BNUMBER:  B-281439.3; B-281439.4 
DATE:  March 23, 1999
TITLE: Capital Health Services, Inc.; JSA Healthcare Corporation, B-
281439.3; B-281439.4, March 23, 1999
**********************************************************************

DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective 
Order.  This redacted version has been approved for public release.
Matter of:Capital Health Services, Inc.; JSA Healthcare Corporation

File:     B-281439.3; B-281439.4

Date:March 23, 1999

Victor G. Klingelhofer, Esq., and John J. O'Brien, Esq., Cohen Mohr, 
for the protesters.
Karl E. Hansen, Esq., TRICARE Management Activity, for the agency.
Ralph O. White, Esq., and Christine S. Melody, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  The Military-Civilian Health Services Partnership Program, 10 
U.S.C.  sec.  1096 (1994)--which authorizes the use of resource sharing 
agreements between the military's medical treatment facilities and 
civilian health care providers to deliver health care services to 
active duty service personnel and other military-related 
beneficiaries--is not a procurement statute for purposes of General 
Accounting Office (GAO) bid protest jurisdiction.  However, GAO will 
take limited jurisdiction over the award of such agreements where the 
protester alleges that the agreements have been improperly used to 
avoid the requirements of the procurement statutes.

2.  Protesters' contention that resource sharing agreements were an 
improper attempt to avoid the requirements of the procurement statutes 
is denied where the agreements were clearly within the authority 
granted by the statute, and within the scope of the underlying 
contract for managed health care services. 

DECISION

Capital Health Services, Inc. and JSA Healthcare Corporation protest a 
decision by the TRICARE Management Activity (TMA) to add the operation 
of two existing NAVCARE outpatient medical clinics in San Diego, 
California, to TMA's ongoing contract with Foundation Health Federal 
Services, Inc.  The protesters argue that the operation of the two 
clinics is beyond the scope of Foundation's contract, that the agency 
was required to hold a competition for the operation of the clinics, 
and that the agency's use of resource sharing agreements to convey 
operation of the clinics to Foundation violated the regulations 
applicable to the use of such agreements.

We deny the protests.

BACKGROUND

The TRICARE Program

The Department of Defense (DOD) maintains an extensive network of 
military medical treatment facilities (MTF) to provide direct care to 
active duty service personnel and, on a space-available basis, to 
other military-related beneficiaries, including dependents of active 
duty personnel and military retirees and their dependents.  The direct 
care provided by the MTFs is supplemented by care paid for by DOD, but 
provided in civilian facilities.   

DOD has implemented a managed health care system, called the TRICARE 
program,  to control the costs associated with providing health care 
to those eligible to receive it.[1]  The TRICARE program uses a 
managed care contractor to coordinate the access of health care 
beneficiaries to MTFs and to supplemental civilian sector health care 
providers.  32 C.F.R.  sec.  199.17(a)(1) (1998).  TMA is the DOD office 
that directs the TRICARE program.  

When the TRICARE program is implemented in a given area, the official 
announcement identifies the geographical area covered by the program.  
Id. at  sec.  199.17(a)(5).  The geographic area at issue in this case 
encompasses Southern California, and is referred to as TRICARE Region 
9.  Within TRICARE's Region 9 are a number of MTFs, each of which is 
responsible for providing health care (on a space-available basis, and 
with certain priorities) to all eligible beneficiaries within a 
geographical subset of the region, called the MTF's catchment area.  
Id.  The most significant MTF within Region 9 is the Naval Medical 
Center San Diego (NMCSD).  NMCSD's care, as well as that of the other 
Region 9 MTFs, is supplemented by the region's managed care support 
contractor, Foundation.

The TRICARE program offers three options for health care:  (1) a 
health maintenance organization-type plan, called TRICARE Prime; (2) a 
network of preferred providers, called TRICARE Extra; and (3) a 
standard fee-for-service plan, called TRICARE Standard.  All active 
duty military personnel are automatically enrolled under TRICARE 
Prime; all other TRICARE-eligible beneficiaries are automatically 
covered under the TRICARE Standard or Extra options, unless they 
select enrollment in the TRICARE Prime program.  32 C.F.R.  sec.  
199.17(a)(6).

Use of Resource Sharing Agreements

The TRICARE program, by statute and by regulation, as well as 
Foundation's contract for Region 9, anticipates the use of unique 
agreements for the sharing of medical resources between DOD and the 
managed care contractor, pursuant to the Military-Civilian Health 
Services Partnership Program, established at 10 U.S.C.  sec.  1096 (1994).  
Specifically, a resource sharing agreement permits the sharing of 
personnel, equipment, supplies, and any other items necessary to 
provide health care, provided the Secretary determines that use of 
such an agreement would result in delivery of health care services to 
beneficiaries in a more effective, efficient, or economical manner.  
10 U.S.C.  sec.  1096(a), (b) (1994); 32 C.F.R.  sec.  199.17(a)(6)(iii)(A).

