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Humana TRICARE Contract Faces Protest from UnitedHealth Group

by: Matthew Potter
March 11, 2011

Category: Business Line, Companies, Congress, Contract Awards, Department of Defense, Events, Federal Budget Process, logistics, medicine, Protest, Services | RSS 2.0

Just when it looked like the last round of TRICARE management contracts had been resolved with the award to Humana (HUM) of the Southern Region contract after a lengthy protest process and review the loser, UnitedHealth Group (UNH), has protested that award.

This is one of several contracts awarded by the Department of Defense to manage what is basically the HMO for military members, their dependents and retirees. The value of the contracts are quite large due to the size of the population being served and this contract is worth $2.5 billion initially and has a total value of over $23 billion if all options are exercised.

In 2009 United won the contract away from incumbent Humana but that company protested and it was upheld. It has taken DOD over a year to resolve the issue ending up with requiring the bidders to submit new proposals. A few weeks ago it was announced that Humana’s bid was chosen over its rival. United is now protesting that award.

The protest is based on the fact that the losing company believes Humana “offered steep discounts in its latest bid that will pay doctors and hospitals below rates paid in the Medicare system.” This could drive providers out of TRICARE and limit care options for the users.

The protest will mean that the new contract will be delayed and the incumbent, Humana, will get basically a bridge to maintain their current services while it is resolved. Depending how it goes the Government Accountability Office (GAO) has the first attempt to review and rule on the protest although it may go further into court. Most protests are resolved within 100 days so there may be a further three months delay before the new contract starts.

If there really is cuts to the U.S. defense budget including attempts to reduce the cost of medical care as proposed by Secretary Gates then protests might become more common. Less big contracts mean their value to an individual company is heightened which leads to a greater need to win them. The potential for changes to the whole health insurance business with the implementation of health care reform also may lead companies to value contracts like this one for their stability and size.

This is now approaching the two year mark for these contracts to be resolved and it could drag out for several more months.

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One Comments

  1. More TRICARE Dominos Falling as UnitedHealthcare’s 2009 Protest Upheld | Defense Procurement News on April 8th, 2011 2:29 am

    […] on that company’s protest. A new contest was held which was won by Humana last month but UnitedHealthcare is protesting that award further delaying the new contract. Humana as the incumbent in 2009 has remained on the contract […]

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