The Comptroller General of the United States has declined to overturn the Pentagon's award of its $3.5 billion managed-care program in California and Hawaii.
However, the Defense Department has decided to allow the three firms vying for the contract to resubmit final offers for the five-year contract, which takes effect April 1, 1995. The Defense Department is expected to grant the contract, awarded earlier this year to Aetna Government Health Plans, by next month.
In effect, the department is overturning its earlier award, though even if Aetna fails to win in the second round of bidding, it still will have run the program for a year.
Bidding firms hope the close scrutiny that has been given to the process will force the Pentagon to change the way it evaluates bids.
Late last year, after months of delays, the Defense Department awarded its managed-care contract for 840,000 military beneficiaries in California and Hawaii to Aetna. The program, known as the CHAMPUS Reform Initiative, covers military personnel and their beneficiaries. CHAMPUS stands for the Civilian Health and Medical Program of the Uniformed Services.
Shortly after the bid was awarded, the unsuccessful firms-Qual-Med, Pueblo, Colo.; Foundation Health Plans, Sacramento, Calif.; and Wellpoint, the for-profit subsidiary of Blue Cross of California, Woodland Hills-protested the award to the General Accounting Office.
The GAO found that the Defense Department hadn't properly reviewed the bidders' cost estimates, instead substituting government cost estimates, and recommended that the process be reopened.
Subsequently, Qual-Med filed a protest with the comptroller general, claiming that the CRI plan hadn't been structured to allow for maximum managed-care efficiencies, thus skewing the bid process.
The comptroller general, who is head of the GAO, denied the bids, arguing that Qual-Med "did not explain how the company's chances of winning this competition could be adversely affected" by the Defense Department's program criteria. However, the comptroller agreed with the GAO report that the Defense Department must evaluate the cost estimates of the bidders rather than substituting government cost estimates.
"It is clear that what the GAO and the (comptroller general) are saying is that we were not given credit for our cost-containment methodologies," said Curt Westen, vice president of administration at Qual-Med.
Beneficiary groups, which have criticized the Defense Department for its rigid criteria, also hope the reviews by the GAO and comptroller general will prompt a change. "It's coming down to crunch time and (the Defense Department) is going to have to decide to let the managed-care companies implement managed care," said Dorsey Chescavage, senior issue specialist for the National Military Family Association.