Correctional Healtg Care Report VT State Auditor 2013
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Report of the Vermont State Auditor October 24, 2013 CORRECTIONAL HEALTH CARE Annual Cost Overruns, but Contract Oversight Has Improved Douglas R. Hoffer Vermont State Auditor Rpt. No. 13-06 Mission Statement The mission of the Auditor’s Office is to hold state government accountable. This means ensuring that taxpayer funds are used effectively and efficiently, and that we foster the prevention of waste, fraud, and abuse. This report is a work of the Office of the State Auditor, State of Vermont, and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from the State of Vermont or the Office of the State Auditor. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. Please contact the Office of the State Auditor if you have questions about reproducing this report. Douglas R. Hoffer STATE AUDITOR STATE OF VERMONT OFFICE OF THE STATE AUDITOR October 24, 2013 Addressees (see last page of letter) Dear Colleagues, Attached is our audit report on Correctional Health Care. The Department of Corrections (DOC) contracts with Correct Care Solutions (CCS) to operate a comprehensive health care program for inmates housed in-state. Because of the importance and expense of this contract, the State Auditor’s Office (SAO) decided to review the State’s oversight of this contract. Specifically, our two objectives were to determine whether DOC monitors the CCS contract in a manner that 1) provides assurance that the State’s costs are minimized and 2) ensures that the contractor meets the contract’s performance requirements. First, DOC’s choice of a cost-plus-management fee contract places the financial risk on the State. As a result, the contractor lacks incentive to minimize costs. Although the CCS contract was recently extended for two years, DOC has engaged consultants to help review various health care delivery options for the future. Second, DOC’s monitoring of the costs of the CCS contract has not ensured that costs are minimized, and the State paid $4.2 million more than the $49.1 million that was budgeted in the first three years of the contract. 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. In addition, DOC policy states that inmate resources, such as insurance coverage, will be used to meet medical expenses incurred for care of the offender beyond services provided by employees and contractors of the department. Accordingly, for complex cases, the contract requires CCS to ascertain whether the inmate has health insurance and to pursue collection on the State’s behalf, including from Medicaid if applicable. However, testing identified one instance in which Medicaid was not billed for an inmate who was hospitalized at a cost to DOC of $84,000. Third, DOC’s monitoring of CCS’s performance against the contract requirements has been mixed. DOC employed various mechanisms to oversee CCS’s activities, but the department did not apply allowed penalties to prompt timelier contractor performance improvements until late 2012, even though CCS had not fulfilled certain contractual requirements from many months earlier. For example, in early 2013, DOC applied penalties for the performance periods August 2010 – December 2011. In taking so much time to apply penalties for performance deficiencies, DOC lost the opportunity to offer a monetary incentive for CCS to correct its deficiencies in a timely manner. 132 State Street • Montpelier, Vermont 05633-5101 Auditor: (802) 828-2281 • Toll-Free (in VT only): 1-877-290-1400 • Fax: (802) 828-2198 email: firstname.lastname@example.org • website: www.auditor.vermont.gov The lack of timely application of all allowable penalties appears to be due, at least in part, to significant personnel and operational changes at the Department during the first three years of the contract’s performance period. However, DOC hired a new contract monitor in October 2012, who implemented a process to systematically track contractor performance against the contract’s guarantees. Since December 2012, the contract monitor has been reducing payments to CCS for assessed penalties, when applicable. DOC has made substantial improvements to both their cost and performance monitoring processes in the past year. However, more needs to be done to help ensure that the State is not paying excessive amounts for the services that it is purchasing. Accordingly, we have offered various recommendations to help reduce its current costs and improve internal controls, and to reduce its risks in the implementation of health care delivery models under current consideration. I would like to thank the management and staff at the Department of Corrections for their cooperation and professionalism during the course of the audit. Sincerely, Doug Hoffer Vermont State Auditor ADDRESSEES The Honorable Shap Smith Speaker of the House of Representatives The Honorable John Campbell President Pro Tempore of the Senate The Honorable Peter Shumlin Governor Mr. Douglas Racine Secretary Agency of Human Services Mr. Andrew Pallito Commissioner Department of Corrections Contents Report Page Introduction 1 Highlights 2 Background 4 Objective 1: DOC’s Monitoring of Health Care Costs Has Not Ensured that Costs Are Minimized, but Improvements Have Been Made 5 CCS Costs 6 DOC Cost Monitoring 7 Opportunities for Cost Savings 12 Potential New DOC Approach 15 Objective 2: DOC’s Monitoring of Contractor Performance Was Mixed, but Has Improved Recently 16 DOC’s Performance Monitoring Process 17 Assessment of Performance Guarantees 18 Conclusions 22 Recommendations 23 Management’s Comments 23 Appendix I: Scope and Methodology 25 Appendix II: Abbreviations 27 Appendix III: Reprint of the Commissioner of the Department of Corrections’ Management Response and Our Evaluation 28 Introduction Adequate health care services are essential to the success and well-being of inmates committed to correctional facilities. Moreover, Vermont is constitutionally1 required to provide the basic necessities for persons in its correctional facilities, including health care. Providing adequate care has proven to be costly. The fiscal year 2014 budget for the Agency of Human Services Department of Corrections (DOC) includes about $19 million for health care services, which is funded from the State’s general fund. DOC contracts with Correct Care Solutions (CCS) to operate a comprehensive health care program for inmates that are housed in-state. This contract requires that CCS operate the health program in a cost-effective, fiscally responsible manner and in accordance with National Commission on Correctional Health Care (NCCHC) standards.2 Because of the importance and expense of this contract, the State Auditor’s Office (SAO) decided to review the State’s oversight of this contract. Specifically, our two objectives were to determine whether DOC monitors the CCS contract in a manner that 1) provides assurance that the State’s costs are minimized and 2) ensures that the contractor meets the contract’s performance requirements. Appendix I contains the scope and methodology we used to address these objectives. With respect to the cost and performance of CCS, the scope of our audit covers the performance period of the first three years of the contract (February 1, 2010 to January 31, 2013). However, we also considered DOC monitoring processes that were added after January 2013. Appendix II contains a list of abbreviations used in this report. 1 This is largely due to the U.S. Constitution’s eighth amendment prohibition against “cruel and unusual punishment” as well as the due process clauses in the fifth and fourteenth amendments. 