Defense Health Care: Opportunities to Improve Future TRICARE Managed Care Support Contract Transitions

DOD contracts with private sector companies—referred to as managed care support contractors—to deliver health care services to its TRICARE program beneficiaries through networks of civilian providers. In July 2016, DOD awarded its fourth generation of TRICARE contracts, referred to as T-2017, for management of civilian providers in its two regions (East and West). For new TRICARE contracts, DOD provides a transition period—usually 9 to 12 months—for the incoming and outgoing contractors. During this time, the incoming contractors must take specific steps to prepare for health care delivery.

The John S. McCain National Defense Authorization Act for Fiscal Year 2019 included a provision for GAO to review the T-2017 transition. This report examines (1) how the requirement to implement TRICARE Select affected the transition, (2) challenges DOD experienced executing the T-2017 transition process, and (3) how DOD addressed problems after the start of health care delivery. GAO reviewed and analyzed DOD guidance, contract requirements, and other relevant documentation, and interviewed DOD officials, TRICARE contractors, and other stakeholders.

The implementation of a required new health care benefit option delayed aspects of the transition to the Department of Defense's (DOD) fourth generation of TRICARE managed care support contracts (T-2017). The National Defense Authorization Act for Fiscal Year 2017 required DOD to implement TRICARE Select, a new preferred provider benefit option. As a result, DOD delayed the start of health care delivery—the date the incoming T-2017 contractors would assume responsibility for managing health care—from October 1, 2017, to January 1, 2018, to align with the mandated implementation date for TRICARE Select. DOD also delayed and lengthened a planned period for the department to make changes to beneficiary information in TRICARE's eligibility system. According to DOD and its contractors, this delay contributed to problems with enrollment processing backlogs that were not addressed until several months after health care delivery began.

DOD experienced challenges during the T-2017 transition that resulted from weaknesses with its transition guidance and oversight. Specifically, DOD's guidance does not always specify the amount and types of data outgoing contractors have to share with incoming contractors. This led to contractor disagreements over data transfers, which DOD did not always resolve in a timely manner. Contractors reported that these issues contributed to problems after health care delivery began for the T-2017 contracts, such as with processing referrals. DHA also determined that some of DHA's oversight requirements, such as for specialty care referrals, were not feasible or effective, which limited some testing of contractors' readiness for health care delivery. This occurred in part because DOD's relevant subject matter experts did not review the requirements.

DOD addressed most of the problems that occurred after health care delivery began by requiring the contractors to develop and implement corrective action plans. DOD and contractors are addressing some problems that have persisted, including problems with the contractors' provider directory accuracy in both regions and claims processing in one region. DOD has an opportunity to avoid similar problems in the future by improving the specificity of its transition guidance and effectiveness of its oversight requirements.

GAO is making three recommendations to improve future contract transitions, including that DOD improve the specificity of its transition guidance and have subject matter experts review oversight requirements. DOD concurred with GAO's recommendations and identified steps the department is taking to address them.

In fiscal year 2018, approximately 9.5 million servicemembers and other  beneficiaries were eligible to receive health care services through  TRICARE, the Department of Defense’s (DOD) regionally structured  health care program. Under TRICARE, beneficiaries can obtain these  services through DOD’s direct care system of military hospitals and  clinics, referred to as military treatment facilities (MTF), or through its  purchased care system of civilian providers. In its TRICARE regions,  DOD contracts with private sector companies—referred to as managed  care support contractors—to manage its purchased care system. Their  responsibilities include developing and maintaining networks of civilian  providers and performing other customer service functions, such as  processing claims, enrolling beneficiaries, and assisting beneficiaries with  finding providers. In fiscal year 2018, purchased care accounted for about  54 percent of the total costs for health care services delivered to  TRICARE beneficiaries.

Within DOD, the Defense Health Agency (DHA) is responsible for the  TRICARE program, including awarding and overseeing the TRICARE  managed care support contracts. In July 2016, DHA awarded its fourth  generation of TRICARE contracts, referred to as the T-2017 contracts.

