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TriWest loses appeal to keep military health contract

Jul. 3, 2012 - 09:46AM   |  
By PATRICIA KIME   |   Comments
Dave McIntyre Jr. is the president of TriWest Healthcare Alliance, which just lost its appeal to continue providing benefits for military members in 21 Western states.
Dave McIntyre Jr. is the president of TriWest Healthcare Alliance, which just lost its appeal to continue providing benefits for military members in 21 Western states. (Gannett News Service)

The Government Accountability Office on Monday upheld a Pentagon decision to award the $20.5 billion contract to manage the Tricare West region to UnitedHealth Group, the nation’s largest insurer.

The decision strips the business from Phoenix-based TriWest Healthcare, which has held the contract since 1996.

TriWest had been granted the contract in 2009 but after UnitedHealth lost an opportunity to manage a different Tricare region contract, it persuaded the government to reopen the bidding process for the West region.

The Defense Department decided March 16 to award the contract to UnitedHealth. But TriWest protested, arguing its bid was lower than the competition’s and the government had not fully vetted UnitedHealth.

The GAO did not reveal its reasons for upholding the Pentagon decision. A thorough report on the process will be released in the coming weeks.

In a statement on TriWest’s website, CEO David McIntyre said corporate officials would discuss the GAOs decision with the company’s owners — 15 Blue Cross and Blue Shield companies and two university health systems — as well as legal counsel before deciding its future.

Among its options: filing a lawsuit in the U.S. Court of Federal Claims.

“We will be making a decision on what, if any, action we will take in response to the GAO’s denial of our protest,” McIntyre said.

TriWest holds one other small federal contract — managing the Marine Corps’ D-STRESS Line, a telephone counseling service that links Marines with former Marines.

But the bulk of its business is managing the Tricare West region.

A Tricare spokesman said the transition would begin immediately and beneficiaries can expect UnitedHealth to assume complete contract management beginning April 1, 2013.

On the GAO’s decision, Tricare Management Activity spokesman Kevin Dwyer said Tricare will work with UnitedHealth to maintain the quality of care the West region’s 2.9 million beneficiaries expect.

“TMA is fully committed to providing the best possible health care to our customers in the West region while obtaining the best value for the government,” Dwyer said.

UnitedHealth Military & Veterans Services said in a statement the company looks forward to “working on behalf of Tricare West beneficiaries.”

“We are committed to working with the Department of Defense to ensure beneficiaries have access to cost effective, quality and innovative care,” said Lori McDougal, CEO of UnitedHealth Military and Veterans Services.

TriWest officials have said they spent years building a network of providers in rural regions and express concern that UnitedHealth, despite having a strong presence in the Western states, will not be able to provide the same level of service to those in remote areas.

Ana Gupte, an equity analyst with Sanford Bernstein who focuses on the health industry said UnitedHealth has put past customer service problems behind it and should provide high quality care.

“Their reputation in the marketplace is exemplary,” she said.

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