Defense Health Care: Oversight of the Adequacy of TRICARE's	 
Civilian Provider Network Has Weaknesses (27-MAR-03,		 
GAO-03-592T).							 
                                                                 
During 2002, in testimony to the House Armed Services Committee, 
Subcommittee on Personnel, beneficiary groups described problems 
with access to care from TRICARE's civilian providers, and	 
providers testified about their dissatisfaction with the TRICARE 
program, specifying low reimbursement rates and administrative	 
burdens. The Bob Stump National Defense Authorization Act of 2003
required that GAO review DOD's oversight of TRICARE's network	 
adequacy. In response, GAO is (1) describing how DOD oversees the
adequacy of the civilian provider network, (2) assessing DOD's	 
oversight of the adequacy of the civilian provider network, (3)  
describing the factors that may contribute to potential network  
inadequacy or instability, and (4) describing how the new	 
contracts, expected to be awarded in June 2003, might affect	 
network adequacy. GAO's analysis focused on TRICARE Prime--the	 
managed care component of the TRICARE health care delivery	 
system. This testimony summarizes GAO's findings to date. A full 
report will be issued later this year.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-592T					        
    ACCNO:   A06443						        
  TITLE:     Defense Health Care: Oversight of the Adequacy of	      
TRICARE's Civilian Provider Network Has Weaknesses		 
     DATE:   03/27/2003 
  SUBJECT:   Customer service					 
	     Health care programs				 
	     Health care services				 
	     Managed health care				 
	     Program evaluation 				 
	     Program management 				 
	     DOD TRICARE Extra Program				 
	     DOD TRICARE Prime Program				 
	     DOD TRICARE Program				 
	     DOD TRICARE Standard Program			 

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GAO-03-592T

Testimony Before the Subcommittee on Total Force, Committee on Armed
Services, House of Representatives

United States General Accounting Office

GAO For Release on Delivery Expected at 1: 30 p. m. Thursday, March 27,
2003 DEFENSE HEALTH CARE

Oversight of the Adequacy of TRICARE*s Civilian Provider Network Has
Weaknesses

Statement of Marjorie Kanof Director, Health Care* Clinical

and Military Health Care Issues

GAO- 03- 592T

To oversee the adequacy of the civilian network, DOD has established
standards that are designed to ensure that its network has a sufficient
number and mix of providers, both primary care and specialists, necessary
to satisfy TRICARE Prime beneficiaries* needs. In addition, DOD has

standards for appointment wait, office wait, and travel times that are
designed to ensure that TRICARE Prime beneficiaries have adequate access
to care. DOD has delegated oversight of the civilian provider network to
lead agents, who are responsible for ensuring that these standards have
been met.

DOD*s ability to effectively oversee* and thus guarantee the adequacy of*
the TRICARE civilian provider network is hindered in several ways. First,
the measurement used to determine if there is a sufficient number of

providers for the beneficiaries in an area does not account for the actual
number of beneficiaries who may seek care or the availability of
providers. In some cases, this may result in an underestimation of the
number of providers needed in an area. Second, incomplete contractor
reporting on access to care makes it difficult for DOD to assess
compliance with this standard. Finally, DOD does not systematically
collect and analyze beneficiary complaints, which might assist in
identifying inadequacies in the TRICARE civilian provider network.

DOD and its contractors have reported three factors that may contribute to
potential network inadequacy: geographic location, low reimbursement
rates, and administrative requirements. However, the information the
contractors provide to DOD is not sufficient to measure the extent to
which the TRICARE civilian provider network is inadequate. While
reimbursement rates and administrative requirements may have created
dissatisfaction among providers, it is not clear that these factors have
resulted in insufficient numbers of providers in the network.

