DoD taking cautious approach to new TRICARE contracts

On Thursday, the Defense Department made much-anticipated awards in the next generation of contracts to run its TRICARE health plan: $41 billion to Humana and $18 billion to Health Net.

Assuming the awards survive the bid protests likely to follow, Defense officials aren’t necessarily in a hurry to transition TRICARE to the new contract structure, known as T-2017. They’d much rather ensure the two vendors are ready to handle the work in the newly-reconfigured East and West regions before moving away from the current arrangement (T-3), whose expiration date the department has extended just in case things go awry.

DoD is aiming to avoid a repeat of what happened in 2013, when UnitedHealthcare, the vendor that eventually took over the West contract after three years of bid protests wasn’t able to handle the workload it agreed to take on, leading to widespread delays and improper denials of claims and forcing DoD to take emergency measures, including letting patients get specialty care without preauthorizations.

“We learned some fairly significant lessons in that last transition,” Vice Adm. Raquel Bono, the director of the Defense Health Agency told reporters Friday. “In our selection of the vendors we wanted to look closely at transition plans and their ability to meet our standards. One of the big lessons we’re going to put into play here is that we absolutely will not shift over until we are assured that the new vendors can perform all the tasks they need to.”

DHA expects the transition period to last between nine and twelve months after the new contracts are formally signed, and language within the new statements of work will require live tests of all of the contractors’ systems to ensure no unexpected hiccups arise before the military migrates TRICARE to the new contracts.

Bono declined to say whether UnitedHealthcare’s performance during the last transition played a significant role in DoD’s decision not to award that firm a regional TRICARE contract in the T-2017 round, saying only that each insurers’ past performance was one of several factors the Defense Health Agency took into account.

Officials plan to debrief all five unsuccessful bidders between Monday and Thursday of this week.

After that, each vendor will have ten days to file an official protest with the Government Accountability Office or the Court of Federal Claims, and considering the dollar amounts involved, it’s a virtual certainty that some companies will do so.

But Bono said said she believed her agency had done everything it reasonably could to make sure the awards would survive the protest adjudication process – unlike the last TRICARE contract round, in which all three of DoD’s regional awards were ultimately overturned in a spiral of protests that dragged out from 2009 through 2012.

“We had a lot of help in putting together the requirements for this contract and making what was really a rigorous source selection, including consultations with GAO and our other acquisition partners,” she said. “In evaluating all the factors that went into this process, we feel very good that we preserved the very highest levels of integrity and that we’ll be able to describe and defend the decisions we made.”

Until the transition actually happens, DoD’s main objective is to make sure beneficiaries don’t see any meaningful difference in the care they’re receiving, said Dr. Karen Guice, the acting assistant secretary for health affairs.

“For today, there’s nothing that changes. They’ll continue to see the same providers they saw yesterday,” she said. “Nothing will change until we’re assured the transition will go smoothly.”

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