Audit: Corrections overspends on health care by $4.2M
By Neal P. Goswami
VERMONT PRESS BUREAU | October 29,2013
MONTPELIER — The Department of Corrections has overspent a health care services contract for inmates by $4.2 million over the past three years, according to a report released Monday by State Auditor Doug Hoffer.
Corrections officials said Monday the additional spending is the result of unforeseen medical care required by inmates under their care. Such expenses cannot be planned for or reduced, the department maintains.
According to Hoffer’s report, the state spent $53.3 million for the original, three-year $49.1 million contract with Correct Care Solutions for inmates housed in Vermont prisons. The amount includes a $4.7 million management fee.
The report notes that the monitoring system in place did not minimize costs as much as it should. However, the system has shown signs of improvement, according to Hoffer.
“DOC’s cost monitoring was not robust during the earlier years of the contract but has improved since late 2012. Moreover, DOC provided evidence that it expressed concerns to CCS about cost overruns during the course of the contract and has explored ways with the contractor to control costs,” Hoffer wrote in a letter presenting the report to legislative leaders and Shumlin administration officials.
The audit “did not find questionable costs or errors of a material nature.” But it faults the “cost-plus-management fee” contract type because it places financial risk on the state. Such contracts provide no incentive for the contract to minimize costs, the report states.
A Corrections’ memo responding to a draft of the audit dated Oct. 15 and included in the report outlines why the state is using such a contract. Previous flat fee contracts produced “varying reports on the quality of care and services provided,” the memo states.
Additionally, the contractor gave notice in 2006 that it planned to terminate the contract because costs were exceeding the agreed upon payment, according to the memo.
Meanwhile, the audit also faulted Corrections for not pursuing penalties for missed benchmarks. The contract allows the state to apply penalties to CCS for failing to meet certain performance goals. The state did not begin reducing payments as allowed until December 2012 “even though CCS had not fulfilled certain contractual requirements from many months earlier.”
“Accordingly, DOC did not effectively use one of the tools that it had available to prompt performance in accordance with contract requirements. Since DOC began assessing penalties, it has continued to apply them to monthly performance periods, when applicable,” the report states.
The Corrections’ memo admits that penalties from the first two years of the contract “were not assessed in a timely fashion.” The memo blamed CCS for failing to provide requisite information and staff turnover among the Corrections personnel overseeing the contract.
Dr. Delores Burroughs-Biron, medical director for the corrections department, said the spending beyond the contract amount is the result of inmates needing more health services than anticipated.
“You can only predict, really, so far, what it will cost to provide health care services for an undetermined number of individuals,” she said. “You can never predict — Medicaid can’t predict, Blue Cross Blue Shield can’t predict — who’s going to get very ill.”
Vermont houses about 1,600 inmates in-state at any given time. Hundreds more are imprisoned in out-of-state facilities. Burroughs-Biron said out-of-state inmates also spend time under the state’s care, however.
“Even though we only contain 1,600 in-state, all 2,000 have to pass through our doors at one point or another,” she said. “So, we’re really providing care to that entire population.”
The state is always at risk of overspending because it provides comprehensive health care coverage for all inmates, Burroughs-Biron said.
“How can you protect the state from big, unforeseen costs?” she said. “You can’t, unless you say, ‘Well, we’re not going to provide certain kinds of care.’”
Providing health care to inmates is more expensive in Vermont than most other states because the state operates eight different facilities for its 1,600 inmates. There is no opportunity to achieve economies of scale, according to Burroughs-Biron.
“In each of those facilities we have to have adequate staff to take care of the health and mental health needs of inmates,” she said. “There has to be duplication because of the way that our system is spread out.”
Corrections officials have been looking to revamp the delivery of health services for inmates since 2011. Burroughs-Biron said a more cost-effective delivery system is being sought and a request for proposals will likely be initiated in the spring for potential contractors, she said.