Correctional Healtg Care Report VT State Auditor 2013

Correctional Healtg Care Report VT State Auditor 2013

• Oct. 24, 2013 • Locations: United States of America -> Vermont • Topics: Medical, Medical Expenses

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Report of the Vermont State Auditor

October 24, 2013

CORRECTIONAL
HEALTH CARE
Annual Cost Overruns, but
Contract Oversight Has Improved

Douglas R. Hoffer
Vermont State Auditor
Rpt. No. 13-06

Mission Statement
The mission of the Auditor’s Office is to hold state government accountable. This
means ensuring that taxpayer funds are used effectively and efficiently, and that we
foster the prevention of waste, fraud, and abuse.

This report is a work of the Office of the State Auditor, State of Vermont, and is not
subject to copyright protection in the United States. It may be reproduced and
distributed in its entirety without further permission from the State of Vermont or the
Office of the State Auditor. However, because this work may contain copyrighted
images or other material, permission from the copyright holder may be necessary if
you wish to reproduce this material separately. Please contact the Office of the State
Auditor if you have questions about reproducing this report.

Douglas R. Hoffer
STATE AUDITOR

STATE OF VERMONT
OFFICE OF THE STATE AUDITOR
October 24, 2013

Addressees (see last page of letter)
Dear Colleagues,
Attached is our audit report on Correctional Health Care. The Department of Corrections (DOC) contracts with
Correct Care Solutions (CCS) to operate a comprehensive health care program for inmates housed in-state.
Because of the importance and expense of this contract, the State Auditor’s Office (SAO) decided to review the
State’s oversight of this contract. Specifically, our two objectives were to determine whether DOC monitors the
CCS contract in a manner that 1) provides assurance that the State’s costs are minimized and 2) ensures that the
contractor meets the contract’s performance requirements.
First, DOC’s choice of a cost-plus-management fee contract places the financial risk on the State. As a result,
the contractor lacks incentive to minimize costs. Although the CCS contract was recently extended for two
years, DOC has engaged consultants to help review various health care delivery options for the future.
Second, DOC’s monitoring of the costs of the CCS contract has not ensured that costs are minimized, and the
State paid $4.2 million more than the $49.1 million that was budgeted in the first three years of the contract.
DOC’s cost monitoring was not robust during the earlier years of the contract but has improved since late 2012.
Moreover, DOC provided evidence that it expressed concerns to CCS about cost overruns during the course of
the contract and has explored ways with the contractor to control costs.
In addition, DOC policy states that inmate resources, such as insurance coverage, will be used to meet medical
expenses incurred for care of the offender beyond services provided by employees and contractors of the
department. Accordingly, for complex cases, the contract requires CCS to ascertain whether the inmate has
health insurance and to pursue collection on the State’s behalf, including from Medicaid if applicable. However,
testing identified one instance in which Medicaid was not billed for an inmate who was hospitalized at a cost to
DOC of $84,000.
Third, DOC’s monitoring of CCS’s performance against the contract requirements has been mixed. DOC
employed various mechanisms to oversee CCS’s activities, but the department did not apply allowed penalties to
prompt timelier contractor performance improvements until late 2012, even though CCS had not fulfilled certain
contractual requirements from many months earlier.
For example, in early 2013, DOC applied penalties for the performance periods August 2010 – December 2011.
In taking so much time to apply penalties for performance deficiencies, DOC lost the opportunity to offer a
monetary incentive for CCS to correct its deficiencies in a timely manner.

132 State Street • Montpelier, Vermont 05633-5101
Auditor: (802) 828-2281 • Toll-Free (in VT only): 1-877-290-1400 • Fax: (802) 828-2198
email: auditor@state.vt.us • website: www.auditor.vermont.gov

The lack of timely application of all allowable penalties appears to be due, at least in part, to significant
personnel and operational changes at the Department during the first three years of the contract’s performance
period. However, DOC hired a new contract monitor in October 2012, who implemented a process to
systematically track contractor performance against the contract’s guarantees. Since December 2012, the
contract monitor has been reducing payments to CCS for assessed penalties, when applicable.
DOC has made substantial improvements to both their cost and performance monitoring processes in the past
year. However, more needs to be done to help ensure that the State is not paying excessive amounts for the
services that it is purchasing. Accordingly, we have offered various recommendations to help reduce its current
costs and improve internal controls, and to reduce its risks in the implementation of health care delivery models
under current consideration.
I would like to thank the management and staff at the Department of Corrections for their cooperation and
professionalism during the course of the audit.

