Up to $55.5B in TRICARE Contracts Nothing to Sneeze At
In July 2009, the US Department of Defense’s TRICARE Management Activity (TMA), which provides health care coverage to 9.4 million active duty military family members, military retirees and their eligible family members, issued a number of regional management contract. Under the regional TRICARE MCS services contracts, the companies provide the US military with management of healthcare provider networks and referrals, medical management, enrollment, claims processing, customer service and access to data, among other requirements. The companies will serve as intermediaries between the U.S. military personnel and the U.S. military’s medical care system, similar to the role of a healthcare insurance provider in the private sector.
The size of the covered TRICARE population ensures that these will not be small contracts. The 2009 contracts covered up to $55.5 billion in US regional managed care support (MCS) services, from 3 companies: TriWest Healthcare Alliance Corp. in Phoenix, AZ for the West, Aetna Government Health Plans in Hartford, CT for the North, and UnitedHealth Military & Veterans Services in Minnetonka, MN for the South.
Every single “winner” subsequently lost, after GAO protests were filed. The protests have finally sorted themselves out, and final winners have been declared, but at the price of years of delay…
TRICARE Trends
The hefty price tag for the TRICARE MCS contracts reflects an upward cost trend for the TRICARE program, which is becoming a lot more expensive in part because of greater usage and in part because of benefits increases with long-term cost implications. See “US DoD IG: Global TRICARE Services Vulnerable to Fraud,” “TRICARE Trials and Tribulations” and “US DoD Trying to Slow Ballooning Prescription Drug Costs” for more background on the burgeoning TRICARE costs.
TMA said that it will offer financial incentives for contractors to meet quality standards; exceptional customer service; detection of fraud, waste, and abuse; increased electronic claims processing; better program management, improved preventive care and cost savings.
To apply these incentives fairly, TMA said it has improved methods to measure and assess network providers, beneficiaries, and military treatment facility commander satisfaction.
TMA said that the transition from the current contracts – known as 3rd generation (T-3) MCS contracts – was scheduled to begin immediately (July 2009), with the start of health care delivery under the new contracts anticipated for April 1/10.
The contractors under the existing MCS contracts were HealthNet Federal Services (North), Humana Military Healthcare Services (South), and TriWest Healthcare Alliance (West).
Contracts and Key Events
The contract to provide managed care support to the Department of Defense TRICARE Program is primarily cost-plus-fixed-fee, and serves nearly 2.9 million TRICARE beneficiaries in The West Region states of Alaska, Arizona, California, Colorado, Hawaii, Idaho, Iowa (except the Rock Island Arsenal area), Kansas, Minnesota, Missouri (except the St. Louis area), Montana, Nebraska, Nevada, New Mexico, North Dakota, Oregon, South Dakota, Texas (areas of Western Texas, incl. El Paso), Utah, Washington, and Wyoming. Work includes management of provider networks and referrals, medical management, enrollment, claims processing, customer service and access to data, among other requirements. The new contract is scheduled to begin on April 1/13.
The instant obligation on the award is $10 million, but the total potential contract value, including the approximate 10-month base period and 5 more 1-year option periods, plus a transition-out period, is estimated at up to $20.462 billion. The administrative services contract alone is worth $1.4 billion over 5 years. This contract was competitively procured using the best value source selection process, with 2 initial offers received by the TRICARE Management Activity in Aurora, CO (HT9402-12-C-0001). UnitedHealth release | UnitedHealth on sector reform | UnitedHealth on health care innovation.
June 15/11: Humana confirmed for the South. Humana Military Healthcare Services announces that the Government Accountability Office (GAO) has rejected UnitedHealth’s protest, and upheld the award of the South Region TRICARE Third Generation (T-3) contract to Humana Military (vid. Feb 25/11). The new contract is scheduled to begin on April 1/12.
April 7/11: TRICARE Management Activity announces that it is canceling the West Region contract it awarded to TriWest Healthcare Alliance Corp in July 2009 (see July 13/09 entry) as the result of a review prompted by a UnitedHealth agency-level protest. TRICARE said it would re-open the solicitation, update the performance period, issue an amended RFP, and allow existing competitors to re-submit proposals. TRICARE said it transitioned the North Region to a new contract with incumbent Health Net Federal Services on April 1/11.TRICARE said the decision on the West Region protest was held up by resolution of a protest over the South Region contract.
