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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

June 2014: 

Defense Health Care: 

More-Specific Guidance Needed for TRICARE's Managed Care Support 
Contractor Transitions: 

GAO-14-505: 

GAO Highlights: 

Highlights of GAO-14-505, a report to congressional requesters. 

Why GAO Did This Study: 

DOD provides health care through TRICARE, its regionally structured 
health care program. In each of its regions (North, South, West), DOD 
uses contractors to manage health care delivery through civilian 
providers, among other tasks. UnitedHealth—an organization new to 
TRICARE—was awarded the contract in the West region. After health care 
delivery began, UnitedHealth experienced problems fulfilling some 
requirements and delivering care to TRICARE beneficiaries. 

GAO was asked to review the West region's transition to UnitedHealth. 
This report provides information on (1) the extent to which TMA 
provided guidance and oversight of the new contractor's transition 
period in preparation for health care delivery; and (2) how, if at 
all, TMA's guidance and oversight during the transition period 
contributed to issues with health care delivery. GAO reviewed and 
analyzed TMA guidance, contract requirements, and other relevant 
documentation, and interviewed TMA and UnitedHealth officials. 

What GAO Found: 

The recent transition of TRICARE's managed care support contractors 
(contractors) in the West region did not go smoothly and highlighted 
numerous deficiencies in guidance and oversight by the TRICARE 
Management Activity (TMA)-—the Department of Defense's (DOD) office 
responsible for awarding and managing these contracts at the time of GAO
's review. For example, TMA did not ensure that its outgoing and 
incoming contractors used the same version of transition guidance, 
resulting in problems that were left largely to the contractors to 
resolve. Additionally, TMA's guidance lacked sufficient specificity 
for some requirements, such as the development of a referral 
management system that could interface with the referral systems used 
by the regions' military treatment facilities—a system that was also 
not tested prior to health care delivery, unlike other critical system 
interfaces. In addition, TMA lacked a process for holding the 
contractor accountable when transition requirements were delayed or 
not met. TMA officials explained that the regional contracts are 
performance-based, meaning that most—but not all—of the contract 
requirements include an expected outcome, but the manner in which that 
outcome is to be achieved is left to the contractor. As a result, TMA 
officials stated that, regardless of their concerns, it was difficult 
to hold UnitedHealthcare Military & Veterans Services (UnitedHealth) 
accountable until the requirement was actually missed. However, as GAO 
has previously reported, important attributes of a performance-based 
contract include features that allow for the evaluation of a contractor'
s performance. UnitedHealth's contract contained these features, and 
as a result, GAO believes that this performance-based contract 
structure did not diminish TMA's responsibility for providing 
sufficient oversight to ensure that the contractor was performing as 
required. 

TMA's inadequate guidance and insufficient oversight contributed to 
problems with health care delivery. UnitedHealth experienced 
difficulty in meeting some of its requirements early on, disrupting 
continuity of care for some beneficiaries and potentially resulting in 
unnecessary costs. For example, the lack of guidance on developing a 
referral management interface contributed to problems with the 
processing of specialty care referrals. Consequently, the requirement 
for beneficiaries to obtain a referral authorization for specialty 
care was temporarily waived-—a move that the Army estimated could cost 
DOD over a million dollars as beneficiaries may have obtained more 
specialty care from civilian providers than from military treatment 
facilities. Further, insufficient oversight related to UnitedHealth's 
determination of the number of staff needed to man its call center 
contributed to a delayed resolution in meeting telephone response time 
requirements. As a result, it was not until the third month of health 
care delivery that UnitedHealth was able to meet its requirement to 
answer 90 percent of calls within 30 seconds. These and other problems 
ultimately resulted in TMA holding the contractor accountable through 
the use of corrective action requests and financial penalties. 

What GAO Recommends: 

GAO recommends that DOD review and revise as necessary, its transition
guidance to strengthen its oversight and ensure that future managed care
support contractors have sufficient information to successfully complete
transition requirements. DOD concurred or partially concurred with 
GAO’s recommendations, but disagreed with some of GAO’s findings. GAO 
maintains that the information presented is accurate, and recommendations 
valid as discussed in the report. 

View [hyperlink, http://www.gao.gov/products/GAO-14-505]. For more 
information, contact Debra Draper at (202) 512-7114 or draperd@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

TMA's Guidance on Contract Transitions Was Inadequate, and Its 
Oversight Was Insufficient: 

Inadequate Guidance and Insufficient Oversight during the Contractor 
Transition Contributed to Health Care Delivery Problems, but 
Ultimately Led to Greater Oversight: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: UnitedHealth's Education and Outreach Efforts during 
Transition and the First 6 Months of Health Care Delivery: 

Appendix II: Comments from the Department of Defense: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: The Seven Key Focus Areas for TRICARE Managed Care Support 
Contract Transitions: 

Table 2: Number of Beneficiary Briefings and Attendees from February 
2013 through September 2013: 

Table 3: Number of Provider Briefings and Attendees from February 2013 
through September 2013: 

Figure: 

Figure 1: Timeline of Events for the Award of TRICARE's Third-
Generation Managed Care Support Contract for the West Region: 

Abbreviations: 

DHA: Defense Health Agency: 

DOD: Department of Defense: 

MTF: military treatment facility: 

TMA: TRICARE Management Activity: 

TRO: TRICARE Regional Office: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

June 18, 2014: 

The Honorable Patty Murray: 
Chairman: 
Committee on Budget: 
United States Senate: 

The Honorable Mark Begich: 
United States Senate: 

In fiscal year 2013, the Department of Defense (DOD) offered health 
care services to almost 9.6 million eligible beneficiaries in the 
United States and abroad through TRICARE, its regionally structured 
health care program.[Footnote 1] Under TRICARE, beneficiaries can 
obtain health care through DOD's direct care system of military 
hospitals and clinics, referred to as military treatment facilities 
(MTF), or through its purchased care system of civilian providers. DOD 
contracts with private sector companies--referred to as managed care 
support contractors (contractors)--to develop and maintain civilian 
provider networks and provide other services, such as specialty care 
referrals, enrollment, medical case management, claims processing, and 
customer service.[Footnote 2] 

Each TRICARE region in the United States (North, South, and West) has 
a TRICARE Regional Office (TRO) that helps oversee the contractors' 
performance, including monitoring network quality and adequacy, and 
customer-satisfaction outcomes. On October 1, 2013, DOD's Defense 
Health Agency (DHA) became responsible for acquiring, administering, 
and overseeing TRICARE's managed care support contracts--
responsibilities formerly handled by the TRICARE Management Activity 
(TMA).[Footnote 3] 

Under the current, third generation of managed care support contracts, 
health care delivery was scheduled to begin nationwide on April 1, 
2010.[Footnote 4] However, due to sustained bid protests for each of 
the contracts and TMA's implementation of related corrective actions, 
health care delivery started at different times in each of the TRICARE 
regions.[Footnote 5] TRICARE's West region was the last of the three 
regions to transition to the third generation of managed care support 
contracts with a health care delivery start date of April 1, 2013. 
[Footnote 6] Unlike the North and South regions, which were awarded to 
incumbent contractors, the West region was awarded to UnitedHealthcare 
Military & Veterans Services (UnitedHealth)--an organization that was 
new to TRICARE.[Footnote 7] Additionally, this was the first 
transition to a nonincumbent contractor since the start of the TRICARE 
program. After health care delivery began, UnitedHealth experienced a 
number of well-publicized problems, reported by DOD and the media, 
performing certain required services for TRICARE beneficiaries, 
including difficulties with the development of its provider network 
and the processing of referrals to specialty providers--problems that, 
according to TMA officials, the incumbent contractors in the North and 
South regions did not experience.[Footnote 8] 

Questions have been raised concerning the problems that transpired 
after the West region's transition to UnitedHealth. You asked us to 
examine whether UnitedHealth was fully prepared for the transition to 
deliver health care, among other issues, including UnitedHealth's 
outreach to beneficiaries and providers during this time. This report 
provides information on (1) the extent to which TMA provided guidance 
and oversight of the new contractor's transition period in preparation 
for health care delivery; and (2) how, if at all, TMA's guidance and 
oversight during the transition period contributed to issues with 
health care delivery. We also provide information on UnitedHealth's 
outreach to beneficiaries and providers during the transition period 
and the first 6 months of health care delivery. (See appendix I.) 

To determine the extent to which TMA provided guidance and oversight 
of the new contractor's preparation for health care delivery, we 
reviewed and analyzed TMA's guidance on how the transition period was 
to be structured, including the roles of TMA and TRO-West in 
overseeing UnitedHealth's transition. We also reviewed TMA's relevant 
guidance and documents for managed care support contract transitions 
to identify requirements for the transition-in of a new contractor and 
the transition-out of an outgoing contractor. Additionally, we applied 
federal standards for internal control, including risk assessment 
activities to identify risks and analyze their possible effect, and 
other activities--such as documentation of significant events--to help 
ensure that ongoing monitoring is effective.[Footnote 9] We 
interviewed officials from TMA, including the Transitions Director 
from the Policy and Operations Directorate and the Contracting Officer 
from the Acquisition Management and Support Directorate, both in TMA's 
Aurora, Colorado office (TMA-Aurora), as well as the Transition 
Manager and Contracting Officer's Representative from TRO-West, to 
obtain their perspectives on transition activities, including 
oversight provided to UnitedHealth during this period.[Footnote 10] We 
also interviewed officials at UnitedHealth to discuss activities that 
occurred during the transition period, including the extent to which 
they collaborated and communicated with TRO-West officials. TriWest 
Healthcare Alliance Corporation (TriWest), the contractor for the West 
region prior to UnitedHealth, was no longer the contractor when we 
started our review, and as a result, we did not interview TriWest 
officials about the transition.[Footnote 11] 

To determine how, if at all, TMA's guidance and oversight during the 
transition period contributed to issues with health care delivery, we 
reviewed and analyzed documents, including UnitedHealth's contract 
requirements and documents that described the oversight 
responsibilities for TMA-Aurora and the TROs. We interviewed officials 
from TMA, including both the Contracting Officer from TMA-Aurora and 
the TRO-West officials who provide day-to-day oversight of the 
contract, to discuss how transition activities affected health care 
delivery. We also discussed how the problems that occurred after 
health care delivery were addressed, including how TMA used corrective 
action requests, award fees, and performance guarantees to hold the 
contractor accountable. Our work focused on activities and 
interactions through the first 6 months of health care delivery, which 
ended on October 1, 2013. Because we conducted the majority of our 
audit work prior to the establishment of the DHA on October 1, 2013, 
we refer to TMA throughout most of this report. When relevant, we 
refer to DHA for activities that occurred after that time. 