The new contracts, which are expected to be awarded in June 2003, may
result in improved network participation by addressing some network
providers* concerns about administrative requirements. For example, the
new contracts may simplify requirements for provider credentialing and
referrals, two administrative procedures providers have complained about.
However, according to contractors, the new contracts may also create
requirements that could discourage provider participation, such as the new
requirement that 100 percent of network claims submitted by providers be

filed electronically. Currently, only about 25 percent of such claims are
submitted electronically. During 2002, in testimony to the House Armed
Services Committee,

Subcommittee on Personnel, beneficiary groups described problems with
access to care from TRICARE*s civilian providers, and providers testified
about their dissatisfaction with the TRICARE program, specifying low
reimbursement rates and administrative burdens. The Bob Stump National
Defense

Authorization Act of 2003 required that GAO review DOD*s oversight of
TRICARE*s network adequacy. In response, GAO is (1) describing how DOD
oversees the adequacy of

the civilian provider network, (2) assessing DOD*s oversight of the
adequacy of the civilian provider network, (3) describing the factors

that may contribute to potential network inadequacy or instability, and
(4) describing how the new contracts, expected to be awarded in June 2003,
might affect network adequacy. GAO*s analysis focused on TRICARE Prime*
the managed

care component of the TRICARE health care delivery system. This testimony
summarizes GAO*s findings to date. A full report will

be issued later this year. www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 592T.
To view the full report, including the scope and methodology, click on the
link above. For more information, contact Marjorie Kanof at (202) 512-
7101. Highlights of GAO- 03- 592T, a report to a

testimony before the Subcommittee on Total Force, Committee on Armed
Services, House of Representatives March 27, 2003

DEFENSE HEALTH CARE

Oversight of the Adequacy of TRICARE*s Civilian Provider Network Has
Weaknesses

Page 1 GAO- 03- 592T

Mr. Chairman and Members of the Subcommittee: I am pleased to be here
today to discuss issues related to the Department of Defense*s (DOD)
healthcare system, TRICARE. TRICARE*s primary mission is to provide care
for its eligible beneficiaries; currently, more than 8.7 million active
duty personnel, retirees, and dependents are eligible to receive care
through TRICARE. These beneficiaries receive their care through Military
Treatment Facilities (MTFs) or through TRICARE*s civilian provider
network, which is designed to complement the availability of care offered
by MTFs. MTFs supply most of the health care services TRICARE
beneficiaries receive. 1 TRICARE faces new challenges in ensuring that its
civilian network can

provide adequate access to care that complements the capabilities of MTFs.
In 2003, DOD will award new contracts for the delivery of care in the
civilian network. As a result, the providers who choose to participate may
change, while those who remain will operate under new policies and
procedures. During this time, TRICARE is still responsible for ensuring
that its civilian network provides adequate access to care, even if the
provider for some beneficiaries* care is changed.

TRICARE also faces beneficiary and provider dissatisfaction with its
existing civilian network. During April 2002, testimony before the House
Armed Services Committee, Subcommittee on Personnel, beneficiary groups
described problems with access to care from TRICARE*s civilian providers.
Also, providers testified about their dissatisfaction with the

TRICARE program, specifying low reimbursement rates and administrative
burdens. In response to these concerns, the Bob Stump National Defense

Authorization Act of 2003 (NDAA 2003) required that we review DOD*s
oversight of the adequacy of the TRICARE civilian network. 2 My remarks
will summarize the findings of our analysis to date, and we will issue a
full report later this year. Our analysis, including our testimony today,
focuses

on TRICARE*s civilian provider network. Specifically, I will discuss (1)
how DOD oversees the adequacy of the civilian provider network, (2) an

1 The military health system was funded at about $26.4 billion for fiscal
year 2003. Approximately 20 percent of this amount, $5. 2 billion, was
budgeted for the TRICARE civilian provider network. 2 Pub. L. No. 107-
314, .S: 712, 116 Stat. 2458, 2588 (2002).

Page 2 GAO- 03- 592T

assessment of DOD*s oversight of the adequacy of the civilian provider
network, (3) the factors that may contribute to potential network
inadequacy or instability, and (4) how the new contracts might affect
network adequacy.

To examine how DOD oversees the civilian provider network and interacts
with the contractors, we interviewed officials at TRICARE Management
Activity (TMA) in Washington D. C., the office that ensures that DOD
health policy is implemented, and officials at TMA- West, the office that
carries out contracting functions, including administering the civilian
contracts and writing the Requests for Proposals for the future contracts.
To assess DOD*s oversight of the TRICARE network, we reviewed and analyzed
extensive information from network adequacy reports from each of the
contractors. We also interviewed DOD regional officials, known as lead
agents, and MTF officials from 5 of 11 TRICARE regions. In addition, we
interviewed officials from each of the four managed care support
contractors who develop and maintain the network of providers to augment
the care provided by MTFs. We visited and discussed network management and
provider complaints with representatives of each contractor. We focused
our work on TRICARE Prime* the managed care component of the TRICARE
health care delivery system. We conducted our work from June 2002 through
March 2003 in accordance with generally accepted government auditing
standards.

