the processing and payment of
Medi-Cal claims. Although the contract was to run through calendar year
1966, it has been renewed monthly to the present.
In 1968, a Governor's task force recommended that the Department conduct
a study of the administration of the Medi-Cal program. This recommenda-
tion resulted partially from early problems the "Blues" experienced in
claims payment. In 1969, Lockheed performed the study which culminated
in the development of an alternative claims processing system, to be owned
by the State, which was called the Medi-Cal Management System (MMS).
The MMS was implemented by Health Care Systems Administrators, (HCSA) a
joint venture of Occidental, Cal-West, and Pacific Mutual Life Insurance
Companies on August 1, 1972, as a prototype operation in Santa Clara and
San Diego Counties. The design of MMS combined claims processing, eligi-
bility, and management reporting into a single system. Major MMS innova-
tions were: model treatment profiles which relate the normal treatment
pattern to medical diagnosis; on-line beneficiary eligibility information
via terminals in county welfare departments; and improved State, federal, and
management reports.
Concurrently, the "Blues" upgraded their claims processing systems and
formed a single management structure to administer their Medi-Cal acti-
vities. This single structure is referred to as Medi-Cal Intermediary
Operations (MIO). The new system integrated computer processing for in-
stitutional and non-institutional claims and offered a wide variety of
management and program reports.
House Resolution 129, approved in 1972, directed the Secretary of the
Health and Welfare Agency to form a Blue Ribbon Panel task force to con-
duct a comparative evaluation of the MMS and the MIO. In June 1973,
the Blue Ribbon Panel made the recommendations that (1) the MIO contract
be renegotiated and (2) MMS and MIO continue their current operational
status through Fiscal Year 1973-74.
The 1973-74 Budget Act provided full-year funding for MIO and MMS;
however, its language limited the MMS prototype expenditures to 75
percent of the MMS budgeted expenditures unless the Department executed
a contract for a statewide fiscal intermediary system by April 1, 1974.
The Department elected to seek a statewide intermediary system at this
time because the operation of two fiscal intermediary systems was not
cost-effective and because of this budget language. It was determined
that only limited additional information could be gathered from continued
operation of the MMS prototype.
Three choices were identified in reviewing the fiscal intermediary
options available to the Department. The options were a statewide
claims processing system through:
1. Operation of the MMS system (either by the State or a
private contractor).
2. Continuance of the MIO system (either under the current
or a new contract).
3. A new system based upon criteria developed by the
Department.
Through the development and prototype operation of MMS and the subse-
quent evaluations comparing MMS and MIO, the Department had the oppor-
tunity to measure the desirability of various administrative and design
features of each for inclusion in a statewide fiscal intermediary system.
MMS and MIO each have demonstrated unique attributes that are desirable
to the Department, as well as shortcomings the Department should avoid.
Comparative analysis of these two systems suggested that the selection of
one over the other had serious disadvantages. First, this approach would
not allow the Department to readily capitalize on those unique desirable
features of the system not chosen. Analysis of the MMS and MIO indicated
that, depending on the subjective weighting of the factors considered,
either system could be judged superior. There is no clear-cut superiority
of either system. Additionally, there could be desirable features relative
to a fiscal intermediary system not contained in either MIO or MMS. An
entirely separate system could exist, superior to both, which the Depart-
ment has not had the opportunity to consider.
In order to avoid the limitations of selecting either MMS or MIO, pro-
posals were solicited for a statewide fiscal intermediary system. The
Request for Proposal (RFP) outlined the desirable features of a fiscal
intermediary, including, but not limited to, those identified in MIO
and MMS. The terms of the RFP were broad enough to allow both HCSA
and MIO to submit proposals, as well as other interested companies.
The requirements, however, were specific enough to preclude
systems not sophisticated enough to handle the Medi-Cal program.
The Request for Proposal elicited proposals from Medi-Cal Intermediary
Operations, Health Care Systems Administrators and a group consisting of
Lone Star Life Insurance Company, PAID Prescriptions and Health Applica-
tion Systems. The selection criteria and evaluation of these three
proposals constitute the substance of this report.
