The Defense Department apparently has opted for a transaction-based fee-for-service type of medical program to cover some 250,000 military retirees and dependents in Oregon and Washington.
The changes in the new medical program, slated to begin operating later this year, have upset groups that represent beneficiaries of the Civilian Health and Medical Program of the Uniformed Services.
In addition, one of the four healthcare companies bidding on the five-year, $600 million program said it may withdraw its application rather than change its management structure to comply with the new approach.
CHAMPUS officials wouldn't comment.
"The new requirements take the `managed' out of `managed care' and aren't in the best interests of CHAMPUS beneficiaries and taxpayers," said Phil Nudelman, president and chief executive officer of Group Health Cooperative of Puget Sound, Seattle, which may withdraw from the bidding.
"It's all about control," said retired Col. Charles Partridge, legislative counsel for the National Association for Uniformed Services, Washington. "The military wants to keep control of the beneficiaries and the providers and the money."
In a letter to Pentagon officials, Mr. Nudelman said the changes give local military officials increased authority to prescribe how the private-sector partner would coordinate care with hospitals and physicians, "while the contractor would be at financial risk" for their decisions.
He noted that Group Health would be forced to negotiate a contract with Seattle's Children's Hospital and Medical Center if the facility was willing to accept the new program's payment terms.
A spokesman for Children's said the hospital routinely accepts patients insured by such payers as CHAMPUS and Group Health. Hospital executives were unaware of any proposed changes in its agreement with CHAMPUS, he said.
Civilian contractors have been vying with the military for control of CHAMPUS' purse strings for years. In California and Hawaii, civilian subcontractors have managed provider networks and negotiated discounts since 1988 on behalf of military hospital commanders for some 840,000 beneficiaries. That medical program is valued at $3.5 billion.
Observers said the changes ordered for Oregon and Washington by the Pentagon may put Group Health and its partner, Oakland, Calif.-based Kaiser Permanente's northwest region, at a disadvantage because those health plans operate their own hospitals, which they're hoping to fill with CHAMPUS patients.
The other bidders on the program may have more flexibility because they don't own hospitals, sources said. They include Sacramento, Calif.-based Foundation Health Corp.; Van Nuys, Calif.-based Health Systems International; and Woodland Hills, Calif.-based WellPoint Health Network.
