IBM to Consolidate Medicare Data Centers

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The Centers for Medicare & Medicaid Services (CMS) signed IBM and two partners to a contract to consolidate 17 data-processing centers into three highly efficient ones over the next five years. CMS expects to save nearly $45 million annually under the new arrangement. The total contract could be worth as much as $1.9 billion over the next 10 years, according to The Washington Post.

IBM’s portion of the CMS services contract is valued at approximately $200 million, making it one of the largest federal outsourcing deals ever. One of the world’s largest claims-processing organizations, CMS is attempting to fulfill requirements of the 2003 Medicare Modernization Act, which mandates that CMS use competitive bidding to streamline the agency’s operations and cost. Claims-processing costs now hover around the 18 percent of the Gross Domestic Product (GDP) threshold Congress set in 2003 for health-care related spending.


Other winners of the work, known as the CMS IT Modernization Initiative, were Electronic Data Systems (EDS) of Plano, Texas and Companion Data Services LLC (CDS), a fully owned subsidiary of Blue Cross Blue Shield, of South Carolina.

Together with IBM, EDS and CDS will be able to compete for future data-center tasks from the Centers under a process known as an Indefinite Quantify/Indefinite Delivery contract vehicle. This allows certain pre-qualified vendors to compete for agency work in a streamlined and cost-effective manner.

About the Author

Rich Miller is the founder and editor at large of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.