For these contracts, DHA consolidated its three TRICARE regions (North,  South, and West) into two regions (East and West). Additionally, the  National Defense Authorization Act for Fiscal Year 2017 (NDAA 2017),  enacted in December 2016, required DOD to implement a number of  changes to the TRICARE program—some of which affected the T-2017  contracts—including a new benefit option called TRICARE Select.

To ensure that its incoming contractors are prepared for their new  responsibilities, DHA provides a 9-to-12 month transition period between  its outgoing and incoming contractors. During this time, the incoming  contractors engage in specific transition activities, such as establishing a  sufficient civilian provider network for their regions and setting up  customer service call centers. The transition period for the T-2017  contracts began on January 1, 2017 and ended on January 1, 2018,  when the incoming contractors assumed full responsibility for health care  delivery under the new contract—referred to as the start of health care  delivery.

If the transition is not fully successful, contractors may experience  problems meeting contract requirements after the start of health care  delivery. Our 2014 review of the contract transition for the third generation  of contracts, referred to as the T-3 contracts, identified issues with DHA’s  guidance for and oversight of the transition process that contributed to  problems the West region contractor experienced after the start of health  care delivery. DHA implemented our recommendations from that report  to improve its transition guidance and oversight. More recently, the  department has reported that the T-2017 contractors have also  experienced some problems after start of health care delivery.

The John S. McCain National Defense Authorization Act for Fiscal Year  2019 and the accompanying House Report 115-676 contained provisions  for us to examine DOD’s oversight of the transition of its TRICARE  managed care support contracts. In this report, we  1.  describe how the requirement to implement TRICARE Select affected  the transition to the T-2017 contracts,  2.  examine challenges DHA experienced executing the T-2017 transition  3.  describe DHA’s efforts to address problems after the start of health  care delivery under the T-2017 contracts.

To describe how the requirement to implement TRICARE Select affected  the transition for the T-2017 contracts, we analyzed relevant DHA  transition documentation related to TRICARE Select, including  documentation of DHA’s transition meetings and written communications  with contractors, as well as the draft and final TRICARE Select policies.  We also analyzed DHA’s “after action” report on the T-2017 transition to  identify issues related to the implementation of TRICARE Select. We  interviewed officials from DHA, including the deputy director, transition  managers, and contracting officers for each TRICARE region, as well as  the incoming and outgoing contractors, two military services’ medical  commands (Army and Air Force), and the Defense Manpower Data  Center (DMDC)—DOD’s central access point for information on eligibility  for benefits—to discuss their experience with TRICARE Select  implementation during the transition.

To examine challenges DHA experienced executing the T-2017 transition  process, we analyzed DHA transition requirements and guidance for the  T-2017 contracts, relevant modifications to the T-2017 contracts, and  relevant sections of the TRICARE Operations Manual. We also analyzed  DHA’s “after action” reports on the T-3 and T-2017 transitions to identify  challenges with the T-2017 transition as well as actions DHA took to  address lessons learned from the T-3 transition. In addition, we reviewed  DHA meeting minutes, correspondence with contractors, and DHA’s new  oversight methods for the T-2017 transition, which included performance  readiness requirements and financial penalties for not meeting certain  requirements. We reviewed DHA’s guidance and oversight for the  TRICARE contract transitions in the context of federal standards for  internal control related to implementing control activities and monitoring  for the timely resolution of issues. We interviewed officials from DHA,  including DHA leadership, regional transition leads, the contracting  officers for each region, communications staff, and other DHA officials, as  well as the incoming and outgoing contractors and DMDC. We also  interviewed stakeholders from the military services’ medical commands  and an organization representing TRICARE beneficiaries to obtain their  perspectives on transition challenges and the impact on beneficiaries.

To describe DHA’s efforts to address problems after the start of health  care delivery, we analyzed relevant documentation, such as DHA’s  procedures for addressing contractors’ deficiencies in meeting contract  requirements, which included the corrective action requests issued by  DHA, the corrective action plans developed by the contractors, and other  related communications between DHA and its contractors. We also  interviewed officials from DHA and the incoming T-2017 contractors to  discuss reasons for problems after health care delivery and how the  problems were addressed, including information on the status of contract  requirements that the contractors were not meeting as of June 2019.

