Auditors say Tricare contract bids were mishandled

By Tom Philpott

Six million military health care beneficiaries learned last July that their Tricare support contractor would be changing on April 1 because those companies that run the north and south regions had lost in competing for the next generation of contracts.

But what a difference six months makes.

Government auditors concluded last November that the winning bids, for contracts worth a combined $38 billion over five years, were mishandled and the winning bids might have been less competitive than first judged.

By mid-December Tricare officials had reviewed the audits, accepted the findings and vowed “corrective action.” Meanwhile, officials decided the current health care contracts will be extended through at least March 31, 2011.

For the six million beneficiaries affected, the extension means no contract-driven shift in health care providers, and no need to change telephone numbers or Web addresses to make medical appointments.

The Tricare Management Activity’s acceptance of all findings by the General Accountability Office is not good news for Aetna Government Health Plans of Hartford, Conn. The GAO found six reasons to sustain the protest filed by the north region contractor, Health Net Federal Services of Rancho Cordova, Calif. The most serious was the appearance of impropriety and unfair advantage gained when Aetna hired a former chief of staff from the program and used him to help draft their bid.

The officer had access to proprietary information on Health Net not only before he left government but while working for Aetna, the GAO said, because he was able to view sensitive documents through his old Tricare e-mail account. Health Net executives hope the corrective action taken for the north region is to award them the contract. Health Net was Aetna’s only competitor.

Humana Military Healthcare Services, which runs the south region, also won its protest of a $21 billion contract awarded to UnitedHealth Military &Veterans Services of Minnetonka, Minn. The GAO said the military’s contracting officer failed to give adequate weight to the value of fee discounts Humana had negotiated with its care providers. GAO suggested re-evaluation of the bids and a fresh decision.

Steven Tough, president of Health Net, said the contract extension “should provide a significant amount of comfort to all those we serve in the north region and to personnel at military treatment facilities and the providers who work so closely with us.”

Tricare runs as smooth today, Tough said, as any health benefit plan in the country, and “at least for the time period defined by these extensions that’s not going to change. Then who knows how this will unfold.”

Health Net has been involved in Tricare since its start in 1995 and before that with its predecessor, the CHAMPUS Reform Initiative. Architects of national health reform, Tough said, could use Tricare as a model for reform nationwide.

“Tricare, while uniquely built for the military, has so many possibilities as a platform for other things,” he said. “It’s got a large base of beneficiaries (across) many different states. It’s got a single point of administration which keeps administrative costs low. It’s got network access and (varied) products (and) customer service dynamics.”

A worry for analysts is Tricare’s steadily rising costs. But Tough said much of that is due to the “ebb and flow” of deployments in wartime and how Tricare civilian provider networks “flex” to care for beneficiaries when personnel depart from military clinics and hospitals.

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