2 NCCHC is an independent organization that, through an accreditation process, renders a professional judgment on the effectiveness of a correction facility’s health services delivery system. In 2012, NCCHC re-accredited the health care services at DOC’s facilities. Page 1 Highlights: Report of the Vermont State Auditor Correctional Health Care: Annual Cost Overruns, but Contract Oversight Has Improved (October 2013, Rpt. No. 13-06) Why We Did this Audit Vermont spends millions of dollars annually for a contractor to provide costeffective and quality health care services for in-state inmates. Our objectives were to determine whether DOC monitors the CCS contract in a manner that 1) provides assurance that the State’s costs are minimized and 2) ensures that the contractor meets the contract’s performance requirements. DOC’s monitoring of the costs of the CCS contract has not ensured that costs are Objective 1 Finding minimized, and the State paid $4.2 million more than the $49.1 million that was budgeted in the first three years of the contract. As shown in Figure 1, CCS’s actual costs exceeded its budget for all but two of the contract’s first 36 months. Also, until late 2012, the level of DOC’s validation of CCS invoices was unclear and appeared to be lacking. However, review processes have since been implemented that demonstrated improvement in DOC’s invoice reviews. Figure 1: CCS’s Actual vs. Budgeted Operational Costsa a These amounts only address costs associated with the services provided and do not include the contractor’s management fees or adjustments for penalties. Our tests of CCS’s actual costs reported for five months in the three largest cost areas did not find questionable costs or errors of a material nature. However, DOC’s choice of a cost-plus-management fee contract places the financial risk on the State. As a result, the contractor lacks incentive to minimize costs. For example, inmates about to be released from the correctional facility are given “bridge” medications until their next health care appointment. Instead of supplying the exiting inmates with the on-hand supply of their medications, CCS returned these medications to the primary pharmacy supplier and placed a new order with a different supplier for the inmates to pick up from a community pharmacy. This is not a cost-effective practice because the bridge medication supplier is more expensive and CCS does not always receive credit for returned drug packages. Page 2 Highlights (continued) Objective 2 Finding DOC’s monitoring of CCS’s performance against the contract requirements has been mixed. DOC employed various mechanisms to oversee CCS’s activities, including meetings at the executive and facility levels that are focused on health care quality, and quarterly quality assurance audits by an independent contractor. However, the department did not apply allowed (but not required) penalties to prompt more timely contractor performance improvements until late 2012, even though CCS had not fulfilled certain contractual requirements from many months earlier. For example, DOC applied penalties for the performance periods August, 2010 – December 2011 in early 2013. In taking so much time to apply penalties for performance deficiencies, DOC lost the opportunity to offer a monetary incentive for CCS to correct its deficiencies in a timely manner. Some of these deficiencies related to the submission of required operational reports for the evaluation of CCS’s performance. According to DOC documentation, between 2010 and mid-2012 CCS did not provide all required operational reports or provided reports that were inaccurate or incomplete. For example, in May 2012 DOC sent CCS a letter stating that it “requests the submission of all outstanding reports related to performance guarantees some of which are 18+ months overdue despite multiple DOC requests and CCS promises to deliver.” What We Recommend The lack of timely application of all allowable penalties appears to be due, at least in part, to significant personnel and operational changes at DOC. In particular, from November 2010 to January 2012, DOC had a vacancy in the health services director position. During this timeframe, the chief nursing officer served a dual role filling in as the interim health services director. Further, the contract monitor changed and Tropical Storm Irene caused DOC’s central office to relocate. Since the health services division only has five staff positions (another DOC staff member in the business office helps monitor the contract), such significant changes can be more difficult to absorb than in a larger organization. DOC hired a new contract monitor in October 2012, who implemented a process to systematically track contractor performance against the contract’s guarantees. Since December 2012, the contract monitor has been reducing payments to CCS for assessed penalties, when applicable. We recommend short-term cost-containment and monitoring improvements related to medications and insurance as well as longer-term recommendations, including using a more cost-effective contracting type than cost-plus-management fee. Page 3 Background DOC’s Health Services Division oversees the provision of all medical services (physical and mental health) for inmates housed in-state. There are five positions in this division,3 including a director and chief nursing officer. DOC operates eight in-state correctional facilities, two of which are work camps. In fiscal year 2012, DOC housed an average daily population of instate inmates of 1,583, 4 which included both sentenced offenders and detainees.5 According to the Public Consulting Group (PCG),6 the unique structure of Vermont’s correctional system makes it difficult to make comparisons to the health care expenditures in other states’ correctional systems. In particular, Vermont correctional facilities perform both prison and jail functions,7 and the State has a small population of in-state inmates in a relatively large number of in-state facilities.8 According to PCG, these attributes contribute to the high cost of Vermont’s inmate health care because they 1) increase staffing needs and 2) do not take advantage of economies of scale available to larger facilities. In January 2010, DOC entered into a contract with CCS for a three-year period, beginning on February 1, 2010, to provide comprehensive healthcare services for Vermont inmates. CCS, in turn, subcontracts for some services, such as pharmacy and off-site services (off-site services include, for example, dialysis procedures and emergency room visits). In February 2013, DOC and CCS agreed to extend this contract two years and it is now scheduled to end in January 2015. 3 There is also a staff member in DOC’s business office that provides contract monitoring support to the Health Services Division. 4 The fiscal year 2012 average daily population of all DOC inmates, including those housed in out-ofstate correctional facilities, was 2,103. 5 Also known as a detentioner, this is a person committed to the Commissioner of Corrections by the court or other authorized person or entity, who is confined in a correctional facility until he/she is sentenced or released. 6 In October 2011, DOC hired PCG to perform an analysis of its health care delivery system and provide recommendations. 7 A jail houses inmates for less than a year. 8 PCG found that only North Dakota had a smaller number of in-state inmates. Page 4 DOC paid CCS $53.3 million for the first three years of the contract. As shown in Figure 2, a little over half of these costs were for salaries and benefits and about 9 percent was for CCS’s management fee. Figure 2: Breakout of Major CCS Costs for First Three Years of Contract, in Millionsa a Numbers do not add to $53.3 million due to rounding. Objective 1: DOC’s Monitoring of Health Care Costs Has Not Ensured that Costs Are Minimized, but Improvements Have Been Made DOC’s monitoring of CCS’s health care costs has not ensured that these costs are minimized since the contractor spent $4.2 million more than was budgeted in the first three years of the contract. Since DOC signed a costreimbursement contract, the department is responsible for (and has paid) this overage. Cost-reimbursement contracts carry a risk of wasteful spending, since entities pay for expenses as incurred instead of agreeing upfront on a fair and reasonable fixed price for the delivery of a service, and so it is prudent to implement robust monitoring processes. DOC’s cost monitoring was not robust during the earlier years of the contract but has improved since Page 5 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. Nevertheless, we found that CCS had not implemented a cost-effective approach to medications provided to released inmates. A consultant (PCG) reported that it does not recommend that the State continue with its cost-reimbursement model in the long-term, and DOC is exploring new delivery models for providing inmate health care. CCS Costs DOC’s agreement with CCS is a cost-plus-management