We conducted this performance audit from December 2018 to November  2019 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

TRICARE T-2017 Contracts and Transition Process

Under T-2017, DHA reduced the number of TRICARE regions by merging  the North and South regions to form the East region, which has  approximately 6 million beneficiaries, while the West region remained the  same with approximately 3.4 million beneficiaries (see figure 1). In July  2016, DHA awarded the East region contract to Humana Government  Business, the incumbent South region contractor, and the West region  contract to Health Net Federal Services, the incumbent North region  contractor. The T-2017 contracts include five 1-year performance  periods and are scheduled to expire on December 31, 2022.

As a result of the changes in regional structure, the T-2017 contract  transition included a transition from Health Net Federal Services (North  region) and Humana Government Business (South region) to Humana  Government Business in the East region as well as a transition from  UnitedHealth Military & Veterans to Health Net Federal Services in the  West Region. The start of the T-2017 transition was initially planned for  August 2016, with a health care delivery start date of August 2017.  However, due to bid protests filed against each contract, the transition  start date was pushed out to January 1, 2017 with a health care delivery  start date of October 1, 2017.

To manage the T-2017 transition, DHA assigned individuals to lead the  transition in each region, who were responsible for coordinating all major  transition activities. The transition leads were supported by other staff,  including contracting officers, contracting officer representatives, and  subject matter experts. In addition, DHA established an organizational  structure comprised of several groups to oversee the T-2017 transition  from day-to-day oversight to leadership updates.

The TRICARE Operations Manual, which is part of the managed care  support contract, establishes transition guidance that includes  requirements for both the incoming and outgoing contractors. The T- 2017 transition guidance focused on the incoming contractors’ readiness  to perform in seven critical areas: (1) provider network, (2) referral  management, (3) enrollment, (4) medical management, (5) claims  processing, (6) customer service, and (7) management.

For the T-2017 transition, DHA introduced two new oversight methods to  ensure contractors’ readiness in the seven critical areas prior to the start  of health care delivery. These methods and other guidance are outlined in  the TRICARE Operations Manual and T-2017 contracts.

The performance readiness validation (PRV) and performance  readiness assessment and verification (PRAV)—referred to as  PRV/PRAV—tested contractors’ functionality in the seven critical  areas outlined in the TRICARE Operations Manual. For the PRV,  contractors validated their own readiness for specific requirements  within each area. For example, the contractor had to validate that it  had a complete provider directory online and operational 60 days prior  to the start of health care delivery at a 95 percent accuracy rate. The  number of requirements varied by critical area. For the PRAV, DHA  subsequently assessed and verified contractors’ validation prior to the  start of health care delivery.

DHA also established financial penalties—referred to as transition  performance guarantees—for five of the seven critical areas. The T- 2017 contracts specify that if a contractor does not meet a transition- in requirement in any one of these five areas, DHA will assess a  financial penalty (see table 1).

In December 2016—prior to the start of the transition—DHA held  transition specification meetings with the incoming and outgoing  contractors to begin planning critical T-2017 transition activities. The  incoming contractors were also required to provide DHA with an  integrated master plan and an integrated master schedule outlining  processes and specific steps for the transition as well as a risk  management plan that identified risks to the successful execution of the  contractor’s schedule. Contractors were required to provide weekly  updates to DHA on the status of their transition schedule progress.

In April 2018—several months after the transition had ended—DHA  produced an “after action” report to identify best practices, lessons  learned, and recommendations to improve future TRICARE contract  transitions. DHA is currently in the process of developing its fifth  generation of contracts, referred to as the T-5 contracts.

