Pentagon Releases Second Draft RFP for $58B Health Care Contract

The Defense Department released its second draft request for proposal (DRFP) for its massive health services contracts on Dec. 11. The combined value of the two proposed contracts could be at least $58 billion based on the value of the incumbent contracts.

This DRFP for Tricare Managed Care Support (T-5) follows a previous version that was released Aug. 28. T-5. The contract will deliver health care services for the approximately 9 million military personnel, retirees, and dependents enrolled in the military’s TRICARE health system in the United States. Healthcare for about half a million people overseas is provided through a separate contract.

Photo credit Department of Defense

A hospital corpsman from Navy Medical Readiness and Training Command Pearl Harbor disinfects a sailor’s arm prior to administering a vaccine at the Shipyard Clinic Immunizations Department, Sept. 14, 2020.

The Defense Health Agency (DHA), which manages the contracts for DOD, has not finished with all industry questions on previous drafts. The Dec. 11 DRFP contains draft locations for beneficiary choice and competitive demonstrations, draft award fee criteria, revised alternative payment model criteria, revised process for return of clinical information, a list of high value military knowledge skills and ability codes, and a redrafted network requirement for industry feedback. A smaller version 2.1 draft is expected in the coming weeks with clinical quality metrics and revised referral management processes.

The currents are divided in to two regions: east and west. The Tricare West contract is held by Health Net Federal Services LLC, a subsidiary of Centene Corp., and the Tricare East contract is held by Humana Military Healthcare Services Inc., a subsidiary of Humana Inc. To date, Centene has earned $8.01 billion of a $17.8 billion total value on TRICARE West, which ends in Dec. of 2023. Humana has earned $17.8 billion of a total $39.9 billion value, and that contract ends in April of 2022. Since the two current contracts are for shorter periods than the proposed eight years for T-5, the potential value of T-5 could exceed the $58 billion combined total ceilings for the East and West contracts.

The upcoming contract will likely offer an abundance of subcontracting opportunities for companies looking to work with primes. The current contracts include 47 subcontracts awarded by the incumbents for a total value of $716 million on Tricare East, while no subcontracts have been reported on Tricare West.

Responses to the latest DRFP are due Jan. 8.

To contact the reporter on this story: Robert Levinson in Washington, D.C. at rlevinson@bgov.com

To contact the editor responsible for this story: Michael Clark at mclark@ic.bloombergindustry.com