Washington County
Auditor’s Office

Audit of Jail Healthcare

Final Report
November 24, 2014

John Hutzler, CIA, CGAP, CCSA
County Auditor

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TABLE OF CONTENTS

EXECUTIVE SUMMARY ……….……………………………… i
Background ……………………………………………………….. 1
Findings and Recommendations ……………….……..…………. 2
Contract Administration ……………….……………… 2
Quality of Care …………............……………… 3
Minimum Staffing Requirements ….…………... 4
Oregon Medical Practice Requirements ..….… 6
Secure Release Program …………..…………… 6
Standard Terms & Conditions …….…………… 7
Contract Terms ……………………………………….. 7
Budget Overruns ……………………………………… 9
Cost Control …...…………………………………….. 11
Issues Already Addressed …………………………… 14
Objectives Scope and Methodology ……..……………..………. 15
Summary of Audit Recommendations …..…………….………. 17
Compliance with Audit Standards ………..……………….…… 20
Response to Audit ……………..……………………………………..

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AUDIT OF JAIL HEALTHCARE
EXECUTIVE SUMMARY
Why we audited jail healthcare

The County Administrator’s Office (CAO) suggested
this audit due to significant increases in jail healthcare
costs and substantial overruns of the jail healthcare
budgets from FY2007 through FY2010. The County has
contracted for jail healthcare services since 1998. We
included this audit in our FY2012 audit plan to address
the following questions:
• Did the County effectively administer the contract?
• Were the terms of the contract appropriate?
• What caused the budget overruns?
• Did the County take appropriate steps to contain
costs?

What we found

The jail healthcare contract was not administered in
accordance with County guidelines and best practices.
Certain terms of the jail healthcare contract did not
adequately protect County interests.
From FY2007 to FY2010 the County did not forecast
and include sufficient funds in the jail healthcare budget
to cover jail healthcare costs.
The County and its contractor have taken steps to control
healthcare costs, but should consider additional options.

What we recommend

To more effectively administer the contract, the contract
administrator should:
 Implement a risk-based contract monitoring plan for
the jail health contract;
 Monitor and enforce compliance with contract
requirements; and
 Ensure that changes to the scope of work are
processed as contract amendments with appropriate
changes to contract payments;
and the County should:
 Reassign administration of the contract;
 Engage a qualified corrections healthcare consultant
to develop the Jail healthcare staffing plan;
 Assign responsibility for ensuring quality of care to
a qualified medical professional independent of the
contractor;
 Require the contractor to implement a quality
assurance program approved by the County’s
qualified medical professional; and
 Validate the results of the vendor’s quality assurance
process through periodic audits.

Contract terms should:
 Clearly specify minimum staffing requirements by
position, by day and by shift;
 Include specific remedies for non-performance;
 Ensure continuity of care in the event of termination
of the contract;
 Ensure that the County can monitor standards
compliance and require the contractor to promptly
remedy violations;
 Require the contractor to implement a quality
assurance program approved by the County;
 Include a strong right to audit clause.
To avoid or limit budget overruns in jail healthcare, the
County should consider:
 Entering into a full-liability contract with the jail
healthcare provider;
 Purchasing commercial insurance to transfer the risk
of catastrophic cases; and/or
 Enrolling uninsured inmates in health coverage
through the Affordable Care Act.
To more effectively control costs the County should:
 Engage a third party medical billings auditor to audit
hospital billings for accuracy;
 Include in the contract provisions that incentivize
cost control;
 Ask bidders to propose specific strategies for
controlling emergency and inpatient hospital cost;
 Evaluate the cost-effectiveness of contracting for
independent utilization review;
 Credit jail admission health screening fees to the jail
healthcare account; and
 Evaluate the feasibility and cost-effectiveness of
enrolling eligible inmates in health coverage under
the Affordable Care Act.

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Washington County Auditor’s Office

BACKGROUND

AUDIT OF JAIL HEALTHCARE

Government officials who incarcerate inmates have a constitutional
obligation to provide for their medical, psychiatric and dental care.
Healthcare in correctional facilities has a long history of problems,
including lack of medical facilities, inadequate care, and unhealthful
living conditions. Although actions by courts and health professional
organizations beginning in the 1970s resulted in significant
improvements in the quality of care, for a variety of reasons these
programs remain subject to significant challenges, including
burgeoning costs.
Governments have increasingly sought to control the rising costs of
corrections healthcare by contracting for healthcare services with
for-profit corporations. However, contracting does not relieve the
government of its responsibility to provide adequate healthcare for
inmates. Neither does a contractor’s obligation to indemnify the
government relieve the government of liability.
A for-profit corporation’s need to demonstrate that it can provide
services at a lower cost than government, while realizing a profit,
creates a natural tension between cost-control and healthcare
objectives. As a result, strong oversight by the government is
essential to ensure that the vendor complies with its contractual
obligation to provide adequate care.
Until 1998 Washington County provided healthcare to inmates of
the old County Jail on Lincoln Street with County staff from the
Department of Health and Human Services (HHS), under the
direction of the County Health Officer. When it opened the new
Washington County Jail (WCJ) in 1998, the County began
contracting for jail healthcare services. The County has bid the
contract three times over the years, but has awarded the contract to
the same vendor each time.1 The Sheriff operates the WCJ, but until
recently, HHS administered the jail healthcare contract.
The contractor was responsible for providing all healthcare services
for inmates of the WCJ and indemnified the County against any
claims arising from its provision of, or failure to provide, healthcare
services. Washington County paid the contractor a monthly fee
established in the contract. This fee covered the cost of all in-house
healthcare, and costs for pharmacy and outside referrals (hospital &
specialty care) up to an annual aggregate cap specified in the
contract. Once the aggregate cap was met, the County reimbursed
the contractor for any additional costs for pharmacy and outside
care. In fiscal year 2013 (FY2013) the County paid approximately
$3.7 million in monthly fees, plus approximately $0.3 million for
costs beyond the aggregate cap, for a total of nearly $4 million.

