Defense Health Care: Continued Management Focus Key to Settling TRICARE Change Orders Quickly Page: 4 of 32

Accountability * Integrity * Reliability
United States General Accounting Office
Washington, DC 20548
April 30, 2001
The Honorable John M. McHugh
The Honorable Martin T. Meehan
Ranking Minority Member
Subcommittee on Military Personnel
Committee on Armed Services
House of Representatives
Under TRICARE, the Department of Defense's (DOD) managed care
program, military-operated hospitals and clinics are supplemented by
contracted civilian services. To date, DOD has awarded seven managed
care support (MCS) contracts to administer health care in 11 geographic
regions. Since the inception of TRICARE, DOD has made numerous
modifications to these contracts via contract change orders. These
changes were made for a variety of reasons, such as the addition of new
benefits or changes in administrative processes. In recent years, DOD's
management of the change order process has resulted in a large backlog of
outstanding change orders. The cost associated with this backlog as well
as its growth has been an ongoing source of congressional concern. Until
recently, DOD directed its MCS contractors to implement change orders
prior to negotiation and payment. Therefore, DOD's backlog of unsettled
changes orders generally consists of change orders for which the MCS
contractors have not received payment. Because DOD's estimates for
change order costs have typically been lower than MCS contractors'
proposed costs, the unsettled change orders could represent a significant
future liability for the Defense Health Program (DHP) if they are settled at
higher amounts than DOD estimated.
In July 1997, we reported that DOD was taking steps to improve its change
order process, and we recommended that DOD continue providing the
high-level management attention it had recently begun to use to implement
change order process improvements.' However, the backlog continued to
grow. On July 1, 2000, DOD began a short-term initiative to negotiate and
pay for all of its outstanding change orders. In addition, DOD has begun to
use a new process for issuing and settling change orders.
1Defense Health Care: Actions Under Way to Address Many TRICARE Contract Change
OrderProblems(GAO/HEHS-97-141, July 14, 1997).

GAO-01-513 TRICARE Change Order Management

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United States. General Accounting Office. Defense Health Care: Continued Management Focus Key to Settling TRICARE Change Orders Quickly, report, April 10, 2001; Washington D.C.. ( accessed January 22, 2019), University of North Texas Libraries, Digital Library,; crediting UNT Libraries Government Documents Department.

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