We conducted this performance audit from August 2013 to June 2014 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

Under TRICARE, DOD contracts with private sector health care companies 
to supplement the care provided by military hospitals and clinics. 
These contracts, which are referred to as managed care support 
contracts, are generally performance-based contracts. For such 
contracts, most, but not all, of the requirements include an expected 
outcome, but the manner in which that outcome is to be achieved is 
left to the contractor. Contractors are given discretion in 
determining how best to meet the government's performance objectives. 
For example, the managed care support contract states that the 
contractor must maintain an adequate network of providers, and the 
contractor is responsible for determining how it will accomplish that 
objective, including how many providers will be in its network. 

TMA expected to award the third generation of managed care support 
contracts in each of the three regions in 2009, but bid protests and 
other actions resulted in delays. In the North region, the final 
contract was awarded in May 2010 to the incumbent contractor, Health 
Net Federal Services, after its bid protest against TMA's initial 
decision to award the contract to Aetna Government Health Plan was 
sustained. In the South region, the final contract was awarded in 
February 2011 to the incumbent contractor, Humana Military Healthcare 
Services, after its bid protest against TMA's initial decision to 
award the contract to UnitedHealth was sustained.[Footnote 12] 

As we reported in March 2014, there were two bid protests in the West 
region.[Footnote 13] The first protest was an agency-level protest 
filed by UnitedHealth in July 2009 challenging the award to TriWest. 
This protest was sustained and included a recommendation that TMA 
reevaluate proposals and make a new source selection decision. In 
implementing this recommendation, TMA allowed offerors to submit 
revised proposals. TMA then reviewed the revised proposals and, based 
on this review, awarded the contract to UnitedHealth. After TMA 
announced the new award, a second West region protest was filed by 
TriWest in March 2012. GAO denied the second protest and upheld 
UnitedHealth as the contractor for the West region. (See figure 1.) 

Figure 1: Timeline of Events for the Award of TRICARE's Third-
Generation Managed Care Support Contract for the West Region: 

[Refer to PDF for image: timeline] 

March 2008: 
TRICARE Management Activity (TMA) issues request for proposals. 

January 2009: 
Final proposal submission to TMA. 

July 2009: 
TMA awards contract to TriWest Healthcare Alliance Corporation 
(TriWest), and UnitedHealth Military & Veterans Services 
(UnitedHealth) files bid protest with TMA over its decision to award 
contract to TriWest[A]. 

April 2011: 
TMA sustains UnitedHealth's bid protest[B]. 

April 2011: 
TMA issues amended request for proposal and allows offerors to submit 
revised proposals. 

March 2012: 
TMA awards contract to UnitedHealth instead of TriWest after 
evaluating the revised proposals, and TriWest files bid protest with 
GAO over TMA's decision to award contract to UnitedHealth. 

July 2012: 
GAO denies TriWest's bid protest and upholds award to UnitedHealth. 

April 2013: 
UnitedHealth begins performance of health care delivery under the 
contract. 

Source: GAO. GAO-14-505. 

[A] TMA held UnitedHealth's July 2009 West region protest in abeyance 
while TMA took corrective action following a sustained bid protest in 
the South region, where UnitedHealth was also an offeror. Because the 
request for proposal for the third-generation managed care contracts 
stated that the same offeror could not win contract awards in more 
than one region, UnitedHealth's West region protest would have become 
moot if it received the South region award following TMA's evaluation 
of revised proposals. After TMA awarded the South region contract to 
Humana in February 2011, UnitedHealth's agency-level protest in the 
West region was revived. 

[B] In the sustained agency-level bid protest, TMA's Contracting 
Officer recommended that TMA reevaluate proposals and make a new 
source selection decision. 

[End of figure] 

The process for implementing the third generation of managed care 
support contracts involves transitioning health care delivery from the 
outgoing contractor to the incoming contractor. The transition 
involves planning, managing, and monitoring to ensure continuity of 
services for TRICARE beneficiaries and providers. The transition 
period officially begins when the managed care support contract has 
been signed by DOD and the contractor, and it ends on the health care 
delivery start date.[Footnote 14] For the West region, UnitedHealth's 
transition period was slightly less than 9 months; it began on July 3, 
2012, and was completed on March 31, 2013, with the health care 
delivery start date of April 1, 2013. 

TMA has guidance for the management and oversight of managed care 
support contract transitions, as well as for the incoming and outgoing 
contractors. TMA's management of all of the third-generation contract 
transitions, including the managed care support contract transitions, 
is governed by TMA's Concept of Operations for TRICARE T-3 Transitions 
Work Group (Concept of Operations).[Footnote 15] In addition, for 
oversight of the contractor's performance, TMA uses the TRICARE 
Acquisitions Directive (Acquisitions Directive), which establishes 
roles and responsibilities for both TMA and TRO officials and a chain 
of command to address contractor nonconformance.[Footnote 16] 
According to this directive, the Contracting Officer is ultimately 
responsible for the oversight of the contractor's performance. The 
Contracting Officer's Representative assists the Contracting Officer 
with this effort by working with other TRO officials to monitor the 
contractor's performance.[Footnote 17] The TRO is responsible for the 
day-to-day monitoring of the contractor's performance during both 
contract transition and health care delivery.[Footnote 18] 

The managed care support contract also contains guidance and 
requirements for the contractor's portion of the transition. The 
contract requirements are organized into seven areas, which are 
considered the key focus areas during the transition period because of 
their importance in delivering health care; they are provider network, 
referral management, enrollment, medical management, claims 
processing, customer service, and management. (See table 1.) The 
contract is also supplemented by four TRICARE manuals, including the 
TRICARE Operations Manual, which includes guidance for both the 
outgoing and the incoming contractors, among other requirements. 
[Footnote 19] 

Table 1: The Seven Key Focus Areas for TRICARE Managed Care Support 
Contract Transitions: 

Areas: Provider network; 
Description: The contractor shall provide a managed, stable, high-
quality network, or networks, of individual and institutional health 
care providers that supplements the clinical services provided to 
beneficiaries in military treatment facilities (MTF). 

Areas: Referral management; 
Description: The contractor is required to process all referrals to 
specialty providers and right of first refusals for the MTF in 
accordance with TRICARE manuals. Right of first refusal is defined as 
providing the MTF with an opportunity to review each referral from a 
civilian provider to determine if the MTF has the capability and 
capacity to provide the medical care and services previously 
identified in the document that dictates the relationship between the 
contractor and the MTF. 

Areas: Enrollment; 
Description: The contractor shall perform all enrollments, including 
correcting enrollment discrepancies when necessary. 

Areas: Medical management; 
Description: The contractor shall ensure that the care it provides, 
including mental health care, is medically necessary and appropriate 
and complies with the TRICARE benefits contained in regulations. The 
contractor shall use its best practices in managing, reviewing, and 
authorizing health care services. In addition, the contractor shall 
operate case management programs designed to manage the health care of 
individuals with high-cost conditions or with specific diseases for 
which evidenced based clinical management programs exist. 

Areas: Claims processing; 
Description: The contractor shall establish, maintain, and monitor an 
automated information system to ensure claims are processed in an 
accurate and timely manner and meet the functional system requirements 
as set forth in the TRICARE manuals that explain how to process claims. 

Areas: Customer service; 
Description: The contractor shall provide comprehensive, readily 
accessible customer service that includes multiple, contemporary 
avenues of access (for example, e-mail, World Wide Web, telephone, and 
facsimile) for the beneficiary. This includes providing telephone 
access for beneficiaries to use when they have inquiries regarding 
their TRICARE benefit. 

Areas: Management; 
Description: The contractor shall establish and maintain experienced 
and qualified key personnel and sufficient staffing and management 
support to meet contractual requirements, including ensuring that the 
information systems that interface with the Department of Defense 
employ the proper security settings. 

Source: GAO analysis of the Department of Defense's managed care 
support contract. GAO-14-505. 

[End of table] 

TMA's Guidance on Contract Transitions Was Inadequate, and Its 
Oversight Was Insufficient: 

TMA's Transition Guidance Was Inadequate for Both TRO-West and 
UnitedHealth: 

TMA provided some guidance to both TRO-West and UnitedHealth for the 
West region's managed care support contract transition, but the 
guidance was inadequate because it lacked sufficient specificity on 
how to both oversee the transition and meet certain transition 
requirements. 

Transition Guidance for TRO-West: 

Although TRO-West was responsible for the day-to-day management of 
UnitedHealth's transition, it lacked specific guidance from TMA on how 
to provide oversight, particularly when the contractor had difficulty 
meeting transition requirements. According to TMA-Aurora officials, 
the Concept of Operations is the official guidance for managing the 
transition of all third-generation TRICARE contracts, including the 
managed care support contracts. We found that this seven-page document 
outlines a basic approach for the transitions, including a general 
management structure. However, it does not provide information on the 
specific roles and responsibilities for managing the day-to-day 
transition process. It also does not contain guidance for addressing 
any problems that may occur, including a process for holding the 
contractor accountable when transition activities are delayed and 
interim milestones are not met. Separately, the Acquisitions Directive 
provides a basic approach for overseeing a contractor's performance, 
including performance during a transition period. However, we found 
that this high-level five-page document also lacks specificity on how 
and when to hold a contractor accountable for not meeting 
requirements. For example, it notes that the Contracting Officer has 
the authority to issue a corrective action request in response to the 
contractor's nonconformance, but does not provide sufficient detail on 
what level of nonconformance would require such response, nor how long 
the Contracting Officer should wait before sending it. 

