oversight

Defense Health Care: Oversight of the Adequacy of TRICARE's Civilian Provider Network Has Weaknesses

Published by the Government Accountability Office on 2003-03-27.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                           United States General Accounting Office

GAO                        Testimony
                           Before the Subcommittee on Total Force,
                           Committee on Armed Services, House of
                           Representatives

For Release on Delivery
Expected at 1:30 p.m.
Thursday, March 27, 2003   DEFENSE HEALTH CARE
                           Oversight of the Adequacy
                           of TRICARE’s Civilian
                           Provider Network Has
                           Weaknesses
                           Statement of Marjorie Kanof
                           Director, Health Care—Clinical
                            and Military Health Care Issues




GAO-03-592T
                                               March 27, 2003


                                               DEFENSE HEALTH CARE

                                               Oversight of the Adequacy of TRICARE’s
Highlights of GAO-03-592T, a report to a
testimony before the Subcommittee on           Civilian Provider Network Has
Total Force, Committee on Armed
Services, House of Representatives             Weaknesses


During 2002, in testimony to the               To oversee the adequacy of the civilian network, DOD has established
House Armed Services Committee,                standards that are designed to ensure that its network has a sufficient
Subcommittee on Personnel,                     number and mix of providers, both primary care and specialists, necessary
beneficiary groups described                   to satisfy TRICARE Prime beneficiaries’ needs. In addition, DOD has
problems with access to care from              standards for appointment wait, office wait, and travel times that are
TRICARE’s civilian providers, and
providers testified about their
                                               designed to ensure that TRICARE Prime beneficiaries have adequate access
dissatisfaction with the TRICARE               to care. DOD has delegated oversight of the civilian provider network to
program, specifying low                        lead agents, who are responsible for ensuring that these standards have been
reimbursement rates and                        met.
administrative burdens.
                                               DOD’s ability to effectively oversee—and thus guarantee the adequacy of—
The Bob Stump National Defense                 the TRICARE civilian provider network is hindered in several ways. First,
Authorization Act of 2003 required             the measurement used to determine if there is a sufficient number of
that GAO review DOD’s oversight                providers for the beneficiaries in an area does not account for the actual
of TRICARE’s network adequacy.                 number of beneficiaries who may seek care or the availability of providers.
In response, GAO is (1) describing             In some cases, this may result in an underestimation of the number of
how DOD oversees the adequacy of
the civilian provider network, (2)
                                               providers needed in an area. Second, incomplete contractor reporting on
assessing DOD’s oversight of the               access to care makes it difficult for DOD to assess compliance with this
adequacy of the civilian provider              standard. Finally, DOD does not systematically collect and analyze
network, (3) describing the factors            beneficiary complaints, which might assist in identifying inadequacies in the
that may contribute to potential               TRICARE civilian provider network.
network inadequacy or instability,
and (4) describing how the new                 DOD and its contractors have reported three factors that may contribute to
contracts, expected to be awarded              potential network inadequacy: geographic location, low reimbursement
in June 2003, might affect network             rates, and administrative requirements. However, the information the
adequacy.                                      contractors provide to DOD is not sufficient to measure the extent to which
                                               the TRICARE civilian provider network is inadequate. While reimbursement
GAO’s analysis focused on
TRICARE Prime—the managed
                                               rates and administrative requirements may have created dissatisfaction
care component of the TRICARE                  among providers, it is not clear that these factors have resulted in
health care delivery system. This              insufficient numbers of providers in the network.
testimony summarizes GAO’s
findings to date. A full report will           The new contracts, which are expected to be awarded in June 2003, may
be issued later this year.                     result in improved network participation by addressing some network
                                               providers’ concerns about administrative requirements. For example, the
                                               new contracts may simplify requirements for provider credentialing and
                                               referrals, two administrative procedures providers have complained about.
                                               However, according to contractors, the new contracts may also create
                                               requirements that could discourage provider participation, such as the new
                                               requirement that 100 percent of network claims submitted by providers be
                                               filed electronically. Currently, only about 25 percent of such claims are
                                               submitted electronically.
www.gao.gov/cgi-bin/getrpt?GAO-03-592T.