In this regard, Foundation's managed care contract required it to: 

     develop and implement a resource sharing program for seeking 
     agreements with individual MTF Commanders for the provision of 
     medical personnel . . . , equipment, and/or supplies by the 
     contractor from the contractor's provider network and from 
     private sources outside of the network for the purpose of 
     enhancing the capabilities of MTFs to provide needed inpatient 
     and outpatient care to beneficiaries.  
Foundation Contract, MDA906-95-C-0007,  sec.  C-2a.(4).

The guidelines for resource sharing, also set forth in Foundation's 
contract, require "written agreements between the contractor and the 
MTF Commander and the appropriate Lead Agent,[2] and between the 
contractor and the resource sharing provider(s), support personnel, 
and/or equipment, and supply vendors."  Id. at  sec.  C-2a.(4)(b)1.  In 
addition, Foundation was required to develop a methodology for 
preparing a detailed cost analysis for each resource sharing proposal 
to estimate the net savings to the government and the contractor 
represented by the sharing approach.  Id.  sec.  C-2a.(4)(a)2.a.

Previous Status of the Outpatient Clinics

The two NAVCARE outpatient clinics at the center of this dispute have 
been associated with NMCSD since 1984, prior to the implementation of 
TRICARE.[3]  Both of the current clinic contracts were awarded by the 
Naval Medical Logistics Command, and neither provided for managed 
care.  Now that TRICARE is implemented in the San Diego area, all 
TRICARE beneficiaries are eligible for care in these NAVCARE clinics.  
32 C.F.R.  sec.  199.17(l)(2).  Capital Health has operated the NAVCARE 
clinic in the Clairemont Mesa area of San Diego since late 1993; the 
clinic currently handles approximately 104,000 visits annually.  JSA 
has operated the NAVCARE clinic in the Chula Vista area of San Diego 
under its current contract since late 1996 (and continuously since 
1986).  The Chula Vista clinic currently handles approximately 114,000 
visits annually.  

In June 1997, the Navy's Fleet and Industrial Supply Center in 
Philadelphia, Pennsylvania issued request for proposals (RFP) No. 
N00140-97-R-2021, seeking offers for the operation of the Clairemont 
Mesa and Chula Vista clinics, and introducing some elements of managed 
care to the clinics.  Two months later, on August 20, the Assistant 
Secretary of Defense, Health Affairs (ASD/HA), directed that all 
NAVCARE clinics be converted to TRICARE outpatient clinics in those 
regions where the TRICARE program was implemented.  ASD/HA Policy 
Memorandum No. 97-062.[4]  Both Capital Health and JSA submitted 
initial proposals and best and final offers in response to the RFP 
before it was canceled on May 7, 1998.  

After the RFP was canceled in May, both protesters became aware that 
the TMA and NMCSD were considering using resource sharing agreements 
with Foundation to operate these clinics.  After several months of 
negotiations, TMA, NMCSD and Foundation executed separate agreements 
for the sharing of resources to enable NMCSD to provide "a full scope 
adult and pediatric primary care clinic offering appointment[-]based 
outpatient primary care services, with limited pharmacy, laboratory, 
and radiology services to include mammography."[5]  

The terms of the agreements show that the government will provide the 
clinic facility, as well as all "maintenance, telecommunications, 
security and utilities, housekeeping and laundry services, and central 
sterile supply support staff, emergency medical services and ambulance 
transport service, and office and medical supplies."  Agreements, 
Attach. A,  sec.  2.5.  Foundation (or its vendor) will provide most of the 
required personnel, and medical equipment and clinic furniture.  Id.  sec.  
2.2-2.4.  In addition, Foundation is not compensated by the agreement 
for the resources it provides.  Instead, compensation is pursuant to 
the negotiated rates for services provided for, or referenced in, 
Foundation's contract.  Id.  sec.  4.0-5.0. 

DISCUSSION

The protesters argued initially that the addition of the Clairemont 
Mesa and Chula Vista NAVCARE outpatient clinics to Foundation's 
contract modified the contract beyond its anticipated scope.  However, 
as explained by TMA, and as recognized by the protesters in their 
supplemental protests, a resource sharing agreement does not result in 
a modification to a contract, but is instead a bilateral, 
free-standing agreement between the MTF (together with TMA's Lead 
Agent), and the managed care contractor.[6]  

In response, the protesters argue that the resource sharing agreements 
here are, nonetheless, beyond the scope of Foundation's contract, 
beyond the scope of any resource sharing agreement heretofore, and 
beyond the authority for such agreements authorized by the resource 
sharing agreement statute--in essence, arguing that the agreements 
here are disguised, improper sole-source awards.  The protesters also 
argue that the resource sharing agreements here violate the 
requirement that such agreements be cost-effective for the government.