In summary, to oversee the adequacy of the civilian network, DOD has
established standards that are designed to ensure that its network has a
sufficient number and mix of providers, both primary care and specialists,
necessary to satisfy TRICARE Prime beneficiaries* needs. In addition, DOD
has standards for appointment wait, office wait, and travel times that are
designed to ensure that TRICARE Prime beneficiaries have adequate access
to care. DOD has delegated oversight of the civilian provider network to
lead agents, who are responsible for ensuring that these standards have
been met.

DOD*s ability to effectively oversee* and thus guarantee the adequacy of*
the TRICARE civilian provider network is hindered in several ways. First,
the measurement used to determine if there is a sufficient number of
providers for the beneficiaries in an area does not account for the actual
number of beneficiaries who may seek care or the availability of
providers. In some cases, this may result in an underestimation of the
number of providers needed in an area. Second, incomplete contractor
reporting on access to care makes it difficult for DOD to assess
compliance with this standard. Finally, DOD does not systematically
collect and analyze

Page 3 GAO- 03- 592T

beneficiary complaints, which might assist in identifying inadequacies in
the TRICARE civilian provider network.

DOD and its contractors have reported three factors that may contribute to
potential network inadequacy: geographic location, low reimbursement
rates, and administrative requirements. However, the information the
contractors provide to DOD is not sufficient to measure the extent to
which the TRICARE civilian provider network is inadequate. While
reimbursement rates and administrative requirements may have created
dissatisfaction among providers, it is not clear that these factors have
resulted in insufficient numbers of providers in the network.

The new contracts, which are expected to be awarded in June 2003, may
result in improved network participation by addressing some network
providers* concerns about administrative requirements. For example, the
new contracts may simplify requirements for provider credentialing and
referrals, two administrative procedures providers have complained about.

However, according to contractors, the new contracts may also create
requirements that could discourage provider participation, such as the new
requirement that 100 percent of network claims submitted by providers be
filed electronically. Currently, only about 25 percent of such claims are
submitted electronically.

TRICARE has three options for its eligible beneficiaries:  TRICARE Prime,
a program in which beneficiaries enroll and receive care

in a managed network similar to a health maintenance organization (HMO); 
TRICARE Extra, a program in which beneficiaries receive care from a

network of preferred providers; and  TRICARE Standard, a fee- for-
service program that requires no network use. The programs vary according
to the amount beneficiaries must contribute towards the cost of their care
and according to the choices beneficiaries have in selecting providers. In
TRICARE Prime, 3 the program in which active duty personnel must enroll,
the beneficiaries must select a primary

3 Out of more than 8.7 million eligible beneficiaries, nearly half are
enrolled in TRICARE Prime. Background

Page 4 GAO- 03- 592T

care manager (PCM) 4 who either provides care or authorizes referrals to
specialists. Most beneficiaries who enroll in TRICARE Prime select their
primary care providers from MTFs, while other enrollees select their PCMs
from the civilian network. Regardless of their status* military or
civilian* PCMs may refer Prime beneficiaries to providers in either MTFs
or TRICARE*s civilian provider network. 5 Both TRICARE Extra and TRICARE
Standard require co- payments, but

beneficiaries do not enroll with or have their care managed by PCMs.
Beneficiaries choosing TRICARE Extra use the same civilian provider
network available to those in TRICARE Prime, and beneficiaries choosing
TRICARE Standard are not required to use providers in any network. For
these beneficiaries, care can be provided at an MTF when space is
available.

