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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Debra Draper
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draperd@gao.gov

 

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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: Open

    Comments: DHA concurred with this recommendation, and in a May 2015 update, DHA stated that it has started re-defining how transition requirements are written. The revised requirements will include demonstration and testing phases, and benchmarking. DHA will also use an Independent Validation and Verification contractor to assess key systems, interfaces, and performance. As of September 2015, we were still awaiting an update from DHA on its progress with these activities. We will update the status of this recommendation when we receive additional information.

    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: Open

    Comments: In its comments on the draft report, DHA partially concurred with this recommendation stating that they believe such contract administration matters require a degree of discretion and business judgement and that they will consider revising existing policy to contain more specific instruction when contracting officers must take corrective action. In a May 2015 update, DHA noted that they were taking steps to ensure the transition contractor demonstrates readiness, and if the contractor does not, then they will be held accountable for any issues. As of September 2015, we were still awaiting an update from DHA on its progress with these activities. We will update the status of this recommendation when we receive additional information.

    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: Open

    Comments: DHA concurred with this recommendation, and in a May 2015 update, DHA stated that it should clearly identify the key focus areas with the associated risk for each area and provide the appropriate level of specificity for those areas, while also ensuring that the contract language is not overly prescriptive to allow contractors to use best business practices. In regards to referral management, they agreed they should emphasize clear definitions, specificity, and expectations for system interface. Based on our recent review of DHA's transition guidance for the next generation of TRICARE managed care support contracts (T-4), we identified instances in which more specificity has been included for the key focus areas, including referral management. However, as of September 2015, we have been unable to discuss these changes with DHA. We will update the status of this recommendation when we receive additional information.

    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: Open

    Comments: In a May 2015 update, DHA agreed that contract transition-in payment should be designed to incentivized timely completion of transition requirements and deadlines. However, DHA also stated that both positive and negative incentives should be included for the contractor to achieve satisfactory progress against pre-established milestones. As of September 2015, we were still awaiting an update from DHA. We will update the status of this recommendation when we receive additional information.

    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: Open

    Comments: In its comments on the draft report and in a November 2014 update, DHA partially concurred with GAO's recommendation in that they agreed there should be sufficient documentation of communication between the agency and the TRICARE contractors but disagreed that the documentation the agency provided to GAO during the audit was not sufficient. Based on our recent review of DHA's transition guidance, we have found that oversight discussions during the transition should now be documented by the contractor. As of September 2015, we have not been able to confirm this with DOD. We will update the status of this recommendation when we receive additional information.

    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: Open

    Comments: DHA concurred with this recommendation, and in a May 2015 update, DHA responded that it had already started redefining its contract requirements as a result of the Defense Acquisition University's recommendation and consultation, which was prior to our review. DHA also chartered a Transition and Contracting Oversight Workgroup to help define the contract transition and oversight requirements. As of September 2015, we were still awaiting an update from DHA on its progress with these activities. We will update the status of this recommendation when we receive additional information.

    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: Open

    Comments: DHA concurred with this recommendation, but in a May 2015 update, stated that all versions of their four manuals provide essentially the same information and guidance to contractors. They stated that the previous contractors used 2002 versions of the manuals and the current contractors use 2008 versions, but the two different versions contain basically the same information so the difference did not contribute to any of the TRICARE West Region transition problems. However, based on our recent review of DHA's transition guidance for the next generation of TRICARE managed care support contracts (T-4), we have found instances in which inconsistencies we previously identified had been corrected. As of September 2015, we have been unable to discuss these changes with DHA. We will update the status of this recommendation when we receive additional information.

    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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