In July 2012, TMA-Aurora officials developed the TMA Transition User 
Guide to supplement the Concept of Operations, which provided more-
specific information on how to implement its approach for managing 
contract transitions.[Footnote 20] At over 140 pages in length, this 
guide established a more-detailed structure for the transition 
process, including key management roles and responsibilities for TMA-
Aurora and TRO-West officials, as well as timelines for important 
meetings and lessons learned from previous contract transitions. 
However, similar to the Concept of Operations and the Acquisitions 
Directive, it does not address how TRO-West officials should provide 
oversight of the contractor's activities, including what to do when 
the contractor is not on track to meet requirements. 

Transition Guidance for UnitedHealth: 

We found that TMA's transition guidance to UnitedHealth as an incoming 
contractor was also inadequate primarily because UnitedHealth's 
transition requirements were more specific than those of the outgoing 
contractor, and TMA did not adequately address these differences. The 
managed care support contracts include transition guidance for both 
the incoming and the outgoing contractors that is outlined in the 
TRICARE manuals, most notably the TRICARE Operations Manual.[Footnote 
21] However, UnitedHealth's contract included the 2008 version of the 
manual, while the contract for the outgoing contractor included the 
2002 version. Despite our attempts to obtain an explanation, TMA-
Aurora and TRO-West officials could not clearly explain to us why the 
two contractors were not required to follow the same transition 
guidance. 

The different versions of the manual contributed to information gaps 
for UnitedHealth, which UnitedHealth officials said was an important 
factor that delayed development of their civilian provider network. 
Specifically, UnitedHealth had intended to duplicate at least 95 
percent of TriWest's provider network to create a more seamless 
transition for beneficiaries, but to accomplish this, it needed 
specific information from TriWest that it expected to receive as part 
of the transition. UnitedHealth's transition guidance stated that the 
outgoing contractor was required to provide the incoming contractor 
with copies of a provider certification file no later than 30 days 
after contract award to be updated on a monthly basis until the start 
of health care delivery.[Footnote 22] However, TriWest's transition 
guidance only contained a reference to a provider certification file, 
but did not define its contents, link it to other provider files 
specifically mentioned, or stipulate a time frame for producing it. 
Instead, TriWest's guidance stated more generally that the outgoing 
contractor was required to provide full cooperation and support to the 
incoming contractor and was silent on when the provider certification 
file had to be delivered.[Footnote 23] TriWest did not provide this 
file within 30 days, but UnitedHealth and TriWest officials were able 
to reach a compromise about the provision of the needed information. 
As a result, TriWest provided UnitedHealth with a provider 
certification file in late August 2012. However, this was almost a 
month later than UnitedHealth expected to receive the information 
based on its transition guidance. Furthermore, UnitedHealth officials 
told us that because there was no guidance on the transfer of the 
provider certification file between incoming and outgoing contractors, 
they received a file with nearly 700,000 provider records without any 
data definitions. As a result, UnitedHealth officials told us that 
they had to spend several months working with the data to make them 
usable for their purposes. In this instance, the lack of consistent 
transition guidance for the outgoing and incoming contractors affected 
the incoming contractor's ability to meet transition requirements. 
Federal standards for internal control note that an agency is 
responsible for the establishment and monitoring of performance 
measures--which would include ensuring consistent transition guidance. 
[Footnote 24] 

TMA's transition guidance to UnitedHealth also lacked sufficient 
specificity for some of the seven key focus areas it had identified in 
the contract as being important for health care delivery, such as 
referral management. TRICARE has a unique referral process that 
provides MTFs with the right of first refusal when TRICARE Prime 
beneficiaries are referred for specialty care--a practice that helps 
maximize the use of the military's direct care system. As a result, 
contractors would need to have a referral management system that could 
electronically interface with the referral management systems used by 
the region's MTFs to facilitate this process. However, the TRICARE 
manuals do not contain guidance for the contractors on how to 
establish this interface. In contrast, DOD provides detailed guidance 
for establishing interfaces with other, more centralized DOD systems, 
such as the guidance for interfacing with the Defense Enrollment 
Eligibility Reporting System.[Footnote 25] A TRO-West official 
explained that the lack of specific guidance for a referral management 
interface is likely due to the fact that the military services use 
different referral management systems, and there is no central DOD 
system for this process. At the time, the military services used one 
of two referral management systems.[Footnote 26] UnitedHealth 
officials told us that they did not learn about the MTFs' different 
systems until a month into the transition period, which affected their 
timeliness in developing an automated referral management system to 
interface with the systems used by the region's MTFs. Additionally, 
during that time, there were also discussions within DOD to adopt one 
of these referral management systems for use across all of the 
military services by March 2013. As a result, UnitedHealth officials 
told us that they developed a referral management system that could 
receive faxed referrals from the MTFs with the expectation that they 
would develop an automated interface once more information was 
available about which single referral management system DOD would 
adopt.[Footnote 27] 

In addition, unlike some other key focus areas, including customer 
service (call centers) and claims processing, TMA did not test 
UnitedHealth's referral process prior to health care delivery. 
According to both TRO-West and UnitedHealth officials, this testing 
was not conducted because it was not required by transition guidance. 
Both TRO-West and UnitedHealth officials agreed that such testing 
would have been beneficial for determining whether their interface 
would work at the start of health care delivery. Providing sufficient 
specificity for, and testing, this system and other systems identified 
as critical for health care delivery would better align with federal 
standards for internal control, which recommend that once an agency 
has identified areas of risk, such as referral management, it should 
analyze those areas, formulating an approach to manage and mitigate 
them.[Footnote 28] 

TMA's Oversight of UnitedHealth's Transition Was Insufficient: 

TMA-Aurora and TRO-West officials provided insufficient oversight of 
the West region's contractor transition because they took limited 
action in response to the concerns they identified and did not resolve 
their concerns promptly. Specifically, the Contracting Officer and TRO-
West officials provided oversight by following the structured process 
outlined in the TMA Transition User Guide. For example, they held 
specific types of meetings defined in the guide, such as a "kick-off 
meeting" with UnitedHealth officials shortly after the transition 
period began to discuss high-level transition strategies; meetings 
were also held to discuss interfacing DOD and UnitedHealth computer 
systems. Additionally, TRO-West officials reviewed UnitedHealth's 
weekly transition reports and participated in weekly meetings with 
UnitedHealth officials to discuss their progress in meeting transition 
requirements. TRO-West officials did not maintain formal agency 
records of these weekly meetings, and they could only provide us with 
examples of handwritten notes of the discussions that transpired. 
Although the notes provide a general outline of topics discussed, they 
lack the degree of specificity that would allow us to determine, 
without making assumptions, the nature of any concerns raised by TRO-
West officials or how UnitedHealth responded. We therefore determined 
that these notes provided insufficient evidence of the agency's 
oversight actions during the transition period.[Footnote 29] 

Due to delays in the awarding of the contract, the Contracting Officer 
told us that there were discussions with TRO-West and UnitedHealth 
officials as early as July 2012 about whether the transition period 
should be extended. According to the Contracting Officer, a decision 
was ultimately made in September 2012 to continue with the expected 
plan, after UnitedHealth officials assured TMA that they would be able 
to meet the transition requirements by the start of health care 
delivery--an assurance that UnitedHealth officials confirmed. The 
Contracting Officer told us that none of these discussions were 
documented because the decision not to extend the transition period 
did not represent a change from what was already required. Although 
TRO-West officials told us that there were no indications at the time 
that the health care delivery start date should be delayed, these 
officials later told us that they had limited data on which to base 
their determination, in part because it was so early in the transition 
period. According to federal standards for internal control, 
sufficient information should be identified and captured in a time 
frame that permits program managers (such as the Contracting Officer 
or TRO-West officials) to make effective decisions.[Footnote 30] 
Without such pertinent information, the Contracting Officer and TRO-
West officials cannot ensure that they made an informed determination 
about whether to extend the transition period. 

Despite not delaying the health care delivery start date, TMA-Aurora 
and TRO-West officials told us that they had concerns with 
UnitedHealth's determination of how it would meet, and its progress 
toward meeting, several of the transition requirements. TRO-West 
officials told us that because the contract is performance-based, they 
had difficulty holding the contractor accountable until an actual 
requirement was missed, and were only able to express their concerns 
regarding the progress to UnitedHealth's officials. However, TRO-West 
officials could not provide sufficient documentation of these 
conversations with UnitedHealth. In addition, while we recognize that 
under a performance-based contract an agency does not provide detailed 
instructions to the contractor on how to meet its requirements, we do 
not believe that a performance-based contract diminishes TMA's 
responsibility to provide an oversight structure for managing the 
contractor's performance during the transition period. As we have 
previously reported, important attributes of a performance-based 
contract include measurable performance standards and a quality 
assurance plan for evaluating the contractor's performance.[Footnote 
31] The contract with UnitedHealth contains these features. Taken 
together, these contract provisions created an obligation on the part 
of the department to provide sufficient oversight to ensure that the 
contractor was performing as required. 

