An Audit Report on Correctional Managed Health Care at the Texas Tech University Health Sciences Center
February 2011
Report Number 11-019
Overall Conclusion
The Texas Tech University Health Sciences Center (TTUHSC) reported that it will experience a $6.0 million deficit in providing correctional managed health care services to offenders in fiscal years 2010 and 2011. In fiscal year 2009, TTUHSC experienced a $38,496 surplus after receiving $1.6 million in supplemental appropriations. In fiscal year 2010, TTUHSC management reported that offsite hospital, ambulance, and specialty care costs had a significant effect on TTUHSC's reported deficit (see Table 1 in this report for additional details).
The State Auditor's Office's audit of TTUHSC identified issues that were similar to the issues identified at the University of Texas Medical Branch at Galveston (see An Audit Report on Correctional Managed Health Care at the University of Texas Medical Branch at Galveston, State Auditor's Office Report No. 11-017, February 2011). Those issues may have a direct effect on the deficit that TTUHSC reported and are summarized below.
Indirect Costs. In fiscal years 2009 and 2010, TTUHSC charged its contract with the Correctional Managed Health Care Committee for indirect costs totaling $11.8 million. TTUHSC calculates those indirect costs at an estimated 6 percent of total revenues. However, TTUHSC did not provide support showing that the administrative costs associated with providing offender health care were equivalent to 6 percent of total revenues. The manner in which TTUHSC calculates indirect costs could have a significant effect on whether TTUHSC experiences a surplus or a deficit.
Salaries. According to information TTUHSC provided, while projecting a deficit of $2.0 million in fiscal year 2010, TTUHSC also awarded $1.1 million in salary increases in the form of merits, equity adjustments, and pay plan adjustments to its correctional managed health care staff. The annual salary increases per individual ranged from $374 to $11,630. Of the $1.1 million in salary increases, $112,503 (approximately 10 percent) was awarded to staff who provide administrative support under the managed health care contract.
Allowable Costs. TTUHSC had support for almost all expenditures auditors tested related to the reported deficits. However, in fiscal year 2010, TTUHSC's correctional managed health care unit (TTUHSC-CMC Division) spent at least $52,465 for employee benefits not authorized by the contract. (See Section 4 of the attachment to this report for auditors' methodology for auditing employee benefits.) Due to a lack of clear guidance in the contract between TTUHSC and the Correctional Managed Health Care Committee, auditors were unable to determine whether $159,082 in fiscal year 2010 expenditures were reasonable and necessary to providing offender health care.
Reimbursement Amounts. The majority of TTUHSC's expenditures related to offender health care are associated with TTUHSC's contracts with medical facilities or medical professionals. The contracts specify agreed-upon reimbursement amounts for providing services. For example:
- TTUHSC has 213 offsite professional services contracts through which providers offer offender health care. TTUHSC reimburses approximately 67 percent of those 213 providers based on the Medicare fee schedule.
- TTUHSC reimburses most offsite hospitals or facilities with which it contracts to provide offender health care at rates based on the Medicare fee schedule.
- TTUHSC reimburses nine local community hospitals with which it contracts to provide onsite health care to offenders at capitated rates that range from $1.86 to $3.57 per patient per day.
Organizational Structure. TTUHSC has established TTUHSC-CMC Division as a department within TTUHSC. That department operates under the direction of an executive director of administration and an executive medical director. The Correctional Managed Health Care Committee does not participate in the day-to-day operations of providing offender health care at TTUHSC. (See Section 2 of the attachment to this report for an organizational chart.)
In a 2007 report, the State Auditor's Office recommended that TTUHSC continue its efforts to replace its existing financial management system with a new system. TTUHSC implemented a new financial accounting system in September 2008.
The information systems TTUHSC uses to report information and generate financial reports on correctional managed health care are generally secure and provide complete and accurate information. However, TTUHSC does not maintain documentation to support the test results for the procedures it performed on certain information systems prior to implementation and upgrade.