To view the full report, including the scope
and methodology, click on the link above.
For more information, contact Marjorie Kanof
at (202) 512-7101.
Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss issues related to the Department
of Defense’s (DOD) healthcare system, TRICARE. TRICARE’s primary
mission is to provide care for its eligible beneficiaries; currently, more
than 8.7 million active duty personnel, retirees, and dependents are eligible
to receive care through TRICARE. These beneficiaries receive their care
through Military Treatment Facilities (MTFs) or through TRICARE’s
civilian provider network, which is designed to complement the
availability of care offered by MTFs. MTFs supply most of the health care
services TRICARE beneficiaries receive.1

TRICARE faces new challenges in ensuring that its civilian network can
provide adequate access to care that complements the capabilities of
MTFs. In 2003, DOD will award new contracts for the delivery of care in
the civilian network. As a result, the providers who choose to participate
may change, while those who remain will operate under new policies and
procedures. During this time, TRICARE is still responsible for ensuring
that its civilian network provides adequate access to care, even if the
provider for some beneficiaries’ care is changed.

TRICARE also faces beneficiary and provider dissatisfaction with its
existing civilian network. During April 2002, testimony before the House
Armed Services Committee, Subcommittee on Personnel, beneficiary
groups described problems with access to care from TRICARE’s civilian
providers. Also, providers testified about their dissatisfaction with the
TRICARE program, specifying low reimbursement rates and
administrative burdens.

In response to these concerns, the Bob Stump National Defense
Authorization Act of 2003 (NDAA 2003) required that we review DOD’s
oversight of the adequacy of the TRICARE civilian network.2 My remarks
will summarize the findings of our analysis to date, and we will issue a full
report later this year. Our analysis, including our testimony today, focuses
on TRICARE’s civilian provider network. Specifically, I will discuss (1)
how DOD oversees the adequacy of the civilian provider network, (2) an


1
 The military health system was funded at about $26.4 billion for fiscal year 2003.
Approximately 20 percent of this amount, $5.2 billion, was budgeted for the TRICARE
civilian provider network.
2
Pub. L. No. 107-314, .§712,116 Stat. 2458, 2588 (2002).




Page 1                                                                    GAO-03-592T
assessment of DOD’s oversight of the adequacy of the civilian provider
network, (3) the factors that may contribute to potential network
inadequacy or instability, and (4) how the new contracts might affect
network adequacy.

To examine how DOD oversees the civilian provider network and interacts
with the contractors, we interviewed officials at TRICARE Management
Activity (TMA) in Washington D.C., the office that ensures that DOD
health policy is implemented, and officials at TMA-West, the office that
carries out contracting functions, including administering the civilian
contracts and writing the Requests for Proposals for the future contracts.
To assess DOD’s oversight of the TRICARE network, we reviewed and
analyzed extensive information from network adequacy reports from each
of the contractors. We also interviewed DOD regional officials, known as
lead agents, and MTF officials from 5 of 11 TRICARE regions. In addition,
we interviewed officials from each of the four managed care support
contractors who develop and maintain the network of providers to
augment the care provided by MTFs. We visited and discussed network
management and provider complaints with representatives of each
contractor. We focused our work on TRICARE Prime—the managed care
component of the TRICARE health care delivery system. We conducted
our work from June 2002 through March 2003 in accordance with
generally accepted government auditing standards.

In summary, to oversee the adequacy of the civilian network, DOD has
established standards that are designed to ensure that its network has a
sufficient number and mix of providers, both primary care and specialists,
necessary to satisfy TRICARE Prime beneficiaries’ needs. In addition,
DOD has standards for appointment wait, office wait, and travel times that
are designed to ensure that TRICARE Prime beneficiaries have adequate
access to care. DOD has delegated oversight of the civilian provider
network to lead agents, who are responsible for ensuring that these
standards have been met.

DOD’s ability to effectively oversee—and thus guarantee the adequacy
of—the TRICARE civilian provider network is hindered in several ways.
First, the measurement used to determine if there is a sufficient number of
providers for the beneficiaries in an area does not account for the actual
number of beneficiaries who may seek care or the availability of providers.
In some cases, this may result in an underestimation of the number of
providers needed in an area. Second, incomplete contractor reporting on
access to care makes it difficult for DOD to assess compliance with this
standard. Finally, DOD does not systematically collect and analyze


Page 2                                                         GAO-03-592T
                 beneficiary complaints, which might assist in identifying inadequacies in
                 the TRICARE civilian provider network.