Although TRO-West monitored UnitedHealth's progress and had concerns 
about its performance, it did little to resolve them, and could not 
always provide documentation of the communication of these concerns to 
UnitedHealth. In one instance, TRO-West officials told us that they 
were concerned about UnitedHealth's ability to meet call center 
requirements because they were concerned about the staffing numbers 
that UnitedHealth had proposed. Specifically, UnitedHealth was 
required to hire a sufficient number of staff to answer customer 
service calls from beneficiaries and providers within prescribed time 
frames. However, the determination of how many staff to hire was 
ultimately UnitedHealth's decision.[Footnote 32] UnitedHealth 
officials told us that in order to determine how many call center 
staff were needed, they estimated the efficiency of their call center 
staff and applied that to an estimated volume of customer service 
calls, which was based on TriWest's daily average plus an additional 
50 percent to factor in a heavier call volume for the start of health 
care delivery. UnitedHealth officials told us that they were unable to 
obtain staffing numbers from TriWest because the numbers were 
proprietary. However, TRO-West officials told us that based on their 
comparisons of UnitedHealth's call center staffing numbers to those of 
TriWest's, they expressed concerns to UnitedHealth about the adequacy 
of its call center staffing estimate. TRO-West officials said that 
UnitedHealth officials replied that their staffing numbers should be 
sufficient, but if needed, they would be able to transfer staff from 
other departments to provide coverage. However, UnitedHealth officials 
did not recall these discussions in our interviews, and TRO-West 
officials could not provide documentation that they took place. TRO-
West's approach was inconsistent with federal standards for internal 
control, which state that management should have a strategy for 
documenting significant events, which would include TMA's 
communication of concerns about the contractor's performance in 
meeting requirements.[Footnote 33] 

When UnitedHealth missed deadlines for transition requirements, TMA 
either did not take, or was slow to take, formal action, and it did 
not sufficiently document all of its informal actions. For example, 
TRO-West officials told us that on several occasions, starting in 
November 2012, they expressed concerns to UnitedHealth that it was not 
progressing sufficiently with meeting two of the requirements related 
to the development of its provider network. Specifically, UnitedHealth 
was required to have both its network of civilian providers (including 
primary care managers and other provider specialties) signed to 
contracts and the providers' relevant information entered into its 
databases 60 days prior to health care delivery.[Footnote 34] Although 
UnitedHealth provided updates in its weekly transition reports on its 
progress in meeting these requirements, including assurances to TRO-
West officials that they would be met, it did not ultimately meet the 
requirements on time. TRO-West officials told us that after the 
requirements were not met, they held informal discussions with 
UnitedHealth officials during weekly transition meetings to determine 
how UnitedHealth would come into compliance. Although TRO-West 
officials could not provide sufficient documentation of these 
discussions, they were able to provide examples of emails sent to 
UnitedHealth about these concerns. According to the Contracting 
Officer, he did not take formal action at that time in order to allow 
TMA-Aurora and TRO-West officials to exercise other informal 
mechanisms for resolving the issue. UnitedHealth did not complete this 
requirement until June 2013--more than 4 months late. 

Although UnitedHealth was not always timely in meeting transition 
requirements, it did not face any financial penalties as a result. 
According to its contract, UnitedHealth was eligible for a transition-
in payment of $10 million to be paid in two increments, with the last 
payment following completion of all transition requirements.[Footnote 
35] The Contracting Officer told us that because the contract did not 
specify that the transition-in payment was subject to timely 
completion of the transition requirements, TMA's interpretation was 
that it had to award the payment without regard to whether the 
contractor met the transition's timeliness requirements. However, our 
previous work has found that performance-based contracts should 
include incentives--either positive or negative, or a combination of 
both--to encourage better quality performance.[Footnote 36] In this 
instance, TMA determined in December 2013 that UnitedHealth completed 
all of its transition requirements--about 8 months after health care 
delivery began. TMA subsequently awarded UnitedHealth the remainder of 
its transition-in payment in February 2014. 

Inadequate Guidance and Insufficient Oversight during the Contractor 
Transition Contributed to Health Care Delivery Problems, but 
Ultimately Led to Greater Oversight: 

TMA's inadequate guidance and insufficient oversight of UnitedHealth's 
transition contributed to problems at the start of health care 
delivery, which in turn led to the disruption in the continuity of 
care for some beneficiaries and potentially cost the department 
millions of dollars, according to Army officials. Specifically, 
inadequate guidance and insufficient oversight contributed to 
UnitedHealth's health care delivery problems, including those related 
to its provider database, referral processing, and call center 
responsiveness. As a result of these difficulties, TMA-Aurora and TRO-
West officials increased their oversight of UnitedHealth, took steps 
to hold the contractor accountable for the problems that had 
transpired, and updated the guidance (TMA Transition User Guide). 

Provider database: The different versions of transition guidance and 
insufficient oversight contributed to information gaps for 
UnitedHealth, which UnitedHealth officials said was an important 
factor that led to its difficulties in creating its provider database. 
UnitedHealth did not have information for all its civilian network 
providers entered into its provider database until June 2013--more 
than 4 months after the contract deadline of January 30, 2013. 
Referrals and claims related to these providers had to be put on hold 
until UnitedHealth officials could complete the data entry process. 
Additionally, at the start of health care delivery, UnitedHealth 
officials told us that they had not entered information on primary 
care managers for 113,000 TRICARE Prime beneficiaries,[Footnote 37] 
and some of these beneficiaries had to be temporarily reassigned to a 
new primary care manager.[Footnote 38] When UnitedHealth had completed 
entering information about its primary care managers 3 weeks after the 
start of health care delivery, the beneficiaries who had been 
reassigned were moved back to their original primary care manager if 
they requested it. 

Referral processing: The absence of transition guidance on developing 
a referral management interface contributed, in part, to 
UnitedHealth's difficulties in establishing an automated referral 
management system, which inconvenienced beneficiaries and was 
potentially costly for the government. Because DOD had not decided 
which referral management system would be used in the region, 
UnitedHealth officials told us that they could only receive faxed 
referrals from MTFs during the first few months of health care 
delivery. This situation contributed to inordinate processing delays 
along with a higher-than-expected number of referrals and staff who 
were not as efficient as anticipated. Specifically, UnitedHealth 
expected its staff to process about 7,000 referrals a day. Instead, 
during the first few days of health care delivery, they processed 
about 2,500 per day. On May 2, 2013, the director of TMA issued a 
temporary waiver of the requirement for TRICARE Prime beneficiaries to 
obtain referral authorizations for specialty care. This waiver was 
initially effective for the first 6 weeks of health care delivery 
starting on April 1, 2013, and was subsequently extended through July 
2, 2013. Officials from the Army estimated that these waivers could 
cost the department over a million dollars in lost resources because 
they impeded the right of first refusal for the MTFs, which 
potentially resulted in more beneficiaries' obtaining specialty care 
from civilian providers, costing the government additional money. 
During this time, UnitedHealth hired more staff and increased its 
efficiency at processing referrals, and in July 2013--about 4 months 
after the start of health care delivery--it was able to meet and 
exceed the contract requirement of processing 90 percent of referrals 
within 2 workdays. While UnitedHealth has not yet met its requirement 
to process 100 percent of all referrals within 3 workdays, it is 
currently processing 99 percent of referrals within this time frame. 
[Footnote 39] In addition, UnitedHealth officials told us that they 
currently use both automated and fax referral systems, depending on 
the MTF. 

Call centers: TMA's oversight of UnitedHealth's plans for staffing its 
call centers was insufficient, which contributed to a delayed 
resolution of UnitedHealth's performance problems, which lasted until 
the third month of health care delivery. Specifically, UnitedHealth 
experienced difficulties in answering telephone calls within the 
required time frame on the first day of health care delivery. This was 
based, in part, on insufficient numbers of call center staff and staff 
who were not as efficient as UnitedHealth had anticipated, along with 
a higher-than-predicted call volume. For the month of April 2013, 
UnitedHealth officials expected about 23,500 calls each day, and they 
hired the number of staff they thought they would need to answer 90 
percent of these calls (21,150) within 30 seconds, as required by the 
contract. However, during the first month of health care delivery, the 
daily number of calls received was about 24,000, and the number of 
calls answered within the required time frame ranged from a low of 
about 2,200 calls (9 percent) to a high of almost 16,000 calls (67 
percent). To meet telephone response time requirements, UnitedHealth 
told us that they used staff from its other departments, subcontracted 
for additional staff, and hired more staff to alleviate the call 
center problems.[Footnote 40] Once UnitedHealth hired and trained more 
call center staff, the staff from other departments and its 
subcontractor were returned to their previous responsibilities. 
UnitedHealth began meeting its telephone response time requirements in 
June 2013. 

After the problems related to network providers, referral processing, 
and call centers transpired, TRO-West increased its oversight by 
sending UnitedHealth formal correspondence related to its failure to 
meet specific contractual requirements. After consulting with TRO-West 
officials, the Contracting Officer issued the first of three related 
corrective action requests--a written request for action describing 
missed contractual requirements--to UnitedHealth on April 5, 2013, for 
the referral delays and other issues. This corrective action request 
cited problems with referral processing and the entry of information 
about primary care managers into UnitedHealth's provider database. 
Further, the request asked that UnitedHealth submit a corrective 
action plan--a plan demonstrating how the requirements would be met--
as soon as possible. While the effect of these issues on the call 
centers was mentioned, the call center response times were not 
addressed in this request. However, the Contracting Officer determined 
that UnitedHealth's initial response was vague and inadequate. As a 
result, he repeated the corrective action request process two more 
times in April 2013. Finally, on May 1, 2013, UnitedHealth submitted a 
corrective action plan that was deemed adequate by the Contracting 
Officer. 

Additionally, based on UnitedHealth's performance during the first 6 
months of health care delivery, TMA-Aurora and TRO-West officials 
determined that UnitedHealth would be financially penalized through 
performance guarantees and award fees in accordance with contract 
requirements. 