As required by the NDAA 2017, DHA established a new preferred  provider benefit option called TRICARE Select and terminated the  TRICARE Standard and Extra benefit options by January 1, 2018. Prior to  2018, beneficiaries primarily had a choice between three basic options— TRICARE Prime (a managed care option), TRICARE Standard (a fee-for- service option), or TRICARE Extra (a preferred provider organization  option). The TRICARE Standard and Extra options did not require  beneficiaries to enroll. However, beneficiaries who choose the TRICARE  Select option must enroll during an annual open enrollment period or  within 90 days of experiencing a qualifying life event. Beneficiary cost  sharing responsibilities were also modified for the new benefit option.

DHA Delayed Time Frames for Key Transition Activities to Implement TRICARE Select

The implementation of TRICARE Select delayed timeframes for the T- 2017 transition and was the primary challenge of the T-2017 transition,  according to DHA and contractor officials. Because the T-2017 contracts  were awarded prior to the enactment of the NDAA 2017, DHA had to  incorporate TRICARE Select requirements into the ongoing T-2017  transition process, including developing updated guidance for contractors.  As a result of the time needed to plan for and implement a new benefit,  DHA delayed timeframes for the following key transition activities.

DHA postponed the start of health care delivery by 3 months.

DHA moved the start of health care delivery from October 1, 2017 to  January 1, 2018 (see fig. 2). According to DHA officials, DHA made  this change to align the start of health care delivery with the  implementation of TRICARE Select to minimize the impact that two,  successive changes could have had on the continuity of care for  beneficiaries. On March 30, 2017—three months into the transition— DHA sent a letter to the contractors informing them of this decision.

DHA also directed its incoming contractors to submit modified  transition schedules and risk management plans.

DHA had to delay the start of a planned enrollment freeze and  lengthen its duration. According to DHA officials, in a typical  transition, DMDC requires 3 to 4 days to make adjustments to  beneficiaries’ records in the Defense Enrollment Eligibility Reporting  System, including assigning beneficiaries to incoming contractors and  regions for the T-2017 contracts. During this time, which is referred  to as an enrollment freeze, contractors cannot access this system to  process any enrollments. For the T-2017 transition, DHA and DMDC  officials stated that, given the termination of two benefit options and  the new enrollment requirements for TRICARE Select, DMDC needed  additional time to adjust every beneficiary enrollment record (over 9  million). Therefore, DHA delayed the start of the T-2017 enrollment  freeze from August to December 2017 and increased its duration from  3 to 4 days to 19 days—December 1-19, 2017 (see fig. 2).

Contractors had less time to process enrollments and make  other system changes. Once an enrollment freeze has ended,  incoming and outgoing contractors have a designated period of time,  referred to as a dual operations period, to process beneficiaries’  enrollments and make other systems changes, such as assigning  Prime beneficiaries to a primary care manager (PCM). Due to the  extended enrollment freeze, contractors had a shorter dual operations  period—less than 2 weeks in December 2017 rather than 6 to 8  weeks beginning in August 2017 (see fig. 2). According to contractors,  the shorter dual operations period for T-2017 transition contributed to  a backlog of enrollment requests and PCM assignments that they  were unable to process prior to the start of health care delivery. To  mitigate the financial effect on beneficiaries, DHA issued point of  service waivers and waived referral requirements for TRICARE Prime  enrollees for both regions and provided an enrollment grace period for  beneficiaries so they did not have to pay higher copayments for  receiving care from non-network providers or care that was not  referred by a PCM.

DHA’s communications to TRICARE beneficiaries were delayed.  TRICARE Select complicated and delayed DHA’s communications to  beneficiaries about TRICARE program changes, which led to  customer service problems after the start of health care delivery. DHA  engaged in various efforts to inform beneficiaries of the new changes,  such as through website updates, blog posts, and direct mailings.  However, DHA’s “after action” report acknowledged that on multiple  occasions its communication division posted incorrect information on  its website because of changing policy language. In addition, DHA  planned to send a direct mailing to beneficiaries to inform them of  TRICARE program changes in October 2017. However, DHA and  DMDC officials told us that this date was delayed due to the additional  time needed to prepare for TRICARE Select. As a result, DHA mailed  information to beneficiaries starting in December 2017, and some  beneficiaries did not receive this mailing until after the start of health  care delivery, according to DHA. An organization representing  TRICARE beneficiaries told us that some beneficiaries were unaware  of the various benefit changes that went into effect on January 1,  2018 because of inadequate communication from DHA. Contractors  also told us that the delayed communication to beneficiaries  contributed to the high volume of customer service calls they received  after the start of health care delivery.

