Audit: State pays too much for inmate care


Click here to read the full report (.pdf)

The report from The Office of the State Auditor looked at care coming from hospitals outside the Department of Correction's in-house medical facilities. The state has to contract for medical services that it's not equipped to handle.

The report says the department "does not have internal controls in place to ensure inmate medical costs are minimized. As a result, there is an increased burden on the Department and the State’s financial resources to provide medical care to the inmate population. The costs of inmate medical services exceed $100 million annually and continue to increase."

Among the findings:

  • Hospitals and medical providers generally dictate the terms of healthcare agreements, so they vary widely from contract to contract and are not always in the best interest of the state.
  • Unlike many other states, the North Carolina Department of Correction does not use Medicare reimbursement rates as a basis for what it pays. South Carolina, for example, pays 135 percent of what Medicare pays.

"In our examination of inmate hospital service payments, we noted that on average, providers were billing the Department at rates that were 467% of the applicable Medicare/Medicaid reimbursement rates," said the report.

The Office of the State Auditor recommends in its report that the department do more to contain medical costs. The DOC worked with the Legislature last year to do just that, and a law was passed that linked reimbursement rates to what the state employees' health care plan pays. But, the requirement didn't cover health care providers that don't participate in the state health care plan, and the Attorney General's office has questioned the law's enforceability because inmates are not plan participants.

In its response to the audit, the Department of Correction said "Many of the points raised in this finding are a result of very complex situations, some of which are not easily remedied. The Department does not have the legal authority to compel public hospitals or providers to treat inmates, nor do we have an established fee schedule, such as the State Health Plan, Medicare or Medicaid. This is first and foremost the major contributing cause to the problems we face in attempting to control the cost of providing medical care to our inmates."

"Without the authority to compel medical providers to treat inmates, the Department is forced to negotiate contracts with each provider individually, at rates which are favorable to the provider," it continued.

The audit also criticizes a lack of uniform standards in how medical claims are submitted and processed for payment. It said investigators found examples where vendors were overpaid even under the terms of their contracts.

In its response, the DOC said it recognizes the need for better internal controls, but said the department position for a person that would deal with many of those issues is vacant, and the department has not been able to fill it because of the state hiring freeze.

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