Three companies protest DoD TRICARE contract awards, including one of the winners

Two weeks ago in this space, we noted it was a near-certainty that losing bidders would file protests against the newly-awarded contracts to manage DoD’s TRICARE health system — not necessarily because the government did anything wrong, but because these are massive contracts, even by Pentagon standards.

What we failed to imagine was that TRICARE contract protests are now so inevitable that a company might want to file one even if they’re one of the winners. That, in fact, happened just before the close of business on Friday, when Health Net Federal Services lodged a complaint with the Government Accountability Office, joining two losing bidders — UnitedHealth and Wellpoint — who protested the TRICARE decisions earlier in the week.

In the July. 21 contract announcement, DoD picked Health Net to run TRICARE’s West region out of a field of three companies that bid for that part of the T-2017 contracts. But in its GAO filing, the company effectively argued that it should have been awarded the East region instead (the government’s request for proposals only allows a company to manage one region at a time).

A Health Net spokesman declined to comment on the company’s reasons for the protest, but it likely has something to do with the fact that the West contract, with its maximum value of $18 billion over six years starting in 2017, is much smaller than the new East region: $41 billion.

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DoD created the forthcoming East region by merging the current North and South regions. Health Net is the incumbent for what’s now the North.

Earlier in the week, UnitedHealth Military and Veterans filed two separate protests, one each for the East and West regions. That firm didn’t win work in either region for the T-2017 contracts set to take full effect in April of next year, but currently manages the West region after getting off to a somewhat rocky start in 2013.

“It’s a selection decision challenge,” said a GAO official who asked not to be identified. “It essentially claims that if the government had done their job properly, it would have realized [United Health] was the best offeror.”

WellPoint Military Care, a division of the large Anthem insurer set up to pursue the TRICARE business, also filed a protest last week on similar grounds. Wellpoint challenged only the East region contract that was awarded to Humana, the incumbent in what’s now the South region. Humana, for its part, also filed a brief with GAO last week seeking to protect its newly-awarded contract.

It’s unlikely that any more of the seven companies which bid on the two contracts would file additional protests. Firms generally have only 10 days to complain to GAO after the government debriefs them on the reasons they weren’t selected, and the Defense Health Agency had planned to wrap-up those sessions by July 28.

One hopes that the challenges are settled somewhat quickly, but as the GAO official noted, this is only the beginning of the process. DHA has 30 days to respond to the protests and GAO has until mid-November to sustain or deny them. But in the last round of TRICARE contracts, known as T-3, a cascading series of protests and reconsiderations of the government’s original decisions dragged out for nearly three years, and none of the original awardees were in charge of the same regions by the time the process was over.

This time around, the Defense Health Agency — which, we should mention, did not exist during the last round of contract awards — did all it could to ensure its initial awards would survive the almost-inevitable legal challenges, DHA officials told reporters two weeks ago, including by consulting with GAO and other procurement experts ahead of time.

In some ways though, this round of contracts is more complex than the last one, which focused mainly on selecting managed care companies that could stitch together the most effective provider networks in the most cost-effective ways for the “purchased care” part of the military health system.

The new contracts come after the Defense Department has begun to undertake initiatives to encourage patients to use military hospitals and clinics wherever possible, and so vendors were also scrutinized on their ability to deliver integrated case management and share electronic records with the military’s own facilities.

DHA also evaluated vendors based on any value-based care “innovations” they’ve shown in managing their private-sector health plans.

“One of the requirements of the T-17 contracts was to invite our vendors to share their best practices and to give them an opportunity to provide some of the services they provide to the commercial market,” said Vice Adm. Raquel Bono, DHA’s director. “We’ve also included incentives and penalties when they deliver on quality metrics and we’re going to evaluate their case management and utilization management. We built a lot of those things into the request for proposals to determine the best value.”

Read more of the DoD Reporter’s Notebook.

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