More TRICARE Dominos Falling as UnitedHealthcare’s 2009 Protest Upheld

by: Matthew Potter
April 8, 2011

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

TRICARE is the U.S. Department of Defense’s primary health care program for its active duty members, their dependents and retirees. It functions as a sort of HMO and allows personnel to utilize civilian healthcare providers and systems. In the past the military used their own network of doctors, clinics and hospitals for this but began moving to this system thirty years or so ago. Two years ago the Department competed the management contracts for TRICARE.

Four different contracts were awarded and the North, South and West regional ones were protested. The protests were upheld and the incumbents remained operating the contracts while the U.S. decided whether to sustain the award, have a new contest or keep the incumbent.

Those decisions were made for the the North and West protests and now the U.S. has announced a decision on the South award. It has been decided that UnitedHealthcare’s (UNH) protest will be upheld and new contest will have to occur for the South contract. The contract had been won by TriWest Healthcare Alliance but that decision was protested and now won’t stand.

The total value of that contract is $17 billion over the five years so its importance to the companies bottom line is very clear.

Interestingly enough UnitedHealthcare won the Southern contract from Humana (HUM) which was also overturned 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 since then working until all of this is resolved.

In the background to all of this is the fact that the Defense Department and the Services are working to reduce the costs of healthcare as it eats up more of the military budget every year. Proposals include raising co-pays and premiums but until the size of the military starts going down it will be hard to decrease this type of spending.

No matter what it may be until 2012 before the 2009 awards are all resolved and the process illustrates the need for the government to use clear source selection criteria and apply them evenly across all of their decisions.

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