EVALUATION APPROACH
EVALUATION APPROACH
Evaluation Approach
The Department of Health has made every effort to ensure that each offeror
was given full and impartial consideration. A competent and dedicated staff,
following a rigorous evaluation approach and utilizing extensive consulta-
tion by outside sources, objectively and thoroughly evaluated every aspect
of each proposal. In the following paragraphs, the key steps in the
evaluation approach are described.
Several weeks prior to receipt of the proposals, members of the staff in
the Program Implementation Section of the Health Financing Systems, Depart-
ment of Health, developed an evaluation plan that was designed to lead to
the selection of the most effective proposed Medi-Cal intermediary system
at the most reasonable cost to the State. Medi-Cal providers, California
taxpayer representatives, experts from other State departments, and De-
partment of Health personnel experienced in the day-to-day operation of
the Medi-Cal program were consulted during the evaluation planning process.
Four independent consulting firms were retained by the Department to review
the evaluation approach, criteria, and process. Additionally, a Statewide
Medi-Cal Intermediary Selection Committee, consisting of representatives
from the State Health and Welfare Agency, Department of Health, and control
agencies, served in an advisory capacity to the Department during the
development of the RFP and the evaluation criteria.
Three weeks prior to receipt of the proposals, teams of three or more
analysts, selected on the basis of their pertinent experience with the
Medi-Cal program, were assigned to evaluate sections of the proposed
systems. Each analyst was thoroughly familiar with the requirements of
the RFP, Medi-Cal rules, regulations, and policies in those areas to which
-2-
he was assigned. Several training sessions covering evaluation techniques
and an intensive review class in interpretation of decision logic tables,
flow charts, and critical path charts were held to refresh evaluation
skills. A five-member control team, made up of staff members who had been
instrumental in the development of the RFP, assisted the evaluation teams
in coordination and reporting requirements.
As proposals were received from the offerors, they were logged in and
assigned a unique control number. When the deadline for submitting pro-
posals had passed, a validation team checked each proposal against a
detailed list of all items requested in the RFP. With only minor exceptions
(as noted elsewhere in this report), all proposals were found to be responsive
to the RFP as submitted.
Following validation, proposals were assigned to teams of analysts. To
ensure that the evaluation of a proposed system's merit would not be
influenced by its cost (and vice versa), cost proposals were detached
from systems proposals prior to their review by analyst teams. As a
result, the analysts who were reviewing systems had no knowledge of the
attendant costs until their evaluation of the systems was complete.
Sections of each bidder's proposal (e.g., professional review, eligibility)
were distributed to evaluation teams in a way that guaranteed that the
sections of no one offeror's proposal would consistently be evaluated first
or last.
(1)
During the development of the evaluation plan, weights were assigned to the
various sections to reflect the relative importance of each section in the
overall system. However, the weights of individual sections were not
(1) See Page 6, Appendix 4 for weight distribution.
-3-
disclosed to the analysts at the time they were evaluating them; thus, their
evaluation could not be influenced by the section's relative importance in
the overall evaluation.
Each analyst independently awarded points and fully documented his evalua-
tion before consensus opinions and point assignments were formed by his
team. Each analyst's opinion had equal weight in the formation of the
team's evaluation and consensus point award. Evaluation teams were in-
structed not to discuss their evaluations with other teams to prevent
preconceptions being formed on sections prior to their review.
In parallel with the evaluation of each system's proposal, an independent
team conducted an analysis of the cost proposals.
The cost estimates included in each proposal were first reviewed for reason-
ableness; that is, individual cost elements were examined to establish that
the offeror had realistically provided for the staff, equipment, facilities,
and support to adequately carry out each proposed function.
Costs then were analyzed for any elements or unique accounting conventions
that would preclude legitimate comparisons between proposals.
The cost data then was examined on four bases:
1. First year total costs (including implementation costs and all other
costs to the State such as cost of phasing out the current
intermediary).
2. One-year operating costs (other than first year).
3. Four-year costs (including implementation costs and all other
costs to the State such as the cost of phasing out the current
-4-
fiscal intermediary).