                 DOD and its contractors have reported three factors that may contribute
                 to potential network inadequacy: geographic location, low reimbursement
                 rates, and administrative requirements. However, the information the
                 contractors provide to DOD is not sufficient to measure the extent to
                 which the TRICARE civilian provider network is inadequate. While
                 reimbursement rates and administrative requirements may have created
                 dissatisfaction among providers, it is not clear that these factors have
                 resulted in insufficient numbers of providers in the network.

                 The new contracts, which are expected to be awarded in June 2003, may
                 result in improved network participation by addressing some network
                 providers’ concerns about administrative requirements. For example, the
                 new contracts may simplify requirements for provider credentialing and
                 referrals, two administrative procedures providers have complained about.
                 However, according to contractors, the new contracts may also create
                 requirements that could discourage provider participation, such as the
                 new requirement that 100 percent of network claims submitted by
                 providers be filed electronically. Currently, only about 25 percent of such
                 claims are submitted electronically.


                 TRICARE has three options for its eligible beneficiaries:
Background
             •   TRICARE Prime, a program in which beneficiaries enroll and receive care
                 in a managed network similar to a health maintenance organization
                 (HMO);
             •   TRICARE Extra, a program in which beneficiaries receive care from a
                 network of preferred providers; and
             •   TRICARE Standard, a fee-for-service program that requires no network
                 use.

                 The programs vary according to the amount beneficiaries must contribute
                 towards the cost of their care and according to the choices beneficiaries
                 have in selecting providers. In TRICARE Prime,3 the program in which
                 active duty personnel must enroll, the beneficiaries must select a primary



                 3
                  Out of more than 8.7 million eligible beneficiaries, nearly half are enrolled in TRICARE
                 Prime.




                 Page 3                                                                        GAO-03-592T
care manager (PCM)4 who either provides care or authorizes referrals to
specialists. Most beneficiaries who enroll in TRICARE Prime select their
primary care providers from MTFs, while other enrollees select their
PCMs from the civilian network. Regardless of their status—military or
civilian—PCMs may refer Prime beneficiaries to providers in either MTFs
or TRICARE’s civilian provider network.5

Both TRICARE Extra and TRICARE Standard require co-payments, but
beneficiaries do not enroll with or have their care managed by PCMs.
Beneficiaries choosing TRICARE Extra use the same civilian provider
network available to those in TRICARE Prime, and beneficiaries choosing
TRICARE Standard are not required to use providers in any network. For
these beneficiaries, care can be provided at an MTF when space is
available.

DOD employs four civilian health care companies or managed care
support contractors (contractors) that are responsible for developing and
maintaining the civilian provider network that complements the care
delivered by MTFs. The contractors recruit civilian providers into a
network of PCMs and specialists who provide care to beneficiaries
enrolled in TRICARE Prime. This network also serves as the network of
preferred providers for beneficiaries who use TRICARE Extra. In 2002,
contractors reported that the civilian network included about 37,000 PCMs
and 134,000 specialists. The contractors are also responsible for ensuring
adequate access to health care, referring and authorizing beneficiaries for
health care, educating providers and beneficiaries about TRICARE
benefits, ensuring providers are credentialed, and processing claims. In
their network agreements with civilian providers, contractors establish
reimbursement rates and certain requirements for submitting claims.
Reimbursement rates cannot be greater than Medicare rates unless DOD
authorizes a higher rate.




4
 A primary care manager is a provider or team of providers at an MTF or a provider in the
civilian network to whom a beneficiary is assigned for primary care services when he or
she enrolls in TRICARE Prime. Enrolled beneficiaries agree to initially seek all
nonemergency, nonmental health care services from these providers.
5
 DOD’s policy is to optimize the use of the MTF. Accordingly, when a referral for specialty
care is made by a civilian PCM, the MTF retains the “right of first refusal” to accommodate
the beneficiary within the MTF or refer the beneficiary to the civilian provider network for
the needed medical care.




