RD210 - Department of Corrections Health Care Cost Assessment Report – June 27, 2016


Executive Summary:
Virginia's 2015 Budget Bill HB 1400 Item 384 states:

"P.1. The Department of Corrections shall develop and issue a Request for Information for the comprehensive management and provision of health care services for (i) all inmates confined at facilities not covered by the August 4, 2014, solicitation/or health care management services, and (ii) all inmates confined at Department facilities statewide. This request for information shall focus on identifying health care management models that use the best practices and cost containment methods employed by Medicaid managed care organizations in delivering provider-managed and outcome-based comprehensive health care services. These services shall include consolidated management and operational responsibility.for delivering all primary and specialty care, nursing, x-ray, dialysis, dental, medical supplies, laboratory services, and pharmaceuticals, as well as all off-site care, case management, and related services. Specific information shall be sought on 1) how existing state-funded managed care networks can be leveraged; 2) federal health care funding opportunities; 3) identifying state-of-the-art practices in care coordination and utilization review; and 4) identifying innovative correctional health care management systems being used or developed in other states. A report summarizing the responses to the Request for Information and estimating the potential long-term savings from the approaches identified in the responses shall be provided to the Chairmen of the House Appropriations and Senate Finance Committees, the Secretary of Public Safety and Homeland Security, and the Department of Planning and Budget no later than October 1, 2015.

2. The Department shall provide to the Secretary of Public Safety and Homeland Security, the Directors of the Departments of Planning and Budget and Human Resources Management, and the Chairmen of the House Appropriations and Senate Finance Committees by July 1, 2016, a report assessing:

a. The costs, benefits, and administrative actions required to eliminate the Department's reliance on a private contractor for the delivery of inmate health care at multiple facilities, and to provide the same services internally using either state employees or individual contract medical personnel.

b. The costs, benefits, and administrative actions required to transition to a statewide health care management model that uses best practices and cost containment methods employed by prison health care management and Medicaid managed care organizations to deliver provider-managed and outcome-based comprehensive health care services through a single statewide contract for all of the Department's adult correctional centers.

c. A review of the Department's actual cost experience comparing the previous arrangement in which the contractor assumed full financial risk for the payment of off-site inpatient and outpatient services, and the current and proposed arrangement in which the Department assumes that risk and also receives any Medicaid reimbursement for such off-site expenses. For purposes of analyzing the first arrangement, it is assumed that the benefit of any Medicaid or other thirdparty reimbursement for hospital or other services would accrue to the contractor. This review shall also compare cost trends experienced by other states which have adopted these two arrangements.

d. A comparison of the costs and benefits of the Department's current management of inmate health care, including the model envisioned in its August 2014 Request for Proposals, to the alternative models the Department is directed to assess in subsections a, b, and c above.

e. The Department of Human Resources Management, the Department of Planning and Budget and other executive branch agencies shall provide technical assistance to the Department as needed.”

This report is intended to assist the Department of Corrections (DOC) in fulfilling its obligations under P.2 of HB 1400, and complements our previous report dated August 15, 2015 that addressed P.1. After outlining the methods we used in our work, we begin by describing DOC's current facilities and management structure and the population of offenders served. We then discuss the conceptual arguments for each of the models represented in a) - d) above and the extent to which we were able to assess them empirically, and finish with our observations and conclusions.