Performance guarantees: The West region managed care support contract 
includes performance guarantees, which are financial penalties based 
on the contractor's performance in meeting certain requirements. 
Specifically, if a contractor does not meet requirements in six areas 
related to customer service and claims processing, such as answering 
90 percent of phone calls from beneficiaries within 30 seconds and 
processing 100 percent of claims within 90 days, they are financially 
penalized. However, these six areas do not include all of the contract 
requirements that TMA identified for the seven key focus areas, such 
as referrals and provider network adequacy. Therefore, these 
guarantees do not reflect the contractor's performance in those areas. 
TMA calculates whether the contractor meets these guarantees on a 
quarterly basis. If the contractor does not meet the requirement, TMA-
Aurora uses a contractually defined formula to determine how much 
money it will be penalized. For the first and second quarter, TMA-
Aurora officials determined that UnitedHealth would be penalized about 
$134,000. A majority of this penalty resulted from its failure to 
answer 90 percent of all customer service calls within the required 30 
seconds.[Footnote 41] 

Award fee: The West region managed care support contract also includes 
financial incentives through an award fee, which is calculated twice a 
year and is based on the contractor's provision of exceptional service 
that is above and beyond contractual requirements. The determination 
of the award fee is based on a combination of the results of 
satisfaction surveys conducted of MTFs, beneficiaries, and providers 
on the contractor's performance (50 percent of the award fee) and an 
evaluation of the performance (the other 50 percent of the award fee). 
[Footnote 42] The survey portion of the award fee requires that a 
contractor must receive a composite score of 4.5 or higher on a scale 
of 6 to receive any portion of the payment. UnitedHealth received a 
composite score of 4 for the first 6 months of health care delivery. 
For the portion of the award fee based on an evaluation of 
UnitedHealth's performance, a panel of TMA officials, including both 
TMA-Aurora and TRO-West officials, determined that there were no 
occurrences where UnitedHealth's performance exceeded contractual 
requirements. Consequently, the panel recommended in December 2013 
that UnitedHealth should not receive any portion of the over $7 
million potential award fee for the first 6 months of health care 
delivery.[Footnote 43] 

In an effort to prevent similar transition difficulties in the future, 
TMA-Aurora officials updated the TMA Transition User Guide in May 2013 
with several of the lessons learned from the West region transition, 
including ensuring that the contractor has pertinent information about 
all primary care managers entered into its provider database prior to 
the start of health care delivery and testing the contractor's 
referral interface prior to that date. However, while these updates 
are helpful, this guide remains limited because it is not sufficiently 
specific, and some of these changes would likely need to be formally 
incorporated into the managed care support contracts. 

Conclusions: 

The transition of managed care support contractors in the West region 
did not go smoothly. Many problems arose that negatively affected 
TRICARE beneficiaries and potentially resulted in additional costs for 
DOD. UnitedHealth was the first new managed care support contractor 
since the TRICARE program began, and its transition highlighted 
numerous deficiencies in TMA's guidance and oversight. In particular, 
insufficient guidance on transition oversight contributed to a 
complacent approach by TRO-West officials, who did little to hold the 
contractor accountable during the transition, aside from holding 
informal conversations that were not always sufficiently documented. 
While TRO-West officials also cited the performance-based contract as 
a basis for their approach, this type of contract does not diminish 
their responsibility to provide an oversight structure to manage the 
contractor's performance in meeting requirements. Furthermore, TMA 
failed to ensure that the incoming and outgoing contractors used the 
same version of transition guidance, resulting in information gaps 
that were left largely to the contractors to resolve, contributing to 
UnitedHealth's delay in meeting transition requirements related to its 
provider network. And, while TMA did consider the possibility of 
extending the transition period, TRO-West officials cited a lack of 
sufficient information to make an informed decision at the time the 
decision was being considered. Moreover, the transition guidance for 
UnitedHealth also lacked sufficient detail for some requirements, 
including the development of a critical interface for managing 
specialty care referrals, which was not pretested to ensure that it 
was fully operational prior to health care delivery, unlike pretesting 
that was done for other system interfaces. 

The confluence of these factors led to a particularly problematic 
start for health care delivery in TRICARE's West region, as evidenced 
by events such as call center failures and inordinate delays in 
processing specialty care referral authorizations. The latter problem 
necessitated that TMA waive its authorization requirements for 3 
months--a costly workaround for DOD. Despite these difficulties, 
approximately 10 months after the start of health care delivery, TMA 
paid UnitedHealth the remainder of its $10 million transition-in 
payment after UnitedHealth completed its transition requirements. 
Eventually, TMA did begin taking steps to hold the contractor 
accountable for the problems that surfaced, including the use of 
corrective action requests and financial penalties. In an effort to 
prevent similar problems in future transitions, TMA also modified the 
guidance provided in the TMA Transition User Guide. However, the 
effectiveness of this modification is unclear because this guidance is 
not sufficiently specific and would likely require contractual 
changes. Without adequate guidance, DHA--which assumed oversight 
responsibility for TMA in 2013--cannot provide reasonable assurance 
that its efforts to oversee future managed care support contract 
transitions will be effective in ensuring that contractors are 
prepared for health care delivery, including meeting all contract 
requirements and appropriately serving their TRICARE beneficiaries. 

Recommendations for Executive Action: 

To ensure that DHA provides appropriate levels of oversight and 
accountability to future managed care support contractor transitions, 
we recommend that the Secretary of Defense require the Director of DHA 
to review existing transition guidance, and revise as needed, to 
include sufficient specificity about: 

1. A requirement that all significant oversight communication between 
the TRO and the contractor be sufficiently documented, particularly 
communication regarding concerns about the contractor's ability to 
meet transition requirements and deadlines; 

2. A requirement that the TROs and Contracting Officers have 
sufficient data and information from the contractor at a defined point 
in time to make an informed determination about whether to extend the 
transition period; 

3. A process for identifying and monitoring all key focus areas, 
including the pretesting of key functions and interfaces prior to the 
start of health care delivery; and: 

4. A course of action for holding the contractor accountable for 
problems that transpire in meeting transition requirements or 
deadlines. 

In addition, to ensure that future managed care support contractors 
have the information they need to successfully complete transition 
requirements and are fully prepared for health care delivery, we 
recommend that the Secretary of Defense require the Director of DHA to: 

5. Ensure that both the incoming and the outgoing contractors are 
using consistent versions of transition guidance; 

6. Revise the contractors' transition guidance to contain clear 
definitions and an appropriate level of specificity, particularly for 
key focus areas identified by DHA, such as referral management; and: 

7. Conduct a review of whether the transition-in payment should be 
designed to incentivize timely completion of transition requirements 
and deadlines. 

Agency Comments: 

We provided a copy of this report to DOD for review and comment. DOD
stated that we made two specific assertions that it wanted to clarify:
(1) that TMA guidance and oversight during the transition period
contributed to issues with health care delivery; and (2) that this is 
the first transition to a nonincumbent contractor since the start of 
the TRICARE program. In addition, with regard to the recommendations, 
DOD either concurred or partially concurred with all of our 
recommendations. DOD’s written comments are reprinted in appendix II.

We disagree with DOD’s statement that our report mischaracterized these
two issues. With regard to our statement that TMA guidance and
oversight during the transition period contributed to issues with health
care delivery, DOD states that the report misinterprets two distinctly
separate transition requirements: establishing an adequate provider
network and transferring provider certification files for claims 
processing. While we understand that the establishment of an adequate 
network is the responsibility of the incoming contractor, our report 
notes that UnitedHealth expected to use the provider certification 
files from the outgoing contractor to help establish its own provider 
network. However, differences in specificity between the two versions 
of transition guidance for the incoming and outgoing contractors 
contributed to the delay of the transfer of these files. Furthermore, 
UnitedHealth spent several months working with the provider certification 
data they eventually received in order to make the data usable for its 
purposes-—all of which contributed to UnitedHealth’s delay in 
establishing an adequate provider network within required time frames. 
Ultimately, UnitedHealth did not meet its requirement to complete 
network development and load all of the provider files 60 days prior 
to health care delivery. TMA was slow to take action—-waiting more 
than 2 months to send a corrective action request related to this 
missed requirement. Because UnitedHealth did not have information 
for all its civilian network providers entered into its provider 
database at the start of health care delivery, referrals and claims 
related to these providers had to be put on hold until UnitedHealth 
officials could complete the data entry process, potentially 
impacting beneficiaries’ access to health care. Additionally, at the 
start of health care  delivery, UnitedHealth officials told us that 
they had not entered  information on primary care managers for 
113,000 TRICARE Prime beneficiaries and that some of these 
beneficiaries had to be temporarily reassigned to a new primary care 
manager until the data entry process was complete. Based on this 
evidence, we disagree with DOD's statement that issues arising from 
the transfer of the provider certification files would not impact 
access to health care delivery. We also disagree with DOD's statement 
that our finding to the contrary is an assertion rather than an 
objective assessment of the facts. 

DOD also wanted to clarify our statement that the transition to the West 
region's contractor was the first transition to a nonincumbent contractor 
since the start of the TRICARE program. DOD noted that TMA has 
successfully transitioned a nonincumbent contractor for the delivery of 
health care services on numerous occasions. We believe that DOD 
misinterpreted our statement, because for the purposes of our report, 
we use the term "contractor" to refer to a managed care support 
contractor. Aside from citing MetLife Federal Dental Plan as an example, 
DOD listed three other contractors that previously participated in the 
first generation of TRICARE managed care support contracts. However, 
none of them participated in a TRICARE managed care support contract 
transition as a nonincumbent. [Footnote 44] Therefore, we believe that 
our statement that UnitedHealth's transition in the West region 
represented the first transition to a nonincumbent managed care support 
contractor since the TRICARE program began is accurate. 

In addition, DOD made the point that our report did not recognize 
numerous occasions when TMA representatives conducted onsite readiness 
reviews and pretesting activities and that it was important to note 
the government exacted numerous financial and other sanctions on 
UnitedHealth because of its inability to meet contract requirements. 
Our report acknowledges that TMA conducted readiness reviews and some 
pretesting activities. However, as stated in our report, TMA did not 
pretest UnitedHealth's referral process, which TRO-West officials told 
us would have been beneficial for determining whether the referral 
process would work prior to health care delivery. Furthermore, we 
believe it is important to stress that TMA did not exact any financial 
or other sanctions during transition. Specifically, as our report 
discusses, UnitedHealth was not always timely in meeting the 
transition requirements, yet it was not financially penalized. TMA did 
not issue any corrective action or financially related sanctions until 
after health care delivery. To date, TMA has provided evidence of 
two financially related sanctions--performance guarantees and award 
fees--which were discussed in our report. However, these financially 
related sanctions were for missed requirements that took place after 
health care delivery began, and were not imposed as a result of the 
missed transition requirements. 