1

The County contracted with Prison Health Services (PHS). In 2011, PHS merged with another leading provider of
corrections health services to form Corizon Health Services.

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AUDIT OF JAIL HEALTHCARE

Total costs for jail healthcare services increased substantially over
the past 15 years, from approximately $1.2 million in FY1999 to
nearly $4 million in FY2013. Significant year-over-year increases in
costs occurred each time the jail healthcare contract was rebid
(Figure 1).
Figure 1

Source: Analysis of CAFR data

FINDINGS &
RECOMMENDATIONS
Contract administration Contract administration best practices recommend that a contract
administrator implement a contract monitoring plan that addresses
key contract requirements prioritized by risk, establishes
performance measures, and assesses the extent to which the
contractor achieves these. We found that the contract administrator
had no such plan for administering the jail healthcare contract. We
recommend that the contract administrator implement a risk-based
contract monitoring plan. The plan should include key contract
requirements and performance measures, procedures for comparing
those measures with actual performance, and procedures for
corrective action.
The County’s Contract Administration Guidelines establish certain
duties of the contract administrator. The contract administrator is
responsible for ensuring contractor performance and compliance
with all terms and conditions of the contract. The contract
administrator must initiate a contract amendment whenever the
scope of work of the contract is changed. We found that the contract
administrator for the jail healthcare contract did not perform these
assigned duties.
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AUDIT OF JAIL HEALTHCARE

Quality of Care Evaluating the quality of care provided to inmates was beyond the
scope of this audit, and we express no opinion on the quality of care
provided. We did review the processes implemented by the contract
administrator to monitor quality of care and concluded they did not
provide the County with reasonable assurance that quality care was
being provided.
The contract required the vendor to establish a Medical Audit
Committee (MAC) to assure that quality care was accessible to all
inmates. The contractor established this committee with
representation from the Contractor’s administrative and medical
staff, the Sheriff’s Office and the contract administrator.
The contract also required that all jail healthcare services be
reviewed and evaluated for quality of care through established and
regularly performed audits. We found no evidence that these audits
had been performed. Although the vendor represented that it had a
quality assurance program, it did not report the results of its quality
assurance audits to the MAC or the contract administrator. The
vendor could not provide the auditors with evidence that the
specified audits were actually conducted.
The County also employed a physician from the local hospital to
audit the medical records of a few randomly selected inmates each
month. We found these audits to be of limited value for monitoring
quality of care. The sample was too small to support conclusions
regarding the quality of care provided to the inmate population. The
focus of the review was on the quality of medical record
documentation, rather than the quality of care provided. We found
no record of recommendations or corrective actions in response to
these audits, although we observed that the physician had noted
recurring problems. The physician reported that he saw little value in
the audit process as implemented by the County.
The MAC was also responsible for recommending and
implementing all policies and procedures necessary for the operation
of the jail healthcare program. We found that the MAC had not
recommended and implemented all policies and procedures for jail
healthcare, and that the vendor had not provided the contract
administrator with a copy of its policies and procedures. We found
that the vendor’s standard policies and procedures had not been
tailored to the WCJ, as required by National Commission on
Correctional Health Care (NCCHC) standards. This deficiency was
not remedied until shortly before a scheduled NCCHC accreditation
inspection.
We recommend that the County assign responsibility for ensuring
the quality of jail healthcare to a qualified medical professional
independent of the vendor, such as the County Health Officer.
Policies and procedures for jail healthcare should be subject to
approval by the County’s qualified medical professional and the
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Sheriff. The County should require the jail healthcare provider to
implement a quality assurance program approved by the County’s
qualified medical professional. The program should continuously
evaluate healthcare provided to inmates both on-site and off-site for
quality appropriateness and continuity of care. The program should
include evaluating compliance with policies and procedures. Results
should be documented and reported regularly to the County’s
qualified medical professional, the MAC and the Jail Commander.
The County should validate the results of the vendor’s quality
assurance process by periodically auditing cases randomly selected
from the pool of cases reviewed by the vendor in its quality
assurance process.
Minimum staffing levels The contract specified minimum staffing levels for jail health
services by position, by day and by shift (see, for example, Table 1).
Table 1
Position

