Report | April 1, 2014

DoD Did Not Negotiate Rates With Overseas Health Care Providers and Generally Paid Claims as Billed



We determined the extent to which the TRICARE Management Activity (TMA), through the TRICARE Overseas Program (TOP) contractor, negotiated and adhered to reasonable rates for health care services provided in overseas locations.


TMA and TOP contractor officials did not negotiate rates in any of the 163 overseas locations, which represented $238 million in health care payments in FY 2012. Also, TMA officials did not include language in the TOP contract requiring the contractor to negotiate rates with overseas providers. TRICARE payments increased from $21.1 million in FY 2009 to $63.8 million in FY 2012 or about 203 percent in six high-dollar-volume locations without negotiated rates or other cost containment measures.

According to the Chief of the TOP Office, TMA did not negotiate rates because TRICARE represented a small market overseas; the contractor would not be able to successfully negotiate rates based on local practices and constantly changing market volumes; negotiating rates could have a negative impact on providing access to quality care to active duty service members and their dependents; and requiring the TOP contractor to negotiate rates would have increased the cost of the contract. However, TMA officials did not have documentation to support these reasons. Additionally, TMA officials did not have a process in place to negotiate rates. Without negotiating rates or implementing other cost containment measures, TMA potentially paid more than necessary for health care services provided by overseas providers and missed potential opportunities to obtain the best value for health care services.


We recommend that the Assistant Secretary of Defense (Health Affairs) initiate action to either establish negotiated rates with high-dollar-volume overseas providers or implement other cost containment measures in high-dollar-volume locations with significant increases. Also, the Assistant Secretary should establish procedures to negotiate rates directly with the TRICARE Overseas Program contractor when the contractor provides service as a health care provider.

Management Comments and Our Response

The Assistant Secretary of Defense (Health Affairs) comments partially addressed Recommendation 1.a, and stated he would include a requirement for a study in the follow-on TOP contract to assess the impact of negotiated rates on access to care in South Korea and the United Kingdom. He did not agree to negotiate rates or implement cost containment measures depending on the findings of the study. Also, he did not agree to any actions for Bahrain, Turkey, and Japan. He stated that he intends to implement maximum allowable rates in U.S. Territories. The Assistant Secretary did not address the specifics of Recommendation 1.b. We request additional comments on these recommendations by May 1, 2014.

This report is a result of Project No. D2013-D000LF-0089.000.