4. Fiscal year pro forma budget costs for FI expense over four-
year life of contracts.
After the systems and costs of each proposal were independently evaluated,
a cost/benefit analysis was performed to select that proposal which offered
the best combination of systems approach and cost.
The Program Implementation Section's recommendation will be reviewed by the
Chief of the Financing Operations Division and the Statewide Medi-Cal
Intermediary Selection Committee which he chairs. Then it will be reviewed
by the Chief of the Health Financing System who will present it to the
Director of Health for his review and final selection and announcement.
The following schedule represents events occurring during the process of
requesting and evaluating the proposals for a statewide Medi-Cal fiscal
intermediary.
December 3, 1973
RFP Released
December 17, 1973
Offerors' Conference
December 28, 1973
Last Date to Protest RFP
January 15, 1974
Last Date to Submit Questions
for Guaranteed Answer
February 1, 1974
Delivery of Proposals to the Department
March 15, 1974
Announce Selected Proposal
May 15, 1974
Sign Contract * april / 1? ?
July 1, 1974
Contractor Begins Operation
VALIDATION
VALIDATION
On February 1, 1974, the Department of Health received responses to its Request
for Proposal (RFP) from:
1. Medi-Cal Intermediary Operations (MIO)
2. Lone Star Life (LSL)
3. Health Care Systems Administrators (HCSA)
These proposals were validated on February 2 and found to be responsive
to the RFP except as noted below.
The following items either were omitted or required clarification or correction:
MIO: Explanation of the phrase "dollarized Claim Volume" (Pages 4 and 5 of
their Volume XXI).
Explanation of the use of two methods to allocate costs of institutional
claims processing.
Definition and method of calculation of "imputed interest" (Page 10 of
their Volume XXI).
Correction of the volume of claims used in determining the cost of Other
Coverage processing. ERRATA Notice Number 5 requires the offeror to bid
on the basis of 792,000 claims per year with a total of 4.5 million
services; MIO's proposal was based on the costs of processing 980,000 claims.
HAS: Failed to submit a positive statement that they had processed 50,000
health claims per month for six months, including hospital (inpatient
and outpatient) and medical (physician) claims.
Failed to submit a list by volume and type of health claims processed for
each client and for what period.
-2-
Failed to submit a listing of the names, titles, and professional,
technical and managerial qualifications of key personnel to be assigned
to implementation and operation of the system. In addition, failed to
submit an indication of the percentage of time that key individuals
would be assigned to the intermediary operation (if assigned less than
100% of the time).
Failed to submit a unit cost for processing claims transferred from
previous fiscal intermediary operations (as required by ERRATA Notice
Number 4).
HCSA: Failed to submit a unit cost for processing claims transferred from
previous fiscal intermediary operations (as required by ERRATA Notice
Number 4).
All offerors responded promptly to the requests for additional information and
were deemed to have met the requirements for validation.
PROPOSALS
SUMMARIES OF
SUMMARIES OF PROPOSALS
HCSA
The Health Care Systems Administrator's (HCSA's) proposed system is currently
operational in 2 of the 58 counties, Santa Clara and San Diego, on a prototype
basis. Prototype operations began August 1972. The system features extensive
computer processing procedures utilizing the Medi-Cal Management
System (MMS). HCSA proposes to operate as a general partnership by Occidental
Life Insurance Company of California, Pacific Mutual Life Insurance Company,
and California-Western States Life Insurance Company. The proposal features a
centralized computer site in Los Angeles for the automated review of claims for
pricing, medical necessity, and compliance with Title 22 regulations and
Department policy. An additional feature is the use of model treatment profiles
(MTP's) which applies an automated medical policy criteria by diagnosis to assure
medical necessity of the health care services provided the Medi-Cal
beneficiary.
HCSA proposes to utilize ten Local Input and Review Centers (LIRC's) which will
be located in the major population centers. Professional and clerical review,
provider relations, and the receipt and input of claims will be the major function
of the LIRC's. The local nature of the LIRC's facilitates contact with
providers and the application of local medical standards in professional review.