M

Program Administrator
Charge Nurse (DON)
Mental Health RN
Qual Mental Health Prof (MSW)
Adult Nurse Practitioner
Administrative Assistant
Medical Records Clerk
Dental Assistant
Registered Medical Assistant
RN
LPN
Discharge Planner (LCSW)
Total Hours/FTE-Day

8
8
8

RN
LPN
Registered Medical Assistant
Medical Records Clerk
Total Hours/FTE-Day
RN
LPN
Registered Medical Assistant
Total Hours/FTE-Day
Total Hours/FTE per week

8
8
8
8
16
16
8

ADP 600
Tu W Th
Day Shift
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
16 16 16
16 16 16
8
8
8

Evening Shift
8
8
8
8
8
8
16 16 16
Night Shift
8
8
8
8
8
8
8
8
8

8
8
16

8
8
8

F

Sa

Su Hrs/Wk

8
8
8
8
8
8
8
8
16
16
8
8
8
16

8
8

8

8
16

8
16

8
16

8
16

8

8

8
8

8
8
8

40
40
40
40
40
40
40
8
40
96
112
40
576

FTE

56
56
40
152
952

1.0
1.0
1.0
1.0
1.0
1.0
1.0
0.2
1.0
2.4
2.8
1.0
14.4
0.0
1.4
1.8
2.0
0.4
5.6
0.0
1.4
1.4
1.0
3.8
23.8

12
8
8
28

0.3
0.2
0.2
0.7

56
72
80
16
224

Subcontractors
Day Shift
Medical Director
Dentist
Psychiatrist
Total Hours/FTE-Day

