Defense Health Care:

Implementation Issues for New TRICARE Contracts and Regional Structure

GAO-05-773: Published: Jul 27, 2005. Publicly Released: Jul 27, 2005.

Additional Materials:

Contact:

Marcia G. Crosse
(202) 512-3407
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

The Department of Defense (DOD) provides health care through TRICARE--a regionally structured program that uses civilian contractors to maintain provider networks to complement health care provided at military treatment facilities (MTF). In 2004, DOD implemented extensive changes to its TRICARE contracts and regional structure. A committee report accompanying the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005 directed GAO to provide information on implementation issues for (1) the new TRICARE contracts and (2) the new regional structure. This report also provides information on the new management tools used to assess (3) contractors' performance and (4) program performance at the MTF and regional levels.

During implementation of the new health care delivery contracts, issues arose that affected the administration of the TRICARE program. These issues increased program costs and impacted operations but had a minimal impact on the delivery of health care to beneficiaries. In particular, DOD's automated referral and authorization system was not available for contractors and MTFs at the start of health care delivery, resulting in the need for labor-intensive manual processes. DOD could not provide comprehensive costs associated with the system's development and subsequent nonavailability, but contractors' initial estimates for implementing manual processes in response to the system's nonavailability exceed $250 million over the 5-year contract period. DOD continues to incur costs to identify and develop solutions for managing referrals and authorizations and could not yet provide a time frame for when an automated system would be implemented. Implementation of the new regional structure, called the governance structure, highlighted ambiguities about the roles and responsibilities of the newly established TRICARE regional offices (TRO) with respect to both contract oversight and coordination with the military services' MTFs. DOD offices, which traditionally oversee the contracts, and the TROs, which were assigned contract oversight responsibilities under the plan for the new governance structure, have had difficulties coordinating their responsibilities. In addition, while the governance plan states that TRO directors are to work with MTFs on issues such as maximizing the use of the direct care system, it does not provide the TROs with a protocol for these interactions. TRO directors do not have authority over MTFs and must rely on a collaborative approach to obtain cooperation. In some instances, military service officials have expressed concern that TROs have overstepped their authority by directly providing MTFs with guidance. DOD has two new management tools for assessing the performance of contractors--performance guarantees and award fees. While performance guarantees serve as the basis for financial penalties, DOD's process for assessing penalties is still evolving. Nonetheless, for the first quarter of the contract year, DOD assessed all contractors with performance guarantee penalties, including penalties related to telephone wait times and the timely submission of referral reports for specialty care. In addition to penalties, DOD uses award fees to provide contractors with financial bonuses based on customer service. All contractors received an award fee for their performance during the first quarter of their contract year. Although business plans were intended to be the management tools used to assess program performance at the MTF and regional levels, the fiscal year 2005 business plans for MTFs and TROs could not be used as intended for program oversight. Lacking clear guidance, each military service used its own approach to develop MTF business plans. The resulting inconsistencies in content and form impeded development of regional business plans, which are intended to incorporate the regions' MTF business plans. The three military services have collaborated to develop a standard MTF business planning approach--an effort that should improve both the MTF and regional plans for fiscal year 2006.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: We recommended that DOD determine comprehensive costs associated with the initial development and nonavailability of its Enterprise Wide Referral and Authorization System (EWRAS) as well as the costs being incurred to develop a solution. In March 2007, DOD's recommendation tracking system cited the costs associated with the TRICARE contract modifications over $400 million---as the department's completed action for this recommendation. However, this response did not include all costs, such as the costs incurred by the military services as a result of the system's inavailability as well as more definitive costs for the initial development that would include costs incurred by the TRICARE Management Activity and the military services for staffing and other resources expended in conceptualizing and developing system specifications. DOD also did not include the cost of any contracts involved in system development.

    Recommendation: As DOD considers what further investments are warranted for managing referrals and authorizations, the Secretary of Defense should direct the Assistant Secretary of Defense for Health Affairs to determine comprehensive costs for the development and nonavailability of the Enterprise Wide Referral and Authorization System as well as the costs being incurred to develop a solution.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: We recommended that DOD clearly define the TRICARE Regional Offices' (TRO) contract oversight roles and responsibilities as they relate to other TRICARE Management Activity (TMA) offices. In our report, we cited confusion about the TROs' role with contract oversight, which is also a function conducted by one of TMA's offices. In September 2006, this recommendation was deemed "completed" in DOD's recommendation tracking system, which stated that contract surveillance and reporting responsibilities are still shared by the TROs and TMA staff and that the offices' functions have been defined and clarified. However, DOD officials would not provide additional information to corroborate that the recommendation had been fully addressed. Without additional evidence, it is unclear whether changes have actually been implemented.

    Recommendation: To facilitate the TROs' oversight of regional health care delivery, the Secretary of Defense should direct the Assistant Secretary of Defense for Health Affairs to clearly define the TROs' contract oversight roles and responsibilities as they relate to other TRICARE Management Activity offices.

    Agency Affected: Department of Defense

  3. Status: Closed - Not Implemented

    Comments: We recommended that DOD establish protocols for how the TRICARE Regional Offices (TRO)are to collaborate with the military services' military treatment facilities (MTF). In our report, we discuss issues related to TRO collaboration with MTFs--specifically, that the newly established TRICARE Governance Plan did not establish protocols for these collaborations even though the TROs are responsible for helping maximize the use of the military services' direct care system in their respective regions. There had been some instances in which the services' Surgeons General and their staff expressed concern that the TROs had overstepped their authority by directly providing guidance to MTFs on issues such as referral management. In September 2006, DOD's recommendation tracking system cited the TRICARE Governance Plan and a memo about business planning as the completed action for our recommendation. However, as stated in our report, while the business planning process is the primary method of collaboration between TROs and MTFs, it is not the only area for which protocols are needed. Because TROs serve as the health plan managers for their regions, they will sometimes need to collaborate with MTFs on issues that are not directly related to the business plans, such as communication of referral management procedures. Additionally, as cited earlier, the TRICARE Governance Plan does not provide protocols for TRO and MTF interactions.

    Recommendation: To facilitate the TROs' oversight of regional health care delivery, the Secretary of Defense should direct the Assistant Secretary of Defense for Health Affairs to establish protocols for how TROs are to collaborate with the military services' MTFs.

    Agency Affected: Department of Defense

 

Explore the full database of GAO's Open Recommendations »

Dec 23, 2014

Dec 12, 2014

Dec 8, 2014

Dec 3, 2014

Dec 1, 2014

Nov 24, 2014

Looking for more? Browse all our products here