Page 4                                                                        GAO-03-592T
                        DOD’s four contractors manage the delivery of care to beneficiaries in 11
                        TRICARE regions. DOD is currently analyzing proposals to award new
                        civilian health care contracts, and when they are awarded in 2003, DOD
                        will reorganize the 11 regions into 3—North, South, and West—with a
                        single contract for each region. Contractors will be responsible for
                        developing a new civilian provider network that will become operational
                        in April 2004. Under these new contracts DOD will continue to emphasize
                        maximizing the role of MTFs in providing care.

                        The Office of the Assistant Secretary of Defense for Health Affairs (Health
                        Affairs) establishes TRICARE policy and has overall responsibility for the
                        program. The TRICARE Management Activity (TMA), under Health Affairs,
                        is responsible for awarding and administering the TRICARE contracts.
                        DOD has delegated oversight of the provider network to the local level
                        through the regional TRICARE lead agent. The lead agent for each region
                        coordinates the services provided by MTFs and civilian network providers.
                        The lead agents respond to direction from Health Affairs, but report
                        directly to their respective Surgeons General. In overseeing the network,
                        lead agents have staff assigned to MTFs to provide the local interaction
                        with contractor representatives and respond to beneficiary complaints as
                        needed and report back to the lead agent.


                        DOD’s contracts for civilian health care are intended to enhance and
DOD Has Standards       support MTF capabilities in providing care to millions of TRICARE
for Network             beneficiaries. Contractors are required to establish and maintain the
                        network of civilian providers in the following locations: for all catchment
Adequacy and            areas,6 base realignment and closure sites,7 in other contract-specified
Requires Contractors’   areas, and in noncatchment areas where a contractor deems it cost-
                        effective. In the remaining areas, a network is not required.
Compliance
                        DOD requires that contractors have a sufficient number and mix of
                        providers, both primary care and specialists, necessary to satisfy the needs
                        of beneficiaries enrolled in the Prime option. Specifically, it is the



                        6
                         Catchment areas are geographic areas determined by the Assistant Secretary of Defense
                        for Health Affairs that are defined by five-digit zip codes, usually within an approximate 40-
                        mile radius of inpatient MTFs.
                        7
                         Base realignment and closure (BRAC) sites are military installations that have been closed
                        or realigned as the result of decisions made by the Commissions on Base Realignment and
                        Closure.




                        Page 5                                                                         GAO-03-592T
    responsibility of the contractors to ensure that the network has at least
    one full-time equivalent PCM for every 2,000 TRICARE Prime enrollees
    and one full-time equivalent provider (both PCMs and specialists) for
    every 1,200 TRICARE Prime enrollees.8

    In addition, DOD has access-to-care standards that are designed to ensure
    that Prime beneficiaries receive timely care. The access standards9 require
    the following:

•   appointment wait times shall not exceed 24 hours for urgent care, 1 week
    for routine care, or 4 weeks for well-patient and specialty care;
•   office wait times shall not exceed 30 minutes for nonemergency care; and
•   travel times shall not exceed 30 minutes for routine care and 1 hour for
    specialty care.

    DOD does not specify access standards for eligible beneficiaries who do
    not enroll in TRICARE Prime. However, DOD requires that contractors
    provide information and/or assist all beneficiaries—regardless of which
    option they choose—in finding a participating provider in their area.

    DOD has delegated oversight of the civilian provider network to the
    regional TRICARE lead agents. The lead agents told us they use the
    following tools and information to oversee the network.

•   Network Adequacy Reporting—Contractors are required to provide
    reports quarterly to the lead agents. The reports contain information on
    the status of the network—such as the number and type of specialists, a
    list of primary care managers, and data on adherence to the access
    standards. The reports may also contain information on steps the
    contractors have taken to address any network inadequacies.
•   Beneficiary Complaints—The complaints come directly from beneficiaries
    and through other sources, such as the contractor or MTFs.

    In addition to these tools, lead agents periodically monitor contractor
    compliance by reviewing performance related to specific contract
    requirements, including requirements related to network adequacy. Lead
    agents also told us they periodically schedule reviews of special issues


    8
    In addition, all four contractors chose to closely follow the Graduate Medical Education
    National Advisory Committee (GMENAC) recommendation for determining the specialty
    mix requirements for their network.
    9
    32 C.F.R. §199.17(p)(5)(2002).




