The Pentagon last week awarded Foundation Health Corp. a five-year, $650.6 million managed-care contract to cover military retirees and dependents in Oregon and Washington state.
The award was the first regional extension of the CHAMPUS Reform Initiative, an effort by the military to put more of its beneficiaries in managed-care plans. Under the plan, the 250,000 beneficiaries of the Civilian Health and Medical Program of the Uniformed Services in Oregon and Washington will be eligible for three benefit options: a capitated HMO plan with some cost-sharing; a PPO plan with discounts from fee-for-service rates for seeing physicians in the network; and continuation of standard fee-for-service benefits.
Providers in the running were Foundation, Rancho Cordova, Calif.; Qual-Med, Pueblo, Colo.; and WellPoint, the for-profit subsidiary of Blue Cross of California, Woodland Hills.
The selection of Foundation closes another chapter in the acrimonious reform initiative. The contract is attractive to providers because of the number of new members it would bring.
But according to at least one of the bidders, those new members came at a cost. Group Health Cooperative of Puget Sound in Seattle dropped out, complaining that although military medical officials control what services are offered, providers face the financial risk of those decisions.
Group Health later became a subcontractor in Foundation's CHAMPUS bid.
The Department of Defense is expected to announce a bigger prize later this month: a delayed multibillion-dollar managed-care contract to serve 840,000 beneficiaries in California and Hawaii.
Retired Army Col. Charles Partridge, legislative counsel for the National Association for Uniformed Services, said his group, which represents members of the military and retirees, did not want to take sides in what he called a "fight between the contractor and military community."
"We want some control over the benefits, we want it managed well, and we want quality of care and access to care," Mr. Partridge said.