fee contract.9 Under a cost-reimbursement contract, contractors are paid based on the incurrence of allowable costs, as opposed to the delivery of a completed product or service. DOC’s choice of a cost-plus-management fee contract means that the State generally absorbs cost overruns because this type of contract places the financial risk on the State rather than the contractor. As a result, this type of contract lacks incentive for the contractor to minimize costs. The maximum amount payable on the original three-year contract was $49,094,656, split between a budgeted amount for the annual cost to provide health care services and an annual fixed management fee. Taken together, these costs were the contractor’s base compensation. Table 1 provides a schedule of the estimated costs outlined in the contract versus what was paid in the first three years of the contract. During this timeframe, the State paid CCS $4.2 million more than what was budgeted in the contract—8.5 percent more than the contracted price. Table 1: Schedule of Budgeted and Actual Costsa Year 1 Budgeted costs for health care services Year 2 Year 3 Total $14,219,581 $14,671,912 $15,053,163 $43,944,656 1,700,000 1,700,000 1,750,000 5,150,000 Total base compensation $15,919,581 $16,371,912 $16,803,163 $49,094,656 Actual costs for health care services $15,677,276 $16,204,264 $16,742,118 $48,623,659 1,643,333 1,586,667 1,437,450 4,667,450 Total, actual cost and management fee $17,320,610 $17,790,931 $18,179,568 $53,291,109 Amount actual costs exceeded budget $1,401,029 $1,419,019 $1,376,405 $4,196,453 Fixed management fee Actual management feeb a b Amounts may not add due to rounding. We subtracted from this line item: 1) a management fee reduction DOC assessed in years one and two and 2) penalties DOC assessed in year three. 9 A cost-plus-management fee contract is a type of a cost-reimbursement contract. Page 6 CCS has consistently exceeded its budget throughout the course of the first three years of the contract. Figure 3 illustrates that CCS was over budget in the cost of providing health care services (i.e., not including the management fee) for all but two of the first 36 months of the contract. Figure 3: Comparison of CCS’s Actual and Budgeted Health Care Services Costsa by Contract Month a These amounts only address costs associated with the health care services provided and do not include the contractor’s management fees or adjustments for penalties. DOC Cost Monitoring Cost reimbursement contracts carry significant risk of overspending taxpayer resources, so it is important that the contracting entity have appropriate monitoring in place to provide reasonable assurance that the contractor is applying efficient methods and effective cost controls. Page 7 Invoices According to state and federal internal control best practices, invoices should be reviewed for accuracy.10 Invoice reviews ensure that services were actually received, the amounts billed are allowable, and the government is not incurring claimed costs that are inadequately supported. Every quarter, CCS is required to submit an invoice that includes a summary of its actual costs (called the quarterly true-up).11 To support their invoices, CCS sends DOC a monthly budget-to-actual financial report that delineates the costs for specific line items, such as salaries, benefits, pharmacy supplies, and off-site expenses. This report can then be validated using underlying support, such as third-party invoices. Until late 2012, however, the level of validation that was occurring was unclear and appeared to be lacking. The records that DOC provided related to cost performance in the first two years of the contract showed limited evidence of invoice reviews. Turnover of the DOC contract monitors may account for these limitations. The first contract monitor retired in December 2011. While the second contract monitor took over in this same month, she was only in this position until April 2012.12 The position then remained vacant until the current contract monitor was hired in October 2012. According to DOC’s financial director, although they searched for records related to financial documentation from the earlier time periods of the contract, they did not find many. Since late 2012, DOC has implemented improved invoice review procedures including: • Obtaining explanations and support for variances in the budget-toactual financial report; 10 Purchasing: Internal Control – Best Practices (Vermont Department of Finance and Management, April 2007) and Contract Management: Extent of Federal Spending under Cost-Reimbursement Contracts Unclear and Key Controls Not Always Used (U.S. Government Accountability Office, GAO-09-921, September 30, 2009). 11 The CCS contract requires the contractor to bill the state monthly for 1/12 of the annual base compensation (budgeted costs and management fee). Every quarter CCS submits an invoice that summarizes the actual costs for the prior three months and reconciles this amount to that which had been previously billed. If the reconciliation shows that actual costs were greater than what had been paid, DOC pays the difference (DOC would receive a credit if the actuals were less than what was paid). 12 According to the DOC financial director, the second contract monitor continued to provide part-time monitoring assistance on the CCS contract until the next contractor monitor was hired even though she had taken a new position. Page 8 • Questioning the allowability and accuracy of the amounts that are shown on the monthly budget-to-actual financial report; • Obtaining actual invoices for two of the largest expenditures— pharmacy and off-site expenses—which are provided by CCS subcontractors; and • Reconciling anomalies with the contractor through explanations from the CCS financial office or obtaining contractor-prepared reconciliations when the invoices do not match the financial statement detail. We conducted tests of CCS’s actual costs reported for September 2010, April 2011, July 2011, November 2012, and January 2013,13 in the three largest cost activities (salaries and benefits, off-site services, and pharmacy supplies) and did not find material questionable costs or errors. Financial System and Internal Controls According to the U.S. Government Accountability Office, costreimbursement contracts involve significantly more government oversight than do fixed-price contracts.14 Accordingly, the federal government requires that the contractor’s accounting system be adequate for determining costs related to the contract and that government monitoring provide reasonable assurance that efficient methods and effective cost controls are used.15 DOC relies on the accuracy and completeness of CCS’s financial reports in its monitoring of the contractor’s costs. However, DOC has not substantiated that it can rely on CCS’s financial systems and internal controls to ensure that the reported costs are accurate and complete. The importance of understanding how a contractor accounts for its financial activities related to the contract is demonstrated by CCS’s approach to available discounts in its former and current pharmacy supplier subcontracts. These subcontracts allowed CCS to take a 1 percent discount for prompt payment. A CCS financial official told us that CCS generally takes these 13 These tests were generally focused on three facilities—Southern State Correctional Facility, Northern State Correctional Facility, and Chittenden Regional Correctional Facility. 14 Contract Management: Extent of Federal Spending under Cost-Reimbursement Contracts Unclear and Key Controls Not Always Used (U.S. Government Accountability Office, GAO-09-921, September 30, 2009). 