Key Points of Report Office of the State Auditor
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Key Points of Report An Audit Report on Managed Health Care at the Texas Department of Criminal Justice January 1998 Overall Conclusion The implementation of a managed health care system, completed in fiscal year 1995, achieved the overall objective of controlling the increasing costs of providing health care to the inmates at the Texas Department of Criminal Justice (Department). As a result, the cost per inmate per day (capitation rate) has decreased from $5.99 in fiscal year 1993 to $5.23 in fiscal year 1997. Opportunities now exist to improve management controls in several areas of the managed health care system, including the system’s governance and organizational structure, the capitation rate, and performance evaluation and monitoring. Key Facts and Findings & In fiscal year 1997, $238.7 million was spent to provide managed health care to an average daily inmate population of 125,110 at the Department. & University members of the Correctional Managed Health Care Advisory Committee (Committee), the governing board for the managed health care system, may be placed in a position of conflicting loyalties by negotiating service contracts with their employers. & The Department does not directly contract with The University of Texas Medical Branch at Galveston and Texas Tech University Health Sciences Center (university providers) to provide health care to its inmates. Instead, it contracts with the Committee, which in turn contracts with the university providers. & Before the capitation rate for the next biennium is set, allowable and unallowable cost components of the managed health care appropriation should be considered. The appropriation is in excess of the university providers' costs. At the end of fiscal year 1996 the university providers realized a net profit of $25.3 million (10.47 percent of revenues) after returning $12 million to the State’s general revenue fund. & As reported by our correctional health care consultant, the correctional managed health care system has achieved some efficiencies since it was implemented in September 1994. Accomplishments were noted in areas such as utilization management, decreased pharmacy costs, and use of telemedicine. Contact Charles Hrncir, CPA, Audit Manager (512) 479-4700 Office of the State Auditor Lawrence F. Alwin, CPA This audit was conducted in accordance with Government Code, Sections 321.0132 and .0133. Table of Contents Executive Summary ......................................... 1 Overall Conclusion .......................................... 5 The Governance Structure of the Managed Health Care System Is Atypical ..................................... 6 The Potential Exists for the University Members of the Committee to Have Conflicting Loyalties to Two Entities ........... 7 Some Health Care Staff Are Placed in Potentially Conflicting Roles ...................................................... 8 The Contracts Between the Various Parties Could be Strengthened ............................................... 9 Reevaluate the Managed Health Care Capitation Rate ..... 16 Allowable Costs Were Not Clearly Defined ..................... 17 All Cost Components for Providing Direct Health Care Have Not Been Identified .................................... 19 University Providers' Catastrophic Reserve Funds Lack Sufficient Methodology .............................................. 22 Fixed and Variable Costs Associated With Providing Health Care Impact the Rate ...................................... 23 Transportation and Security Costs Related to Health Care Are Not Tracked ...................................... 26 Correctional Managed Health Care Lacks a Comprehensive Monitoring System ......................... 28 Management Does Not Have a Formal Tracking and Reporting System to Assist in Monitoring and Evaluating Health Care Operations at the Prison Units ..................... 29 Table of Contents, concluded No Standardized System Exists to Ensure Monitoring Is Being Performed Consistently Across All Units ................... 38 A Closer Look at One Prison Unit's Performance Evaluation System Report Illustrates the System's Monitoring Problems ........ 39 Department Is Not Notified About Capital Assets Purchased For Its Inmates' Health Care by the University Providers ...... 42 Credentialing Processes for Practitioners Need to Be Improved ............................................... 44 Managements' Responses .................................. 49 Summary Letter From the Correctional Managed Health Care Advisory Committee ................................... 49 Response From the Texas Department of Criminal Justice ........ 51 Response From Texas Tech University Health Sciences Center ..... 59 Response From The University of Texas Medical Branch at Galveston .............................................. 66 Appendices 1 - Objectives, Scope, and Methodology ......................... 73 2 - Health Care Costs .......................................... 76 3 - Location of Prison Units ...................................... 81 4 - Legislation ................................................ 82 5 - An Evaluation of Managed Health Care in the Texas Prison System ................................... 85 Executive Summary he implementation of a managed health The Governance Structure of the Tcare system, completed in fiscal year Managed Health Care System Is 1995, achieved the overall objective of Atypical controlling the increasing costs of providing health care to the inmates at the Texas Department of Criminal Justice (Department). The Correctional Managed Health Care As a result, the cost per inmate per day Advisory Committee (Committee) was (capitation rate) has decreased from $5.99 in legislatively mandated to create and oversee fiscal year 1993 to $5.23 in fiscal year 1997. the implementation of a managed health care delivery system at the Department. The Opportunities now exist to improve existence of this separate governing body, management controls in several areas of the outside of the Department, has resulted in an managed health care system: organizational structure comprised of a series of contractual relationships. & University members of the governing body may be placed in a position of conflicting Instead of contracting directly with the loyalties by negotiating service contracts inmates' health care providers, the Department with their employers. has a contract with the Committee, which in turn contracts with The University of Texas & The capitation rate should be reevaluated Medical Branch at Galveston (UTMB) and with consideration given to defining, Texas Tech University Health Sciences Center identifying, and quantifying allowable (TTUHSC) to provide health care to the costs to provide reasonable and necessary inmates. UTMB and TTUHSC (university health care to the inmates. providers) also have a number of subcontractors that participate in the health & Management controls such as cost care delivery system. allocation systems and performance monitoring and evaluation need to be This organizational structure has several improved. unique characteristics: & & Strengthening of contract provisions The governance structure of the managed would provide some compensating health care system creates the potential for controls and increase accountability of all conflicting loyalties. The Committee is parties. comprised of six members: two each from UTMB, TTUHSC, and the Department. As reported by our correctional health care The Committee, which is responsible for consultant, the correctional managed health implementation and oversight of the care program has achieved some efficiencies correctional managed health care system, since it was fully implemented in September negotiates the contracts between itself and 1994. Accomplishments were noted in the its medical care providers, UTMB and areas such as utilization management, TTUHSC. Since two-thirds of the decreased pharmacy costs, and use of Committee members are employed by the telemedicine. See Appendix 5 for the universities that provide the health care, consultant's report. this close relationship may not ensure the AN AUDIT REPORT ON MANAGED HEALTH CARE AT JANUARY 1998 THE TEXAS DEPARTMENT OF CRIMINAL JUSTICE PAGE 1 Executive Summary objectivity of the health care procurement inmate to provide health care may not be set at process. the appropriate level. & Oversight roles and responsibilities of all All cost components for providing direct parties are not obvious. These roles and health care have not been identified. For responsibilities are defined by various example, there is no fee or charge back for contracts. indirect support services provided by the universities to managed health care. The many levels of contracting tend to Furthermore, allocation of staff workload blur the lines of responsibility and among both university providers' managed accountability by the various parties. health care initiatives (for the Department and Because the health care system's others) is based upon estimations, which may framework is structured through yield an inaccurate cost designation. contracting, it is essential that all contractual agreements clearly define each Each university provider has set aside a party's performance standards and catastrophic reserve fund; however, there has monitoring responsibilities. been no actuarial analysis to determine what the reserve fund balances should be. Because & The Committee’s funding is contained the providers have realized excess revenues within the legislative managed health care