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
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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).