15 We used criteria from the federal government because the state does not have requirements or guidance pertaining to the monitoring of cost-reimbursement contracts. Page 9 discounts. The official informed us that DOC and CCS have an “informal” agreement for the current subcontract such that the discount will be passed on to DOC if Vermont pays its monthly invoices within the payment terms. CCS provided a spreadsheet showing that CCS passed on $8,331 in discounts for the January-June 2013 timeframe. However, CCS did not pass on any of the discounts that it took under the pharmacy supply subcontract that was in place from February 2010 to October 2012 (estimated at $1,300 a month). According to the CCS official, the discounts under the prior subcontractor were not passed through to Vermont because there was no agreement in place for this to be done. However, the contract defines an actual cost as those costs that are incurred as recorded in the books and records of the contractor, so we believe that any discounts taken by CCS should have been passed through to DOC. Although these amounts are not large in the context of the total contract, they demonstrate the risk taken under a cost-reimbursement contract when the contractor’s financial methods are not understood and monitored carefully. Page 10 DOC’s approach also entails a risk that it could be relying on financial reports that are generated by systems or internal control processes that have weaknesses. For example, during our walkthroughs of controls related to pharmacy supplies at three correctional facilities, we found a weakness in how CCS controls their unused and expired medications. At all three facilities, at least once a month unused and expired medications were returned to the primary pharmacy subcontractor16 (see Figure 4 for a picture of a box of medications to be returned to the pharmacy subcontractor). This process reduces DOC’s costs because in certain circumstances, the pharmacy subcontractor will credit CCS invoices for returns.17 Figure 4: Box of Medication in Blister Packs at the Chittenden Regional Correctional Facility To Be Returned to Pharmacy Subcontractor • • • CCS’s policy states that medications placed in the box for return to the pharmacy subcontractor should be documented on a return form. CCS health service administrators (HSAs) noted that the return form was created when the box was full and ready to be returned. However, none of the facilities tracked what went into the box while awaiting return. As a result of this control weakness, we could not validate that all unused and expired medications were returned as intended, which indicates that there is a risk that DOC’s costs were not being adequately reduced by the subcontractor’s return process. Moreover, there is a risk that medications could be diverted. 16 This process does not apply to controlled substances (e.g., narcotics), which are sent to a subcontractor for disposal. 17 Under the current pharmacy supply subcontract, credit is issued for returned pharmacy items that are reusable under applicable federal and state laws and regulations. For example, credit is issued on full, unopened manufacturer’s unit-dose packaged medications and full, unopened commercially prepackaged bulk containers. Page 11 According to DOC’s health services director, the department did not have a “how to” manual on how to monitor a cost-reimbursement contract, but since January 2012 it has implemented cost validation and monitoring processes to more fully understand what is being charged. We agree that DOC’s recent documentation shows evidence of more rigorous monitoring of costs. This more rigorous monitoring, coupled with the limited length of time remaining until the contract ends, partially mitigates the risk associated with not doing a full evaluation of CCS’s financial systems and internal controls. Opportunities for Cost Savings According to the federal Office of Management and Budget, there is a risk of wasteful spending when entities pay for expenses as incurred instead of agreeing on a fair and reasonable fixed price upfront for the delivery of a service. DOC’s documentation (e.g., correspondence, emails, and meeting minutes) indicates that it expressed concerns to CCS about cost overruns and explored ways with the contractor to control costs. For example, in an April 2013 meeting between DOC and CCS executive staff, there was a discussion about staffing cost overruns, and the DOC health services director requested that CCS provide options to lower these costs. Nevertheless, during the course of our audit, we identified changes in CCS’s approach that could reduce the State’s costs related to inmate health care. Bridge Medications NCCHC standards state that for planned discharges, health staff should arrange for a sufficient supply of current medications—called bridge medications—to last until the inmate can be seen by a community health care professional. The DOC contract with CCS and CCS’s policy are consistent with this standard (we did not identify a DOC policy that specifically addresses bridge medications). Both the contract and the CCS policy indicate that medication supply would be for a period of 7-30 days. The CCS policy allows the facility to provide inmates with their available blister package(s) of medication upon release if the quantity is less than or equal to the quantity being provided to the inmate upon release. Instead of providing the inmate with the existing supply of his or her medication, CCS local health care officials return those drugs to the supplier and order a new prescription for the inmate to pick up at an community pharmacy. This is not a cost-effective practice because the bridge medication supplier is more expensive and CCS does not always receive credit for returned drug packages. For example, using their January 2013 invoices, we identified 28 medications from the primary pharmacy subcontractor and the bridge medication Page 12 pharmacy subcontractor that had common National Drug Codes.18 The bridge medication subcontractor’s price was more expensive in every case.19 To illustrate, for two inmates who were released from the Chittenden Regional Correctional Facility in January 2013, one received four bridge medications and the other three bridge medications for which CCS returned unused stock. The cost of these bridge medications was $1,329, and CCS returned the unused stock to the primary pharmacy subcontractor for a credit of $97. We estimate that DOC paid about $1,100 more than it would have if CCS had used their supply of the medications for the two inmates rather than ordering from the bridge medication supplier.20 The CCS health staff at the three facilities we visited stated that they were told not to provide on-hand medications to inmates upon release. Concerns cited were related to offenders that later denied receiving the medications and the lack of child-proof containers. However, CCS’s written policy states that an inmate’s existing medicine supply could be provided to the released inmate. Moreover, offenders used to sign a CCS form (including witness signature) acknowledging receipt of the medication and their responsibility for keeping the medication away from children. The CCS regional manager stated that the changes in how bridge medications were to be handled were discussed during a CCS monthly operational meeting but that the written policy had not changed. Although there was documentation indicating that DOC was aware of this practice change, we found no evidence of DOC’s approval of the change. The CCS contract requires DOC approval of the contractor’s policies and procedures and states that they are subordinate to DOC policies and procedures. DOC’s health services director stated that she has been communicating with CCS about this issue and has asked for support for CCS’s position that medications that have already been purchased and are onsite at the correctional facility cannot be given to the exiting inmate. It also appears that some inmates are given a greater quantity of bridge medications than may be required. For example, of the 524 prescriptions for 18 The National Drug Code is a unique, three-segment number that serves as the universal product identifier for drugs. 19 For example, for a 30-day supply, 1) Abilify® 20 MG tablets (used as an add-on treatment with antidepressants) cost $826.15 from the primary pharmacy supplier and $965.49 from the bridge medication supplier and 2) Humulin® R U-100 insulin solution (used to treat diabetes) cost $73.11 from the primary pharmacy supplier and $87.44 from the bridge medication supplier. 