DOD employs four civilian health care companies or managed care support
contractors (contractors) that are responsible for developing and
maintaining the civilian provider network that complements the care
delivered by MTFs. The contractors recruit civilian providers into a
network of PCMs and specialists who provide care to beneficiaries enrolled
in TRICARE Prime. This network also serves as the network of preferred
providers for beneficiaries who use TRICARE Extra. In 2002, contractors
reported that the civilian network included about 37,000 PCMs and 134,000
specialists. The contractors are also responsible for ensuring adequate
access to health care, referring and authorizing beneficiaries for health
care, educating providers and beneficiaries about TRICARE

benefits, ensuring providers are credentialed, and processing claims. In
their network agreements with civilian providers, contractors establish
reimbursement rates and certain requirements for submitting claims.
Reimbursement rates cannot be greater than Medicare rates unless DOD
authorizes a higher rate. 4 A primary care manager is a provider or team
of providers at an MTF or a provider in the civilian network to whom a
beneficiary is assigned for primary care services when he or

she enrolls in TRICARE Prime. Enrolled beneficiaries agree to initially
seek all nonemergency, nonmental health care services from these
providers. 5 DOD*s policy is to optimize the use of the MTF. Accordingly,
when a referral for specialty

care is made by a civilian PCM, the MTF retains the *right of first
refusal* to accommodate the beneficiary within the MTF or refer the
beneficiary to the civilian provider network for the needed medical care.

Page 5 GAO- 03- 592T

DOD*s four contractors manage the delivery of care to beneficiaries in 11
TRICARE regions. DOD is currently analyzing proposals to award new
civilian health care contracts, and when they are awarded in 2003, DOD
will reorganize the 11 regions into 3* North, South, and West* with a
single contract for each region. Contractors will be responsible for
developing a new civilian provider network that will become operational in
April 2004. Under these new contracts DOD will continue to emphasize
maximizing the role of MTFs in providing care. The Office of the Assistant
Secretary of Defense for Health Affairs (Health

Affairs) establishes TRICARE policy and has overall responsibility for the
program. The TRICARE Management Activity (TMA), under Health Affairs, is
responsible for awarding and administering the TRICARE contracts. DOD has
delegated oversight of the provider network to the local level through the
regional TRICARE lead agent. The lead agent for each region coordinates
the services provided by MTFs and civilian network providers. The lead
agents respond to direction from Health Affairs, but report directly to
their respective Surgeons General. In overseeing the network, lead agents
have staff assigned to MTFs to provide the local interaction with
contractor representatives and respond to beneficiary complaints as needed
and report back to the lead agent.

DOD*s contracts for civilian health care are intended to enhance and
support MTF capabilities in providing care to millions of TRICARE
beneficiaries. Contractors are required to establish and maintain the
network of civilian providers in the following locations: for all
catchment areas, 6 base realignment and closure sites, 7 in other
contract- specified areas, and in noncatchment areas where a contractor
deems it costeffective. In the remaining areas, a network is not required.

DOD requires that contractors have a sufficient number and mix of
providers, both primary care and specialists, necessary to satisfy the
needs of beneficiaries enrolled in the Prime option. Specifically, it is
the

6 Catchment areas are geographic areas determined by the Assistant
Secretary of Defense for Health Affairs that are defined by five- digit
zip codes, usually within an approximate 40- mile radius of inpatient
MTFs. 7 Base realignment and closure (BRAC) sites are military
installations that have been closed

or realigned as the result of decisions made by the Commissions on Base
Realignment and Closure. DOD Has Standards

for Network Adequacy and Requires Contractors* Compliance

Page 6 GAO- 03- 592T

responsibility of the contractors to ensure that the network has at least
one full- time equivalent PCM for every 2,000 TRICARE Prime enrollees and
one full- time equivalent provider (both PCMs and specialists) for every
1,200 TRICARE Prime enrollees. 8 In addition, DOD has access- to- care
standards that are designed to ensure

that Prime beneficiaries receive timely care. The access standards 9
require the following:

 appointment wait times shall not exceed 24 hours for urgent care, 1 week
for routine care, or 4 weeks for well- patient and specialty care; 
office wait times shall not exceed 30 minutes for nonemergency care; and 
travel times shall not exceed 30 minutes for routine care and 1 hour for

specialty care. DOD does not specify access standards for eligible
beneficiaries who do not enroll in TRICARE Prime. However, DOD requires
that contractors provide information and/ or assist all beneficiaries*
regardless of which option they choose* in finding a participating
provider in their area.

