Ethics issues surface for TRICARE

By Tom Philpott: CNJ columnist

Aetna Government Health Plans of Hartford, Conn., appears to have gained an unfair advantage in competing for TRICARE’s North Region support contract, valued at $16.7 billion, by hiring a former chief of staff at TRICARE headquarters to help the company draft its winning proposal.

The Government Accountability Office, auditing arm of Congress, said the chief of staff had access to proprietary information on Aetna’s rival, Health Net Federal Services of Rancho Cordova, Calif., before leaving government, and also while working for Aetna because he continued to have access to sensitive documents through his old TRICARE e-mail account.

In a 36-page decision, GAO upheld Health Net’s protest of the contract award to Aetna, advising the TRICARE Management Activity (TMA) in Falls Church, Va., to conduct a new review of bids and make a new decision, taking into account what their auditors found.

Just last month, GAO also sustained Humana Military Healthcare Services’ protest of TRICARE’s $21 billion support contract award for its South Region to United Health Military & Veterans Services of Minnetonka, Minn.

That decision said the contracting officer did not adequately weigh the value of fee discounts Humana has negotiated with health care providers in judging future costs relative to competitors. GAO said TMA should re-evaluate the proposals and make a fresh decision.

GAO brought a heavier hammer down on the Aetna contract. Though it doesn’t allege that procurement integrity law was broken, GAO said contracting agencies like TMA have an obligation “to avoid even the appearance of impropriety” in government procurement. This time it failed.

If TMA’s own investigation confirms the alleged unfair competitive advantage, Aetna could be excluded from the competition, “thereby leaving Health Net as the only viable awardee,” GAO said.

TRICARE support contractors build and manage huge civilian health care provider networks for military beneficiaries who don’t have access to on-base health care. The companies handle TRICARE enrollments, process claims, provide customer service and coordinate specialty care.

Health Net is the current TRICARE contractor for the 22-state North Region, serving 3 million military health care beneficiaries. It filed its protest in August, a month after the announced award went to Aetna.

Appearance of impropriety was just one of six reasons GAO cited for upholding the Health Net protest. Other errors were committed by TRICARE and its unnamed contracting officer, which included failure to “reasonably evaluate” Aetna’s past performance information and to “perform a reasonable price/cost realism assessment” of Aetna’s significantly lower bid.

Steven Tough, president of Health Net, said the alleged conflict of interest is perhaps the most significant reason for TMA to decide in the next 60 days whether to overturn the award to Aetna. But the “realism” of Aetna’s bid also is seen as questionable, he said. Aetna assumes, for example, it can hire most Health Net employees at lower salaries, he said.