    Page 6                                                                      GAO-03-592T
                             related to network adequacy, such as conducting telephone surveys of
                             providers to determine whether they are accepting TRICARE patients. In
                             addition, lead agents stated they meet regularly with MTF and contractor
                             representatives to discuss network adequacy and access to care.

                             If the lead agents determine that a network is inadequate, they have formal
                             enforcement actions they may use to correct deficiencies. However, lead
                             agents told us that few of the actions have been issued. They said they
                             prefer to address deficiencies informally rather than take formal actions,
                             particularly in areas where they do not believe the contractor can correct
                             the deficiency because of local market conditions. For example, rather
                             than taking a formal enforcement action, one lead agent worked with the
                             contractor to arrange for a specialist from one area to travel to another
                             area periodically.


                             DOD’s ability to effectively oversee—and thus guarantee the adequacy
DOD’s Civilian               of—the TRICARE civilian provider network is hindered by (1) flaws in its
Provider Network             required provider-to-beneficiary ratios, (2) incomplete reporting on
                             beneficiaries’ access to providers, and (3) the absence of a systematic
Oversight Has                assessment of complaints. Although DOD has required its network to meet
Weaknesses                   established ratios of providers to beneficiaries, the ratios may
                             underestimate the number of providers needed in an area. Similarly,
                             although DOD has certain requirements governing beneficiary access to
                             available providers, the information reported to DOD on this access is
                             often incomplete—making it difficult to assess compliance with the
                             requirements. Finally, when beneficiaries complain about availability or
                             access in their network, these complaints can be directed to different DOD
                             entities, with no guarantee that the complaints will be compiled and
                             analyzed in the aggregate to identify possible trends or patterns and
                             correct network problems.


Required Provider-to-        In some cases, the provider-to-beneficiary ratios underestimate the
Beneficiary Ratios May       number of providers, particularly specialists, needed in an area. This
Not Account for Actual       underestimation occurs because in calculating the ratios, the contractors
                             do not always include the total number of Prime enrollees within the area.
Number of Beneficiaries or   Instead, they base their ratio calculations on the total number of
Availability of Providers    beneficiaries enrolled with civilian PCMs and do not count beneficiaries
                             enrolled with PCMs in MTFs. The ratio is most likely to result in an
                             underestimation of the need for providers in areas in which the MTF is a
                             clinic or small hospital with a limited availability of specialists.



                             Page 7                                                         GAO-03-592T
                          Moreover, in reporting whether their network meets the established ratios,
                          different contractors make assumptions about the level of participation on
                          the part of civilian network providers. These assumptions may or may not
                          be accurate, and the assumptions have a significant effect on the number
                          of providers required in the network. Contractors generally assume that
                          between 10 to 20 percent of their providers’ practices are dedicated to
                          TRICARE Prime beneficiaries. Therefore, if a contractor assumes 20
                          percent of all providers’ practices are dedicated to TRICARE Prime rather
                          than 10 percent, the contractor will need half as many providers in the
                          network in order to meet the prescribed ratio standard.


Information Reported on   In the network adequacy reports we reviewed, managed care support
Access Standards Was      contractors did not always report all the information required by DOD to
Incomplete                assess compliance with the access standards. Specifically, for the network
                          adequacy reports we reviewed from 5 of the 11 TRICARE regions, we
                          found that contractors reported less than half of the required information
                          on access standards for appointment wait, office wait, and travel times.
                          Some contractors reported more information than others, but none
                          reported all the required access information. Contractors said they had
                          difficulties in capturing and reporting information to demonstrate
                          compliance with the access standards. Additionally, two contractors
                          collected some access information, but the lead agents chose not to use it.


Beneficiary Complaints    Most of the DOD lead agents we interviewed told us that because
Are Not Systematically    information on access standards is not fully reported, they monitor
Collected and Evaluated   compliance with the access standards by reviewing beneficiary
                          complaints. Beneficiaries can complain about access to care either orally
                          or in writing to the relevant contractor, their local MTF, or the regional
                          lead agent. Because beneficiary complaints are received through
                          numerous venues, often handled informally on a case-by-case basis, and
                          not centrally evaluated, it is difficult for DOD to assess the extent of any
                          systemic access problems. TMA has a central database of complaints it has
                          received, but complaints directed to MTFs, lead agents, or contractors
                          may not be directed to this database.

