Aetna Government Health Plans of Hartford, Conn., appears to have gained an unfair advantage in competing for TRICARE's North Region support contract, valued at $16.7 billion, by hiring a former chief of staff at TRICARE headquarters to help the company draft its winning proposal.

The Government Accountability Office, auditing arm of Congress, said the chief of staff had access to proprietary information on Aetna's rival, Health Net Federal Services of Rancho Cordova, before leaving government, and also while working for Aetna because he continued to have access to sensitive documents through his old TRICARE e-mail account.

In a 36-page decision, GAO upheld Health Net's protest of the contract award to Aetna, advising the TRICARE Management Activity (TMA) in Falls Church, Va., to conduct a new review of bids and make a new decision, taking into account what their auditors found.

Just last month, GAO also sustained Humana Military Healthcare Services' protest of TRICARE's $21 billion support contract award for its South Region to UnitedHealth Military & Veterans Services of Minnetonka, Minn. That decision said the contracting officer did not adequately weigh the value of fee discounts Humana has negotiated with health care providers in judging future costs relative to competitors. GAO said TMA should reevaluate the proposals and make a fresh decision.

GAO brought a heavier hammer down on the Aetna contract. Though it doesn't allege that procurement integrity law was broken, GAO said contracting agencies like TMA have an obligation "to avoid even the appearance of impropriety" in government procurement. This time it failed.

If TMA's own investigation confirms the alleged unfair competitive advantage, Aetna could be excluded from the competition, "thereby leaving Health Net as the only viable awardee," GAO said.

TRICARE support contractors build and manage huge civilian healthcare provider networks for military beneficiaries who don't have access to on-base health care. The companies handle TRICARE enrollments, process claims, provide customer service and coordinate specialty care.

Health Net is the current TRICARE contractor for the 22-state North Region, serving three million military healthcare beneficiaries. It filed its protest in August, a month after the announced award went to Aetna.

Appearance of impropriety was just one of six reasons GAO cited for upholding the Health Net protest. Other errors were committed by TRICARE and its unnamed contracting officer, which included failure to "reasonably evaluate" Aetna's past performance information and to "perform a reasonable price/cost realism assessment" of Aetna's significantly lower bid.

Steven Tough, president of Health Net, said the alleged conflict of interest is perhaps the most significant reason for TMA to decide in the next 60 days whether to overturn the award to Aetna. But the "realism" of Aetna's bid also is seen as questionable, he said. Aetna assumes, for example, it can hire most Health Net employees at lower salaries, he said.

GAO had bracing criticism for the contracting officer. Even though the "record demonstrates" that the former chief of staff at TMA had access to Health Net "proprietary information," no "consideration of the issue" was shown by the contracting officer. Yet the "agency's obligation" is to avoid "even the appearance of impropriety in government procurement," GAO said.

The decision doesn't name the former TMA chief of staff. TRICARE sources said it is retired Air Force Col. Charles "Chuck" Wolak, now Aetna's chief of field operations. GAO said the officer was chief of staff at TMA from early 2005 until March 2007 when he became "source selection authority" or top contracting officer for the TRICARE-for-Life claims processing contract.

A draft request for proposals for next generation support contacts was released in June that year. A final request went out in March 2008. The former chief of staff began work for Aetna on Nov. 19, 2007, and "the very next day," GAO said, "he began working on 'certain projects' related to" Aetna's bid on the TRICARE contract.

Aetna told GAO that the new employee worked principally on portions of their bid dealing with beneficiary satisfaction and customer service. He was not involved in proposal pricing. But GAO said Aetna had no "firewall" in place to limit such participation, and Aetna's policy of destroying documents in connection with preparing bid proposals prevented further confirmation.

Some of Wolak's e-mails at Aetna suggested a broader involvement than the company had indicated, GAO suggested. It also found that while this officer was TMA chief of staff in 2006, he attended at least four high-level meetings where future TRICARE support contracts were discussed. The briefing and position papers given participants identified problems and weaknesses in current contracts, different approaches for resolving those concerns and pros and cons of each.

A position paper from one such meeting was "procurement sensitive" and contained non-public price and cost information about the operation of TRICARE support contracts by all of incumbent contractors including total support contract price.

"The record also demonstrates that the former TMA official continued to have access to his TMA e-mail account, and in fact accessed that account on at least three occasions after he began working for (Aetna)," GAO said.

"What do you think would have happened had we not protested," asked Tough, noting that a "significant" conflict issue has come to light.

Wolak could not be reached for comment by this column's deadline.

Aetna released a statement saying it can't know what action the Department of Defense may take in response to the GAO decision. But the company "believes it made a very strong proposal for the TRICARE contract and...feels confident that Aetna acted appropriately at all times."

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(Nov. 21, 2009)