April 2004

California Department of Corrections: It Needs to Ensure That All Medical Service Contracts It Enters Are in the States Best Interest and All Medical Claims It Pays Are Valid

This report concludes that Corrections does not adequately ensure that it enters into medical service contracts that are in the States best interest. Specifically, Corrections staff who negotiate contracts tend to rely on a 30-year-old state policy exemption that allows them to award contracts for most medical services without seeking competitive bids. Another barrier to cost-effective medical service contracts is Corrections flawed negotiating practices. Some hospital contracts leave out information vital to ensuring that the State receives the discounts specified in the contracts. Other contracts do not justify awarding rates that are higher than Corrections standard rates, violating this requirement of Corrections contract manual. Additionally, Corrections sometimes exceeds the authorized contract amount and fails to obtain proper approvals before receiving non-emergency services. Finally, Corrections prisons are not adhering to its utilization management program, established to ensure inmates receive quality care at contained costs. Consequently, prisons are overpaying for some services, incurring unnecessary costs for the State.