Defense Health Care:

Dental Contractor Overcame Obstacles, but More Proactive Oversight Needed

HEHS-97-58: Published: Feb 28, 1997. Publicly Released: Feb 28, 1997.

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Pursuant to a legislative requirement and a congressional request, GAO reviewed several issues regarding the Department of Defense's (DOD) TRICARE Active Duty Family Member Dental Plan (FMDP), focusing on whether: (1) the contractor's, United Concordia Companies, Inc., fee allowances for participating and nonparticipating dentists are appropriate; (2) Concordia has established an adequate network of participating dentists; (3) Concordia's claims processing and marketing efforts meet contract requirements; and (4) DOD is meeting its oversight responsibilities to ensure that Concordia complies with contract requirements.

GAO noted that: (1) Concordia has overcome numerous start-up problems and is now performing the task areas GAO reviewed within the contract's requirements; (2) DOD, however, has not yet taken a proactive role in overseeing the contract and thus far has not acted to assure itself and the Congress that the contractor is performing as required; (3) regarding fee appropriateness, neither applicable regulations nor the contract establish how Concordia's fees should be set nor whether or when they should be revised; (4) thus, while contractually required to pay dentists at certain fee levels based on "prevailing charges," or less when billed charges are lower, in effect, Concordia is left to determine whether its fees are appropriate and whether and how such contractual requirements are met; (5) GAO's analysis of Concordia's fee-setting methods showed that its initial February 1996 fees were based on less up-to-date charge data than were its revised August 1996 fees; (6) although not required to do so, Concordia could have elected to update its initial fee schedules by using a trend factor reflecting the estimated 1994 and 1995 dental charge increase, thus making them about as up to date as its August 1996 fees; (7) in the geographic areas GAO reviewed, Concordia has ample numbers of network dentists within 35 miles of beneficiaries' residences, one of the two access standards; (8) at two remote military base areas, however, there are not enough dentists available for Concordia to develop an adequate network; (9) in a third area, Camp Lejeune Marine Corps Base in Jacksonville, North Carolina, nearly all dentists have declined to participate in Concordia's network, for which DOD is now considering several remedial interventions; (10) data were not available in time with which to evaluate compliance with DOD's other access standard, that beneficiaries obtain an appointment with a participating general dentist within 21 days; (11) although tardy during the early months of the contract, Concordia data indicate that it is now processing dentists' claims for payment within required time limits; (12) Concordia's marketing activities meet requirements; (13) even though the fixed-price contract places the greatest risk on Concordia, DOD's oversight, generally relying on contractor self-reporting, does not provide DOD adequate assurance that the contractor is performing as required; and (14) responding to GAO's concerns, DOD officials told GAO they plan to conduct a performance evaluation in the summer of 1997, but they have not yet defined what the evaluation will entail.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: DOD maintains that the subject contractor is required to maintain a participating dentist network, so that prevailing fee schedule rates for participating and non-participating dentists will need to be attractive enough to keep the dental network intact over the contract's life. Nonetheless, in the future, DOD will include a requirement that dentists' startup fees be based on prevailing charges at the start of service delivery.

    Recommendation: To position DOD to ensure contractor compliance with the FMDP's requirements, the Secretary of Defense should direct the Assistant Secretary of Defense, Health Affairs, to require that discussions be held with the contractor and, as appropriate, the contract modified to clearly state how prevailing charges are to be established for fee-setting purposes, including the method and frequency for reviewing and, as appropriate, revising the fee schedules.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: This dental insurance program covers about 1.8 million beneficiaries and allows up to $1,000 annually per person for a wide range of dental services. The program is administered nationwide for DOD under competitively awarded 5-year contracts. In September 1997, DOD closed out its internal audit recommendation tracking system record on the GAO report and stated that future requests for proposals will incorporate a requirement that, at the start of health care delivery, fee schedules be based upon current reasonably available prevailing charge data or adjusted with a trend factor. DOD will release the next request for proposals for the FMDP in 1999.

    Recommendation: To position DOD to ensure contractor compliance with the FMDP's requirements, the Secretary of Defense should direct the Assistant Secretary of Defense, Health Affairs, to require that future FMDP requests for proposals require that the contractor's start-up fees it pays to dentists reflect prevailing charges established in the same manner as above or, if needed, be adjusted with a trend factor to approximate such charges.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: DOD initiated its first audit of the contractor's performance in June 1997 and submitted its draft report to the contractor for review and comment by September 1997. In addition, DOD hired a consumer survey research company to conduct a telephone survey to obtain beneficiary feedback and determine beneficiary satisfaction with the contractor's performance and the FMDP benefit.

    Recommendation: To position DOD to ensure contractor compliance with the FMDP's requirements, the Secretary of Defense should direct the Assistant Secretary of Defense, Health Affairs, to require that a contract oversight strategy be developed that efficiently targets the: (1) appropriateness of Concordia's fee schedules; (2) adequacy of its networks; (3) timeliness of its claims and predeterminations processing; and (4) efficiency of its marketing activities.

    Agency Affected: Department of Defense


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