DHA officials told us that they took several steps to minimize the risks  these delays and the implementation of TRICARE Select created,  including the use of various transition oversight meetings to discuss and  track related challenges. For example, the regional transition  management staff participated in a monthly Risk Review Board meeting  to discuss concerns related to the schedule of transition activities, such  as the impact of TRICARE Select on the time needed for performance  testing in critical areas. DHA also discussed transition risks related to  TRICARE Select during weekly meetings with contractors throughout the  transition. Furthermore, in August 2017, DHA hosted an Enrollment  Summit for all stakeholders involved with the transition and  implementation of TRICARE Select, where they discussed the schedule  of transition steps and the coordination needed to implement the  interrelated T-2017 and NDAA 2017 requirements.

In addition, DHA kept contractors informed about TRICARE Select as  they developed the related policies. Beginning in June 2017, DHA  provided contractors with draft guidance on the new benefit to keep them  informed of potential changes and obtain their feedback. According to  DHA, this also allowed contractors to plan for and begin implementing the  program changes they would be required to make once the policies were  finalized. DHA issued the final TRICARE Select policies to its contractors  in late October 2017, which left contractors with less than 3 months to  implement the finalized changes prior to the start of health care delivery  on January 1, 2018. According to DHA officials and contractors,  contractors ideally would have had the final TRICARE policies at the start  of the 9-to-12 month transition period.

Challenges Experienced during the T-2017 Transition Process Reflect Weaknesses in DHA’s Guidance and Oversight

Lack of Specificity and Accuracy in DHA’s Guidance Contributed to Disagreements between Contractors, Which DHA Failed to Resolve in a Timely Manner

During the T-2017 transition, outgoing and incoming contractors had  disagreements over data transfers. According to DHA officials and  contractors, DHA’s transition guidance to contractors was not always  specific or accurate regarding the amount and type of data to be shared,  as well as how these data should be transferred. Furthermore, according  to contractors, DHA did not always resolve contractors’ guidance-related  disagreements in a timely manner. Contractors said this contributed to  delays in implementing some transition steps and problems after the start  of health care delivery. DHA faced challenges related to the following  data transfer issues:

Referral and authorization data. The contractors in the West region  disagreed on how many years of historical referral and authorization  data the outgoing contractor would provide the incoming contractor  because this was not specified in the guidance, according to the  contractors and DHA’s contracting officers. While the contractors in  the East region mutually agreed on the years of data to transfer, the  West region contractors did not. As a result, the incoming West region  contractor reached out to DHA for resolution on August 2, 2017 by  letter, and continued to discuss it with DHA officials during weekly  meetings, as documented in meeting minutes we reviewed. However,  DHA did not address the issue until December 12, 2017, at which  point DHA rejected the incoming contractor’s request for additional  historical data because the outgoing contractor would not have  enough time to provide it by the start of health care delivery on  January 1, 2018. The incoming contractor reported that not receiving  the anticipated historical referral information contributed to several  problems related to referrals after the start of health care delivery.  First, it contributed to delays in processing referrals within timeliness  standards. Second, the lack of data made it difficult for contractors  to help MTFs address customer referral inquiries, which negatively  affected the contractor’s relationship with MTFs. Finally, the contractor  had limited ability to resolve beneficiaries’ customer service questions  related to referrals and had to reissue authorizations for some  referrals.

