Strategic Sourcing of Healthcare-Provider Services in the Military Healthcare System
Open Access DepositedA Procurement-Reform Case Study
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Tradition impedes reform. The United States Army, Navy and Air Force (the Services) traditionally operate separate medical departments, comprising significant elements of the Military Health System (MHS). Since the Department of Defense’s (DoD) founding, in 1947, the Services successfully resisted MHS transformation, reflected in a series of studies over several decades, intended to consolidate administration and gain efficiencies. Healthcare costs comprise an increasing percentage of DoD’s budget. Circa 2011, these costs reached a tipping point, forcing MHS transformation at long last, including creation of the Defense Health Agency (DHA). The Services nonetheless continued to resist change, leading DoD diplomatically to approach MHS transformation in gradual, incremental manner. By 2017, the slow pace of change, causing the deferring of savings and efficiencies, provoked Congressional intervention in the form of statutes bolstering DHA’s administrative authority. Procurement of direct-healthcare provider (DHP) services across the DoD has been fragmented and inefficient, a second-order effect of the Services’ separate medical departments. Strategic sourcing, mandated from 2005 to 2019, comprised a means of rationalizing fragmented procurement. Multiple DoD efforts to strategically source DHP services among the Services began circa 2004. These efforts fall into two historical phases. The earlier efforts, circa 2004-2008, met with resistance from the Services and resulted in failure. The latter effort, the Defense DHA “MQS” MATOC, circa 2015-present, has achieved relative success, due in part to a strategic-sourcing mandate in the 2017 NDAA. Strategic sourcing of DHP services promises significant efficiencies and cost savings for the DoD. Congress should require through legislation a single DoD line of authority for healthcare contracting under the DHA.
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