On Feb 25/11, TRICARE canceled the South Region contract awarded to UnitedHealth in July 2009 and awarded the contract to Humana, the incumbent holder of the contract. In response, UnitedHealth filed a protest with the GAO. The protest is still pending. UnitedHealth said in a statement that it believes it was the “superior bidder” on both the South and West Region contracts.
March 7/11: South protest. UnitedHealth Military and Veterans Services files protest with the GAO over the TRICARE Management Activity’s decision to award the South Region contract to Humana Military Healthcare Services, the incumbent holder of the contract. In July 2009, UnitedHealth beat out Humana for the South Region contract (see July 13/09 entry). However, Humana filed a protest with the GAO, which sustained the protest. On Feb. 25/11, TMA announced its intention to award the South Regional contract to Humana.
Feb 25/11: The TRICARE Management Activity (TMA) announces its intention to award the South Region contract to Humana Military Health Services in Louisville, KY. The contract originally awarded to UnitedHealth Military & Veterans Services in July 2009 (see July 13/09 entry) was canceled. TMA said it reached the decision after a “detailed evaluation” of revised proposals from the 2 firms in response to the GAO sustainment of a Humana protest to the 2009 contract award. The total potential contract value, including a 10-month transition period and 5 one-year option periods for healthcare delivery, plus a transition-out period, is $23.5 billion.
TMA said that a decision regarding an agency-level protest on the West Region award to the current contractor, TriWest Healthcare Alliance Corp, is still pending. The existing TRICARE contracts will remain in place in the South and West Regions until transition to the 3rd-generation US regional contracts (T-3) is complete “to ensure continuous care and services to all beneficiaries.”
May 5/10: Health Net in the North. The TRICARE Management Activity announces that it canceled the North Region contract awarded to Aetna Government Health Plans (see July 13/09 entry) “for the convenience of the government” based on the GAO sustainment of a protest by the previous holder of the North Region contract, Health Net Federal Services. TRICARE said it decided to award the contract to Health Net.
In addition TRICARE said it was issuing an amended RFP for the South Region contract based on the GAO’s recommendations in response to a protest filed by the previous South Region contract holder Humana Military Healthcare Services. An agency-level protest regarding the West Region award is pending. As a result of these actions, the April 1/10 effective date for the 3 contracts has been delayed. Health Net release.
July 13/09: TriWest Healthcare Alliance Corp won a cost-plus-fixed-fee contract (H94002-09-C-0010) with a base period plus 1 option period for $2.8 billion to provide TRICARE MCS services in the US West Region. The total potential contract value, including a 10-month base period (transition-in) and 5 one-year option periods for health care delivery, plus a transition-out period, is estimated at $17 billion. The West region includes Alaska, Arizona, California, Colorado, Hawaii, Idaho, Iowa (except the Rock Island Arsenal area), Kansas, Minnesota, Missouri (except the St. Louis area), Montana, Nebraska, Nevada, New Mexico, North Dakota, Oregon, South Dakota, Texas (areas of Western Texas only), Utah, Washington, and Wyoming. This contract was competitively procured via the TRICARE Management Activity e-solicitation Web site with 2 offers received.
July 13/09: Aetna Government Health Plans won a cost-plus-fixed-fee contract (H94002-09-C-0008) with a base period plus 1 option period for $2.8 billion to provide TRICARE MCS services in the US North Region. The total potential contract value, including the 10-month base period (transition-in) and 5 one-year option periods for health care delivery, plus a transition-out period, is estimated at $16.7 billion. The North Region includes the District of Columbia, Connecticut, Delaware, Illinois, Indiana, Iowa (Rock Island Arsenal area only), Kentucky (except the Fort Campbell area), Maine, Maryland, Massachusetts, Michigan, Missouri (St. Louis area only), New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia, and Wisconsin. This contract was competitively procured via the TRICARE Management Activity e-solicitation Web site with 2 offers received.
July 13/09:: UnitedHealth Military & Veterans Services won a cost-plus-fixed-fee contract (H94002-09-C-0009) with a base period plus 1 option period for $3.7 billion to provide TRICARE MCS services in the US South Region. The total potential contract value, including the 10-month base period (transition-in) and 5 one-year option periods for health care delivery, plus a transition-out period, is estimated at $21.8 billion. The South Region includes Alabama, Arkansas, Florida, Georgia, Kentucky (the Fort Campbell area only), Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee, and Texas (excluding areas of Western Texas). This contract was competitively procured via the TRICARE Management Activity e-solicitation Web site with 3 offers received.
