Fate of TRICARE in west unsure

TRICARE beneficiaries across 21 western states won't know for another three months whether TriWest Healthcare Alliance will continue to administer their healthcare benefit beyond March of next year.

After 16 years, TriWest lost its latest bid to continue to run the TRICARE West Region under a third generation support contract, this one worth an estimated $20.5 billion over almost six years.

Defense Department officials awarded the contract instead to a company new to TRICARE users, a subsidiary of UnitedHealth Group, Inc., of Minnetonka, Minn., the nation's largest health insurance entity.

TriWest, however, is protesting that award to the Government Accountability Office. GAO has 100 days, until early July, to decide whether the contract was awarded properly or if it should be reversed or re-bid.

David J. McIntyre, Jr., TriWest's president and chief executive officer, said last week the challenge is based on two issues. One is that contract officials "disregarded several hundred million dollars" in discounts that TriWest had guaranteed. Even ignoring those discounts, said McIntyre, the government has conceded TriWest's bid was lower than its rival's.

TriWest also argues that UnitedHealth was judged to offer "best value" based only on a review of its performance on its five largest accounts, and not on a broader review of problems raised by providers or beneficiaries that resulted over the years in legal judgments and hefty fines.

Before awarding the contract, officials "never bothered to go to the public market space to figure out what might be out there. They didn't contact other entities (UnitedHealth) performs work for. They didn't contact the insurance commissioners in the states that they operate in," he said.

McIntyre compared it to "buying a house without an inspection.

In July 2009 UnitedHealth won the South Region contract and TriWest the West contract. But Humana, the incumbent contractor for the South, filed a protest and in February 2011 GAO reversed UnitedHealth's award.

TRICARE decided to reopen bidding on UnitedHealth's argument that too much weight had been given TriWest's promise to negotiate discounts below Medicare levels and not enough on quality of care. By last September, TriWest appeared more vulnerable when it agreed to pay $10 million to settle whistle-blower claims the company had failed to pass along to the military certain discounts it had negotiated with providers.

The West region serves almost 2.9 million beneficiaries across Alaska, Arizona, California, Colorado, Haw-aii, Idaho, Iowa, Kansas, Minnesota, Missouri, Mont-ana, Nebraska, Nevada, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington, Wyoming and western Texas.

Matt Stearns, spokesman for UnitedHealth Military & Veterans Services, the business unit that would service the West Region, declined to comment on specifics of McIntyre's "unfortunate" reaction.

Stearns pointed to a recent Fortune Magazine survey of business executives, directors and analysts that listed UnitedHealth as the most admired and innovated company in the health insurance business.

Joyce Raezer, executive director of National Military Family Association, said she is nervous to read forecasts by TRICARE officials of a "seamless" transition to the new contractor for the West region.

"I've seen enough of these to be worried about every transition," Raezer said. Any shift in TRICARE contractors creates problems.

Tom Philpott can be contacted at Military Update, P.O. Box 231111, Centreville, Va. 20120-1111, or by e-mail at:


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