8

4
8
8

Source: Jail Healthcare contract FY2012 minimum staffing requirements

The contract administrator did not require the contractor to meet the
explicitly defined minimum staffing requirements of the contract.
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Instead, he granted the contractor a degree of flexibility in staffing
that was inappropriate for a contract of this nature.
The contract administrator also failed to implement an effective
system to ensure the jail was staffed with the appropriate number
and types of healthcare staff at all times. He did not require the
contractor to report staffing in sufficient detail to determine whether
staffing specifications were met or whether the staffing actually
provided was adequate to ensure quality of care. The vendor
provided only monthly staffing summaries that included total hours
for each staff member, but did not break those hours down by day
and shift. Those reports did not reveal days and shifts on which
staffing was less than specified in the staffing plan.
For example, the plan required that the vendor staff the facility with
at least one registered nurse (RN) at all times. As the senior medical
position on duty during evening and night shifts and on weekends,
the RN was a critical position. The contract also specified that only
an RN could perform certain healthcare functions, including
admission triage and health screenings. We analyzed payroll records
for FY2012 and found that no RN was on duty in the WCJ 19% of
the time.
We analyzed the contractor’s summary staffing reports and found
significant understaffing of several other positions. In FY2012, the
contractor provided only 56% of contracted hours for the medical
director, 44% of the contracted hours of a licensed clinical social
worker, and 77% of the contracted hours of the dentist. These were
senior staffing levels in their respective areas of practice. We noted
that less highly qualified positions were sometimes overstaffed.
However, backfilling with less qualified staff could compromise
quality of care and increases the provider’s profit at the County’s
expense.
We estimated the value of the minimum specified staffing that the
County did not receive between July 1, 2008 and June 30, 2012 to be
at least $350,000. Failing to enforce minimum staffing requirements
may also have increased other County costs for jail healthcare. We
examined the contractor’s monthly reports for December 2007
through June 2012. We found that when the hours Medical
Director’s were more than 5 hours below the specified minimum, the
average number of referrals to external physicians was 42% higher,
and the average number of deputy transports for medical care was
48% higher, than in other months. When the total hours for all
providers (Medical Director, Physician Assistant, and Nurse
Practitioner), were more than 10 hours below specified minimums,
ER visits, hospital admissions, and inmates on non-formulary drugs
averaged 21%, 32%, and 33% higher, respectively. Deputy
transports, and additional hospitalizations, ER visits, external
referrals and pharmaceutical expenses resulted in additional costs to
the County beyond the contract fee.
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Minimum staffing requirements for jail healthcare should be
developed by qualified professionals independent of the healthcare
contractor with expertise in correctional healthcare. We recommend
that the County engage a jail healthcare consultant to develop those
requirements. Requirements for line healthcare staff should be
specified in the contract by number of hours per position, per day
and per shift. Administrative positions should be specified as full
time equivalents with scheduling flexibility. The contract should
make clear that specifications are minimum requirements and that
the contractor must provide any additional staffing necessary to meet
its contract obligations without additional compensation, unless the
contract fee is modified by contract amendment. The contract
administrator should monitor and ensure compliance with minimum
staffing requirements and should require that the contractor report
staffing provided at a level of detail that supports such monitoring.
The contract should provide specific damages for understaffing.
When necessary and appropriate, staffing requirements should be
changed only through a contract amendment with appropriate
adjustments to the contract fee.
Oregon Medical Practice The contract provided that all jail healthcare staff must be licensed
Requirements to practice in Oregon and must comply with all Oregon professional
practice act regulations. We found that the contract administrator did
not monitor compliance with this provision. We found that a
Physician’s Assistant employed by the contractor worked in the
WCJ for 36 weeks without adequate physician supervision required
by the Oregon Medical Practice Act. We recommend that the
County require the vendor to provide evidence of its compliance
with Oregon medical practice requirements.
Secure Release Program The contract required that the contractor establish a Secure Release
program. The County agreed to pay an additional amount for the
contractor to add a Discharge Planner to its staffing plan. As
proposed, the Secure Release program included providing a 30-day
supply of prescribed medications and an appointment with a
community healthcare provider to all inmates requiring follow-up
care upon release. We found that the contractor provided
medications upon release only to inmates housed for at least 30 days
and did not make appointments with community healthcare
providers at release. The contract administrator had apparently
accepted these reductions in the scope of work without negotiating
reductions in compensation or initiating a contract amendment.
We recommend that the Contract Administrator monitor contractor
performance and enforce compliance with contract provisions
related to the Secure Release program. When reductions in the scope
of work are negotiated, they should be accompanied by negotiations
to reduce contract fees. Changes to the scope of work should be
accomplished by contract amendment.
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Standard Terms & The County maintains a set of Standard Terms and Conditions to be
Conditions included in all County contracts. The contract administrator did not
monitor or enforce certain of the standard contract terms and
conditions in the jail healthcare contract, including the contractor’s
obligations to report claims made against it, to obtain County
approval of subcontracts, and to provide access to records.
