New flurry of bidding set for Tricare's West contract

Nearly two years after three regional Tricare contracts were awarded, two are still up in the air because of insurance company appeals. The latest: the West contract, which is up for a new round of bids.

The Dept. of Defense Tricare Management Activity, which oversees the health benefit program for active and retired military personnel, announced April 7 that it will solicit a new round of bids for a five-year contract to administer benefits in Tricare's 21-state West region.

The five-year contract was one of the three awarded in July 2009. All three awards were challenged. In the case of the West contract, Tricare said that because of the long appeals process, it would send out a new request for proposal and allow new bids to be submitted. A decision on the winning bid will come in late 2011.

For the West region, worth an estimated $17 billion over five years, UnitedHealthcare Military & Veterans had lost out to Phoenix-based TriWest Healthcare Alliance, which has been administering Tricare benefits there since 1996. TriWest is owned by a holding company that is backed by 15 nonprofit health systems and two university hospitals in its region, which encompasses most of the U.S. west of the Mississippi River. TriWest was the only existing Tricare contract holder that won a new contract in 2009.

But UnitedHealth Group filed a protest over the deal. United argued that Tricare put military families' health care access at risk by choosing contractors that promise to secure discounts with hospitals and physicians below Medicare levels.

TriWest, however, said it has found ways to make care more efficient, such as using technology. As for payment, Tricare spokesman Austin Camacho said rates are tied to Medicare by law. "That's not something [Tricare Management Activity] can decide to change," he said.

In the North region, Aetna beat out incumbent contractor Health Net, but Health Net challenged the decision and in May 2010 won back the contract, worth an estimated $21 billion. The new contract began April 1.

United originally won the South region contract, but the incumbent contractor, Humana, successfully challenged the award. United has challenged the reversal, and the challenge remains pending.

Once formal protests filed with the Government Accountability Office over the North and South contracts had been addressed, TMA turned its attention to the protest that United had filed over the West region contract.

Because so much time had passed since the companies originally bid on the contract, the TMA announced it would solicit a new round of bids.

"While we welcome the [Defense Dept.] decision to uphold our protest, we hope the department will keep Tricare beneficiaries foremost in mind as the process moves forward -- and not use the resolicitation as a means to request drastic, guaranteed cuts to provider reimbursements," said Lori McDougal, CEO of UnitedHealthcare Military & Veterans. "Such a course would invite a race to the bottom, compromising access to quality, affordable care for members of the military and their families."

TriWest spokesman Scott Celley said the company is confident it will win the new contract. "The path to a successful Defense Dept. contract award can often be a long process and goes through many different stages," he said.

United can win either the South or West contract, but not both. In the request-for-proposal process, Tricare said a company could win a maximum of one region.