DOD concurred or partially concurred with each of our recommendations. 
However, DOD disagreed with some of the related findings upon which 
these recommendations were based. Additionally, despite its 
concurrence, DOD did not always provide details on how it plans to 
implement our recommendations. DOD's specific responses to each of our 
recommendations are as follows: 

* DOD partially concurred with our first recommendation to require 
that all significant oversight communication between the TRO and the 
contractor be sufficiently documented. While DOD agreed with the 
substance of this recommendation, it disagreed with our finding that it 
could not provide us with sufficient documentation of the 
communication of its concerns to UnitedHealth about its ability to 
meet transition and performance requirements and deadlines. DOD noted 
that it provided thousands of pages of comprehensive documentation of 
both formal and informal correspondence with UnitedHealth--essentially 
stating that it is already meeting this recommendation and implying 
that no additional action is necessary. While we agree that DOD was 
able to provide documentation of its oversight, not all of it 
reflected its communication of specific concerns with UnitedHealth. 
For example, DOD could not provide documentation regarding its 
concerns about the call center staffing that UnitedHealth had 
proposed--discussions that UnitedHealth officials did not recall 
during our interviews. Further, the documentation of DOD's 
communications with UnitedHealth was largely dependent upon 
handwritten notes, which were difficult to understand without 
extensive explanation by DOD officials. We therefore continue to 
believe that ourrecommendation remains valid. 

* DOD concurred with our second recommendation to require that the TRO 
and Contracting Officers have sufficient data and information to make 
an informed determination about whether to extend the transition 
period. Although we were not informed of this during our work, DOD's 
comments alluded that it was already undertaking this activity prior 
to our review. DOD's comments indicate that it has already undertaken 
steps to implement this action, but did not provide any timeframes 
for when this activity would be complete. 

* DOD concurred with our third recommendation to require a process for 
the identification and monitoring of all key focus areas, including 
the pretesting of key functions. DOD noted in its comments that prior 
to our review, DHA began redefining contract requirements for 
transition and oversight. DOD added that this effort would include 
revised transition requirements for pretesting. In addition, DOD 
stated that an independent contractor will be used to assess key 
systems, interfaces, and performance. 

* DOD partially concurred with our fourth recommendation to review 
existing transition guidance and revise as needed to include 
sufficient specificity and accountability for meeting transition 
requirements or deadlines. DOD noted that during its review of 
existing transition guidance, it will consider whether specific 
guidance for the Contracting Officer is needed. Although DOD stated 
that contract administration matters require a certain degree of 
discretion and business judgment, we found that the Contracting 
Officer was inconsistent in using his authority to take formal action 
against UnitedHealth when it missed transition requirements. We 
therefore we believe that implementing this recommendation is critical 
to ensure that future transitions--particularly those of nonincumbent 
contractors--proceed without incident. 

* DOD concurred with our fifth recommendation to ensure that both the 
incoming and the outgoing contractors are using consistent versions of 
transition guidance. However, DOD also noted in its comments that the 
progression from the 2002 manuals to the 2008 manuals did not create a 
wholesale change between the two versions and that the use of the two 
versions was not a contributory factor in the difficulties that 
transpired during the transition. While we agree that the changes in 
the manuals were not necessarily wholesale, there was a difference in 
the level of specificity, which UnitedHealth said contributed to 
problems with its transition. Specifically, the 2008 version noted 
that the outgoing contractor was required to provide the incoming 
contractor with copies of a provider certification file no later than 
30 days after contract award, to be updated on a monthly basis until 
the start of health care delivery. However, the 2002 version contained 
only a reference to the provider certification file, and did not 
define its contents, link it to other provider files specifically 
mentioned, or stipulate a time frame for producing it. Further, the 
2002 version stated more generally that the outgoing contractor was 
required to provide full cooperation and support to the incoming 
contractor. Therefore, we continue to believe that the differences in 
the two versions of the manuals created an information gap, which 
UnitedHealth officials identified as an important factor that delayed 
development of its civilian provider network, and that action to 
respond to our recommendation is needed. 

* DOD concurred with our sixth recommendation that the contractors' 
transition guidance should be revised to contain clear definitions and 
an appropriate level of specificity, particularly for key focus areas 
identified. DOD stated that the key focus areas with the associated 
risk for each area should be clearly identified with the appropriate 
level of specificity by DHA, while still ensuring that the contract 
language is not overly prescriptive to allow contractors to use best 
business practices. While we understand DOD's concern about not being 
overly prescriptive, we believe our findings illustrate why having 
clear definitions and sufficient specificity is vital to ensuring 
that future transitions are successful, and why action is needed. 

* DOD also concurred with our seventh recommendation to conduct a 
review of whether the transition-in payment should be designed to 
incentivize timely completion of transition requirements and 
deadlines. In addition, DOD stated that the transition requirements 
should have both positive and negative incentives for the contractor 
to achieve satisfactory progress. 

We are sending copies of this report to the Secretary of Defense and 
appropriate congressional committees. The report is also available at 
no charge on GAO's website at [hyperlink, http://www.gao.gov]. 

If you or your staff members have any questions about this report, 
please contact me at (202) 512-7114 or draperd@gao.gov. Contact points 
for our Offices of Congressional Relations and Public Affairs may be 
found on the last page of this report. GAO staff members who made key 
contributions to this report are listed in appendix III. 

Signed by: 

Debra A. Draper: 
Director, Health Care: 

[End of section] 

Appendix I: UnitedHealth's Education and Outreach Efforts during 
Transition and the First 6 Months of Health Care Delivery: 

UnitedHealth began its transition to become the West region's managed 
care support contractor on July 3, 2012, with health care delivery 
starting on April 1, 2013. As part of its contract, UnitedHealth is 
required to conduct outreach and hold briefings for beneficiaries at 
various military sites throughout its region and develop a provider 
education program that is designed to enhance providers' awareness of 
TRICARE. In addition, all materials used to educate beneficiaries and 
providers on TRICARE must be approved by the Department of Defense. 

In February 2013, UnitedHealth began providing briefings to 
beneficiaries about various aspects of TRICARE, including health 
coverage information related to retirement, dependents, and 
deployment. (See table 2 for briefings conducted through the first 6 
months of health care delivery.) In addition, UnitedHealth distributed 
welcome packages to all beneficiary households in the region, which 
included a welcome letter and a brochure produced by the TRICARE 
Management Activity. 

Table 2: Number of Beneficiary Briefings and Attendees from February 
2013 through September 2013: 

Month: February[B]; 
Number of briefings[A]: 89; 
Number of attendees: 5,676. 

Month: March; 
Number of briefings[A]: 344; 
Number of attendees: 20,207. 

Month: April; 
Number of briefings[A]: 505; 
Number of attendees: 23,255. 

Month: May; 
Number of briefings[A]: 520; 
Number of attendees: 22,895. 

Month: June; 
Number of briefings[A]: 508; 
Number of attendees: 23,693. 

Month: July; 
Number of briefings[A]: 490; 
Number of attendees: 22,919. 

Month: August; 
Number of briefings[A]: 548; 
Number of attendees: 44,235. 

Month: September; 
Number of briefings[A]: 547; 
Number of attendees: 32,598. 

Month: Total[C]; 
Number of briefings[A]: 3,551; 
Number of attendees: 195,478. 

Source: GAO analysis of documentation from UnitedHealth. GAO-14-505. 

[A] The information at these briefings varied, including information 
about retirement, family members' use of TRICARE, and deployment. 

[B] According to UnitedHealth officials, they began briefing 
beneficiaries on February 16, 2013, ahead of the scheduled April 1, 
2013, departure of the outgoing contractor. 

[C] This reflects the total number of beneficiary briefings and 
attendees from February 19, 2013, through September 30, 2013, the 
first 6 months of health care delivery. 

[End of table] 

The type of education that UnitedHealth offered to providers depended 
on whether the provider was new to UnitedHealth. Providers new to 
UnitedHealth received a general orientation about both TRICARE and 
UnitedHealth. Existing UnitedHealth providers received an orientation 
that included similar materials, but was premised on the providers' 
familiarity with UnitedHealth and its network programs and tools. In 
addition, UnitedHealth officials began conducting briefings to educate 
providers about TRICARE in February 2013. (See table 3 for briefings 
conducted through the first 6 months of health care delivery.) 

Table 3: Number of Provider Briefings and Attendees from February 2013 
through September 2013: 

Month: February[B]; 
Number of briefings[A]: 11; 
Number of attendees: 202. 

Month: March; 
Number of briefings[A]: 90; 
Number of attendees: 7,654. 

Month: April; 
Number of briefings[A]: 81; 
Number of attendees: 8,228. 

Month: May; 
Number of briefings[A]: 55; 
Number of attendees: 4,470. 

Month: June; 
Number of briefings[A]: 65; 
Number of attendees: 2,490. 

Month: July; 
Number of briefings[A]: 79; 
Number of attendees: 6,274. 

Month: August; 
Number of briefings[A]: 78; 
Number of attendees: 879. 

Month: September; 
Number of briefings[A]: 96; 
Number of attendees: 4,855. 

Month: Total[C]; 
Number of briefings[A]: 555; 
Number of attendees: 35,052. 

Source: GAO analysis of documentation from UnitedHealth. GAO-14-505. 

[A] These briefings were held as webinars or town hall meetings with 
providers. 

[B] According to UnitedHealth officials, the provider briefings began 
on February 1, 2013, which is when the provider materials from the 
West region's TRICARE Regional Office became available. 

[C] This reflects the total number of provider briefings and attendees 
from February 1, 2013, through September 30, 2013, the first 6 months 
of health care delivery. 

[End of table] 

[End of section] 

Appendix II: Comments from the Department of Defense: 

The Assistant Secretary of Defense: 
Health Affairs: 
1200 Defense Pentagon: 
Washington, DC 20301-1200: 

May 28, 2014: 

Ms. Debra Draper: 
Director, Defense Healthcare: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Ms. Draper: 

This is the Department of Defense response to the U.S. Government 
Accountability Office (GAO) Draft Report GAO-14-505, "Defense Health 
Care Agency: More Specific Guidance Needed for TRICARE's Managed Care 
Support Contractor Transitions," dated April 30, 2014 (GAO Code 
291157). 

