Defense Health Care: Oversight of the Adequacy of TRICARE's Civilian Provider Network Has Weaknesses
Published: 2003-03-27T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: During 2002, in testimony to the House Armed Services Committee, Subcommittee on Personnel, beneficiary groups described problems with access to care from TRICARE's civilian providers, and providers testified about their dissatisfaction with the TRICARE program, specifying low reimbursement rates and administrative burdens. The Bob Stump National Defense Authorization Act of 2003 required that GAO review DOD's oversight of TRICARE's network adequacy. In response, GAO is (1) describing how DOD oversees the adequacy of the civilian provider network, (2) assessing DOD's oversight of the adequacy of the civilian provider network, (3) describing the factors that may contribute to potential network inadequacy or instability, and (4) describing how the new contracts, expected to be awarded in June 2003, might affect network adequacy. GAO's analysis focused on TRICARE Prime--the managed care component of the TRICARE health care delivery system. This testimony summarizes GAO's findings to date. A full report will be issued later this year.
section_title: What GAO Found
paragraphs: To oversee the adequacy of the civilian network, DOD has established standards that are designed to ensure that its network has a sufficient number and mix of providers, both primary care and specialists, necessary to satisfy TRICARE Prime beneficiaries' needs. In addition, DOD has standards for appointment wait, office wait, and travel times that are designed to ensure that TRICARE Prime beneficiaries have adequate access to care. DOD has delegated oversight of the civilian provider network to lead agents, who are responsible for ensuring that these standards have been met. DOD's ability to effectively oversee--and thus guarantee the adequacy of--the TRICARE civilian provider network is hindered in several ways. First, the measurement used to determine if there is a sufficient number of providers for the beneficiaries in an area does not account for the actual number of beneficiaries who may seek care or the availability of providers. In some cases, this may result in an underestimation of the number of providers needed in an area. Second, incomplete contractor reporting on access to care makes it difficult for DOD to assess compliance with this standard. Finally, DOD does not systematically collect and analyze beneficiary complaints, which might assist in identifying inadequacies in the TRICARE civilian provider network. DOD and its contractors have reported three factors that may contribute to potential network inadequacy: geographic location, low reimbursement rates, and administrative requirements. However, the information the contractors provide to DOD is not sufficient to measure the extent to which the TRICARE civilian provider network is inadequate. While reimbursement rates and administrative requirements may have created dissatisfaction among providers, it is not clear that these factors have resulted in insufficient numbers of providers in the network. The new contracts, which are expected to be awarded in June 2003, may result in improved network participation by addressing some network providers' concerns about administrative requirements. For example, the new contracts may simplify requirements for provider credentialing and referrals, two administrative procedures providers have complained about. However, according to contractors, the new contracts may also create requirements that could discourage provider participation, such as the new requirement that 100 percent of network claims submitted by providers be filed electronically. Currently, only about 25 percent of such claims are submitted electronically.

section_title: Letter
paragraphs: I am pleased to be here today to discuss issues related to the Department  of Defense’s (DOD) healthcare system, TRICARE. TRICARE’s primary  mission is to provide care for its eligible beneficiaries; currently, more  than 8.7 million active duty personnel, retirees, and dependents are eligible  to receive care through TRICARE. These beneficiaries receive their care  through Military Treatment Facilities (MTFs) or through TRICARE’s  civilian provider network, which is designed to complement the  availability of care offered by MTFs. MTFs supply most of the health care  services TRICARE beneficiaries receive.
TRICARE faces new challenges in ensuring that its civilian network can  provide adequate access to care that complements the capabilities of  MTFs. In 2003, DOD will award new contracts for the delivery of care in  the civilian network. As a result, the providers who choose to participate  may change, while those who remain will operate under new policies and  procedures. During this time, TRICARE is still responsible for ensuring  that its civilian network provides adequate access to care, even if the  provider for some beneficiaries’ care is changed.
TRICARE also faces beneficiary and provider dissatisfaction with its  existing civilian network. During April 2002, testimony before the House  Armed Services Committee, Subcommittee on Personnel, beneficiary  groups described problems with access to care from TRICARE’s civilian  providers. Also, providers testified about their dissatisfaction with the  TRICARE program, specifying low reimbursement rates and  administrative burdens.
In response to these concerns, the Bob Stump National Defense  Authorization Act of 2003 (NDAA 2003) required that we review DOD’s  oversight of the adequacy of the TRICARE civilian network. My remarks  will summarize the findings of our analysis to date, and we will issue a full  report later this year. Our analysis, including our testimony today, focuses  on TRICARE’s civilian provider network. Specifically, I will discuss (1)  how DOD oversees the adequacy of the civilian provider network, (2) an  assessment of DOD’s oversight of the adequacy of the civilian provider  network, (3) the factors that may contribute to potential network  inadequacy or instability, and (4) how the new contracts might affect  network adequacy.
