TriWest loses appeal to keep military health contract

WASHINGTON -- After a bitter advertising campaign and a $10 million fine stemming from a government lawsuit, TriWest Healthcare Alliance has lost its appeal to keep its contract as the military's health provider for 21 Western states.

TriWest has held the Tricare West contract, estimated to be worth $17 billion over the next five years, since 1996 and it is the only contract TriWest holds. After losing the contract to UnitedHealth Group, TriWest appealed the decision to the Government Accountability Office. Both UnitedHealth and TriWest officials said TriWest lost that appeal, though GAO has not yet released its reasoning.

"Given our 16-year-long commitment to providing access to care for military families across the West Region, we are extremely disappointed by the GAO's findings regarding our protest," said TriWest President David McIntyre in a statement. "We will be discussing this decision with our company's owners and the counsel who represent us, and will, in turn, be making a decision on what, if any, action we will take in response to the GAO's denial of our protest."

McIntyre said the government's decision had nothing to do with the $10 million fine, which stemmed from a whistle-blower lawsuit.

UnitedHealth Group said it would continue to work through the transition of military and veterans health care services, which is scheduled for April 2013.

"UnitedHealth Military & Veterans Services is honored to be able to put our expertise and experience to work on behalf of Tricare West beneficiaries, and we look forward to working with the Defense Department and the incumbent contractor to ensure a smooth transition for servicemembers, retirees and their families," said Lori McDougal, CEO of UnitedHealth Military & Veterans Services. "We are committed to working with the Department of Defense to ensure beneficiaries have access to cost-effective, quality and innovative care."

In September, TriWest paid $10 million to settle a Justice Department lawsuit after whistle-blowers claimed TriWest "systematically defrauded" Tricare by billing the government higher rates than they had negotiated with health care providers. The lawsuit also said TriWest sent 3,000 claims through one location a day to intentionally bypass checks to avoid late-payment fees, and that it paid claims for ineligible beneficiaries.

TriWest countered the lost bid by launching a negative advertising campaign against UnitedHealth. A full-page ad in USA TODAY, as well as other publications, and billboards at the Pentagon subway station listed UnitedHealth's past lawsuits.

After losing the appeal, McIntyre said the government did not conduct a reasonable evaluation of UnitedHealth's proposal or its background, that the TriWest bid would cost less, that UnitedHealth has no experience dealing with military contracts, and that it would cause disruptions and a loss of money to switch the contract.

UnitedHealth said it would not engage in a back-and-forth, but said that it has handled hundreds of government contracts and that it felt confident that TriWest would work with them to transfer the bid. UnitedHealth also took out an ad stating that it looked forward to working with the military.

The contract includes 2.9 million people, including servicemembers and their families, in 21 states.

In a previous interview with USA TODAY, McIntyre said he would not rule out further legal action if the GAO denied their appeal.