Defense Health Care:

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

GAO-14-505: Published: Jun 18, 2014. Publicly Released: Jun 18, 2014.

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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.

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 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.

For more information, contact Debra Draper at (202) 512-7114 or draperd@gao.gov.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: As of April 2015, the Defense Health Agency (DHA, formerly the Tricare Management Activity) included a section on performance readiness validation and performance readiness assessment and verification in its TRICARE operations manual for the next generation of TRICARE contracts. This new section includes pre-testing for the seven key focus areas prior to the start of health care delivery, which should help DHA ensure that the contractor is prepared for health care delivery and potentially avoid some of the problems that arose during the TRICARE West Region transition.

    Recommendation: To ensure that DHA provides appropriate levels of oversight and accountability to future managed care support contractor transitions, the Secretary of Defense should 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 pretesting of key functions and interfaces prior to the start of health care delivery.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: In 2015, the Defense Health Agency (formerly the TRICARE Management Activity) revised its Request for Proposal for the next generation of TRICARE contracts to include performance guarantees to financially penalize the contractor for not meeting transition requirements or deadlines for five categories of performance prior to the start of health care delivery in response to GAO's recommendation. These new financial penalties should help DHA hold its contractors accountable for meeting transition requirements and deadlines under the next generation of TRICARE contracts.

    Recommendation: To ensure that DHA provides appropriate levels of oversight and accountability to future managed care support contractor transitions, the Secretary of Defense should 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.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: In April 2015, the Defense Health Agency (DHA, formerly the TRICARE Management Activity) introduced a validation and verification process to ensure that certain administrative and clinical processes are functional prior to the start of health care delivery. As part of this new process, DHA will validate each contractor's assessment of its progress related to seven key focus areas. For example, the TRICARE Operations Manual now provides more specificity on the referral management process, including which information technology systems need to interface and timelines for completing the interface. This additional information should help DHA ensure that incoming contractors are better prepared for the start of health care delivery.

    Recommendation: 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, the Secretary of Defense should 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.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: In 2015, the Defense Health Agency (DHA, formerly the TRICARE Management Activity) added performance guarantees for its next generation of TRICARE contracts for five categories of performance during the transition-in period (i.e. loading of provider information into systems, beneficiary enrollment, call center operations for timeliness and accuracy, referral management, and claims processing). Specifically, the incoming contractor will guarantee that its performance during the transition-in period will meet or exceed standards, and the failure to do so will result in reduced payments to the contractor. These performance guarantees should help DHA ensure that the incoming contractor has appropriate incentives and disincentives to meet requirements in preparation for health care delivery.

    Recommendation: 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, the Secretary of Defense should 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.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: In 2015, the Defense Health Agency (DHA,formerly the TRICARE Management Activity) updated its TRICARE Operations Manual to require the contractor to document all oversight discussions with department officials with formal minutes and submit them in accordance with the contract deliverable requirements list. In addition, a DHA official told GAO that they have developed an online data repository with a transition management documentation system, which will allow subject matter experts to categorize questions and comments and put them into "buckets" for tracking. Both of these changes should facilitate DHA officials' ability to oversee TRICARE contract transitions.

    Recommendation: To ensure that the Defense Health Agency (DHA) provides appropriate levels of oversight and accountability to future managed care support contractor transitions, the Secretary of Defense should require the Director of 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 contractor be sufficiently documented, particularly communication regarding concerns about the contractor's ability to meet transition requirements and deadlines.

    Agency Affected: Department of Defense

  6. Status: Closed - Implemented

    Comments: In 2016, the Defense Health Agency (DHA, formerly the TRICARE Management Activity) updated their transition guidance to include a new verification and validation process and more specific requirements, which will provide more sufficient information. This should facilitate officials' ability to make an informed decision on whether to extend the transition-in period, if necessary. Specifically, the TRICARE Operations Manual now includes performance readiness validation and performance readiness and assessment verification processes to assess a contractor's readiness in seven critical areas, including enrollment, customer service, medical management, referrals and authorizations, and provider networks. Further, this verification process will have specified dates for completion in each critical area and these dates will be agreed upon during one of the early transition meetings. This policy update should provide sufficient data and information when needed so that department officials can make an informed decision about whether to extend a contractor's transition period. Furthermore, DHA has extended the transition-in period from 9 months to 12 months, according to the acquisition strategy for its next generation of TRICARE managed care support contracts.

    Recommendation: To ensure that DHA provides appropriate levels of oversight and accountability to future managed care support contractor transitions, the Secretary of Defense should 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.

    Agency Affected: Department of Defense

  7. Status: Closed - Implemented

    Comments: In 2016, the Defense Health Agency (formerly the TRICARE Management Activity) revised the transition guidance in the 2008 TRICARE Operations Manual to match the transition guidance in TRICARE Operations Manual for the next generation of TRICARE contracts based on GAO's recommendation. Having consistent transition guidance for the incoming and outgoing contractors will help facilitate a seamless transition without delays in meeting critical requirements.

    Recommendation: 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, the Secretary of Defense should require the Director of DHA to ensure that both the incoming and the outgoing contractors are using consistent versions of transition guidance.

    Agency Affected: Department of Defense

 

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