                          While contractor and lead agent officials told us they have received few
                          complaints about network problems, this small number of complaints
                          could indicate either an overall satisfaction with care or a general lack of
                          knowledge about how or to whom to complain. Additionally, a small
                          number of complaints, particularly when spread among many sources,



                          Page 8                                                           GAO-03-592T
                       limits DOD’s ability to identify any specific trends of systemic problems
                       related to network adequacy within TRICARE.


                       DOD and contractors have reported three factors that may contribute to
DOD and Contractors    network inadequacy: geographic location, low reimbursement rates, and
Report Three Factors   administrative requirements. While reimbursement rates and
                       administrative requirements may have created dissatisfaction among
That May Contribute    providers, it is not clear how much these factors have affected network
to Network             adequacy because the information the contractors provide to DOD is not
                       sufficient to reliably measure network adequacy.
Inadequacies
                       DOD and contractors have reported regional shortages for certain types of
                       specialists in rural areas. For example, they reported shortages for
                       endocrinology in the Upper Peninsula of Michigan and dermatology in
                       New Mexico. Additionally, in some instances, TRICARE officials and
                       contractors have reported difficulties in recruiting providers into the
                       TRICARE Prime network because in some areas providers will not join
                       managed care programs. For example, contractor network data indicate
                       that there have been long-standing provider shortages in TRICARE in
                       areas such as eastern New Mexico, where the lead agent stated that the
                       providers in that area have repeatedly refused to join any network.

                       According to contractor officials, TRICARE Prime providers have
                       expressed concerns about decreasing reimbursement rates. In addition,
                       there have been reported instances in which groups of providers have
                       banded together and refused to accept TRICARE patients due to their
                       concerns with low reimbursement rates. One contractor identified low
                       reimbursement rates as the most frequent cause of provider
                       dissatisfaction. In addition to provider complaints, beneficiary advocacy
                       groups, such as the Military Officers Association of America (MOAA), have
                       cited numerous instances of providers refusing care to beneficiaries
                       because of low reimbursement rates.

                       By statute, DOD cannot generally pay TRICARE providers more than they
                       would be paid under the Medicare fee schedule. In certain situations, DOD
                       has the authority to pay up to 115 percent of the Medicare fee to network
                       providers.10 DOD’s authority is limited to instances in which it has
                       determined that access to health care is severely impaired within a


                       10
                        See 32 C.F.R. §199.14(h)(1)(iv)(D),(E)(2002).




                       Page 9                                                          GAO-03-592T
locality. In 2000, DOD increased reimbursement rates in rural Alaska in an
attempt to entice more providers to join the network, but the new rates
did not increase provider participation.11 In 2002, DOD increased
reimbursement rates to 115 percent of the Medicare rate for the rest of
Alaska. In 2003, DOD increased the rates for selected specialists in Idaho
to address documented network shortcomings. In 1997, DOD also
increased reimbursement rates for obstetrical care. These cases represent
the only instances in which DOD has used its authority to pay above the
Medicare rate.12 Because Medicare fees declined in 2002, and there is a
potential for future reductions, some contractors are concerned that
reimbursement rates may undermine the TRICARE network.

Contractors also report that providers have expressed dissatisfaction with
some TRICARE administrative requirements, such as credentialing and
preauthorizations and referrals. For example, many providers have
complained about TRICARE’s credentialing requirements. In TRICARE, a
provider must get recredentialed every 2 years, compared to every 3 years
for the private sector. Providers have said that this places cumbersome
administrative requirements on them.

Another widely reported concern about TRICARE administrative
requirements relates to preauthorization and referral requirements.
Civilian PCM providers are required to get preauthorizations from MTFs
before referring patients for specialized care. While preauthorization is a
standard managed care practice, providers complain that obtaining
preauthorization adversely affects the quality of care provided to
beneficiaries because it takes too much time. In addition, civilian PCMs
have expressed concern that they cannot refer beneficiaries to the
specialist of their choice because of MTFs’ “right of first refusal” that gives
an MTF discretion to care for the beneficiary or refer the care to a civilian
provider.

