Defense Health Care: More-Specific Guidance Needed for TRICARE's Managed Care Support Contractor Transitions
Released: 2014-06-18T00:00:00

Letter

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.

As we reported in March 2014, there were two bid protests in the West region.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.

The first protest was an agency-level protest filed by GAO denied the second protest and upheld UnitedHealth as the contractor for the West region. (See fig. 1.)

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. 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). 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. 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. The TRO is responsible for the day-to-day monitoring of the contractor’s performance during both contract transition and health care delivery.

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

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.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.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. 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. 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.

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. 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. 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.

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.

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.

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. 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 The assurance plan for evaluating the contractor’s performance.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. 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.

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.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 provided updates in its 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. 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. 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, and some of these beneficiaries had to be temporarily reassigned to a new primary care manager.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.

When UnitedHealth had completed entering 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. 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. 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.

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. 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.

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). 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.

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. 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. 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 our recommendation 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. DOD's comments indicate that it has already undertaken steps to implement this action, but did not provide any time frames 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 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 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.

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.

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.)

Appendix II: Comments from the Department of Defense

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

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.