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California State Auditor Criticizes Prison Outside-Hospital Contract Costs

In a detailed 98 page report to Governor Arnold Schwarzenegger and the California Legislature, the California State Auditor criticized the California Department of Corrections' (CDC) lax management of contract outside-hospital medical services for CDC prisoners. The July 27, 2004 report observed that CDC's costs rose at a rate of 21% per year between 1999 and 2003, versus the national average hospital services consumer price index growth of 8% per year. The growth in in-patient hospital costs was attributed to the need for more expensive services, while the growth in out-patient costs was driven by both more expensive and more numerous hospital visits.

It should be noted that this report pre-dates any effect from the recent Plata v. Schwarzenegger settlement agreement to remedy CDC's constitutionally inadequate health care services statewide. Plata requires implementing more stringent (and expansive, e.g., HCV treatment ) standards for prisoner health care estimated to add hundreds of millions of dollars exposure per year. The report concludes with twelve recommendations to CDC [and reports CDC's invited response] on how better to manage procedures in contracting with outside healthcare facilities. But it does not even address the overriding cost driver: a rapidly aging population of over 30,000 condemned, lifer and long-term prisoners whose temporally declining health will impose skyrocketing requirements for major medical treatment, including organ transplants. CDC already spends 20% of its $6.2 billion budget on medical care.

As the report is presented, it provides detailed tables of actual outside hospital cost breakdowns for each of California's 33 prisons, showing both the in patient and out-patient care components. Some prisons, such as the California Medical Facility (CMF), California Men's Colony and Corcoran State Prison, contain their own limited accreditation hospitals. Indeed, medically needy prisoners are often transferred there to treat chronic medical problems. CMF, for example, has therapeutic whirlpool baths and an AIDS unit. And for over ten years, CMF has maintained a modern hospice for the terminally ill, where they receive the dignity of 24-hour comforting provided by prisoner volunteers.

But before the onset of terminal care lies the vast need for constitutionally adequate medical care in the far-flung corners of the state where California prisons have migrated. A natural disconnect results from such isolation that makes unavailable a local pool of the cross-section of medical specialties needed to support 5,000 bed prisons. CDC compensates for this by authorizing medical transfers" from outlying facilities to urban prisons such as San Quentin State Prison, located close to top-notch San Francisco Bay Area clinics and hospitals. While the prisoners benefit from gaining needed care, the relative costs go up to match the high cost of living that the Bay Area is noted for. This reverse migration" effect has provided an unintended opportunity for the hospitals and clinics thus employed, by spawning a steady flow of state-paid business whose rates are often not closely pre-negotiated as are those of Medicare, Medical, HMOs and private insurance companies. As a result, CDC often pays top dollar for its urgent" hospital services compared to that charged for regular managed-care clients. The back side for the hospitals is that the state is a notoriously slow bill payer. (See, e.g., this issue of PLN, [dental infection death caused when unpaid local hospital was avoided in favor of fatal 76 mile ambulance transfer to gain emergency care].)

Often caught in the squeeze are desperately ill prisoners, for whom rapid medical response can actually minimize overall costs. But in a system where minimally qualified doctors and nurses are frequently the only staff available to CDC at its outlying facilities, the problems and eventual costs become magnified by the delay of appropriate early medical intervention. And that's without considering the pain and suffering of prisoners clawing their way through lengthy administrative appeal processes just to have their complaints even aired. In short, CDC is often shooting itself in the financial foot with its inherent bureaucratic inertia. Prisoners rushed in Code-3 ambulance runs to outside hospitals' intensive care units cost enormous sums that could have been avoided or delayed by lowering the internal barriers to good preventive care inside the walls in the first place.

That having been said, it is not at all surprising that the State Auditor found widely varying cost histories at different CDC prisons. The contract management skills that inhere in metropolitan prisons whose labor pools are rich in college educated employee candidates may well be unavailable at isolated prisons. This is borne out in the auditor's observations that variations on cost controls seem more consistent with local prison auditing skills than with prison-unique medical needs. Overall, the auditor's comments go towards CDC's central office to better train and install internal controls to gain uniformity in cost-control results.

But while auditing can steer CDC towards better management controls of health care costs, the ills complained of in this audit report simply pale in light of the staggering cost increases that will flow, controls or not, from the improved medical care driven by Plata as well as the exponentially increasing needs of the endlessly aging population of life prisoners who are being denied their statutory expectation of parole by a politically driven no parole" policy.

See: California State Auditor Report on CDC, publication 2003-125, July, 2004. Bureau of State Audits, 555 Capitol Mall, Suite 300, Sacramento CA, 95814 (up to five copies are free).

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