To examine how DOD oversees the civilian provider network and interacts  with the contractors, we interviewed officials at TRICARE Management  Activity (TMA) in Washington D.C., the office that ensures that DOD  health policy is implemented, and officials at TMA-West, the office that  carries out contracting functions, including administering the civilian  contracts and writing the Requests for Proposals for the future contracts.  To assess DOD’s oversight of the TRICARE network, we reviewed and  analyzed extensive information from network adequacy reports from each  of the contractors. We also interviewed DOD regional officials, known as  lead agents, and MTF officials from 5 of 11 TRICARE regions. In addition,  we interviewed officials from each of the four managed care support  contractors who develop and maintain the network of providers to  augment the care provided by MTFs. We visited and discussed network  management and provider complaints with representatives of each  contractor. We focused our work on TRICARE Prime—the managed care  component of the TRICARE health care delivery system. We conducted  our work from June 2002 through March 2003 in accordance with  generally accepted government auditing standards.
In summary, to oversee the adequacy of the civilian network, DOD has  established standards that are designed to ensure that its network has a  sufficient number and mix of providers, both primary care and specialists,  necessary to satisfy TRICARE Prime beneficiaries’ needs. In addition,  DOD has standards for appointment wait, office wait, and travel times that  are designed to ensure that TRICARE Prime beneficiaries have adequate  access to care. DOD has delegated oversight of the civilian provider  network to lead agents, who are responsible for ensuring that these  standards have been met.
DOD’s ability to effectively oversee—and thus guarantee the adequacy  of—the TRICARE civilian provider network is hindered in several ways.  First, the measurement used to determine if there is a sufficient number of  providers for the beneficiaries in an area does not account for the actual  number of beneficiaries who may seek care or the availability of providers.  In some cases, this may result in an underestimation of the number of  providers needed in an area. Second, incomplete contractor reporting on  access to care makes it difficult for DOD to assess compliance with this  standard. Finally, DOD does not systematically collect and analyze  beneficiary complaints, which might assist in identifying inadequacies in  the TRICARE civilian provider network.
DOD and its contractors have reported three factors that may contribute  to potential network inadequacy: geographic location, low reimbursement  rates, and administrative requirements. However, the information the  contractors provide to DOD is not sufficient to measure the extent to  which the TRICARE civilian provider network is inadequate. While  reimbursement rates and administrative requirements may have created  dissatisfaction among providers, it is not clear that these factors have  resulted in insufficient numbers of providers in the network.
The new contracts, which are expected to be awarded in June 2003, may  result in improved network participation by addressing some network  providers’ concerns about administrative requirements. For example, the  new contracts may simplify requirements for provider credentialing and  referrals, two administrative procedures providers have complained about.  However, according to contractors, the new contracts may also create  requirements that could discourage provider participation, such as the  new requirement that 100 percent of network claims submitted by  providers be filed electronically. Currently, only about 25 percent of such  claims are submitted electronically.
subsections: section_title: Background
paragraphs: TRICARE has three options for its eligible beneficiaries:    TRICARE Prime, a program in which beneficiaries enroll and receive care  in a managed network similar to a health maintenance organization  (HMO);    TRICARE Extra, a program in which beneficiaries receive care from a  network of preferred providers; and    TRICARE Standard, a fee-for-service program that requires no network  use.
The programs vary according to the amount beneficiaries must contribute  towards the cost of their care and according to the choices beneficiaries  have in selecting providers. In TRICARE Prime, the program in which  active duty personnel must enroll, the beneficiaries must select a primary  care manager (PCM) who either provides care or authorizes referrals to  specialists. Most beneficiaries who enroll in TRICARE Prime select their  primary care providers from MTFs, while other enrollees select their  PCMs from the civilian network. Regardless of their status—military or  civilian—PCMs may refer Prime beneficiaries to providers in either MTFs  or TRICARE’s civilian provider network.
Both TRICARE Extra and TRICARE Standard require co-payments, but  beneficiaries do not enroll with or have their care managed by PCMs.  Beneficiaries choosing TRICARE Extra use the same civilian provider  network available to those in TRICARE Prime, and beneficiaries choosing  TRICARE Standard are not required to use providers in any network. For  these beneficiaries, care can be provided at an MTF when space is  available.