One standard provision required the vendor to inform the County of
all claims made against it by third parties. Knowledge of claims filed
by WCJ inmates against its jail healthcare provider could alert the
County to deficiencies in the vendor’s performance and to potential
County liability. Knowledge of claims against the vendor in other
jurisdictions could alert the County to risks of nonperformance by
the vendor. We found that the vendor had not notified the County of
all claims made against it.
Another standard provision required the vendor to obtain the
County’s written approval of any subcontract. The vendor entered
into subcontracts with physicians, dentists, psychiatrists and
hospitals to provide healthcare to inmates of the WCJ without
obtaining written approval from the County. Although the contract
administrator was aware that the vendor was subcontracting work,
he did not require the vendor to submit those subcontracts for
approval and did not report the vendor’s failure to do so to
Purchasing or County Counsel. As a result the County was not in a
position to ensure that subcontracts adequately protected the
County’s interests. We found that one subcontract did not ensure
that the County would receive the level of service the vendor was
obligated to provide. Several subcontracts did not contain certain
provisions which the Standard Terms and Conditions specified
should be included in all subcontracts.
Another standard provision required the vendor to maintain records
documenting its performance and to allow duly authorized County
representatives access to such records. The contractor repeatedly
refused the Auditor’s request for access to certain records pertinent
to this contract, and the contract administrator took no action to
require the contractor to comply with this provision.
We recommend that the contract administrator monitor and enforce
compliance with the Standard Terms and Conditions included in the
jail healthcare contract.
Contract terms Certain terms of the jail healthcare contract were inadequate to
protect County interests. These included several provisions of the
Standard Terms and Conditions and others specific to the jail
healthcare contract.
The jail healthcare contract required that “health care services must
be provided in compliance with the standards of the National
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Commission on Correctional Health Care (NCCHC).” The contract
further stated: “More specifically, the services provided must meet
the standards to the extent required to achieve NCCHC
accreditation.” The second sentence suggests that maintaining
NCCHC accreditation would be sufficient to satisfy the requirement
that healthcare services must be performed in compliance with the
standards. This language could limit the County’s right to monitor
compliance with standards and to require the contractor to remedy
violations.
The WCJ has maintained its NCCHC accreditation status. However,
NCCHC evaluates a facility’s standards compliance through on-site
visits only every three years. NCCHC does not require that a facility
comply with all standards in order to receive a certificate of
compliance. In fact, the WCJ was most recently accredited by
NCCHC despite noncompliance with 15% of essential standards.
We recommend that the jail healthcare contract provide specifically
that the County has the right to monitor the contractor’s compliance
with NCCHC standards and to require the contractor to promptly
remedy any standards violations.
The contract required the contractor to establish a Medical Audit
Committee (MAC) with the objective of assuring that quality care
was available to all inmates. The same section provided that “All
services under the purview of health services shall be reviewed and
evaluated for quality of care through established and regularly
performed audits.” Although County Counsel advised us that the
contract required the vendor to perform these audits, the vendor
maintained that they were a County responsibility. The contract
administrator had not required the vendor to perform these audits.
We recommend that the County clarify contract language regarding
the contractor’s obligation to implement a quality assurance
program.
The jail healthcare contract did not provide for monetary damages or
withholding payment for non-performance. The only remedy
provided for contract violations was termination of the contract.
Termination is a drastic remedy that could create hardship for the
County and endanger the health of inmates, because replacing the
jail healthcare provider is a months-long process. Revisions to the
County’s Standard Terms and Conditions have improved the remedy
language, but the jail healthcare contract could be further improved.
We recommend that the County add provisions for specific remedies
for non-performance and a termination clause that ensures continuity
of care until the vendor is replaced.
The record access and audit provisions of the Standard Terms and
Conditions were insufficient to ensure County access to contractor
records and the County Auditor’s access to contractor staff. The
contractor maintained that its policy and procedure manual for WCJ
Health Services, its quality assurance manuals, its quality assurance
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reports on healthcare services at WCJ, and its subcontracts with
local hospitals and providers were proprietary documents that it was
not obligated to provide to the County. The contractor refused the
auditor’s request to interview certain members of its WCJ healthcare
staff. Without guaranteed access to such materials and contractor
staff, the County could not adequately monitor performance.
The audit clause should require the contractor and its staff to
cooperate with the County Auditor in evaluating contract
compliance and performance. Standard contract terms should ensure
that the County Auditor’s Office can perform its charter
responsibility to continuously evaluate County programs and
activities when such activities are performed by contractors. We
recommend that the County strengthen standard contract provisions
for access to vendor records. The audit clause in the County’s
Standard Terms and Conditions should state clearly that it applies to
performance audits as well as financial audits.
Budget overruns Jail healthcare costs increased significantly in FY2007 and FY2008
and have remained higher. The County experienced significant
budget overruns in jail healthcare from FY2007 through FY2010
because increases in expenditures were not matched by budget
increases until FY2011 (Figure 2).
Figure 2
Jail Healthcare costs and budget
5

