Contractors working to modernize a provider enrollment system have been shown the door, the Centers for Medicare & Medicaid Services (CMS) announced.
Instead, CMS will work with the highly influential advisory group Department of Government Efficiency (DOGE) to complete a system overhaul that will be far less costly and time-consuming, the agency said.
“Two contractors spent nine years and $200M working on a modern provider enrollment system at CMS,” the agency said in an X post. “After 14 missed deadlines, zero usable output was produced. CMS has now cancelled these two contracts (saving $17.8M annually), has hired multiple software engineers, and, working with DOGE, are accelerating this project.”
As of March 12, DOGE’s wall of receipts highlighting terminated contracts did not include the contracts mentioned by CMS in the post. The website was last updated March 11 and is supposed to be refreshed weekly.
The online Medicare enrollment system PECOS, or Provider Enrollment, Chain and Ownership System, is likely the system targeted by DOGE in this instance, Fierce Healthcare has learned. PECOS was established as the central electronic system to process payments for every physician accepting Medicare and indicates whether providers are eligible to be paid out in Medicare
CMS has long promised to modernize the system, which frustrates providers and companies in the space, by implementing PECOS 2.0.
Sometimes federal agencies will choose a group of vendors to carry out a project through open-ended purchasing agreements and task orders. Those vendors are named to the award but aren’t guaranteed to receive its dollars, said Jonathan Cottrell, a former vice president at provider data management company Verisys.
For example, CMS can receive IT services through a Strategic Partners Acquisition Readiness Contract (SPARC) with CGI. This contract is indefinite delivery and quantity (IDIQ) over a 10-year period, where CGI can offer a variety of services. It’s not always clear exactly when services will be needed, or how much they will cost, so agencies award IDIQ contracts to cover their bases.
One contract does seem to align closely with the contract mentioned in CMS’ post on X and on CGI’s website. With a start date of Feb. 1, 2016, the Department of Health and Human Services awarded CGI Federal a contract to manage and maintain Medicare enrollment through PECOS.
There have been more than $87 million in federal outlays so far and $238 million is obligated for the project’s current end date in November. Last November, CGI received an additional $23.2 million to “incorporate and fund additional efforts,” a contract description said.
Healthcare voices familiar with government contracts and the provider enrollment field say this is likely what CMS was referencing. But without more transparency, it’s difficult to discern what exactly was cancelled, or the identity of the other unnamed contractor.
“It could very well be that this vendor was being paid to do five different things,” said Cottrell. “One of the five had to [do] with PECOS 2.0, but not five of the five. So the dollars they’re saying that are being saved might only be a fraction of the amount going to PECOS 2.0.”
CGI Federal and CMS did not return a request for comment.
DOGE’s inclusion leads to optimism, concern
Elon Musk and DOGE argue the government is inefficient and rife with waste, fraud and abuse. For some stakeholders working with PECOS daily, seeing the upgraded system delayed after many years and millions of dollars spent, they greet a new approach with an open mind.
The PECOS database and website portal is outdated, slow and not user-friendly, said Stephanie Lambert, a provider enrollment project analyst for revenue cycle management company Zotec Partners. Zotec works with more than 17,000 providers located in all 50 states. Ensuring information is accurate for each state is burdensome when physicians practices are constantly expanding.
“They’re spreading and they’re growing, which is great for physician business, but it’s a nightmare for provider enrollment because that means every time you’re in a new state, that’s a new enrollment,” she said. “Every new tax ID, that’s a new enrollment. Every change to your ownership, it’s an enrollment change per state that you have. It starts to multiply very quickly the more complex your group practice is.
“I’m not sure why the execution never occurred,” Lambert added, speaking of the modernization efforts. “It seemed like things were moving along for a number of years.”
Each year, CMS holds a provider enrollment conference where the agency talks about issues such as PECOS. CMS already postponed the 2025 Quality Conference scheduled for this month, saving $4.8 million, DOGE claims.
PECOS 2.0 was supposed to better locate and fill duplicative information needed for multiple government systems, as well as speed up a portal that runs very slowly, all in the name of reducing physician burnout.
Provider surrogates, which manage credentialing on behalf of a provider, spend a significant part of their day on the phone with providers so they can access the correct information, seemingly hidden within clunky government systems, said Kentesha Ward, co-founder of the credentialing startup CredAlt.
“That’s horrible for them to be able to navigate,” she explained. “They really don’t have the time to be able to navigate this system and to approve those surrogacy requests.”
Users have to wait through long stretches of lag time just to navigate the portal. That adds up to many wasted hours over a week, said Lambert.
But if the government needs to update the database and web portals, does that require eight years of work and tens of millions dedicated to the project? It’s true, she acknowledged, a lot of information across systems must be integrated seamlessly.
“Is that budget appropriate? I don’t know,” she said. “It does require a lot of involvement from different people … and of course, we’re dealing with sensitive data, so we want to make sure that we’re doing this in a way that’s compliant.”
On the other hand, if stopping waste, fraud and abuse is the goal, canceling contracts and asserting control over the initiative doesn’t automatically accomplish that end, given the resources already dedicated to PECOS 2.0 and the lack of transparency so far behind DOGE’s new efforts.
The federal government hoped users would begin transition to PECOS 2.0, but there likely would be some ongoing maintenance needed of the old system. Now, with the fate of a new system in the hands of recently hired software engineers, industry experts worry they are not set up for success and may not be around long-term to see out the completion and maintenance of a crucially important database.
“There’s a lot of things in the federal government that need to be modernized,” said Jenn Kerfoot, chief strategy and senior growth officer for digital health company DUOS, conceding PECOS currently resembles the Windows 2000 era. “But guess what? The old stuff still works. If it’s not broke, we should maybe not upend and fix it.”
Kerfoot said this “chainsaw approach” is potentially dangerous and could cause unintended consequences. During the COVID-19 pandemic, many providers were set up through PECOS so they could be reimbursed by Medicare. Knowing the system is dependable and properly maintained is invaluable during public health emergencies when the reliability of these systems should be an afterthought.
“If that system is not maintained, there is no national backup process,” said Kerfoot. “At a time when we do not have enough physicians in this country, specifically in rural America to address the needs of individuals, is this really the thing that we need to solve for?”
Although a fresh set of eyes could be useful, there’s no indication the newcomers will value input from working groups or credentialing experts outside the government to understand the unique needs of end users. These software engineers, no matter how brilliant they may be, need support from those deeply embedded in the industry, otherwise those efforts are also wasteful, said Ward.
“I think that’s what lost in a lot of software companies,” she said. “They just build without knowledge of the field.”