DOD has delegated oversight of the civilian provider network to the
regional TRICARE lead agents. The lead agents told us they use the
following tools and information to oversee the network.

 Network Adequacy Reporting* Contractors are required to provide reports
quarterly to the lead agents. The reports contain information on the
status of the network* such as the number and type of specialists, a list
of primary care managers, and data on adherence to the access standards.
The reports may also contain information on steps the contractors have
taken to address any network inadequacies.  Beneficiary Complaints* The
complaints come directly from beneficiaries

and through other sources, such as the contractor or MTFs. In addition to
these tools, lead agents periodically monitor contractor compliance by
reviewing performance related to specific contract requirements, including
requirements related to network adequacy. Lead agents also told us they
periodically schedule reviews of special issues

8 In addition, all four contractors chose to closely follow the Graduate
Medical Education National Advisory Committee (GMENAC) recommendation for
determining the specialty mix requirements for their network.

9 32 C. F. R. S:199. 17( p)( 5)( 2002).

Page 7 GAO- 03- 592T

related to network adequacy, such as conducting telephone surveys of
providers to determine whether they are accepting TRICARE patients. In
addition, lead agents stated they meet regularly with MTF and contractor
representatives to discuss network adequacy and access to care.

If the lead agents determine that a network is inadequate, they have
formal enforcement actions they may use to correct deficiencies. However,
lead agents told us that few of the actions have been issued. They said
they prefer to address deficiencies informally rather than take formal
actions, particularly in areas where they do not believe the contractor
can correct the deficiency because of local market conditions. For
example, rather than taking a formal enforcement action, one lead agent
worked with the contractor to arrange for a specialist from one area to
travel to another area periodically.

DOD*s ability to effectively oversee* and thus guarantee the adequacy of*
the TRICARE civilian provider network is hindered by (1) flaws in its
required provider- to- beneficiary ratios, (2) incomplete reporting on
beneficiaries* access to providers, and (3) the absence of a systematic
assessment of complaints. Although DOD has required its network to meet
established ratios of providers to beneficiaries, the ratios may
underestimate the number of providers needed in an area. Similarly,
although DOD has certain requirements governing beneficiary access to
available providers, the information reported to DOD on this access is
often incomplete* making it difficult to assess compliance with the
requirements. Finally, when beneficiaries complain about availability or
access in their network, these complaints can be directed to different DOD
entities, with no guarantee that the complaints will be compiled and
analyzed in the aggregate to identify possible trends or patterns and
correct network problems.

In some cases, the provider- to- beneficiary ratios underestimate the
number of providers, particularly specialists, needed in an area. This
underestimation occurs because in calculating the ratios, the contractors
do not always include the total number of Prime enrollees within the area.
Instead, they base their ratio calculations on the total number of
beneficiaries enrolled with civilian PCMs and do not count beneficiaries
enrolled with PCMs in MTFs. The ratio is most likely to result in an
underestimation of the need for providers in areas in which the MTF is a
clinic or small hospital with a limited availability of specialists. DOD*s
Civilian

Provider Network Oversight Has Weaknesses

Required Provider- toBeneficiary Ratios May Not Account for Actual Number
of Beneficiaries or Availability of Providers

Page 8 GAO- 03- 592T

Moreover, in reporting whether their network meets the established ratios,
different contractors make assumptions about the level of participation on
the part of civilian network providers. These assumptions may or may not

be accurate, and the assumptions have a significant effect on the number
of providers required in the network. Contractors generally assume that
between 10 to 20 percent of their providers* practices are dedicated to
TRICARE Prime beneficiaries. Therefore, if a contractor assumes 20 percent
of all providers* practices are dedicated to TRICARE Prime rather than 10
percent, the contractor will need half as many providers in the network in
order to meet the prescribed ratio standard.

