Pacific edition, Sunday, January 24, 2010

Six million military health care beneficiaries learned last July that their Tricare support contractor would be changing on April 1, 2010, because those companies that run Tricare’s 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 Tricare contracts will be extended through at least March 31, 2011.

For the six million beneficiaries impacted, 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 (TMA) 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 current 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 at TMA and used him to help draft their bid package.

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 TMA takes for North Region is to award them the contract. Health Net was Aetna’s only competitor in the bidding process.

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

TriWest Healthcare Alliance of Phoenix will remain support contractor for 2.7 million beneficiaries in the West Region. That award was not challenged but TriWest’s current contract is being extended until next March too, when presumably new five-year contracts will take effect across the Tricare system.

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."

Tough said he was glad to read in Tricare’s letter back to GAO that the TMA, in taking corrective action, would look first at Aetna’s use of the former "high-level" TMA employee to prepare its bid.

"They could have elected not to," said Tough. So at Health Net, he said, that decision has "created a sense of optimism about the protest and the direction of where this could be headed." Tough said he’s "very confident" TMA will "do the right thing for the program and beneficiaries."

In Tough’s view, the right thing is to Health Net the contract.

"We believe that the conflict of interest, the appearance of impropriety, is a very serious matter," he said. "The competitive advantage, how do you clear it?" Tough asked rhetorically. "If you had access to proprietary information, how do you just claim that that didn’t exist anymore. That’s the challenge ... and why we think it’s such a serious issue."

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. It’s got a lot of things that are pretty enticing" for those looking to reform health systems.

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. That’s occurring now in North Region, Tough said, for the Haitian tragedy with personnel leaving Bethesda Naval Medical Center, Md., and the naval hospital in Norfolk, Va.

On that point, "Steve is absolutely on target," said his counterpart for the South Region, Humana Military’s president and CEO David J. Baker. "The beauty of these Tricare contracts is our ability to flex as evidenced by the fact that Tricare has flexed [for] troop commitments in theaters like Iraq and Afghanistan. That’s one of the real successes of the program."

Baker, a retired Air Force colonel and medical service corps officer, contrasted the flexibility of the system today to the enormous difficulty that beneficiaries faced trying to find civilian doctors to see them as CHAMPUS patients in the 1970s and 80s as appointments in local military medical facilities got scarce during "those kinds of contingencies."

To comment, send e-mail to or write to Military Update, P.O. Box 231111, Centreville, VA, 20120-1111

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