Jurisdiction and Extent of Review

As a preliminary matter, before we can address the protesters' 
allegations, we must first consider whether a resource sharing 
agreement falls within the bid protest jurisdiction of our Office.

Our jurisdiction to hear bid protests limits our review to alleged 
violations of procurement statutes or regulations by federal agencies 
in the award or proposed award of contracts for the procurement of 
goods and services, and solicitations leading to such awards.  31 
U.S.C.  sec.  3551(1), 3552 (1994).  For the reasons set forth below, we 
conclude that the Military-Civilian Health Services Partnership 
Program, 10 U.S.C.  sec.  1096, which authorizes resource sharing 
agreements, is not a procurement statute.

First, the statute, on its face, does not anticipate an acquisition of 
goods or services.[7]  Rather, 10 U.S.C.  sec.  1096(a) authorizes 
agreements "providing for the sharing of resources between facilities 
of the uniformed services and facilities of a civilian health care 
provider" with whom the government has a managed health care contract.  
In addition, the pool of eligible recipients of these agreements is 
expressly limited to those with whom the government already has a 
managed health care contract.  Thus, nothing about the statute 
anticipates the award of new contracts.  Further, the statute does not 
anticipate compensation of the civilian health care provider for the 
additional employees, equipment, or supplies provided.  Rather, the 
statute clearly explains that beneficiaries will pay for the added 
services pursuant to the terms of their health care coverage.  10 
U.S.C.  sec.  1096(c).  Finally, the statute underscores the shared nature 
of these endeavors by authorizing reimbursement of professional 
license fees for uniformed services members who must pay such a fee to 
provide health care at the facility of a civilian health care provider 
pursuant to one of these agreements.  10 U.S.C.  sec.  1096(d).  In short, 
none of the provisions of this statute support the protester's claim 
that the Military-Civilian Health Services Partnership Program is a 
procurement statute. 

Nonetheless, while we do not agree that a generic resource sharing 
agreement is the equivalent of a procurement, our consideration of 
jurisdiction does not end there.  As noted above, the protesters 
allege that the resource sharing agreements here are being used to 
avoid the procurement statutes and regulations.  The fact that these 
NAVCARE clinics were previously operated pursuant to Navy-awarded 
procurement contracts supports the protesters' assertion.  This case 
is thus analogous to those cases where we take limited jurisdiction 
over challenges to contract modifications, see MCI Telecomms. Corp., 
B-276659.2, Sept. 29, 1997, 97-2 CPD  para.  90 at 7 (review limited to 
whether modification is beyond the scope of original contract, and 
would otherwise be subject to requirements for competition), and 
challenges to cooperative agreements under the Federal Grant and 
Cooperative Agreement Act, 31 U.S.C.  sec.  6305, see Energy Conversion 
Devices, Inc., B-260514, June 16, 1995, 95-2 CPD  para.  121 at 2 (review 
limited to whether cooperative agreement is consistent with the 
statutory guidance in the Act to ensure that agency is not attempting 
to avoid the requirements of procurement statutes or regulations).  
Accordingly, we will take jurisdiction over the issuance of these 
agreements for the limited purpose of considering whether they have 
been used to improperly avoid the requirements of the procurement 
statutes.[8]  See MCI Telecomms. Corp., supra; Energy Conversion 
Devices, Inc., supra. 

The Propriety of the Clairemont and Chula Vista Resource Sharing 
Agreements

In considering whether the agency improperly used resource sharing 
agreements where competitive procurements should have been conducted, 
we look to the authorizing statute for such agreements.  See Spire 
Corp., B-258267, Dec. 21, 1994, 94-2 CPD  para.  257 at 3.  Here, the 
statute expressly anticipates the sharing of personnel, equipment, 
supplies, and any other items or facilities necessary to provide 
health care services.  10 U.S.C.  sec.  1096(b).  As explained above, the 
agreements here provide that the MTF is responsible for the clinic 
building and numerous facets of its operation (security, maintenance, 
supplies, etc.), while Foundation is responsible for ensuring that the 
facility is properly staffed, and for providing equipment and 
furniture.  Thus, our review shows that these agreements are well 
within the parameters of the authorizing statute, and we have no basis 
to conclude that the agreements have been used improperly as a 
substitute for competitive procurements.

With respect to the protesters' contentions that the agreements here 
are beyond the scope of Foundation's contract, we look generally to 
whether there is evidence of a material difference between the 
agreement and the original contract, and whether the original contract 
adequately advised offerors of the potential for the type of change 
covered by the agreement.  See MCI Telecomms. Corp., supra, at 7-8.  
In this area, we see no evidence to support a conclusion that the 
resource sharing agreements here are beyond the scope of Foundation's 
contract.  