In the network adequacy reports we reviewed, managed care support
contractors did not always report all the information required by DOD to
assess compliance with the access standards. Specifically, for the network
adequacy reports we reviewed from 5 of the 11 TRICARE regions, we found
that contractors reported less than half of the required information on
access standards for appointment wait, office wait, and travel times. Some
contractors reported more information than others, but none reported all
the required access information. Contractors said they had difficulties in
capturing and reporting information to demonstrate compliance with the
access standards. Additionally, two contractors collected some access
information, but the lead agents chose not to use it. Most of the DOD lead
agents we interviewed told us that because

information on access standards is not fully reported, they monitor
compliance with the access standards by reviewing beneficiary complaints.
Beneficiaries can complain about access to care either orally or in
writing to the relevant contractor, their local MTF, or the regional lead
agent. Because beneficiary complaints are received through

numerous venues, often handled informally on a case- by- case basis, and
not centrally evaluated, it is difficult for DOD to assess the extent of
any systemic access problems. TMA has a central database of complaints it
has received, but complaints directed to MTFs, lead agents, or contractors
may not be directed to this database.

While contractor and lead agent officials told us they have received few
complaints about network problems, this small number of complaints could
indicate either an overall satisfaction with care or a general lack of
knowledge about how or to whom to complain. Additionally, a small

number of complaints, particularly when spread among many sources,
Information Reported on

Access Standards Was Incomplete

Beneficiary Complaints Are Not Systematically Collected and Evaluated

Page 9 GAO- 03- 592T

limits DOD*s ability to identify any specific trends of systemic problems
related to network adequacy within TRICARE.

DOD and contractors have reported three factors that may contribute to
network inadequacy: geographic location, low reimbursement rates, and
administrative requirements. While reimbursement rates and administrative
requirements may have created dissatisfaction among providers, it is not
clear how much these factors have affected network adequacy because the
information the contractors provide to DOD is not sufficient to reliably
measure network adequacy. DOD and contractors have reported regional
shortages for certain types of specialists in rural areas. For example,
they reported shortages for

endocrinology in the Upper Peninsula of Michigan and dermatology in New
Mexico. Additionally, in some instances, TRICARE officials and contractors
have reported difficulties in recruiting providers into the TRICARE Prime
network because in some areas providers will not join managed care
programs. For example, contractor network data indicate that there have
been long- standing provider shortages in TRICARE in areas such as eastern
New Mexico, where the lead agent stated that the providers in that area
have repeatedly refused to join any network.

According to contractor officials, TRICARE Prime providers have expressed
concerns about decreasing reimbursement rates. In addition, there have
been reported instances in which groups of providers have banded together
and refused to accept TRICARE patients due to their concerns with low
reimbursement rates. One contractor identified low reimbursement rates as
the most frequent cause of provider dissatisfaction. In addition to
provider complaints, beneficiary advocacy groups, such as the Military
Officers Association of America (MOAA), have cited numerous instances of
providers refusing care to beneficiaries because of low reimbursement
rates.

By statute, DOD cannot generally pay TRICARE providers more than they
would be paid under the Medicare fee schedule. In certain situations, DOD
has the authority to pay up to 115 percent of the Medicare fee to network
providers. 10 DOD*s authority is limited to instances in which it has
determined that access to health care is severely impaired within a

10 See 32 C. F. R. S:199.14( h)( 1)( iv)( D),( E)( 2002). DOD and
Contractors

Report Three Factors That May Contribute to Network Inadequacies

Page 10 GAO- 03- 592T

locality. In 2000, DOD increased reimbursement rates in rural Alaska in an
attempt to entice more providers to join the network, but the new rates
did not increase provider participation. 11 In 2002, DOD increased
reimbursement rates to 115 percent of the Medicare rate for the rest of
Alaska. In 2003, DOD increased the rates for selected specialists in Idaho
to address documented network shortcomings. In 1997, DOD also increased
reimbursement rates for obstetrical care. These cases represent the only
instances in which DOD has used its authority to pay above the Medicare
rate. 12 Because Medicare fees declined in 2002, and there is a potential
for future reductions, some contractors are concerned that reimbursement
rates may undermine the TRICARE network.

Contractors also report that providers have expressed dissatisfaction with
some TRICARE administrative requirements, such as credentialing and
preauthorizations and referrals. For example, many providers have
complained about TRICARE*s credentialing requirements. In TRICARE, a
provider must get recredentialed every 2 years, compared to every 3 years
for the private sector. Providers have said that this places cumbersome
administrative requirements on them.