20 We included in our estimate the amount of medication that would have to be ordered from the bridge medication supplier to address those cases in which DOC returned a partial package of drugs to the primary pharmacy supplier. Page 13 bridge medications billed in November 2012 and January 2013, 447 (85 percent) were for a 30-day supply. In one of the three facilities that we visited, the HSA stated that the practice at that facility was to automatically place an order for a 30-day supply of bridge medications without consideration as to the inmate’s next medical appointment. Finally, inmates that are in a correctional facility for only a few days may receive bridge medications, even though they could have valid prescriptions at their pharmacies or at home. We found no DOC or CCS policy that distinguishes between short- and long-term inmates with respect to supplying bridge medications and, according to the CCS regional manager, there is no difference in the process for supplying bridge medications. One HSA told us that short-term inmates are provided with a 30-day supply of medications upon release although she noted that she will sometimes direct the applicable nurse not to submit the order if she becomes aware that the inmate has a supply at home. Providing release medications to short-term inmates is significant because, according to DOC data, in almost 70 percent of the 7,479 releases from incarceration in fiscal year 2013, the inmate’s length of stay was between 1-30 days.21 Also, many offenders are on medication when they enter a DOC facility. For example, according to PCG, in September and October 2011, about 56 percent of all inmates processed into DOC were on at least one medication. Providing medications to inmates that may already have filled prescriptions at home not only increases DOC’s costs, but it also adds to the risk that these extra medications could be misused in the community. According to the federal Drug Enforcement Administration, the abuse of prescription drugs is a serious social and health problem in the United States. Insurance DOC policy states that inmate resources, such as insurance coverage, will be used to meet medical expenses incurred for care of the offender beyond services provided by employees and contractors of the department. Accordingly, for complex cases, the contract requires CCS to ascertain whether the inmate has health insurance and to pursue collection on the State’s behalf. In addition, CCS is responsible for helping inmates complete a Medicaid application. 21 The length of stay was between 1-3 days for 2,963 releases, 4-7 days for 811 releases, 8-15 days for 731 releases, and 16-30 days for 698 releases. Page 14 We tested whether off-site services for inmates that were enrolled in Medicaid 1) had claims submitted to Medicaid for applicable services22 and 2) did not result in payments by DOC and Medicaid for the same services. We identified no cases in which DOC and Medicaid both paid for the same service. However, we identified one instance in which Medicaid was not billed for an inmate who was hospitalized at a cost to DOC of $84,000. We traced the inmate referenced to the Medicaid Management Information System and found that the inmate was enrolled in Medicaid and that no Medicaid claim had been filed for the period in which he received services. According to the DOC contract monitor, this occurred because the claim was incorrectly coded and it was bypassed as being eligible for Medicaid. With respect to other types of insurance, we saw evidence in one of the months used for our tests that CCS had established a receivable associated with workers’ compensation insurance for an inmate who had been injured prior to being incarcerated. However, we did not see evidence in the test months of other types of private insurance being billed for inmate health care. A CCS senior vice president reported that the contractor seeks to collect this information. We asked the senior vice president to provide documentation illustrating that private insurance had been billed, when applicable. On August 22, 2013, he reported that CCS had no record that they had billed a third-party insurer other than Medicaid nor had the subcontractor that CCS uses to process claims for off-site services. The senior vice president also stated that the claims processing subcontractor for off-site services has not received any refunds from other insurers. Considering that CCS and its off-site services claims subcontractor have been in place since February 2010, the lack of any billings to a third-party insurer indicates that an effective process to identify other payers that could reduce DOC’s costs is not in place. Implementing an effective process to bill insurance companies is becoming increasingly important. According to legal advice sought by the health services director, under the Affordable Care Act, beginning in January 2014, a detainee may enroll in a qualified health plan prior to conviction and this plan can be billed to cover the inmate’s health care costs. Accordingly, it would behoove DOC to ensure that CCS is collecting insurance information and billing for appropriate claims. Potential New DOC Approach Act 41 (2011) required the Agency of Administration, in conjunction with the Joint Fiscal Office, to conduct a study of how the State can best provide 22 Medicaid does not pay for inmates’ health care except for certain off-site care (e.g., inpatient hospitalization or nursing home care). Page 15 quality health care to persons incarcerated in Vermont at a cost savings to the State. In response to this requirement, DOC hired PCG in October 2011 to provide 1) a comprehensive and detailed analysis of all aspects of the correctional health care system, 2) recommendations to reduce costs and maintain a clinically appropriate level of care that can be implemented under the current DOC model, and 3) a long-term plan for a healthcare delivery system. PCG completed its work in January 2012. As part of its analysis, PCG stated that it would not recommend that the State continue with its cost-reimbursement model over the long-term. PCG found that this approach does not allow for the contractor to develop new or innovative approaches. In addition, the PCG study outlined multiple operational models and various strategies for DOC to consider for reducing costs without sacrificing quality. As part of the next phase in its Act 41 study, in March 2013, DOC contracted with Community Oriented Correctional Health Services to conduct analyses identifying strengths, weaknesses, opportunities, and threats in eight areas for five potential health care delivery models.23 The eight areas are: 1) staffing; 2) continuity of care; 3) care planning; 4) capacity for data sharing; 5) procedures for prior approval, quality assurance, and utilization management, 6) data collection and metrics; 7) governance; and 8) finance. This contract’s deliverables are expected to be completed by March 2014. Objective 2: DOC’s Monitoring of Contractor Performance Was Mixed, but Has Improved Recently DOC’s monitoring of contractor performance was mixed because although DOC employed various mechanisms to oversee CCS’s activities, the department did not apply allowable penalties to prompt timelier contractor performance improvements. With respect to DOC’s monitoring, the contract required CCS to submit regularly scheduled operational and financial reports, hold multidisciplinary inter-organizational meetings, and establish a quality assurance process. In addition, the contract includes performance guarantees that allow DOC to apply penalties if this monitoring determines that the 23 The five models are the use of 1) OneCare, a joint venture between Fletcher Allen Health Care and Dartmouth-Hitchcock Medical center as the contractor, 2) Bi-State Primary Care Association of Federally Qualified Health Centers in Vermont and New Hampshire as the contractor, 3) a new nonprofit or limited liability corporation that distributes services between local providers near each jail, 4) state employees hired by DOC, and 5) the Green Mountain Care Board as the organizational entity for correctional health care rather than DOC. Page 16 contractor did not meet certain performance expectations. DOC did not begin to reduce payments to CCS for penalties until December 2012, even though CCS had not fulfilled certain contractual requirements from many months earlier. Moreover, the penalties that were assessed did not cover all of the deficiencies. 