UnitedHealth sues over contract with U.S.

  • Article by: JIM SPENCER , Star Tribune
  • Updated: June 21, 2011 - 8:08 PM

$20 billion is at stake as Minnetonka firm goes after the federal Tricare business.

WASHINGTON - UnitedHealth Group filed a lawsuit against the U.S. Department of Defense Tuesday, seeking the restoration of a $20 billion contract to oversee health care for more than 3 million military members, retirees and families within the government's Tricare network.

Minnetonka-based UnitedHealth won the contract to serve Tricare's south region in 2009, only to have the deal taken away in 2011, following a protest by Humana, the health insurance company that previously held the contract. UnitedHealth then filed its own protest, which failed last week when the Government Accountability Office refused to side with UnitedHealth in the dispute.

UnitedHealth claims that after losing the contract, Humana reworked its bid using doctor and hospital reimbursement fees that are too low to attract physicians and facilities to participate in the Tricare program.

"The stakes for military families are simply too high, and the deficiencies in the contracting process too significant, for the Department of Defense to proceed with implementing this contract as it stands," Lori McDougal, CEO of UnitedHealthcare's military health division, said in a statement.

UnitedHealth remains in the running for another Tricare contract, this one worth roughly $15 billion in the west region. UnitedHealth lost that contract in the initial bidding, but persuaded the government to reopen the solicitation because of technical errors in the review process.

However, in a news release issued Tuesday afternoon, UnitedHealth indicated that it doesn't expect to get the west region contract.

"The Pentagon has indicated that it will go down the same risky path it chose in the south region by inviting [bids that] guarantee cuts in payments to doctors and hospitals in the Tricare west network," the company said.

UnitedHealth will try to persuade the U.S. Court of Federal Claims that such cuts will make it difficult, if not impossible, for Tricare beneficiaries to find health care providers who accept their insurance.

Jim Spencer • 202-408-2752

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