Claims data. The incoming and outgoing West region contractors  also disagreed on which elements of claims data needed to be  transferred. For example, the incoming contractor requested  information from the claims notes section, which the outgoing  contractor stated contained some proprietary information. According  to the incoming contractor, this section typically contains information  important for claims processing, such as medical necessity reviews— medical record reviews to determine that health care services are  appropriate for payment. When the outgoing contractor refused to  provide the claims notes, the incoming contractor raised the issue  several times to DHA during weekly meetings and through letters, as  documented in meeting minutes and correspondence we reviewed.  However, DHA determined that the outgoing contractor did not need  to provide the information requested, as the non-proprietary  information was available in other claims data sections. According to  the incoming contractor, without access to more detailed historical  information from the claims notes, there were instances in which they  were unable to adjust payment determinations for certain claims paid  prior to transition, which resulted in provider and beneficiary  dissatisfaction.

Beneficiary payment information. The incoming contractors faced  challenges obtaining payment information for TRICARE beneficiaries  who paid their health insurance premiums using credit cards or  electronic funds transfers. According to a contracting officer, DHA  initially directed the outgoing contractor to transfer beneficiary  payment data to the incoming contractor. However, the outgoing  contractors told us that they were unable to transfer this data due to  banking laws and proprietary information security standards. DHA  agreed that the outgoing contractors could not legally transfer this  information and resolved the problem by requiring incoming  contractors to reach out directly to beneficiaries to obtain the payment  information. According to incoming contractor officials, this created  additional, unanticipated effort, since they had to contact beneficiaries  for this information directly, which diverted transition resources, such  as enrollment staff, away from ongoing transition activities. In addition,  contractors reported that this put certain TRICARE plan beneficiaries  at risk since those who did not resubmit their payment information  risked disenrollment and gaps in health care coverage. The  contractors and DHA made attempts to notify affected beneficiaries  that they needed to contact the contractor to reestablish their  automated premium payments. However, approximately 224,000  beneficiaries’ credit card or electronic funds transfer enrollments for  premium payments did not continue after January 1, 2018. To give  beneficiaries more time to provide this information, DHA provided a  150-day grace period for premium payments. Still, certain  beneficiaries were disenrolled from TRICARE plans for failure to  establish a recurring form of payment. For example, more than 15,000  beneficiaries were disenrolled in the East region.

In its “after action” report, DHA acknowledged that it did not always  provide specific and accurate requirements for data transfers in its  transition guidance and that this should be addressed for the next  transition. However, the report did not address the difficulties related to  resolving contractors’ questions and disagreements on these issues. For  example, DHA officials told us that they followed an informal process for  tracking and handling issues raised by contractors during the transition,  which was explained in the initial transition specifications meeting in  December 2016. However, the outgoing and incoming contractors in the  West region expressed concerns about this process, explaining that it  was difficult to resolve issues, particularly with the amount of time it took  for DHA to provide a response, such as with the referral and authorization  disagreement. Federal standards for internal control note that an agency  should implement control activities through policies, such as by providing  guidance with greater specificity for data transfers. These standards also  indicate that agencies should remediate deficiencies in a timely manner,  such as the prompt resolution of contractors’ guidance-related disputes  so as to not disrupt the transition schedule. Without more specific  guidance and a process that ensures timely dispute resolution, DHA risks  disagreements and delays for future contract transitions, which could  hinder health care delivery.

Some of DHA’s Requirements for Determining Contractors’ Readiness for Health Care Delivery Were Not Feasible or Effective