DOD employs four civilian health care companies or managed care  support contractors (contractors) that are responsible for developing and  maintaining the civilian provider network that complements the care  delivered by MTFs. The contractors recruit civilian providers into a  network of PCMs and specialists who provide care to beneficiaries  enrolled in TRICARE Prime. This network also serves as the network of  preferred providers for beneficiaries who use TRICARE Extra. In 2002,  contractors reported that the civilian network included about 37,000 PCMs  and 134,000 specialists. The contractors are also responsible for ensuring  adequate access to health care, referring and authorizing beneficiaries for  health care, educating providers and beneficiaries about TRICARE  benefits, ensuring providers are credentialed, and processing claims. In  their network agreements with civilian providers, contractors establish  reimbursement rates and certain requirements for submitting claims.  Reimbursement rates cannot be greater than Medicare rates unless DOD  authorizes a higher rate.
DOD’s four contractors manage the delivery of care to beneficiaries in 11  TRICARE regions. DOD is currently analyzing proposals to award new  civilian health care contracts, and when they are awarded in 2003, DOD  will reorganize the 11 regions into 3—North, South, and West—with a  single contract for each region. Contractors will be responsible for  developing a new civilian provider network that will become operational  in April 2004. Under these new contracts DOD will continue to emphasize  maximizing the role of MTFs in providing care.
The Office of the Assistant Secretary of Defense for Health Affairs (Health  Affairs) establishes TRICARE policy and has overall responsibility for the  program. The TRICARE Management Activity (TMA), under Health Affairs,  is responsible for awarding and administering the TRICARE contracts.  DOD has delegated oversight of the provider network to the local level  through the regional TRICARE lead agent. The lead agent for each region  coordinates the services provided by MTFs and civilian network providers.  The lead agents respond to direction from Health Affairs, but report  directly to their respective Surgeons General. In overseeing the network,  lead agents have staff assigned to MTFs to provide the local interaction  with contractor representatives and respond to beneficiary complaints as  needed and report back to the lead agent.
section_title: DOD Has Standards for Network Adequacy and Requires Contractors’ Compliance
paragraphs: DOD’s contracts for civilian health care are intended to enhance and  support MTF capabilities in providing care to millions of TRICARE  beneficiaries. Contractors are required to establish and maintain the  network of civilian providers in the following locations: for all catchment  areas, base realignment and closure sites, in other contract-specified  areas, and in noncatchment areas where a contractor deems it cost- effective. In the remaining areas, a network is not required.
DOD requires that contractors have a sufficient number and mix of  providers, both primary care and specialists, necessary to satisfy the needs  of beneficiaries enrolled in the Prime option. Specifically, it is the  responsibility of the contractors to ensure that the network has at least  one full-time equivalent PCM for every 2,000 TRICARE Prime enrollees  and one full-time equivalent provider (both PCMs and specialists) for  every 1,200 TRICARE Prime enrollees.
In addition, DOD has access-to-care standards that are designed to ensure  that Prime beneficiaries receive timely care. The access standards require  the following:    appointment wait times shall not exceed 24 hours for urgent care, 1 week  for routine care, or 4 weeks for well-patient and specialty care;    office wait times shall not exceed 30 minutes for nonemergency care; and  travel times shall not exceed 30 minutes for routine care and 1 hour for  specialty care.
DOD does not specify access standards for eligible beneficiaries who do  not enroll in TRICARE Prime. However, DOD requires that contractors  provide information and/or assist all beneficiaries—regardless of which  option they choose—in finding a participating provider in their area.
DOD has delegated oversight of the civilian provider network to the  regional TRICARE lead agents. The lead agents told us they use the  following tools and information to oversee the network.
Network Adequacy Reporting—Contractors are required to provide  reports quarterly to the lead agents. The reports contain information on  the status of the network—such as the number and type of specialists, a  list of primary care managers, and data on adherence to the access  standards. The reports may also contain information on steps the  contractors have taken to address any network inadequacies.
Beneficiary Complaints—The complaints come directly from beneficiaries  and through other sources, such as the contractor or MTFs.
In addition to these tools, lead agents periodically monitor contractor  compliance by reviewing performance related to specific contract  requirements, including requirements related to network adequacy. Lead  agents also told us they periodically schedule reviews of special issues  related to network adequacy, such as conducting telephone surveys of  providers to determine whether they are accepting TRICARE patients. In  addition, lead agents stated they meet regularly with MTF and contractor  representatives to discuss network adequacy and access to care.