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. DOC’s Performance Monitoring Process DOC’s contract with CCS requires that the contractor provide a series of operational and financial reports. These reports are intended to provide DOC with basic information regarding health services activity in the facilities and a means to evaluate performance. Examples of these reports include those that address staffing levels at the facilities, how long it took for CCS to administer prescribed drugs or complete required health assessments, and how quickly CCS responded to inmates’ requests for health care services. CCS did not always provide required operational reports or the reports did not contain all required information. DOC provided evidence that they brought reporting deficiencies to the attention of CCS and attempted to resolve these deficiencies during the course of the contract. For example, in December 2010, DOC sent CCS a summary of the first year of the contract in which it stated that “there are a number of inaccuracies in both CCS financial and statistical reports and this is not acceptable. Data parameters that were agreed upon … have not been reported. As a result, data that would greatly assist in delivery management are not available.” (Further discussion of this issue is contained in the subsection labeled Assessment of Performance Guarantees.) DOC also regularly held a variety of meetings with CCS. According to the contract, these multidisciplinary, inter-organizational meetings are intended to identify inmate problems and opportunities for improvement, as well as to communicate quality improvement findings and to describe actions taken to resolve problems that are specific to health services. For example, since the inception of the contract, DOC and CCS have held monthly meetings at the executive level (called the Executive Health Committee) and quarterly meetings at the facility level (called the Medical Administration Committee) that are focused on health care quality. On the financial side, DOC and CCS hold executive business meetings. Other ad hoc meetings were also held to address specific operational issues. Another critical monitoring piece is quality assurance. Since August 2010, DOC has used a contractor to perform quarterly independent audits of specific health-related indicators. The Vermont Program for Quality in Health Care Page 17 (VPQHC) conducted audits at the eight correctional facilities and provided DOC with quarterly and biannual reports. Examples of the health-related indicators reviewed by VPQHC include whether: 1) health assessments are completed within seven days of an inmate’s intake, 2) the medical administration record matches the doctor’s orders, and 3) sick call requests are triaged within the timeframes outlined by the contract. In addition, the CCS contract requires that the contractor maintain a continuous quality improvement program, which entails having the eight facilities conduct selfaudits every month of samples of medical records for adherence to requirements. DOC’s Health Services Division’s quality assurance administrator checks the validity of the facility self-audit reports. Assessment of Performance Guarantees According to Vermont’s contracting policy,24 penalties should be considered for failure to meet standards or deliver products. The policy goes on to state that penalties should generally be assessed and reflected in the next invoice payment. Performance guarantee penalties were included in the CCS contract for times when the contractor failed to meet certain requirements, but assessment of penalties was at the discretion of DOC. For the first three years of the contract period, DOC assessed a total of $331,100 in performance guaranty penalties and reduced the payments to CCS in the same amount. However, the first time DOC reduced payments to CCS as a result of assessed penalties was in the December 2012 quarterly true-up invoice. These penalties encompassed the performance period of January-June 2012. DOC sent CCS a letter announcing these penalties on July 31, 201225— about two years after the performance guaranty clauses came into effect.26 DOC applied additional penalties for the performance periods August, 2010 – December 2011 and July 2012 – December 2012 in the next quarterly true-up invoice.27 This is not the timely assessment of penalties as called for in Vermont’s contracting policy. Moreover, the significant delay in assessing penalties may 24 Vermont Agency of Administration’s Bulletin 3.5, Contracting Procedures (July 15, 2008). 25 CCS disputed some of these penalties and requested that they be reconsidered. DOC later agreed to abate some of the penalties. 26 The contract did not allow penalties to be assessed in the first six months of the performance period, which was considered to be a breaking-in period. 27 This quarterly true-up invoice encompassed the performance period November 2012 – January 2013. It was submitted and paid in March 2013. Page 18 account for CCS not addressing some of DOC’s concerns. For example, in a September 2012 email, the DOC health services director observed: “It seems that the whole notion of creating reports for the purpose of documenting care and services and assessing performance were [sic] not taken seriously by CCS. There was no expectation that they would be paying penalties.” In taking so much time to apply penalties for performance deficiencies that had occurred many months earlier (in some cases about two years earlier), DOC lost the opportunity to offer a monetary incentive for CCS to correct its deficiencies in a timely manner. DOC also did not assess all of the penalties allowed under the contract. To the extent data was available, we recalculated the penalties that could have been applied for CCS’s performance at three facilities for five months. Our results, summarized in Table 2, demonstrate that DOC could have applied an additional $11,371 in penalties in these limited circumstances alone. Table 2: DOC and SAO Calculations of Penalties for CCS Performance At Three Facilitiesa During Five Monthsb Performance Guaranty Amount Assessed by DOC No more than 100 inmate trips statewide for medical purposes of a non-emergent nature in any month. (Penalty = twice the actual costs for trips over 100) Provide/administer pharmaceutical drugs for routine administration of on-going care within two hours of scheduled time. (Penalty = $500 per occurrence) Provide/administer medications ordered statc within 1 hour of the provider's order for medications immediately accessible onsite. (Penalty = $500 per occurrence) Provide/administer medications for which a prompt administration order has been given within two hours of the provider's order if stock supply is not available and a backup pharmacy must be used. (Penalty = $500 per occurrence) Pharmacy must deliver newly ordered prescriptions within 48 hours Monday-Friday; 72 hours Saturday and Sunday. (Penalty = $500 per occurrence) Page 19 Amount Calculated Difference DOC’s Rationale by SAO 0 $9,271 $9,271 The DOC health services director reviewed and determined the trips were medically necessary and that no penalties would be assessed. 0 $1,500 $1,500 DOC abated the penalties based on subsequent explanatory information provided by CCS. 0 0 0 0 0 0 0 0 0 Performance Guaranty Amount Amount Assessed Calculated Difference by DOC by SAO $17,500 $17,400 ($100) DOC’s Rationale Failure to achieve a passing score (90 percent) in the quarterly independent quality assurance audit. (Penalty = $100 per failed indicator; maximum of $2,500 per quarter) Maintain NCCHC accreditation for every current and 0 0 0 future facility in the state system. (Penalty = $500 per day per non-accredited facility) Meet dental staffing requirements or adequately control 0d 0d 0 the size of the waiting list. (Penalty not to exceed $500/day for not providing adequate access to dental services) Qualified health care professionals to be hired to fill all Neither DOC nor SAO could calculate whether penalties on this posts in accordance with staffing standards and coverage measure should have been assessed as CCS did not provide schedules. (Penalty not to exceed $500 for each reports that would support such a calculation uncovered shift) Provide timely response to inmate requests for health $50 $750 $700 DOC did not calculate care services. (Penalty = $50 per request outstanding 48 penalties on exceptions it hours Monday-Friday; 72 hours Saturday and Sunday) determined to be reasonable. Provide specialty services in a