Dollars (millions)

4

3

2

1

0
2003

2005

2007

2009

2011

2013

Fiscal year
Budget

Total cost

Source: Analysis of Adopted Budget & CAFR data

The County has been unable to budget accurately for the costs of jail
healthcare under the 2007 contract (Figure 2). Budgeting for costs
subject to the aggregate cap (external referrals and pharmacy) has
proven particularly challenging. The budget variances that began in
FY2007 reflect this inability to project costs subject to the cap.
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From FY2007 to FY2013, funds included in the budget for external
referrals and pharmacy increased from about $0.4 million to more
than $1.8 million. Budgeted amounts bore little relationship to the
costs actually incurred. This resulted in substantial deficits from
FY2008 to FY2010 and substantial surpluses in FY2012 and
FY2013, as illustrated in Figure 2.
Prior to FY2007, the aggregate cap specified in the contract
appeared to operate as a constraint on costs. The total cost of
external referrals and pharmacy for FY2003 through FY2006 was
only 2% more than the sum of the aggregate caps for the period.
Since FY2007, costs for external referrals and pharmacy have far
exceeded the cap even after a substantial increase in the cap in
FY2010 (Figure 3).
Figure 3
Aggregate cap and costs subject to the cap
1,500

Dollars (000)

1,250
1,000

750
500
250
0
2003

2005

2007
2009
Fiscal year

Costs subject to the aggregate cap

2011

2013

Aggregate cap

Source: Analysis of CAFR data & Jail Healthcare contracts

The parties had gradually eliminated clauses included in earlier
contracts that promoted cost control. The first contract limited to
$25,000 the vendor’s liability for the healthcare costs of an
individual inmate. The 2002 contract changed the contractor’s
liability to an aggregate limit on all off-site services and pharmacy
costs. The County was responsible for costs above the aggregate
limit established in the contract. However, the 2002 contract also
provided that the “contractor bears the risk of non-payment for
services in excess” of the contract. This provided an incentive for
the contractor to contain cost within the contract amount. That
incentive was eliminated in the 2007 contract.
Until 2010, if costs for external referrals and pharmacy remained
below the aggregate cap, the contractor could retain 50% of the
savings. In 2010 the contract was amended to eliminate this last
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incentive for the contractor to control costs subject to the cap.
Thereafter 100% of savings, if any, would be returned to the County.
These changes gradually eliminated financial incentives for the
contractor to control costs for off-site referrals and pharmacy. As a
result, the County lost control over those costs and could no longer
accurately project and budget for jail healthcare costs.
One approach to eliminating budget overruns would be to enter into
a full-liability contract with no aggregate cap. Under such a contract,
the vendor assumes responsibility for all jail healthcare costs,
including the cost of in-house healthcare, pharmacy and external
referrals. With a full liability contract the County could budget for
the contract amount with confidence that the budget would not be
exceeded. While Washington County has not recently solicited
competitive proposals for a full liability contract, its current vendor
recently entered into such a contract with another Oregon county.
Because healthcare costs for the WCJ have been more stable in
recent years, vendors may be more willing to assume the risk of a
full-liability contract.
Another approach to controlling budget overruns would be for the
County to purchase commercial insurance. Budgeting accurately for
a known insurance premium is much easier than forecasting when a
“budget-busting” catastrophic case might occur. To manage its risk
universe, the County employs a combination of self-insurance and
commercial insurance. It relies upon the Risk Management
department to cost-effectively balance risk retention and risk
transfer.
The availability of healthcare coverage for inmates under the
Affordable Care Act could also reduce the County’s liability for
inmate healthcare costs.
To avoid or limit future budget overruns in jail healthcare, we
recommend that the County consider:
• entering into a full-liability contract,
• purchasing commercial insurance to transfer the risk of
catastrophic cases, and/or
• enrolling inmates in healthcare coverage under the
Affordable Care Act.
Cost control The County and its contractor have taken steps to control healthcare
costs, but should consider additional options.
WCJ initiated a fee-for-service program. Fees were charged for
healthcare services requested by an inmate. In accordance with the
position of the NCCHC, fees were small ($10) and were not
compounded when an inmate was seen more than once for the same
medical condition. Fees were not charged when an inmate was
indigent. Healthcare fees were charged to and paid from an inmate’s
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jail account. Uncollected charges remained in an inmate’s account
and could be collected if the inmate were readmitted to the jail. Fees
collected for inmate requested healthcare services (about $10,000
per year) were credited to the jail healthcare account. We did not
assess the effectiveness of the fee-for-service program in controlling
costs resulting from inmate abuse of healthcare services in WCJ.
Jail policy also provided that all inmates admitted to the facility
must receive an intake health screening, for which the inmate was
assessed a fee. Although permitted by Oregon law, because the
intake screening was mandatory, this policy was inconsistent with
NCCHC guidelines for charging inmates a fee for healthcare
services. Those guidelines provide that only services initiated by the
inmate should be subject to a fee, and they state explicitly that no
charges should be made for the intake health screening. When we
brought this issue to the attention of the Sheriff and the Jail
Commander, they changed the policy to eliminate the fee for the
intake health screening. However, as we were finalizing our report,
we were informed that the Jail had reinstituted a fee for the
mandatory intake health screening. We recommend that this fee be
discontinued.
Fees collected for the intake health screening (over $70,000 in
FY2014) were not credited to the jail healthcare account. If the WCJ
continues to assess and collect fees for the intake health screening,
we recommend that those fees be credited to the jail healthcare
account.
The jail healthcare contractor had implemented a drug formulary to
promote the use of less-costly and generic drug alternatives. The
contractor paid most external specialty care providers at deeply
discounted rates. The County and the contractor had been unable to
negotiate a discount rate with the hospital to which most jail inmates
were referred.
The County paid more than $4 million dollars in hospital charges for
jail inmates between FY2006 and FY2012. We did not assess the
accuracy of hospital charges. However, studies show that hospital
bills frequently contain errors and recommend that bills be reviewed.
The County did not review hospital bills for accuracy, and there was
little incentive for the contractor to do so, since its liability was
limited by the aggregate cap, which was routinely exceeded. We
recommend that the County engage a third party medical billings
auditor, on a contingency fee basis, to audit hospital bills for inmate
care.
As described earlier in this report, contract changes gradually
eliminated the financial incentives for the contractor to control costs
for off-site referrals. We found that utilization of off-site emergency
room and inpatient hospitalization treatment nearly doubled from
FY2006 to FY2013. Utilization of external specialty services
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increased by 58% over the same period. Total costs for services
subject to the cap more than tripled from FY2006 to FY2013.
Costs subject to the cap represented a much larger share of total
healthcare costs under the 2007 contract than they did under the
previous contract (Figure 4).
Figure 4

Source: Analysis of CAFR data & Jail Healthcare contracts

We express no opinion on the medical necessity of the off-site
referrals. However, the terms of the current contract and weaknesses
in contract administration, described earlier in this report, created a
risk that over-utilization of external resources could occur without
being detected by the County.
Utilization review is a safeguard against unnecessary and
inappropriate medical care. The County has relied almost entirely on
the contractor for utilization review, while employing a contract fee
structure that appears to provide an incentive for the contractor to
refer inmates for external care to reduce its costs for providing care
in the jail facility. We recommend that the County include in the
contract provisions that incentivize the contractor to control costs
and ask bidders for the next jail healthcare contract to propose
specific strategies for controlling emergency and inpatient hospital
costs. We recommend that the County evaluate the cost
effectiveness of contracting for independent utilization review
services.
Many states and counties, including Multnomah County, have begun
facilitating the enrollment of inmates in health coverage under the
Affordable Care Act (ACA). While implementing such a program in
a local jail presents special challenges, it has the potential to reduce
the County’s liability for jail healthcare costs and to reduce the
likelihood that inmates will return to jail following their release. We
recommend that the County evaluate the feasibility and costeffectiveness of implementing a program to facilitate the enrollment
of eligible WCJ inmates in health coverage under the ACA.
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Issues already addressed To address the contractor’s refusal to provide pertinent records to
the auditor, we recommended that County Counsel strengthen the
audit clause of the County’s standard contract terms and conditions.
By May 2012 the clause had been strengthened and the jail health
contract was amended to include the revised Standard Terms and
Conditions.
In an interim report in November 2013, we recommended that the
CAO consider assigning responsibility for administration of the jail
healthcare contract to a new contract administrator outside of HHS.
The CAO has assigned responsibility for the administration of the
contract to a Senior Management Analyst in the Finance Department
reporting directly to the Assistant County Administrator.
Jail policy required that female inmates seeking an elective abortion
must obtain the approval of Jail Command Staff. We advised the
Sheriff in July 2012 that this policy appeared to be inconsistent with
NCCHC Standards. The Sheriff removed the requirement that this
medical procedure be approved by jail security staff.
We also discovered in the course of our audit work that the
employee who conducted the County’s audit of inmate healthcare
records was recording inmates’ protected healthcare information on
his personal computer and taking it home to prepare his audit
reports, in violation of the Health Information Portability and
Accountability Act (HIPAA). In May 2012 we brought this matter to
the attention of the County’s Information Security Officer who acted
promptly to ensure that the practice was discontinued.