DHA experienced challenges executing its new T-2017 transition  oversight methods—PRV/PRAV and performance guarantees—as  planned because of fundamental problems with how some requirements  were written and the implementation of TRICARE Select. As a result,  some of the requirements were not feasible or effective in assessing  contractors’ readiness for health care delivery.  1.  Certain PRV/PRAV requirements were not feasible as originally  written or were not aligned with the corresponding performance  guarantee, according to DHA officials. For example, one of the PRV  requirements in the critical area of medical management focused on  testing the contractors’ web-based systems for exchanging  information electronically with the government and providers, but this  was not always possible as some information continues to be  transferred in hard copy, such as by fax. In addition, the performance  guarantee related to provider network development did not align with  the corresponding PRV/PRAV requirements. A DHA official told us  that aligning the performance guarantee and PRV/PRAV  requirements would have resulted in a higher financial penalty for one  of the contractors.  2.  Contractors noted that some PRV/PRAV requirements were not  complete or effective measures of readiness. For example,  contractors told us that requirements for claims and referrals did not  effectively test the actual volume of administrative tasks that they  would have to process after the start of health care delivery.  According to the West region contractor, one of the referral PRAV  tests required contractors to demonstrate that they could process 300  referrals during DHA’s onsite review, whereas they typically need to  process 9,000 referrals a day after the start of health care delivery.  3.  The original PRV/PRAV requirements did not account for TRICARE  Select, since the contracts were awarded prior to the enactment of the  NDAA 2017. Furthermore, due to the delayed and extended  enrollment freeze that ended on December 19, 2017, DHA  determined that contractors could not demonstrate a fully operational  enrollment system sixty days prior to the start of health care delivery  as originally required. Additionally, the contractors had limited access  to DHA’s information technology systems for testing scenarios that  included TRICARE Select. As a result, contractors had to test the  majority of the critical areas (claims, enrollment, customer service,  and referral management) with information technology systems that  did not include TRICARE Select, which was not a true test of their  readiness.

To address issues with feasibility and TRICARE Select, DHA modified the  PRV requirements for four of the seven critical areas during transition.  Specifically, DHA modified all of the PRV requirements for enrollment,  referral management, and claims processing as well as one PRV  requirement for medical management. DHA also waived the  corresponding performance guarantees for the three of these critical  areas that had such guarantees (enrollment, referral management, and  claims processing). As a result, the contractors were not subjected to  financial penalties for not meeting the requirements for these critical  areas.

According to DHA officials, the problems with the PRV/PRAV  requirements experienced during the T-2017 transition occurred in part  because DHA subject matter experts did not review the requirements  prior to the release of the final request for proposal. As a result, officials  said that it was not until after the contracts were awarded that subject  matter experts determined that some of the requirements could not be  performed as written. Nonetheless, DHA officials and contractors agreed  that the PRV/PRAV processes are good conceptual measures, and  should continue to be used for the next transition with improvements to  their feasibility and effectiveness. Having subject matter experts review  contractors’ readiness requirements for feasibility and contract alignment  could help ensure that these requirements are appropriate measures of  contractor readiness. In addition, DHA’s “after action” report included  feedback and lessons learned from officials and contractors on the  PRV/PRAV requirements, which DHA could incorporate for future  transitions. Federal standards for internal control state that an agency  should internally communicate quality information to enable personnel to  perform key roles in achieving objectives. By considering lessons  learned from this transition and having subject matter experts review the  requirements, DHA would be able to better ensure their metrics are  appropriate to prepare contractors for health care delivery.

DHA Required Contractors to Develop Corrective Action Plans to Address Problems after the Start of Health Care Delivery

DHA reported that the T-2017 contractors had overall better performance  meeting contract requirements after the start of health care delivery than  the two previous generations of TRICARE contracts. Nonetheless, DHA  has acknowledged that both T-2017 contractors did experience some  problems meeting certain contract requirements. DHA addressed most of  these problems through the issuance of corrective action requests, which  require the contractors to submit and implement a corrective action plan  (see table 2). One exception where DHA did not issue formal corrective  action requests was for problems both contractors experienced with  processing enrollment backlogs after the start of health care delivery due  to the extended TRICARE Select enrollment freeze during transition.

Although most of the problems have been resolved, some problems have  persisted into the second year of health care delivery, which DHA and  contractors reported they are continuing to address.

Provider directory accuracy. Both contractors have continued to fall  short of the requirement for 95 percent accuracy of their online  provider directories—problems they also experienced during the  transition. As of June 2019, the West region contractor’s directory  was 76 percent accurate and the East region’s was 64 percent  accurate, according to DHA officials. Both contractors expressed  concern about the methodology used to assess their performance  against this requirement and stated that the 95 percent standard is too  high. DHA officials acknowledged that the 95 percent standard is high  and that the provider directory corrective action requests may remain  open indefinitely because of the high standard, though they continue  to monitor the corrective action requests.

