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North Carolina Lacks Control and Overpays for Prisoner Health Care

by David M. Reutter

North Carolina’s Department of Corrections (NDOC) has inadequate procedures to contain prisoner medical costs and it overpays for prisoner medical care, concludes a fiscal control audit issued by the state’s auditor.

NDOC spends over $100 million yearly in prisoner medical care, and the costs continue to increase. It has contractual relationships with hospitals and other service providers to deliver medical services that prisons are not equipped to provide prisoners.
A survey indicated that other states limit medical costs to amounts established in negotiated contracts, to Medicare or Medicaid rates, to rates paid under other programs for indigent care or to discount insurance provider rates.

The NDOC’s analysis indicated it incurred higher reimbursement costs for similar medical procedures than those paid by the insurance providers. The Auditor noted, based on its limited comparison of claims data, that payments were made for prisoner medical procedures that would not be considered allowable charges under either the state employee health plan or the Medicaid program. The comparison also revealed multiple rates applied for the same procedure code.

The Auditor examined the 131 largest hospital payments, which accounted for $8.9 million of the $31.5 million in hospitalization costs paid, during the audit period. That review revealed six instances where the hospital provider was overpaid, totaling $170,900. Incorrect payment methodology in five errors amounted to $148,519 of the reimbursement. The other error of $22,381 came from NDOC paying the contract rate rather than the amount billed.

An expanded review of payments to one hospital from July 2007 to December 2008 identified payments of $469,000 in excess of the amount billed due to NDOC paying the contract rate. The overall examination of prisoner hospital service payments revealed NDOC paid, on average, rates that were 467% of the applicable Medicare/Medicaid reimbursement rates.

Hospitals disagree with using Medicare/Medicaid rates for prisoners. “We’re talking about a segment of the population that’s more dangerous; therefore, more costly to manage and they’re often sicker and more costly to treat,” said Don Dalton, spokesman for the North Carolina Hospitals Association. “Hospitals are underpaid well below cost in both Medicare and Medicaid.”

The Audit also found there is inadequate internal control over the payments of prisoner medical claims. NDOC lacked uniform written policies and procedures related to such claims. Manual entry of claims makes the high volume of transactions susceptible to error. Finally, purchasing agents, rather than legal representatives and experienced medical claims contract personnel, are involved in negotiating and drafting contracts.

NDOC agreed to all the noted deficiencies and said it would act to correct them.
Legislators, however, have to take some action to require public hospitals to treat prisoners. “As a taxpayer and not just the state auditor, it’s my expectation that the people who are responsible, the people who can make this go away, the people who can get these costs in line will step up to the plate this session and make this happen,” said State Auditor Beth Wood.

The report also found deficiencies in the personnel and payroll process of NDOC. Some employees were paid for hours they did not work and others were underpaid. Some records were not properly authorized by supervisors. The Auditor also found that inadequate controls existed on the control over access to the Offender Population Unified System. Once again, NDOC agreed with the findings and promised to correct them. The Auditor’s February 11, 2010 report, Department of Correction Fiscal Control Audit, is available on PLN’s website.

Additional source: WRAL

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