We would like to thank the GAO for providing the opportunity to 
address the recent report on TRICARE's West Region contract transition 
and the conclusions presented. The review was conducted at the request 
of the Honorable Patty Murray and the Honorable Mark Begich, United 
States Senators, to review issues related to transition activities by
UnitedHealthcare Military and Veterans. GAO defined this request to 
capture a review of how the TRICARE Management Activity (TMA) provided 
guidance and oversight of the transition in preparation for health 
care delivery; and how, if at all, TMA's guidance and oversight during 
the transition contributed to issues with health care delivery. While 
we appreciate the GAO's recommendations, the agency would like to 
clarify the following two assertions stated in the report: a) TMA 
guidance and oversight during the transition period contributed to 
issues with health care delivery; and, b) this is the first transition 
to a non-incumbent contractor since the start of the TRICARE program. 

GAO contends inadequate guidance and insufficient oversight from TMA 
contributed to UnitedHealthcare Military and Veterans' difficulties 
meeting certain requirements, including creating its provider database 
which contributed to issues with healthcare delivery. The report 
misinterprets two distinctly separate transition requirements: 
establishing an adequate provider network and transferring provider 
certification files for claims processing. It is the sole 
responsibility of the incoming contractor to create an adequate 
provider network. UnitedHealthcare Military and Veterans' lack of 
success in developing an adequate network caused healthcare delivery 
issues. Similarly, transfer of provider certification files from the 
outgoing to the incoming contractor is essential for claims 
processing. Issues arising from such transfers might cause provider 
dis-satisfaction due to delay in payment of claims but would not
impact access to healthcare delivery. The outgoing contractor 
attempted to accomplish the transfer of these provider certification 
files but UnitedHealthcare Military and Veterans was not prepared to 
receive them. 

TMA has successfully transitioned a non-incumbent contractor for the 
delivery of healthcare services on numerous occasions. Examples of non-
incumbent contractors are Sierra Military Health System, HealthNet 
Federal Services, Anthem Alliance for Health, Inc., and MetLife 
Federal Dental Plan. Thus, the West Region transition was not the 
first of its kind since the start of the TRICARE program. 

I would like to mention that the report did not fully recognize 
numerous occasions when TMA government representatives conducted 
onsite readiness reviews and pretesting activities. It is important to 
note the government exacted numerous financial and other sanctions on 
UnitedHealthcare Military and Veterans because of their inability to 
execute contract requirements. Because of government dissatisfaction 
with their performance, UnitcdHealthcare Military and Veterans 
implemented corrected action plans and removed senior leadership. 
Subsequent to these interventions, the government began to see an 
improvement in UnitedHealthcare Military and Veterans performance. 

In conclusion, the report provides recommendations the Defense Health 
Agency will utilize to improve the healthcare transition process. 
DoD's response to this GAO's specific recommendations are enclosed. 
Thank you for the opportunity to respond. 

Sincerely, 

Signed by: 

Jonathan Woodson, M.D. 

Enclosures: 
1) Summary of Recommendations and DoD responses. 

GAO Draft Report: 
Dated April 30, 2014: 
GAO-14-505 (GAO Code 291157): 

"Defense Health Care: More Specific Guidance Needed for TRICARE's 
Managed Care Support Contractor Transitions" 

Department Of Defense Comments To The GAO Recommendation: 

Recommendation 1: The U.S. Government Accountability Office (GAO) 
recommends that the Secretary of Defense require the Director of 
Defense Health Agency (DHA) to review existing transition guidance, 
and revise as needed, to include sufficient specificity about a 
requirement that all significant oversight communication between the 
TRICARE Regional Office (TRO) and the contactor be sufficiently 
documented particularly communication regarding concerns about the 
contractors' ability to meet transition requirements and deadlines. 

DoD Response: 

Partially Concur. Agree that all significant oversight communication 
between the government and the Contractor should be sufficiently 
documented, in particular, communication regarding concerns about the 
contractor's ability to meet transition and performance requirements 
and deadlines. We disagree that sufficient documentation was not 
provided. During the West Region TRICARE Third Generation Transition 
review, Defense Health Agency provided GAO thousands of pages of 
comprehensive documentation by the government on formal and informal 
correspondence, to include meeting notes, emails, and voluminous 
transition oversight committee briefings slides that detailed the 
interaction between the government and the contractor. This 
documentation was provided by approximately 50 government personnel to 
include subject matter experts through senior leadership. We disagree 
with GAO determination that the documentation provided was 
insufficient evidence of the agency's oversight actions. 

Recommendation 2: The GAO recommends that the Secretary of Defense 
require the Director of DHA to review existing transition guidance, 
and revise as needed, to include sufficient specificity about a 
requirement that the TROs and Contracting Officers have sufficient 
data and information from the contractor at a defined point in time to 
make an informed determination about whether to extend the transition 
period. 

DoD Response: 

Concur w/Comment. We agree that transition guidance should include a 
methodology for ensuring data and information is available at 
milestone decision points to make an informed determination regarding 
the option to extend a transition period. We also agree that the 
TRICARE Regional Offices and Contracting Officers need sufficient data 
and information at a defined point in time to make an informed 
determination about whether to extend the contract period, and all 
other stakeholders need this same information (i.e., availability must 
also be made to program managers and leadership responsible for 
decision making). Prior to the GAO's review, DIIA began redefining how 
requirements are written. This re-structuring of the transition and 
oversight is being made at the consultation and recommendation of 
Defense Acquisition University. Appointment of a Transition and 
Contracting Oversight Workgroup has been charted to define transition 
and oversight requirements. 

Recommendation 3: The GAO recommends that the Secretary of Defense 
require the Director of DHA to review existing transition guidance, 
and revise as needed, to include sufficient specificity about a 
process for identifying and monitoring all key focus areas, including 
the pre-testing of key functions and interfaces prior to the start of 
the health care delivery. 

DoD Response: 

Concur w/Comment. Agree that a process for identifying and monitoring 
all key focus areas/requirements should be included in the transition 
guidance, including the pre-testing or benchmarking of key functions 
and interfaces prior to the start of the health care delivery. 
Furthermore, we believe the ability to perform the key focus 
areas/requirements should be evident during the evaluation of the 
contractor's bid. During the acquisition phase, contractor critical 
processes should be assessed for risk and deemed to meet requirements 
based on detailed industry performance in the submission packages. 
Additionally, in the acquisition phase, the government should select 
key critical areas to pre-test. For example, benchmark or pre-testing 
performed under the West Region TRICARE Third Generation transition 
included claims, stress-testing of eligibility checks, systems 
interfaces, enrollment and Primary Care Manager functions. In 
addition, the identification of key dependencies and milestones is a 
foundation of the updated requirements which are being developed. Of 
course, certain factors cannot be recreated in stress and benchmark 
testing (e.g., 40,000 live calls to a call center with inexperienced, 
untrained staff and unprepared systems). Again, prior to the GAO's 
review, the Defense Health Agency began re-defining how requirements 
are written. The revised transition requirements will include 
demonstration, testing, and benchmarking. In addition, the use of an 
Independent Validation and Verification contractor will be used to 
assess key systems and systems interfaces and performance. 

Recommendation 4: The GAO recommends that the Secretary of Defense 
require the Director of DHA to review existing transition guidance, 
and revise as needed, to include sufficient specificity about a course 
of action for holding the contractor accountable for problems that 
transpire in meeting transition requirements or deadlines. 

DoD Response: 

Partially concur. While existing transition guidance will be reviewed 
for adequacy, the agency will consider whether specific instruction is 
needed to direct contracting officers when to take corrective action.
The report states that TRICARE Management Activity transition guidance 
"notes that the Contracting Officer has the authority to issue a 
corrective action request in response to the contractor's 
nonperformance, but does not provide sufficient detail on what level of 
nonconformance would require such response, nor how long the 
Contracting Officer should wait before sending it." Such contract 
administration matters require a certain degree of discretion and 
business judgment with which Contracting Officers are invested, 
trained, and trusted to exercise. Additionally, we are defining the 
key processes and ensuring the contractor can demonstrate the 
readiness of these key functions transition period. In addition, the 
contractor's failure to fully meet defined critical milestones will 
result in significant penalties. The contractors will be held 
accountable for any performance shortfalls on critical functions. 

Recommendation 5: The GAO recommends that the Secretary of Defense 
require the Director of DHA to ensure that both the incoming and 
outgoing contractors are using consistent version of transition 
guidance. 

DoD Response: 

Concur. Defense Health Agency uses four manuals (Operations, Policy, 
Systems, and Reimbursement) to UnitedHealthcare Military & Veterans 
provide specific guidance to purchased care contractors. These manuals 
are incorporated by reference into the respective purchased care 
contracts. The previous Managed Care Support Contractor for the West 
Region (TriWest) used the 2002 version of the manuals. The current 
Managed Care Support Contractor for the West Region (UnitedHealthcare 
Military & Veterans) uses the 2008 version of the manuals. These two 
manuals contain basically the same transition requirements for 
incoming and outgoing transition requirements. These manuals are 
continually updated as appropriate and the updates are then 
incorporated into the various purchased care contracts by 
modification. The 2008 version of the manuals are essentially a 
continuation of the 2002 version of the manuals. The reason for 
implementing the 2008 version was to reestablish a base line for the 
TRICARE Third Generation (T-3) suite of purchased care contracts based 
on the 2002 versions and to also address those requirements that are 
unique to the T-3 suite of contracts. The progression from the 2002 
manuals to the 2008 manuals did not create a wholesale change between 
the two versions of the manuals and the use of the two versions was 
not a contributory factor. 

Recommendation 6: The GAO recommends that the Secretary of Defense 
require the Director of DHA to revise the contractors transition 
guidance to contain clear definitions and an appropriate level of 
specificity, particularly for key focus areas identified by DHA, such 
as referral management. 