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OBJECTIVES, SCOPE
& METHODOLOGY

AUDIT OF JAIL HEALTHCARE

We included this audit in our FY2012 audit program to address the
following objectives:
 Was the jail healthcare contract administered in accordance
with County guidelines and best practices?
 Did the terms of the contract for jail healthcare protect the
County’s interests in controlling costs, ensuring quality of
care, compliance with jail healthcare standards, providing
remedies for nonperformance, and ensuring access to
contractor records?
 What could the County have done to better match the
approved budget for jail healthcare to costs?
 Did the County act appropriately to contain jail healthcare
costs?
This audit examined budgets and expenditures, contract terms,
contract administration, and cost control efforts for the jail
healthcare contract effective July 1, 2008 through June 30, 2013.
The original scope period, July 1, 2008 through June 30, 2011, was
extended as the audit was delayed by changes in audit staffing and
issues relating to access to information. We examined contracts and
practices in earlier years to provide historical perspective and
highlight changes in the contract and the behavior of the parties.
To evaluate the County’s administration of the contract, we:
 reviewed the County’s contract administration guidelines
and literature on best practices in contract administration,
 interviewed County staff responsible for administration of
the contract and County Counsel staff,
 toured the jail, including jail healthcare facilities, and
documented the flow of inmates through the jail healthcare
system,
 reviewed contract staffing requirements and vendor staffing
reports,
 analyzed vendor payroll records,
 reviewed Oregon professional practice requirements,
NCCHC standards and positions on jail healthcare, and
relevant portions of the Oregon Jail Standards,
 reviewed relevant sections of inspection reports on WCJ
from NCCHC, the Oregon State Sheriff’s Association, the
Oregon Department of Corrections and Washington County
Grand Juries,
 searched the internet and court records for claims filed
against the vendor,
 reviewed the vendor’s subcontracts for health services to
WCJ inmates,
 attended MAC meetings and reviewed MAC minutes, and
 reviewed WCJ and vendor policies and procedures for jail
healthcare and the vendor’s quality assurance manual.

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To evaluate whether the contract adequately protected County
interests, we:
 reviewed current and previous WCJ healthcare contracts,
similar contracts in other jurisdictions and alternative
contracting models,
 interviewed County purchasing staff, contract administration
staff, County Counsel staff and vendor management, and
 reviewed NCCHC accreditation reports on WCJ and the
NCCHC accreditation process.
To identify the causes of budget overruns in the Jail healthcare
program and develop our recommendations for addressing them, we:
 reviewed the current and previous WCJ healthcare contracts
and all amendments, the jail healthcare contracts of other
jurisdictions, and other contracting models,
 reviewed and analyzed historical budget and expenditure
data for the WCJ healthcare program, including detailed data
on external referral and pharmacy costs,
 interviewed County staff responsible for developing the
healthcare budget and the County Risk Manager, and
 researched available options for insurance to cover the costs
of inmate healthcare.
To document and assess the effectiveness of measures to monitor
and control jail healthcare costs, we:
 interviewed the County’s contract administrator and vendor
management staff,
 analyzed fees charged and paid for external services and
pharmacy,
 examined provider and hospital subcontracts,
 reviewed the literature on hospital billing errors and
utilization review, and the vendor’s utilization review
manual,
 reviewed Jail policies on healthcare fees and analyzed
inmate account records, and
 reviewed monthly staffing and performance reports.
Survey work was performed by a consultant under contract to the
Auditor’s Office. After the consulting contract ended, fieldwork was
completed by Auditor’s Office staff. We provided the County
Administrator with interim reports in May 2013 and November 2013
that included most of the findings and recommendations in this final
report.
The contractor delayed and denied access to certain records, reports
and personnel. While the contractor’s actions delayed our work
significantly, we eventually obtained sufficient, appropriate evidence
to support our findings and conclusions.