Nevertheless, there are not direct data confirming that low reimbursement
rates or administrative burdens translate into widespread network



11
 U.S. General Accounting Office, Defense Health Care: Across-the-Board Physician Rate
Increase Would Be Costly and Unnecessary, GAO-01-620 (Washington, D.C.: May 24, 2002).
12
 Similarly in April 2002, DOD adopted a policy that will authorize a 10 percent bonus
payment to select TRICARE providers working in medically underserved areas as defined
by Health Resources and Services Administration, consistent with Medicare payment
policy. DOD plans to implement the bonus payment in July 2003.




Page 10                                                                  GAO-03-592T
                    inadequacies. We found that out of the 2,156 providers who left one
                    contractor’s network during a 1-year period, 900 providers cited reasons
                    for leaving. Only 10 percent of these providers identified low
                    reimbursement rates as a factor and only 1 percent cited administrative
                    burdens.


                    DOD’s new contracts for providing civilian health care, called TNEX, may
New Contracts May   address some network concerns raised by providers and beneficiaries, but
Address Some        may create other areas of concern. Because the new contracts are not
                    expected to be finalized until June 2003, the specific mechanisms DOD and
Network Concerns,   the contractors will use to ensure network adequacy are not known. DOD
but May Create      plans to retain the access standards for appointment and office wait times,
                    as well as travel-time standards. However, instead of using provider-to-
Others              beneficiary ratios to measure network adequacy, TNEX requires that the
                    network complement the clinical services provided by MTFs and promote
                    access, quality, beneficiary satisfaction, and best value health care for the
                    government.13 However, TNEX does not specify how this will be measured.

                    TNEX may reduce administrative burden related to provider credentialing
                    and patient referrals. Currently, TRICARE providers must follow
                    TRICARE-specific requirements for credentialing. In contrast, TNEX will
                    allow for network providers to be credentialed through a nationally
                    recognized accrediting organization. DOD officials stated this approach is
                    more in line with industry practices. Patient referral procedures will also
                    change under TNEX. Referral requirements will be reduced, but the MTFs
                    will still retain the “right of first refusal.”

                    On the other hand, TNEX may be creating a new administrative concern
                    for contractors and providers by requiring that 100 percent of network
                    claims submitted by providers be filed electronically. In fiscal year 2002,
                    only 25 percent of processed claims were submitted electronically.14
                    Contractors stated that such a requirement could discourage providers
                    from joining or staying in their network. However, DOD states that
                    electronic filing will cut claims-processing costs and save money.



                    13
                     DOD defines best value health care as high quality care delivered in the most economical
                    manner for the military health system that optimizes the MTF system while delivering the
                    highest level of customer service.
                    14
                     This percentage does not include pharmacy claims or claims for care provided to
                    Medicare-eligible beneficiaries under TRICARE For Life.



                    Page 11                                                                     GAO-03-592T
                  Another concern that has been raised by beneficiary groups extends
                  beyond the network and potentially impacts beneficiaries who use
                  TRICARE Standard. TNEX will no longer require contractors to provide
                  information to all beneficiaries, including Standard beneficiaries, about
                  providers participating in their area and to assist them in accessing care.
                  Under the existing contracts, contractors are required to provide
                  beneficiaries with the name of at least one participating provider, offer to
                  contact the provider on behalf of the beneficiary, and offer to contact at
                  least three local providers if a participating provider is not available
                  locally. In contrast, TNEX does not include these requirements. MOAA and
                  other beneficiary groups are concerned about this omission because they
                  have received an increasing number of complaints from their constituents
                  related to difficulties in finding providers who accept TRICARE Standard
                  beneficiaries.

                  Mr. Chairman, this concludes my prepared statement. I would be happy to
                  answer any questions you or other Members of the Subcommittee may
                  have.


                  For more information regarding this testimony, please contact me at (202)
Contacts and      512-7101. Kristi Peterson, Allan Richardson, Louise Duhamel, Marc
Acknowledgments   Feuerberg, Krister Friday, Gay Hee Lee, and John Oh also made key
                  contributions to this statement.




(290280)
                  Page 12                                                         GAO-03-592T