If the lead agents determine that a network is inadequate, they have formal  enforcement actions they may use to correct deficiencies. However, lead  agents told us that few of the actions have been issued. They said they  prefer to address deficiencies informally rather than take formal actions,  particularly in areas where they do not believe the contractor can correct  the deficiency because of local market conditions. For example, rather  than taking a formal enforcement action, one lead agent worked with the  contractor to arrange for a specialist from one area to travel to another  area periodically.
section_title: DOD’s Civilian Provider Network Oversight Has Weaknesses
paragraphs: DOD’s ability to effectively oversee—and thus guarantee the adequacy  of—the TRICARE civilian provider network is hindered by (1) flaws in its  required provider-to-beneficiary ratios, (2) incomplete reporting on  beneficiaries’ access to providers, and (3) the absence of a systematic  assessment of complaints. Although DOD has required its network to meet  established ratios of providers to beneficiaries, the ratios may  underestimate the number of providers needed in an area. Similarly,  although DOD has certain requirements governing beneficiary access to  available providers, the information reported to DOD on this access is  often incomplete—making it difficult to assess compliance with the  requirements. Finally, when beneficiaries complain about availability or  access in their network, these complaints can be directed to different DOD  entities, with no guarantee that the complaints will be compiled and  analyzed in the aggregate to identify possible trends or patterns and  correct network problems.
subsections: section_title: Required Provider-to- Beneficiary Ratios May Not Account for Actual Number of Beneficiaries or Availability of Providers
paragraphs: In some cases, the provider-to-beneficiary ratios underestimate the  number of providers, particularly specialists, needed in an area. This  underestimation occurs because in calculating the ratios, the contractors  do not always include the total number of Prime enrollees within the area.  Instead, they base their ratio calculations on the total number of  beneficiaries enrolled with civilian PCMs and do not count beneficiaries  enrolled with PCMs in MTFs. The ratio is most likely to result in an  underestimation of the need for providers in areas in which the MTF is a  clinic or small hospital with a limited availability of specialists.
Moreover, in reporting whether their network meets the established ratios,  different contractors make assumptions about the level of participation on  the part of civilian network providers. These assumptions may or may not  be accurate, and the assumptions have a significant effect on the number  of providers required in the network. Contractors generally assume that  between 10 to 20 percent of their providers’ practices are dedicated to  TRICARE Prime beneficiaries. Therefore, if a contractor assumes 20  percent of all providers’ practices are dedicated to TRICARE Prime rather  than 10 percent, the contractor will need half as many providers in the  network in order to meet the prescribed ratio standard.
section_title: Information Reported on Access Standards Was Incomplete
paragraphs: In the network adequacy reports we reviewed, managed care support  contractors did not always report all the information required by DOD to  assess compliance with the access standards. Specifically, for the network  adequacy reports we reviewed from 5 of the 11 TRICARE regions, we  found that contractors reported less than half of the required information  on access standards for appointment wait, office wait, and travel times.  Some contractors reported more information than others, but none  reported all the required access information. Contractors said they had  difficulties in capturing and reporting information to demonstrate  compliance with the access standards. Additionally, two contractors  collected some access information, but the lead agents chose not to use it.
section_title: Beneficiary Complaints Are Not Systematically Collected and Evaluated
paragraphs: Most of the DOD lead agents we interviewed told us that because  information on access standards is not fully reported, they monitor  compliance with the access standards by reviewing beneficiary  complaints. Beneficiaries can complain about access to care either orally  or in writing to the relevant contractor, their local MTF, or the regional  lead agent. Because beneficiary complaints are received through  numerous venues, often handled informally on a case-by-case basis, and  not centrally evaluated, it is difficult for DOD to assess the extent of any  systemic access problems. TMA has a central database of complaints it has  received, but complaints directed to MTFs, lead agents, or contractors  may not be directed to this database.
While contractor and lead agent officials told us they have received few  complaints about network problems, this small number of complaints  could indicate either an overall satisfaction with care or a general lack of  knowledge about how or to whom to complain. Additionally, a small  number of complaints, particularly when spread among many sources,  limits DOD’s ability to identify any specific trends of systemic problems  related to network adequacy within TRICARE.
section_title: DOD and Contractors Report Three Factors That May Contribute to Network Inadequacies
paragraphs: DOD and contractors have reported three factors that may contribute to  network inadequacy: geographic location, low reimbursement rates, and  administrative requirements. While reimbursement rates and  administrative requirements may have created dissatisfaction among  providers, it is not clear how much these factors have affected network  adequacy because the information the contractors provide to DOD is not  sufficient to reliably measure network adequacy.