timely fashion (agreed0 0 0 upon target date). (Penalty = $500 per day until services commence or $2,500 per incident if no resolution) Meet mortality documentation submission timelines and 0 0 0 other mortality review requirements. (Penalty = $2,500 per occurrence) Develop an individualized treatment plan for each $1,750 $1,750 0 inmate diagnosed with serious mental illness. (Penalty = $250 per occurrence) Provide prescription drugs and/or other services in 0 0 0 accordance with the mental health treatment plan. (Penalty = $250 per occurrence) Provide required operational and financial reports within Not applicable to test. Penalties for reports are issued on a DOCprescribed time periods. (Penalty = $500 per report per wide basis, not for individual facilities. See the following month) paragraph for information on penalties associated with reports. a b c d The three facilities were Southern State Correctional Facility, Northern State Correctional Facility, and Chittenden Regional Correctional Facility. The five months were September 2010, April 2011, July 2011, November 2012, and January 2013. According to the contract, stat generally confers the presence of an emergent or urgent situation. In the earliest three test months, CCS did not provide documentation to DOC that would allow a determination of whether this standard was met. Since DOC was relying on the contractually required operational reports as part of its performance monitoring of the contract, we also evaluated the penalties assessed on the timeliness of the required reports for all correctional facilities between September 2010 and January 2013. However, we could not perform a calculation of the amount of penalties that could have been applied because DOC’s records would not support such an analysis. According to DOC documentation, between 2010 and mid-2012 CCS did not provide all Page 20 required operational reports or provided reports that were inaccurate or incomplete. In May 2012 DOC sent CCS a letter stating that it “requests the submission of all outstanding reports related to performance guarantees some of which are 18+ months overdue despite multiple DOC requests and CCS promises to deliver.” Subsequent to this letter, CCS submitted all but four required reports dating from August 2010 to December 2011. DOC penalized CCS $105,000 for the four missing operational reports. We could not determine what the penalty amount should have been because DOC’s records were insufficient to determine which reports were not provided in a timely fashion or which reports DOC did not consider usable for each month of the contract—the information needed to calculate potential penalty amounts. According to the health services director, DOC management decided not to implement the full penalty amount because of turmoil between DOC and CCS surrounding the format and submission of operational reports that are used to assess contract performance. The director went on to state that animosity surrounding the report requirements and objections by CCS over penalties were beginning to taint negotiations for a contract extension, which were occurring at the same time. In addition, according to the health services director, DOC management forgave penalties for report delinquencies in exchange for a reduction in management fees in the last two years of the amended contract and a waiver of inflationary increases in future years (although this waiver only pertains to the CCS budget and not to actual costs that are reimbursable). In addition, the contractor lacked an incentive to provide some reports where the penalty for not meeting the standard was likely greater than the penalty for not providing the report. The penalty for not submitting a report is $500 a month. However, • CCS can incur a penalty of $500 per occurrence if it does not administer pharmaceutical drugs for routine administration of ongoing care within two hours of the scheduled time. For a single month—September 2012—CCS incurred a $2,500 penalty. • CCS can incur a penalty of $250 per occurrence if it does not develop an individualized treatment plan for each inmate diagnosed with serious mental illness. In March 2012 CCS incurred a $3,500 penalty. • CCS is supposed to meet a minimum staffing requirement or else it can incur a penalty of up to $500 for each uncovered shift. This is significant because the agreed-upon staffing levels at each facility are based on the clinical needs of the inmate patients and the volume of care and nature of services to be provided. According to the DOC contract monitor, January 2013 was the first time that CCS provided a Page 21 usable report to DOC that allows the department to determine whether this requirement is being met. The lack of timely application of all allowable penalties appears to be due, at least in part, to significant personnel and operational changes. In particular, from November 2010 to January 2012, DOC had a vacancy in the health services director position. During this timeframe, the chief nursing officer served a dual role filling in as the interim health services director. Further, there were also changes in the contract monitor and Tropical Storm Irene caused DOC’s central office to relocate. Since the health services division only has five staff positions (another DOC staff member in the business office helps monitor the contract), such significant changes can be more difficult to absorb than in a larger organization. According to the interim health services director/chief nursing officer, her primary focus was on the clinical delivery and critical health care needs of the inmates. DOC hired a new contract monitor in October 2012, who implemented a process to systematically track contractor performance against the contract’s guaranties. Since December 2012, the cost monitor has been reducing payments to CCS for penalties associated with monthly performance periods, when applicable. Conclusions Cost-plus-management fee contracts are high risk contracting mechanisms for the State and require strong oversight to ensure that the State’s objectives are met and its resources are used wisely. DOC did not initially implement an effective cost monitoring process and the first three years of the contract produced a cost overrun of $4.2 million. Moreover, CCS changed its practice for supplying bridge medications to one that is more expensive—passing those costs onto DOC. With respect to performance monitoring, DOC established a process that relied on CCS reports, meetings, and independent quality assurance audits. Nevertheless, monitoring was lacking because CCS did not provide complete and accurate reports in a timely manner and DOC did not assess penalties until many months after the performance period in which the deficiency occurred. DOC has made substantial improvements to both their cost and performance monitoring processes in the past year. Nevertheless, to ensure that the State is not paying excessive amounts for the services that it is purchasing, DOC can take short-term actions to reduce its current costs and improve internal controls as well as long-term actions to reduce its risks in the implementation of health care delivery models under current consideration. Page 22 Recommendations Short-Term Recommendations We recommend that the Commissioner of the Department of Corrections: 1. Evaluate CCS’s process for controlling unused and expired medications and ensure that controls are in place to provide safeguards that medications designated for return to the pharmacy subcontractor are accounted for and returned. 2. Develop a policy that minimizes the cost of bridge medications and directs CCS to ensure that this policy is consistently followed at all of the correctional facilities. This policy should include, at a minimum: 1) providing inmates with their on-hand medications upon release, where possible; 2) limiting the amount of bridge medication provided to the inmate to no more than that which is needed until a scheduled appointment date with an outside provider; and 3) establishing guidelines for when it is, and is not, appropriate to provide bridge medications to short-term inmates. 