UHG Protest to Regain $23.5B Gov’t Contract Denied

The U.S. Government Accountability Office on Tuesday rejected UnitedHealth Group's protest of a federal decision to rescind a contract that was originally awarded to it.

A protest launched by UnitedHealth Group (UHG) in an effort to regain a $23.5 billion medical-care contract was denied on Tuesday.

The U.S. Government Accountability Office (GAO) rejected UHG's protest of a U.S. Department of Defense decision to rescind a contract initially awarded to the Minnetonka-based company-but it isn't saying why because the decision was issued under a protective order.

In July 2009, Tricare Management Activity-the military's health-care program-awarded to UHG a contract under which it would have provided health-care benefits to soldiers and family members in 11 southern states. The contract's total value over five years was estimated at $23.5 billion.

But Tricare said in late February that it terminated the contract with UnitedHealth “for convenience of the government” and planned to instead award it to Louisville, Kentucky-based Humana Military Healthcare Services.

Humana protested the government's decision to award the contract to UnitedHealth, claiming that the process used to select a contractor was different than what was outlined in its request for proposals.

The GAO explored Humana's assertion-and it agreed with Humana, which prompted Tricare to review contract proposals and “resulted in a different 'best value' selection,” according to Tricare.

UHG formally protested the decision in March, saying that Tricare misevaluated the proposals and made an unreasonable selection decision, and four members of Minnesota's Congressional delegation sent a letter in support of that protest.

Health-care delivery under the contract in question is set to begin April 1, 2012.

“We intend to pursue all available options, including legal action, to ensure any Tricare South contract award by the Department of Defense provides the best access to quality health care for military members and their families,” UHG said Wednesday in an e-mailed statement.

Despite Tuesday's setback, UHG still could win a $17 billion contract for the 21 states in Tricare's Western region-which would help counteract the Southern region loss. Government regulations prohibit one company from providing health-care benefits in more than one of Tricare's three U.S. regions.

The Tricare Western contract was awarded to Phoenix-based TriWest Healthcare Alliance Corporation in July 2009. But UHG formally protested, and Tricare said in April that it would “re-evaluate the award.” Tricare has since re-opened the bidding process and will look at the revised proposals and make a final decision later this year.

“We are continuing to pursue the West,” UHG said Wednesday.

UnitedHealth Group is Minnesota's largest public company based on its revenue, which totaled $94.2 billion in 2010. With 11,500 Minnesota employees, it's also among Minnesota's 15 largest employers.

Tricare administers health plans for 9.6 million members of the armed services and their families, including about 3 million in the southern region that's covered by the contract in question.