Defense Health Care

In 1985, Congress authorized the Defense Department (DOD) to establish a dental benefits program for family members of active duty service personnel who could no longer be accommodated on a space-available basis at military dental clinics. Through 2001, the plan will be run nationwide for DOD under a contract with United Concordia Companies, Inc. of Camp Hill, Pennsylvania. Concordia experienced a difficult and lengthy takeover from the incumbent contractor. In addition, Congress has raised concerns about the amounts that Concordia paid to dentists, the number of participating dentists, and the timeliness of claims processing and the restrictiveness of coverage. This report discusses whether (1) Concordia's fee allowances for participating and nonparticipating dentists are appropriate, (2) Concordia has established an adequate network of participating dentists, (3) Concordia's claims processing and marketing efforts meet contract requirements, and (4) DOD is ensuring that Concordia complies with contract requirements.

GAO noted that: (1) Concordia has overcome numerous start-up problems and is now performing the task areas GAO reviewed within the contract's requirements; (2) DOD, however, has not yet taken a proactive role in overseeing the contract and thus far has not acted to assure itself and the Congress that the contractor is performing as required; (3) regarding fee appropriateness, neither applicable regulations nor the contract establish how Concordia's fees should be set nor whether or when they should be revised; (4) thus, while contractually required to pay dentists at certain fee levels based on "prevailing charges," or less when billed charges are lower, in effect, Concordia is left to determine whether its fees are appropriate and whether and how such contractual requirements are met; (5) GAO's analysis of Concordia's fee-setting methods showed that its initial February 1996 fees were based on less up-to-date charge data than were its revised August 1996 fees; (6) although not required to do so, Concordia could have elected to update its initial fee schedules by using a trend factor reflecting the estimated 1994 and 1995 dental charge increase, thus making them about as up to date as its August 1996 fees; (7) in the geographic areas GAO reviewed, Concordia has ample numbers of network dentists within 35 miles of beneficiaries' residences, one of the two access standards; (8) at two remote military base areas, however, there are not enough dentists available for Concordia to develop an adequate network; (9) in a third area, Camp Lejeune Marine Corps Base in Jacksonville, North Carolina, nearly all dentists have declined to participate in Concordia's network, for which DOD is now considering several remedial interventions; (10) data were not available in time with which to evaluate compliance with DOD's other access standard, that beneficiaries obtain an appointment with a participating general dentist within 21 days; (11) although tardy during the early months of the contract, Concordia data indicate that it is now processing dentists' claims for payment within required time limits; (12) Concordia's marketing activities meet requirements; (13) even though the fixed-price contract places the greatest risk on Concordia, DOD's oversight, generally relying on contractor self-reporting, does not provide DOD adequate assurance that the contractor is performing as required; and (14) responding to GAO's concerns, DOD officials told GAO they plan to conduct a performance evaluation in the summer of 1997, but they have not yet defined what the evaluation will entail.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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