IBM to Consolidate Medicare Data Centers

IBM gets a $200 million chunk of a contract to consolidate 17 Medicare data centers into three highly efficient ones over the next five years.

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.