DoD Response: 

Concur w/Comment. Agree that the government should clearly identify 
the key focus areas with the associated risk for each area and provide 
the appropriate level of specificity for those key focus areas 
identified by DHA, while at the same time ensuring that the contract 
language is not overly prescriptive to allow contractors to use best 
business practice. In regard to referral management and other areas, 
the emphasis should be on clear definitions and specificity in the 
government referral system and in expectations for interface by the 
contractor. 

Recommendation 7: The GAO recommends that the Secretary of Defense 
require the Director of DHA to conduct a review of whether the 
transition-in payment should be designed to incentivize timely 
completion of transition requirements and deadlines. 

DoD Response: 

Concur w/Comment. Agree that the contract transition requirements 
should be designed to incentivize timely completion of transition 
requirements and deadlines. However, the incentives should encompass 
both positive and negative incentives for the contractor to achieve 
satisfactory progress against pre-established milestones. 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Debra Draper, (202) 512-7114 or draperd@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Bonnie Anderson, Assistant 
Director; Danielle Bernstein; Jacquelyn Hamilton; Jeffrey Mayhew; 
Laurie Pachter; and Bill Woods made key contributions to this report. 

[End of section] 

Footnotes: 

[1] Generally, eligible beneficiaries include active duty personnel 
and their dependents, medically eligible National Guard and Reserve 
servicemembers and their dependents, and retirees and their dependents 
and survivors. Active duty personnel include Reserve component members 
on active duty for at least 30 days. 

[2] DOD awarded one managed care support contract for the TRICARE 
program in each of its three U.S. regions. 

[3] Prior to October 1, 2013, TMA oversaw the TRICARE program. In 
response to increasing pressure on its budgetary resources, DOD 
established the DHA on October 1, 2013, to assume management 
responsibility of numerous functions of its medical health system, 
including the former TMA, which was eliminated on that date. For 
additional information about the establishment of DHA, see GAO, 
Defense Health Care Reform: Additional Implementation Details Would 
Increase Transparency of DOD's Plans and Enhance Accountability, 
[hyperlink, http://www.gao.gov/products/GAO-14-49] (Washington, D.C.: 
Nov. 6, 2013). 

[4] TRICARE's first-and second-generation managed care support 
contracts were awarded in 1996/1997 and 2003, respectively. 

[5] A bid protest is a challenge to the award or proposed award of a 
contract for procurement of goods and services or a challenge to the 
terms of a solicitation for such a contract. An offeror--a competitor 
for a government contract--who was not awarded a contract may 
challenge a federal agency's award or proposed award of a contract 
based on an alleged violation of statute or regulation. Such a 
challenge, known as a "post-award bid protest," may be filed with the 
contracting agency (referred to as an agency-level protest), the U.S. 
Court of Federal Claims, or GAO. GAO's bid protest function--in 
contrast to its audit function--is an adjudicative process that is 
carried out by attorneys in GAO's Procurement Law group, who prepare 
bid protest decisions resolving disputes concerning the awards of 
federal contracts. 

[6] The managed care support contract's health care delivery date in 
the North region was April 1, 2011, and in the South region it was 
April 1, 2012. 

[7] UnitedHealth is a subsidiary of the UnitedHealthcare Group. 
According to its website, the UnitedHealthcare Group is a diversified 
insurance company that has several lines of business, including 
private health insurance. Prior to competing for the third generation 
of managed care support contracts, UnitedHealth had no previous 
experience as a managed care support contractor. 

[8] Beneficiaries who use TRICARE Prime--the managed care option--must 
enroll, and are assigned a primary care manager from either an MTF or 
the civilian provider network. Primary care managers may provide the 
beneficiaries with referrals to specialty care if the MTFs are unable 
to provide that care themselves. 

[9] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[10] TMA's acquisition and contracting staff are based primarily in 
Aurora, Colorado. 

[11] TriWest's contract as the West region's contractor ended on March 
31, 2013. 

[12] For additional information on the third generation of TRICARE's 
managed care support contracts and the associated bid protests, see 
GAO, Defense Health Care: Acquisition Process for TRICARE's Third 
Generation of Managed Care Support Contracts, [hyperlink, 
http://www.gao.gov/products/GAO-14-195] (Washington, D.C.: Mar. 7, 
2014). 

[13] See [hyperlink, http://www.gao.gov/products/GAO-14-195]. 

[14] The transition-in period may vary based on the time necessary to 
conduct the subsequent acquisition and whether incumbents succeed 
themselves. According to 10 U.S.C. § 1095c(b), DOD is generally 
required to allow nonincumbents a 9- to 12-month transition-in period. 
A 10-month transition-in period is considered by the industry to be the 
minimum time necessary for nonincumbents to transition in. 

[15] See TMA, Concept of Operations for TRICARE T-3 Transitions Work 
Group (2008). 

[16] See TMA, TRICARE Acquisition Directive, TAD 42-02, revision 000 
(Falls Church, Va.: Feb. 16, 2012). 

[17] The Contracting Officer's Representative is a TRO employee who is 
located in the TMA-Aurora office along with the Contracting Officer. 

[18] For the West region transition, TRO-West was responsible for the 
day-to-day monitoring. 

[19] The other three manuals relate to TRICARE systems, reimbursement, 
and policies. These manuals, while separate documents, are 
incorporated as part of the contract itself. 

[20] The Transition User Guide was first used for the West region's 
transition, and is expected to be used for other TRICARE contract 
transitions. See TMA, TMA Transition User Guide (July 2, 2012). 

[21] Both the contract and the TRICARE manuals also guide requirements 
after health care delivery begins. 

[22] See TRICARE Operations Manual 6010.56-M (Aurora, Colo.: Feb. 1, 
2008), chapter 1, section 7, paragraph 4.3.11. The provider 
certification files would contain demographic information on the 
outgoing contractor's network of civilian providers, including the 
numbers of providers, their specialties (if any), and addresses. 

[23] See TRICARE Operations Manual 6010.51-M (Aurora, Colo.: Aug. 1, 
2002), chapter 1, section 8, paragraph 4.4.3.1. 

[24] See [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[25] The Defense Enrollment Eligibility Reporting System is a database 
that contains the service-related and demographic data that are used 
to determine eligibility for military benefits, including health care, 
for all active duty servicemembers, military retirees, and the 
dependents and survivors of active duty servicemembers and military 
retirees. 

[26] The Army used one type of referral management system, the Air 
Force used another type of referral management system, and the Navy 
used the same system as the Air Force's, in addition to manual faxing. 

[27] A TRO-West official told us that as of November 2013 each of the 
military departments was using the same referral management system. 

[28] See [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[29] According to generally accepted government auditing standards, 
evidence is not sufficient or appropriate when using the evidence 
carries an unacceptably high risk that it could lead the auditor to 
reach an incorrect or improper conclusion. See GAO, Government 
Auditing Standards, [hyperlink, 
http://www.gao.gov/products/GAO-12-331G] (Washington, D.C.: December 
2011), paragraph 6.71(b). 

[30] See [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[31] For more information on performance-based contracts, see GAO, 
Contract Management: Guidance Needed for Using Performance-Based 
Service Contracting, [hyperlink, 
http://www.gao.gov/products/GAO-02-1049] (Washington, D.C.: Sept. 23, 
2002). 

[32] The contract prescribes several requirements related to the 
answering of customer service calls, including that 90 percent of 
calls should be answered by a customer service representative within 
30 seconds. See TRICARE Operations Manual 6010.56-M, chapter 1, 
section 3. 

[33] See [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[34] See TRICARE Operations Manual 6010.56-M, chapter 1, section 7, 
paragraph 2.2.1. 

[35] The transition-in payment is a negotiated incentive to 
UnitedHealth for completing the transition. While all of the 
contractors are eligible for transition-in payments, the amount of the 
payment is negotiated as part of the contract and varies by region. 

[36] See [hyperlink, http://www.gao.gov/products/GAO-02-1049]. 

[37] Beneficiaries who use TRICARE Prime--a managed care option--must 
enroll and are assigned a primary care manager (generally, a primary 
care physician, internal medicine physician, or general practitioner 
physician), who either provides care or authorizes referrals to 
specialists. 

[38] If beneficiaries had a primary care manager whose information had 
not yet been entered into UnitedHealth's provider database, they were 
only temporarily reassigned to a different primary care manager if 
they called to inquire about this issue. 

[39] See TRICARE Operations Manual 6010.56-M, chapter 1, section 3, 
paragraph 1.2.1. 

[40] UnitedHealth subcontracted with several entities to meet the 
requirements of its contract. One of those entities, Health Net--the 
managed care support contractor in the North region--assisted with the 
hiring of about 100 staff to help alleviate call center problems. 

[41] While all of the contractors are evaluated using the same six 
criteria, the maximum amount the contractor could be penalized is 
negotiated as part of the contract and may vary by region. 
UnitedHealth's penalty was taken in April 2014. 

[42] The evaluation of the contractor's performance is conducted by 
several TMA officials, including the Contracting Officer, and these 
officials subjectively evaluate whether UnitedHealth exceeded contract 
requirements related to several areas, including maintaining an 
efficient referral management. 

[43] On an annual basis, the potential award fee for UnitedHealth is 
about $15 million. While all of the contractors are evaluated using 
the same criteria, the amount of the award fee is negotiated as part 
of the contract and may vary by region. 

[44] The three other examples of contractors were Sierra Military 
Health System, Health Net Federal Services, and Anthem Alliance for 
Health, Inc. Although Sierra Military Health System and Anthem 
Alliance for Health, Inc., were contractors under the first generation 
of TRICARE manage care support contracts, neither participated in the 
transition to the second generation of contracts. In addition, Health 
Net Federal Services--formerly Foundation Federal Health Services--has 
been a contractor since the first generation of TRICARE contracts, and 
as a result, it has not participated in a TRICARE managed care support 
contract as a nonincumbent. 

[End of section] 

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