3. Ensure that CCS is collecting inmates’ insurance information and billing their insurance for appropriate claims. Long-Term Recommendations As part of evaluating a new service delivery model for providing health care services to inmates, we recommend that the Commissioner of the Department of Corrections: 1. Select a more cost-effective contracting type than cost-plusmanagement fee. 2. Include a plan for a monitoring process at the outset of any new contract to provide reasonable assurance that effective cost and performance controls are in place as soon as the contract is enacted and that applicable penalties are assessed in a timely manner. Management’s Comments On October 15, 2013, the Commissioner of the Department of Corrections provided a letter commenting on a draft of this report. Appendix III contains a reprint of the letter and our evaluation of one of the department’s comments. Page 23 - - - - In accordance with 32 VSA §163, we are also providing copies of this report to the secretary of the Agency of Administration, commissioner of the Department of Finance and Management, and the Department of Libraries. In addition, the report will be made available at no charge on the state auditor’s website, http://auditor.vermont.gov/ Page 24 Appendix I Scope and Methodology In addressing both of our objectives, we reviewed 1) DOC’s contract with CCS, which included the request for proposal and CCS’s best and final offer; 2) the State’s contracting requirements and internal control guidance; and 3) monitoring requirements or guidance for cost reimbursement contracts issued by others. We also reviewed DOC directives that address inmate health care services. Regarding the DOC’s monitoring of CCS’s costs, we obtained, reviewed, and summarized the contractor’s invoices and monthly budget-to-actual financial reports for the first three years of the contract (February 1, 2010 to January 31, 2013). We discussed the DOC monitoring process with the health services director and current and former contract monitors and reviewed emails and other correspondence between DOC and CCS regarding cost issues. We focused our review on three major cost areas: salaries and benefits, offsite services, and pharmacy supplies, which in total accounted for about 78 percent of the contract’s costs in the first three years of the contract. We discussed how CCS tracks these costs with CCS central office officials. We also reviewed applicable CCS policies and performed walkthroughs of the time reporting process and off-site service and pharmacy supply invoice review process with CCS officials at three correctional facilities—Southern State Correctional Facility, Northern State Correctional Facility, and Chittenden Regional Correctional Facility. We chose these facilities because they had incurred the highest costs in the first three years of the contract. We also performed testing related to costs associated at these three facilities for five of the 36 months of the original contract period, focusing on the three major cost categories. The months for which we performed tests were September 2010, April 2011, July 2011, November 2012, and January 2013. The following are examples of the tests that we performed: • Confirmed that CCS’s invoices were based on their reported costs. • Confirmed that CCS had documentation that supported the facilityspecific budget-to-actual financial reports. • Compared the CCS staff members for the site listed in the payroll system used by CCS to the timekeeping system and confirmed that the timekeeping system provided support for the staff members and number of hours worked at the site. • Confirmed that inmates listed on the pharmacy subcontractors’ invoices were incarcerated at the facility at the time and that the CCS Page 25 Appendix I Scope and Methodology medical records system supported that the drug on the invoice was prescribed and administered for 75 transactions. • Confirmed that charges for off-site services were for patients who were in fact incarcerated at the time and that their medical records confirmed that off-site services were provided for 75 transactions. • Compared the invoices from the off-site services subcontractor to recipient eligibility data in the Medicaid Management Information System to confirm that DOC was not charged for Medicaid claims. With respect to our performance monitoring objective, we identified the various performance requirements in the contract and determined which had penalties that could be applied for non-conformance. For those requirements that included potential penalties, we obtained DOC documents pertaining to penalty calculations that they had performed and assessed. Based on documents provided by DOC, we independently calculated the penalties that could have been assessed and 1) verified DOCs calculations or 2) obtained an explanation for those penalties that were not assessed. We also discussed the DOC performance monitoring process with the health services director, chief nursing officer, contract monitor, and quality assurance administrator. We obtained and reviewed the minutes of meetings held with CCS throughout the course of the contract period and reviewed the results of reviews of specific health-related indicators by DOC’s independent quality assurance contractor, the Vermont Program for Quality in Health Care. Our audit work was performed between January and early September 2013 at DOC headquarters in Williston, CCS’s regional office in Waterbury, Southern State Correctional Facility in Springfield, Northern State Correctional Facility in Newport, and Chittenden Regional Correctional Facility in South Burlington. We conducted this performance audit in accordance with generally accepted government auditing standards, which require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Page 26 Appendix II Abbreviations CCS DOC HSA NCCHC PCG SAO VPQHC Correct Care Solutions Department of Corrections Health Service Administrator National Commission on Correctional Health Care Public Consulting Group State Auditor’s Office Vermont Program for Quality in Health Care Page 27 Appendix III Reprint of the Commissioner of the Department of Corrections’ Management Response and Our Evaluation Page 28 Appendix III Reprint of the Commissioner of the Department of Corrections’ Management Response and Our Evaluation Page 29 Appendix III Reprint of the Commissioner of the Department of Corrections’ Management Response and Our Evaluation Page 30 Appendix III Reprint of the Commissioner of the Department of Corrections’ Management Response and Our Evaluation Page 31 Appendix III Reprint of the Commissioner of the Department of Corrections’ Management Response and Our Evaluation Page 32 Appendix III Reprint of the Commissioner of the Department of Corrections’ Management Response and Our Evaluation Page 33 Appendix III Reprint of the Commissioner of the Department of Corrections’ Management Response and Our Evaluation See comment 1 in the table after DOC’s response. Page 34 Appendix III Reprint of the Commissioner of the Department of Corrections’ Management Response and Our Evaluation Page 35 Appendix III Reprint of the Commissioner of the Department of Corrections’ Management Response and Our Evaluation Page 36 Appendix III Reprint of the Commissioner of the Department of Corrections’ Management Response and Our Evaluation Page 37 Appendix III Reprint of the Commissioner of the Department of Corrections’ Management Response and Our Evaluation Page 38 Appendix III Reprint of the Commissioner of the Department of Corrections’ Management Response and Our Evaluation Page 39 Appendix III Reprint of the Commissioner of the Department of Corrections’ Management Response and Our Evaluation Page 40 Appendix III Reprint of the Commissioner of the Department of Corrections’ Management Response and Our Evaluation The following presents our evaluation of one of the comments made by the Commissioner of the Department of Corrections. Comment 1. DOC disagreed with our statement that its cost monitoring had improved since late 2012; asserting that the improvement began in January 2012 and providing a list of activities that it had performed throughout 2012. We reviewed the totality of our evidence related to DOC’s cost monitoring in 2012 and considered the list of activities included in DOC’s response to the draft report. Based on this review, we believe that our statement accurately reflects the condition of DOC’s monitoring of costs during the course of the contract period in the scope of our audit. Page 41