HCSA also proposed an eligibility system which is currently operational in the
prototype counties and will provide for the Medi-Cal card issuance, Federal,
State, and county eligibility reporting. The system will also act as an
interface with the PHP and Pilot Project programs.
MIO
The Medi-Cal Intermediary Operations' (MIO's) proposed system is currently
operational in 56 of the 58 counties. The system is highlighted by a com-
bination of manual and computer processing at three regional sites. Blue
Cross North, Blue Cross South, and California Blue Shield, with a liaison
office for coordination. The data processing effort is by subcontract with
Electronic Data Systems-Federal (EDSF) with a computer center located in San
Francisco. Extensive manual and computer editing and auditing is performed
on claims to assure appropriate pricing, medical necessity, and compliance
with Title 22 regulations and Department policy. MIO utilizes the background
and the health care knowledge of the corporate Blue Cross and Blue Shield plans
in the development of automated medical policy and utilization control programs.
Professional review is conducted at the regional centers and at the thirteen
Foundations which are regional medical societies and are under subcontract to
perform peer review activities. Provider relations is handled by staff at the
three regional centers and at the Foundations.
LSL
The proposal by LSL, a consortium of Lone Star Life Insurance Company, PAID
Prescriptions, and Health Application Systems, provides for a computer processing
system which will utilize the Medi-Cal Management System (MMS). LSL proposes
to assume the management and operation of the claims processing system now
performed by Health Care Systems Administrators, with a few alterations. LSL
proposes to utilize automated procedures for appropriate pricing, medical
necessity testing, and compliance to Title 22 regulations and Department policy.
LSL also proposes to implement the Model Treatment System (MTS) which is similar
to the Model Treatment Profile (MTP) application developed by HCSA. The MTS
was developed by Health Applications System with Federal funding, and provides
for automated claims review for medical necessity and utilization by applying
developed treatment patterns in the claims review activity.
LSL proposes a computer site to be located in Burlingame and five Local Input
and Review Centers (LIRC's). The LIRC's will be located regionally throughout
the State and will provide for claims receipt, input, and review, and provider
relations activities. Professional review will utilize the PSRO concept.
PSRO's (Professional Standards and Review Organizations) are federally developed
systems for Medicaid and Medicare medical review activities in various regional
settings throughout the State.
LSL proposes to utilize the existing equipment, facilities, and personnel
currently under the HCSA management. LSL also proposes to manage and operate
the eligibility system currently operational under HCSA with some modifications.
OPTIONS
SUMMARY OF STATE
SUMMARY OF STATE OPTIONS
Summary of State Options
Offerors were asked to present proposals on the following options in
conjunction with their claims processing system:
A. Providing a Beneficiary Explanation of Medi-Cal
Benefits (BEOMBs) to beneficiaries.
B. To follow-up on claims containing other coverage
to recover funds due the Medi-Cal program.
C. To Review Medically Needy Only and Medically Indigent
claims to determine if liability has been satisfied.
D. To issue checks to providers.
E. To provide and maintain an eligibility subsystem.
The State's proposals for options were evaluated using the same
criteria and methods applied to the bidders' responses.
The most effective manner to provide the options on which the
offerors were asked to present a proposal was selected. This
selection took into consideration the effectiveness and cost of each
proposal as compared to the effectiveness and cost of the State
proposed option. In other words, cost was not the only factor in
selecting who would provide each of the options.
If HCSA is the successful offeror, they will perform all the options
requested. However, HCSA's costs are also shown with the State pro-
viding the eligibility subsystem.
If LSL is the successful offeror, they will provide the check write
function and the State will provide the other options.
If MIO is the successful offeror, they will provide the beneficiary
explanation of Medi-Cal benefits, other coverage processing, and the
check write function. The State will provide the MNO and MI review
function and the eligibility subsystem.
routine to the process ng system which are required by the
SUMMARY OF COMPARATIVE
EV ALUATI ON
SUMMARY OF COMPARATIVE EVALUATION
COMPARATIVE EVALUATION
Introduction
On December 3, 1973, the California Department of Health requested proposals
for implementation and operation of a statewide Medi-Cal intermediary system
which would meet the needs of the Department in the most effective and econo-
mical manner. Proposal requirements included the ability to:
Process Medi-Cal claims according to regulations and policies
established by the State.