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SUMMARY OF AUDIT
RECOMMENDATIONS

AUDIT OF JAIL HEALTHCARE

To more effectively administer the jail healthcare contract:
1. The contract administrator should implement a risk-based
contract monitoring plan for the jail healthcare contract. The
plan should include key contract requirements and performance
measures, procedures for comparing those measures with actual
performance, and procedures for corrective action.
2. The County should assign responsibility for ensuring the quality
of jail healthcare to a qualified medical professional independent
of the vendor, such as the County Health Officer. Policies and
procedures for jail healthcare should be subject to approval by
the County’s qualified medical professional and the Sheriff.
3. The County should require the contractor to implement a quality
assurance program. The program should continuously evaluate
healthcare provided to inmates both on-site and off-site for
quality appropriateness and continuity of care. The program
should include evaluating compliance with policies and
procedures.
4. The County should require that the contractor’s quality
assurance program be approved by the County’s qualified
medical professional.
5. Results of the contractor’s quality assurance monitoring should
be documented and reported regularly to the County’s qualified
medical professional, the MAC and the Jail Commander.
6. The County should validate the results of the vendor’s quality
assurance process by periodically auditing cases randomly
selected from the pool of cases reviewed by the vendor.
7. The County should engage a jail healthcare consultant,
independent of the healthcare contractor, to develop minimum
healthcare staffing requirements for the WCJ.
8. The contract administrator should monitor and enforce
compliance with minimum staffing requirements.
9. The contract administrator should require the contractor to report
staffing at the same level of detail as staffing requirements
specified in the contract.
10. The contract administrator should require the vendor to provide
evidence of its compliance with Oregon medical practice
requirements.
11. The contract administrator should monitor contractor
performance and enforce compliance with contract provisions
related to the Secure Release program.

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12. The contract administrator should negotiate appropriate
reductions in the contract fee in connection with any reductions
in the scope of work.
13. The contract administrator should process a contract amendment
whenever the scope of work is changed. When necessary and
appropriate, staffing requirements should be changed only
through a contract amendment with appropriate adjustments to
the contract fee.
14. The contract administrator should monitor and enforce
compliance with provisions of the County’s Standard Terms and
Conditions included in the jail healthcare contract.
15. The County Administrator should assign responsibility for
administration of the jail healthcare contract to a new contract
administrator outside of HHS. The CAO had fully implemented
this recommendation before we completed our audit work.
To ensure that County interests are protected by the terms of the jail
healthcare contract:
16. Requirements for line healthcare staffing should be specified in
the contract by number of hours per position, per day and per
shift. Administrative and contracted positions should be
specified as full-time equivalents with scheduling flexibility.
The contract should make clear that specifications are minimum
staffing requirements and that the contractor must provide any
additional staffing necessary to meet its contract obligations
without additional compensation, unless the contract fee is
modified by contract amendment.
17. The County should ensure that the jail healthcare contract
provides that the County has the right to monitor the contractor’s
compliance with NCCHC standards and to require the contractor
to promptly remedy any standards violations.
18. The County should clarify contract language regarding the
contractor’s obligation to implement a quality assurance
program.
19. The County should ensure the jail healthcare contract provides
specific remedies for non-performance, including specific
damages for understaffing by the contractor.
20. The County should include in the jail healthcare contract a
termination clause that ensures continuity of care until the
vendor is replaced.

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21. The County should strengthen standard contract provisions for
access to vendor records. The audit clause in the County’s
Standard Terms and Conditions should state clearly that it
applies to performance audits as well as financial audits.

To avoid or limit future budget overruns in jail healthcare:
22. The County should consider:
• entering into a full-liability contract with the jail healthcare
provider,
• purchasing commercial insurance to transfer the risk of
catastrophic cases, and/or
• enrolling uninsured inmates in health coverage through the
ACA.
To more effectively control jail healthcare costs:
23. The County should engage a third party medical billings auditor,
on a contingency fee basis, to audit hospital billings for inmate
care.
24. The County should include in the contract provisions that
incentivize the contractor to control costs.
25. The County should ask bidders for the next jail healthcare
contract to propose specific strategies for controlling emergency
and inpatient hospital costs.
26. The County should evaluate the cost effectiveness of contracting
for independent utilization review services to monitor external
referrals.
27. The County should evaluate the feasibility and cost-effectiveness
of implementing a program to facilitate the enrollment of
eligible WCJ inmates in health coverage under the ACA.
28. The Jail should not assess inmates a fee for the mandatory intake
health screening. If it continues to assess a fee for the mandatory
intake health screening, fees collected should be credited to the
jail healthcare account.
Other recommendations:
29. The Jail should not require that a pregnant inmate seeking an
elective abortion must obtain the approval of Jail Command
Staff. The Sheriff had fully implemented this recommendation
before we completed our audit work.

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30. The County’s quality assurance physician should not be allowed
to store protected health information on his personal computer.
HHS had fully implemented this recommendation before we
completed our audit work.

COMPLIANCE WITH We conducted this performance audit in accordance with generally
AUDIT STANDARDS accepted government auditing standards. Those standards 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.
signed:

Audit Team: County Auditor: John Hutzler, CIA, CGAP, CCSA
Auditor Assigned: Latham Stack, CIA, CGAP
Reviewer:
Mona Rabii, CIA, CISA, CGAP

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