DOD and contractors have reported regional shortages for certain types of  specialists in rural areas. For example, they reported shortages for  endocrinology in the Upper Peninsula of Michigan and dermatology in  New Mexico. Additionally, in some instances, TRICARE officials and  contractors have reported difficulties in recruiting providers into the  TRICARE Prime network because in some areas providers will not join  managed care programs. For example, contractor network data indicate  that there have been long-standing provider shortages in TRICARE in  areas such as eastern New Mexico, where the lead agent stated that the  providers in that area have repeatedly refused to join any network.
According to contractor officials, TRICARE Prime providers have  expressed concerns about decreasing reimbursement rates. In addition,  there have been reported instances in which groups of providers have  banded together and refused to accept TRICARE patients due to their  concerns with low reimbursement rates. One contractor identified low  reimbursement rates as the most frequent cause of provider  dissatisfaction. In addition to provider complaints, beneficiary advocacy  groups, such as the Military Officers Association of America (MOAA), have  cited numerous instances of providers refusing care to beneficiaries  because of low reimbursement rates.
By statute, DOD cannot generally pay TRICARE providers more than they  would be paid under the Medicare fee schedule. In certain situations, DOD  has the authority to pay up to 115 percent of the Medicare fee to network  providers. DOD’s authority is limited to instances in which it has  determined that access to health care is severely impaired within a  locality. In 2000, DOD increased reimbursement rates in rural Alaska in an  attempt to entice more providers to join the network, but the new rates  did not increase provider participation. In 2002, DOD increased  reimbursement rates to 115 percent of the Medicare rate for the rest of  Alaska. In 2003, DOD increased the rates for selected specialists in Idaho  to address documented network shortcomings. In 1997, DOD also  increased reimbursement rates for obstetrical care. These cases represent  the only instances in which DOD has used its authority to pay above the  Medicare rate. Because Medicare fees declined in 2002, and there is a  potential for future reductions, some contractors are concerned that  reimbursement rates may undermine the TRICARE network.
Contractors also report that providers have expressed dissatisfaction with  some TRICARE administrative requirements, such as credentialing and  preauthorizations and referrals. For example, many providers have  complained about TRICARE’s credentialing requirements. In TRICARE, a  provider must get recredentialed every 2 years, compared to every 3 years  for the private sector. Providers have said that this places cumbersome  administrative requirements on them.
Another widely reported concern about TRICARE administrative  requirements relates to preauthorization and referral requirements.  Civilian PCM providers are required to get preauthorizations from MTFs  before referring patients for specialized care. While preauthorization is a  standard managed care practice, providers complain that obtaining  preauthorization adversely affects the quality of care provided to  beneficiaries because it takes too much time. In addition, civilian PCMs  have expressed concern that they cannot refer beneficiaries to the  specialist of their choice because of MTFs’ “right of first refusal” that gives  an MTF discretion to care for the beneficiary or refer the care to a civilian  provider.
Nevertheless, there are not direct data confirming that low reimbursement  rates or administrative burdens translate into widespread network  inadequacies. We found that out of the 2,156 providers who left one  contractor’s network during a 1-year period, 900 providers cited reasons  for leaving. Only 10 percent of these providers identified low  reimbursement rates as a factor and only 1 percent cited administrative  burdens.
section_title: New Contracts May Address Some Network Concerns, but May Create Others
paragraphs: DOD’s new contracts for providing civilian health care, called TNEX, may  address some network concerns raised by providers and beneficiaries, but  may create other areas of concern. Because the new contracts are not  expected to be finalized until June 2003, the specific mechanisms DOD and  the contractors will use to ensure network adequacy are not known. DOD  plans to retain the access standards for appointment and office wait times,  as well as travel-time standards. However, instead of using provider-to- beneficiary ratios to measure network adequacy, TNEX requires that the  network complement the clinical services provided by MTFs and promote  access, quality, beneficiary satisfaction, and best value health care for the  government. However, TNEX does not specify how this will be measured.
TNEX may reduce administrative burden related to provider credentialing  and patient referrals. Currently, TRICARE providers must follow  TRICARE-specific requirements for credentialing. In contrast, TNEX will  allow for network providers to be credentialed through a nationally  recognized accrediting organization. DOD officials stated this approach is  more in line with industry practices. Patient referral procedures will also  change under TNEX. Referral requirements will be reduced, but the MTFs  will still retain the “right of first refusal.”
On the other hand, TNEX may be creating a new administrative concern  for contractors and providers by requiring that 100 percent of network  claims submitted by providers be filed electronically. In fiscal year 2002,  only 25 percent of processed claims were submitted electronically.  Contractors stated that such a requirement could discourage providers  from joining or staying in their network. However, DOD states that  electronic filing will cut claims-processing costs and save money.