Provide an effective means of detecting potential abuses of
the Medi-Cal program.
Obtain appropriate information through production of timely,
accurate reports by the fiscal intermediary.
Inform Medi-Cal providers of policies, regulations, and billing
procedures; explain fully to providers the disposition of all
claims submitted by them for payment.
If the proposer opted to propose eligibility, establish and
maintain a centralized eligibility file and issue Medi-Cal
identification to beneficiaries.
On February 1, 1974, three proposals were submitted in response to the
Department's Request for Proposals (RFP).
A. A proposal from Medi-Cal Intermediary Operations, an
organization composed of California Blue Shield, Hospital
Service of California (Blue Cross-North), and Hospital
-2-
Service of Southern California (Blue Cross-South), based
on their current 56-county operation. This proposal was
designated MIO.
B. A proposal based on the State-owned Medi-Cal Management
System, submitted by Lone Star Life Insurance Company,
PAID Prescriptions, and Health Application Systems. This
proposal was designated LSL.
C. A proposal based on the State-owned Medi-Cal Management
System (MMS) submitted by Health Care Systems Administrators,
a general partnership of Pacific Mutual, Occidental, and
California-Western States Life Insurance Companies, an organi-
zation which currently operates the MMS as a two-county
prototype. This proposal was designated HCSA.
The three proposals were found to be responsive to the RFP, and could,
with minor modification, meet its minimum requirements. The proposal sub-
mitted by LSL, however, was not submitted in sufficient detail in many
sections to allow full evaluation and assure adequate performance on a
statewide basis.
Both MIO's and HCSA's proposals were judged to be capable of meeting the
needs of the Medi-Cal program and the Department of Health. Although MIO's
proposal was judged superior to HCSA's in the areas of forms, security,
accounting, and professional review, HCSA was rated higher overall, chiefly
because of its greater use of computer capability. This capability allows
-3-
the Medi-Cal regulations to be applied to all providers accurately and
consistently.
MIO
LSL
HCSA
HCSA
(HCSA Eligibility)
(CID Eligibility)
Point
Points Received
Converted
Points Received
Converted
Points Received
Converted
Points Received
Converted
Range
Out of 100
Points
Out of 100
Points
Out of 100
Points
Out of 100
Points
Offeror's Qualifications
Pass/Fail
Pass
-0-
Pass
-0-
Pass
-0-
Pass
-0-
Implementation
10
72
7.2
22.8
2.28
73
7.3
73
7.3
Change Control
Pass/Fail
Pass
-0-
Pass
-0-
Pass
-0-
Pass
-0-
Claim Review
45
58.8
26.46
37.8
17.01
64.3
28.93
64.3
28.93
Administrative Subsystem
12
62.9
7.64
34
4.08
69.3
8.31
69.3
8.31
Equipment and Facilities
Pass/Fail
Pass
-0-
Pass
-0-
Pass
-0-
Pass
-0-
Communications Between
2
60
1.2
12
.24
68
1.36
68
1.36
Fiscal Intermediary and
State
Professional Review
20
56
11.2
50
10
40
8.0
40
8.0
Eligibility
8
48.9
3.91
46.5
3.72
77.4
6.19
51.1
4.09
Other Coverage
3
60
1.8
40
1.2
60
148
60
1.8
Total
100
59.41
38.53
61.89
59.79
POINT AWARD AND COST SUMMARY
HCSA
HCSA
MIO
LSL
(As Bid)
(SOES)
Total Points (Raw Score)
59.41
38.53
61.89
59.79
Total Points (Reference
137,678
1,695
212,747
140,571
Evaluation Criteria, Page 21)
Normal Year Costs (In Millions)
$39.4
$34.4
$34.2
$34.3
First Year Costs (In Millions)
$40.9
$48.3
$47.5
$46.7
Four-Year Contract Costs (In
$159.7
$151.5
$150.1
$149.6
Millions)