Foundation's contract anticipated that it would work with the MTF and 
TMA Lead Agent to provide managed care for all eligible beneficiaries 
within TRICARE's Region 9.  Foundation Contract,  sec.  C.a.  In addition, 
the contract directed the use of resource sharing agreements wherever 
possible, rather than task order modifications.  Id.  sec.  C-2a.(4), 
C-13a.  We also note that the operation of the NAVCARE clinics as 
separate non-managed care outpatient facilities, within the NMCSD 
catchment area, was a redundant service left over from before the 
implementation of TRICARE.

Finally, we note the protesters' contention that the use of resource 
sharing agreements to provide for the operation of the Clairemont and 
Chula Vista clinics appears to be a broader use of such agreements 
than has been seen heretofore.  We agree.  Our review of the resource 
sharing agreements used to date by TRICARE, both as part of 
Foundation's Region 9 contract, and as part of our audit review of the 
use of such agreements, suggests that the agreements here may be the 
most significant use yet of the authority provided at 10 U.S.C.  sec.  
1096, and the TMA agrees.  For example, our 1997 audit report 
describes the use of such an agreement simply to augment the internal 
medicine services at an MTF to reduce the need for referrals to 
outside internists.  GAO/HEHS-97-130 at 29.  Similarly, Foundation's 
Contract,  sec.  G, Exhibit 7, at 125-126 describes a possible resource 
sharing agreement to provide an echo-cardiogram technician to augment 
the MTF's cardiology capability.

On the other hand, as the discussion above concludes, there is nothing 
about the resource sharing agreements used here that provides for 
services beyond those anticipated by the statute authorizing these 
agreements.  In addition, the agreements are clearly within the scope 
of Foundation's contract, and reflect a reasonable agency decision to 
delete the redundant non-managed care clinics from areas covered by 
the TRICARE managed care system.  For these reasons, we see nothing 
unreasonable or improper about these agreements simply because they 
are larger or more significant than previous agreements.  

The protests are denied.

Comptroller General
of the United States

1. Prior to implementing the TRICARE program, DOD administered an 
insurance-like program for supplemental care called the Civilian 
Health and Medical Program of the Uniformed Services (CHAMPUS).  
CHAMPUS was a traditional fee-for-service program that allowed 
beneficiaries to obtain services from providers of their own choosing 
without preauthorization.  See generally Defense Health Care:  TRICARE 
Resource Sharing Program Failing to Achieve Expected Savings, 
(GAO/HEHS-97-130 Aug. 22, 1997) at 3-4; Foundation Health Fed. Servs., 
Inc.; QualMed, Inc., B-254397.4 et al., Dec. 20, 1993, 94-1 CPD  para.  3 at 
3. 

2. To coordinate MTF and contractor services, and to monitor health 
care delivery, each TRICARE region is headed by a joint-service 
administrative organization called a lead agent.  GAO/HEHS-97-130 at 
4.

3. TMA Request for Dismissal, Nov. 30, 1998, at 2.

4. This direction is also set forth at 32 C.F.R.  sec.  199.17(l)(1), which 
states that the NAVCARE clinics are "transitional entities" and that 
authorization for their operation will cease with the implementation 
of TRICARE, or on October 1, 1997, whichever is later.

5. NAVCARE Prime, Chula Vista:  Resource Sharing Agreement, Attach. A,  sec.  
2.2; NAVCARE Prime, Clairemont:  Resource Sharing Agreement, Attach. 
A,  sec.  2.2.  Since these agreements are virtually identical, they will 
hereinafter be cited as the "Agreements."

6. In fact, TMA's contract with Foundation explains that task order 
modifications to the contract requiring the contractor to provide 
personnel, medical equipment and supplies should only be used when 
resource sharing is not mutually beneficial to the government and the 
contractor.  Foundation Contract,  sec.  C-2a.(4), C-13a. 

7. The protesters here overstate the similarity between these resource 
sharing agreements and procurement contracts when they suggest that 
the agreements are being used to procure the operation of the NAVCARE 
clinics from Foundation, almost as if Foundation were providing a 
"turnkey" outpatient clinic.  Under the previous Navy contracts, the 
protesters provided all aspects of the clinics, including the clinic 
building; as discussed above, the agreements here anticipate the 
sharing of resources necessary to operate a clinic.

8. On the other hand, because our statutory grant of jurisdiction 
limits our review to awards or proposed awards of procurement 
contracts, we have no jurisdiction to review allegations that the 
agency performed an inadequate cost review to determine that the 
resource sharing agreements here will be cost-effective for the 
government.  See Sprint Communications Co., L.P., B-256586, 
B-256586.2, May 9, 1994, 94-1 CPD  para.  300 at 3, 5 (our limited review of 
cooperative agreements does not extend to an alleged conflict of 
interest in the award of a cooperative agreement).