Another widely reported concern about TRICARE administrative requirements
relates to preauthorization and referral requirements. Civilian PCM
providers are required to get preauthorizations from MTFs before referring
patients for specialized care. While preauthorization is a standard
managed care practice, providers complain that obtaining preauthorization
adversely affects the quality of care provided to beneficiaries because it
takes too much time. In addition, civilian PCMs have expressed concern
that they cannot refer beneficiaries to the specialist of their choice
because of MTFs* *right of first refusal* that gives an MTF discretion to
care for the beneficiary or refer the care to a civilian provider.

Nevertheless, there are not direct data confirming that low reimbursement
rates or administrative burdens translate into widespread network

11 U. S. General Accounting Office, Defense Health Care: Across- the-
Board Physician Rate Increase Would Be Costly and Unnecessary, GAO- 01-
620 (Washington, D. C.: May 24, 2002). 12 Similarly in April 2002, DOD
adopted a policy that will authorize a 10 percent bonus payment to select
TRICARE providers working in medically underserved areas as defined

by Health Resources and Services Administration, consistent with Medicare
payment policy. DOD plans to implement the bonus payment in July 2003.

Page 11 GAO- 03- 592T

inadequacies. We found that out of the 2,156 providers who left one
contractor*s network during a 1- year period, 900 providers cited reasons
for leaving. Only 10 percent of these providers identified low
reimbursement rates as a factor and only 1 percent cited administrative
burdens.

DOD*s new contracts for providing civilian health care, called TNEX, may
address some network concerns raised by providers and beneficiaries, but
may create other areas of concern. Because the new contracts are not

expected to be finalized until June 2003, the specific mechanisms DOD and
the contractors will use to ensure network adequacy are not known. DOD
plans to retain the access standards for appointment and office wait
times, as well as travel- time standards. However, instead of using
provider- tobeneficiary ratios to measure network adequacy, TNEX requires
that the network complement the clinical services provided by MTFs and
promote access, quality, beneficiary satisfaction, and best value health
care for the government. 13 However, TNEX does not specify how this will
be measured.

TNEX may reduce administrative burden related to provider credentialing
and patient referrals. Currently, TRICARE providers must follow TRICARE-
specific requirements for credentialing. In contrast, TNEX will allow for
network providers to be credentialed through a nationally recognized
accrediting organization. DOD officials stated this approach is more in
line with industry practices. Patient referral procedures will also change
under TNEX. Referral requirements will be reduced, but the MTFs will still
retain the *right of first refusal.*

On the other hand, TNEX may be creating a new administrative concern for
contractors and providers by requiring that 100 percent of network claims
submitted by providers be filed electronically. In fiscal year 2002, only
25 percent of processed claims were submitted electronically. 14
Contractors stated that such a requirement could discourage providers

from joining or staying in their network. However, DOD states that
electronic filing will cut claims- processing costs and save money.

13 DOD defines best value health care as high quality care delivered in
the most economical manner for the military health system that optimizes
the MTF system while delivering the highest level of customer service.

14 This percentage does not include pharmacy claims or claims for care
provided to Medicare- eligible beneficiaries under TRICARE For Life. New
Contracts May

Address Some Network Concerns, but May Create Others

Page 12 GAO- 03- 592T

Another concern that has been raised by beneficiary groups extends beyond
the network and potentially impacts beneficiaries who use TRICARE
Standard. TNEX will no longer require contractors to provide information
to all beneficiaries, including Standard beneficiaries, about providers
participating in their area and to assist them in accessing care. Under
the existing contracts, contractors are required to provide beneficiaries
with the name of at least one participating provider, offer to contact the
provider on behalf of the beneficiary, and offer to contact at least three
local providers if a participating provider is not available locally. In
contrast, TNEX does not include these requirements. MOAA and other
beneficiary groups are concerned about this omission because they have
received an increasing number of complaints from their constituents
related to difficulties in finding providers who accept TRICARE Standard
beneficiaries.

Mr. Chairman, this concludes my prepared statement. I would be happy to
answer any questions you or other Members of the Subcommittee may have.

For more information regarding this testimony, please contact me at (202)
512- 7101. Kristi Peterson, Allan Richardson, Louise Duhamel, Marc
Feuerberg, Krister Friday, Gay Hee Lee, and John Oh also made key
contributions to this statement. Contacts and

Acknowledgments

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