UnitedHealthcare Protests Reversal of TRICARE South Region Contract Award

UnitedHealthcare’s military division today filed a formal protest with the Government Accountability Office (GAO) over the Department of Defense’s (DoD) decision to reverse UnitedHealthcare’s award of the TRICARE South Region contract to provide health benefits to 3 million active and retired members of the uniformed services and their families.

On July 13, 2009, the Defense Department’s TRICARE Management Activity (TMA) awarded UnitedHealthcare its South Region contract, covering 11 states from Florida and South Carolina to Texas, and part of Kentucky. The incumbent contractor then filed a protest with the GAO. On February 25, 2011, after 20 months and 13 amendments to its original solicitation, TMA reversed its selection of UnitedHealthcare and, instead, retained the incumbent, Humana Military Healthcare Services.

"The Department of Defense got it right nearly two years ago when it awarded the TRICARE contract to UnitedHealthcare based on quality, value, innovation and price,” said Lori McDougal, CEO of UnitedHealthcare’s military division. "Today, we are reaffirming our commitment to delivering high quality health care to TRICARE beneficiaries.”

Over the course of a two-year delay, the government has foregone concrete economic benefits from choosing a new contractor while the incumbent has benefited. During the delay, the incumbent changed its bid and guaranteed significant discounts going forward in what it would pay doctors and hospitals in Humana’s TRICARE network. UnitedHealthcare believes these discounts would pay providers significantly below what doctors and hospitals are paid in the Medicare system. UnitedHealthcare believes these terms could ultimately harm the TRICARE South Region health care system.

"Severe discounts in provider payments present a real risk that doctors would be forced to drop out of the TRICARE South Region Network, which would lead to deterioration in the quality, access and service available to beneficiaries,” McDougal said. "We feel that this risk should be fully understood and assessed before Defense proceeds further. Military families should not bear the risk of compromised quality and access to care.”

According to standard procedures, today’s protest filing will trigger a statutory stay of the award. "UnitedHealthcare will request that DoD respect the process and take no further action on the South Region contract until the protest process is complete,” McDougal said.

The TRICARE system administers healthcare plans for 9.6 million beneficiaries worldwide as a vital supplement to the military health system. The TRICARE South Region contractor would administer the health plan for beneficiaries in Alabama, Arkansas, Florida, Georgia, Kentucky (only in the Ft. Campbell area), Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee and Texas (excluding the El Paso area).

UnitedHealthcare won the South Region contract in 2009 as part of the Department’s intention to create "TRICARE Third Generation,” or T-3, an effort to deliver "the best possible overall health care at the best value, improving clinical quality and disease management while incentivizing cost efficiencies and excellent performance by the contractors.” TRICARE set out to implement T-3 through an equitable bidding process that was intended to increase innovation and competition. The incumbent has been an administrator of the TRICARE contract since 1996.

"In reality, the TRICARE contracting process has retreated from the high ideals that originally resulted in the award of the South Region contract to UnitedHealthcare,” McDougal said. "The Pentagon’s reversal maintains the hold of entrenched incumbents on all three TRICARE regions while locking in rate cuts in the South that will likely drive doctors and hospitals out of the network, reducing access for beneficiaries.”

About UnitedHealth Group
UnitedHealth Group is a diversified health and well-being company dedicated to helping people live healthier lives and making health care work better. With headquarters in Minnetonka, Minn., UnitedHealth Group offers a broad spectrum of products and services through six operating businesses: UnitedHealthcare Employer & Individual; UnitedHealthcare Medicare & Retirement; UnitedHealthcare Community & State; OptumHealth; Ingenix; and Prescription Solutions. Through its family of businesses, UnitedHealth Group serves more than 75 million individuals worldwide. UnitedHealth Military & Veterans Services is a UnitedHealth Group company whose mission is to provide innovative, high quality and affordable healthcare solutions in partnership with government health programs. Visit www.unitedhealthgroup.com or www.unitedhealthmilitary.com for more information.