Report 99027 Summary - January 2000
California Department of Corrections:
Utilizing Managed Care Practices Could Ensure More Cost-Effective and Standardized Health Care
RESULTS IN BRIEF
The Budget Act of 1999 directed the Bureau of State Audits to audit the California Department of Corrections (department) to determine whether it appropriately and effectively manages its medical operations. As part of the audit, we were to include recommendations for operating the department's facilities in a managed care environment. We found the department has just begun to develop an infrastructure for inmate health care that is standard in managed care organizations; therefore, it has only partially adopted the comprehensive practices these organizations use to ensure cost-effective medical services.
The department does not fully or adequately use various managed care practices. For example, there is no comprehensive process for review of health care operations at its 33 institutions. Without such a process, the department cannot effectively determine what aspects of its operations need improvement. The department also lacks a modern statewide information management structure, including networking capabilities, which restricts its ability to gather and analyze data. The deputy director in charge of the department's health care services division acknowledges that its ability to manage the health care operation is limited by its lack of data and staff to analyze the data.
The department also has not developed systemwide treatment guidelines or analyzed medical outcomes for the purpose of making patient care for its 150,000 inmates more uniform and cost-effective. At present, the level of care varies among institutions, in part because of lawsuits that inmates successfully brought against the department charging inadequate health care at specific facilities. The department believes that certain court-imposed services it currently offers at only a few facilities should be implemented at all of them; however, it has not obtained sufficient resources to do so.
Key operating data, such as costs per inmate for nurses and medical technical assistants (MTAs), length of hospital stays, and total medical costs also vary significantly among institutions. For example, some facilities pay more than four times as much for nursing costs per inmate than others do. Likewise, some institutions incur salary costs, including overtime, for MTAs that are nearly twice what other institutions pay per inmate. The department does not routinely analyze comprehensive data on its medical services, so it does not know why health care costs vary so widely or whether the institutions with the lowest costs are operating optimally or simply providing a level of services below that of other institutions. Similarly, it does not know whether its highest-cost facilities are inefficient or provide excessive care, and thus present opportunities for potential savings. The department performs limited reviews in certain circumstances, but it cannot readily improve care or cut unnecessary costs until it institutes a comprehensive, systematic analysis of its operations.
The department has implemented one program that was designed to reduce unnecessary patient visits. Five years ago, it began collecting $5 co-payments from inmates to curtail unnecessary visits to the doctor. The program has not generated the expected revenue, nor has the department analyzed the program to assess whether it actually has reduced visits sufficient to offset the operating costs. The department cannot demonstrate that the program is cost-effective, so we recommend that it be eliminated.
The department also could reduce its health care costs by purchasing more of its pharmaceuticals using contracts, taking advantage of more competitive contracting techniques, and increasing its efforts to monitor prescribing practices at all 33 institutions. Contracted prices allow the department to purchase medications at more competitive prices, yet it has obtained contracted prices for only 40 percent of its purchases. Additionally, an inadequate data collection system for its pharmacy operations presents obstacles for the department to achieve greater efficiency and effectiveness through assessing physicians' prescription practices at its various institutions. Further, the department's drug formulary is outdated, although it is an important management tool intended to ensure that institutions prescribe the most appropriate and cost-effective medications. Moreover, the department reports that it experiences difficulties due to the many vacancies in its pharmacist positions.
A final issue we examined was the licensing of the department's correctional treatment centers (CTCs). The department has not yet licensed all its CTCs, as required. As of December 1999, only 2 of a planned 16 CTCs were licensed, and we question whether the department is providing an authorized level of care at the remaining facilities. Contrary to the department's assertion, the Department of Health Services, which licenses the CTCs, told us it was unaware of the kinds of care the unlicensed CTCs provide.
To improve the management of its health care operations and better employ managed care practices, the department should take the following actions:
- Report to the Legislature on its progress in adopting managed care practices. As part of the report, it should identify the infrastructure requirements, such as data collection and staffing, which will allow it to comprehensively and systematically review its medical operations. Additionally, it should identify the potential savings that could be realized through a more efficient operation. In the meantime, it should perform proactive and systematic reviews of its medical operations to the extent possible.
- Identify which services differ because of litigation or other reasons to determine what additional resources it needs to remedy any inconsistencies, and then seek the appropriate budgetary changes to ensure a consistent level of care at each facility.
- Work with the Department of Health Services to ensure that all CTCs become licensed and that those CTCs not yet licensed provide only the level of care appropriate for an unlicensed facility.
- Discontinue its policy requiring inmates to pay for a portion of health care visits.
- Periodically review key operating data such as information on costs and lengths of stay, investigate inconsistent or unusual data, take steps to minimize unnecessary costs, and then verify the corrective action resulted in the desired change.
- Take appropriate steps to reduce overtime payments for MTAs.
- Ensure that its methods for procuring pharmaceuticals allow for the fullest amount of competition possible and work with the Department of General Services to expand the number of drugs placed on the statewide contract.
- Explore other procurement processes that provide greater savings than the department currently enjoys.
- Identify the conditions that are limiting its ability to collect and report data on its pharmaceutical operations and propose changes.
- Ensure that its pharmaceutical operations are staffed properly by addressing conditions that have led to vacancies among its pharmacists.
- Monitor drug usage periodically, including physician prescription practices, so information regarding the most appropriate and cost-effective drugs is available. Use this information to update its formulary regularly.
The department generally agrees with our recommendations and outlines certain corrective actions. However, it contends that it may be premature to report to the Legislature on its progress in adopting managed care. Rather, the department believes that implementing activities proposed in the governor's budget for fiscal year 2000-01 will enable it to incorporate cost management techniques, which may or may not mirror managed care, and improve the quality of care provided.