Claims processing timeliness and accuracy. The East region  contractor has struggled to meet timeliness and accuracy standards  for processing claims. The contract requires contractors to process 98  percent of claims within 30 calendar days of receipt and 100 percent  of claims within 90 days with a 98 percent accuracy rate. As of June  2019, the contractor was meeting the 30 day timeliness requirement  and was close to meeting the 90 day timeliness requirement (99.99  percent within 90 days). However, the contractor continued to miss  the performance standard for claims processing accuracy, according  to DHA officials. DHA officials told us that the department had  completed multiple on-site reviews and continues to monitor this issue  to ensure the contractor improves its ability to meet claims processing  standards. Contractor officials acknowledged that they needed to  improve their oversight of claims functions and improve training and  job aids with their claims processing subcontractor, which was a new  partner for their T-2017 contract.

A smooth transition of health care delivery between outgoing and  incoming managed care support contractors helps ensure continuity of  care for TRICARE beneficiaries. In the most recent transition, the need to  concurrently implement a new benefit option—TRICARE Select— presented some unique challenges that delayed the transition timeline  and limited DHA’s ability to ensure contractors’ readiness in certain areas.  While the implementation of a new benefit option during the T-2017  contract transition was a one-time occurrence, our review highlighted  weaknesses in DHA’s transition guidance and oversight that could pose  challenges to future contract transitions. By improving the specificity of its  transition guidance, revising its process for resolving contractors’ issues,  and ensuring review of PRV/PRAV requirements for feasibility and  effectiveness, DOD could mitigate these challenges and thus improve  future transitions.

We are making the following three recommendations to DHA:

The Director of DHA should define data sharing requirements with  more specificity in its transition guidance for outgoing and incoming  contractors, including the time period covered and the types of data  that must be shared. (Recommendation 1)

The Director of DHA should revise the process the agency has in  place for resolving issues raised between contractors during transition  to ensure such issues are resolved within time frames that will not  adversely affect the transition schedule. (Recommendation 2)

The Director of DHA should incorporate lessons learned from this  transition and ensure that subject matter experts review PRV/PRAV  requirements and performance guarantees prior to the issuance of the  request for proposal for the next transition. These requirements  should be reviewed to ensure their feasibility and effectiveness for  assessing contractor readiness. (Recommendation 3)

We provided a draft of this report to DOD for comment. In its written  comments, reproduced in appendix I, DOD generally agreed with our  findings and concurred with our recommendations. DOD outlined steps  the department will take to improve the next TRICARE contract transition,  including revising the TRICARE Operations Manual to better define data  sharing requirements, developing a process to ensure that all contractor  questions are answered appropriately and in a timely manner, and  ensuring SMEs are involved in writing the PRV/PRAV requirements. DOD  also provided technical comments, which we incorporated as appropriate  We are sending copies of this report to the Secretary of Defense and  appropriate congressional committees. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or cosgrovej@gao.gov. Contact points for our  Office of Congressional Relations and Office of Public Affairs can be  found on the last page of this report. Other major contributors to this  report are listed in appendix II.

Appendix I: Comments from the Department of Defense

Appendix II: GAO Contact and Staff Acknowledgments

In addition to the contact named above, Bonnie Anderson, Assistant  Director; Rebecca Abela, Analyst-in-Charge; Cathleen Hamann;  Jacquelyn Hamilton; Rianna Jansen; and Vikki Porter made contributions  to this report.

DOD offers health care through contractors with TRICARE, its regional health care program. In July 2016, DOD awarded its fourth generation of TRICARE contracts, which consolidated two regions.

DOD provided a transition period for its incoming and outgoing contractors, after which the incoming contractors assumed responsibility for delivering health care. The incoming contractors had trouble meeting deadlines for processing referrals and claims because DOD’s transition guidance wasn’t specific enough to prepare them.

We recommended that DOD improve guidance and oversight requirements for future transitions.