Staking a claim on the future

KPMG helped a Medicare administrative contractor reduce IT costs to position the company for continuing competitiveness.

A Medicare administrator
IT cost optimization
  • Client challenge
  • Benefits to client
  • Approach
  • KPMG insights

Client challenge

A large healthcare solutions organization operates in a perfect storm of high-stakes conditions: As a designated Medicare Administrative Contractor (MAC), all revenues come from a small number of multi-year government contracts. The competition between MACs is fierce, with the pipeline of available contracts shrinking, and every bid a “bet-the-company” effort.

The MAC sector is technology-intensive, using IT-enabled scale and speed to collectively process more than 1.2 billion Medicare claims a year. Our client’s leadership asked KPMG to assess and retool its Information Technology (IT) operations in order to reduce costs-per-claim—the all-important industry benchmark. With KPMG’s help, the healthcare organization is on its way to potentially reducing IT costs by 20 percent and driving costs-per-claim to industry-leading levels. The organization’s leadership has staked its claim in a survival-of-the-fittest future.

Benefits to client

With KPMG’s help, our client is now positioned for survival and growth during a period of industry consolidation, when the difference between commercial success and failure rests on a relatively small number of large Medicare contracts. Specific benefits include:

  • an IT services outsourcing framework in place that will help reduce the IT budget by a projected 20 percent
  • a change in focus for the IT organization from tactical involvement with servers, databases, applications, and batch jobs to what really matters: strategic management of its platform to meet the real needs of its federal client
  • an IT operating model that can help achieve and sustain cost savings year after year.


KPMG worked together with our client’s leadership over a two-and-a-half-year period to design and implement a cost-efficiency-focused IT solution. KPMG:

  • assessed the client’s IT cost profile, designed a target operating model, offered road map options to help achieve the client’s goals, and supported implementation through go-live
  • focused on help desk/desktop support, data center, and voice/data networks as potential areas of savings, and subsequently helped our client replace two in-house data centers with a single third-party shared services center
  • established vendor-review and vendor management frameworks, helping the organization develop RFP templates for its managed IT services and all future proposals.

KPMG insights

We understand how to align public- and private-sector stakeholder interests

We help different types of stakeholder communities—in this case, end-user government agencies, our client’s parent company, leadership and IT staff, and current or prospective external IT partners—easily understand the challenges and benefits that are relevant to their specific interest.


We uncover hidden IT opportunities

We’re able to identify the precise drivers of IT cost—broken down by function—and then turn them into tangible savings, with pragmatic solutions that we’ve successfully used in similar engagements or other industries.

This client now has an outsourcing framework in place that will help reduce the IT budget by a projected 20 percent.