Sincerely,

Doug Hoffer
Vermont State Auditor

ADDRESSEES
The Honorable Shap Smith
Speaker of the House of Representatives
The Honorable John Campbell
President Pro Tempore of the Senate
The Honorable Peter Shumlin
Governor
Mr. Douglas Racine
Secretary
Agency of Human Services
Mr. Andrew Pallito
Commissioner
Department of Corrections

Contents

Report
Page

Introduction

Highlights

Background

Objective 1: DOC’s Monitoring of Health Care Costs Has Not
Ensured that Costs Are Minimized, but Improvements Have Been
Made

CCS Costs

DOC Cost Monitoring

Opportunities for Cost Savings

Potential New DOC Approach

Objective 2: DOC’s Monitoring of Contractor Performance Was
Mixed, but Has Improved Recently

DOC’s Performance Monitoring Process

Assessment of Performance Guarantees

Conclusions

Recommendations

Management’s Comments

Appendix I: Scope and Methodology

Appendix II: Abbreviations

Appendix III: Reprint of the Commissioner of the Department of
Corrections’ Management Response and Our Evaluation

Introduction
Adequate health care services are essential to the success and well-being of
inmates committed to correctional facilities. Moreover, Vermont is
constitutionally1 required to provide the basic necessities for persons in its
correctional facilities, including health care. Providing adequate care has
proven to be costly. The fiscal year 2014 budget for the Agency of Human
Services Department of Corrections (DOC) includes about $19 million for
health care services, which is funded from the State’s general fund.
DOC contracts with Correct Care Solutions (CCS) to operate a
comprehensive health care program for inmates that are housed in-state. This
contract requires that CCS operate the health program in a cost-effective,
fiscally responsible manner and in accordance with National Commission on
Correctional Health Care (NCCHC) standards.2 Because of the importance
and expense of this contract, the State Auditor’s Office (SAO) decided to
review the State’s oversight of this contract. Specifically, our two objectives
were to determine whether DOC monitors the CCS contract in a manner that
1) provides assurance that the State’s costs are minimized and 2) ensures that
the contractor meets the contract’s performance requirements.
Appendix I contains the scope and methodology we used to address these
objectives. With respect to the cost and performance of CCS, the scope of our
audit covers the performance period of the first three years of the contract
(February 1, 2010 to January 31, 2013). However, we also considered DOC
monitoring processes that were added after January 2013. Appendix II
contains a list of abbreviations used in this report.

This is largely due to the U.S. Constitution’s eighth amendment prohibition against “cruel and
unusual punishment” as well as the due process clauses in the fifth and fourteenth amendments.

NCCHC is an independent organization that, through an accreditation process, renders a professional
judgment on the effectiveness of a correction facility’s health services delivery system. In 2012,
NCCHC re-accredited the health care services at DOC’s facilities.
Page 1

Highlights: Report of the Vermont State Auditor
Correctional Health Care: Annual Cost Overruns, but
Contract Oversight Has Improved
(October 2013, Rpt. No. 13-06)
Why We Did this Audit Vermont spends millions of dollars annually for a contractor to provide costeffective and quality health care services for in-state inmates. Our objectives were to
determine whether DOC monitors the CCS contract in a manner that 1) provides
assurance that the State’s costs are minimized and 2) ensures that the contractor
meets the contract’s performance requirements.
DOC’s monitoring of the costs of the CCS contract has not ensured that costs are
Objective 1 Finding
minimized, and the State paid $4.2 million more than the $49.1 million that was
budgeted in the first three years of the contract. As shown in Figure 1, CCS’s actual
costs exceeded its budget for all but two of the contract’s first 36 months. Also,
until late 2012, the level of DOC’s validation of CCS invoices was unclear and
appeared to be lacking. However, review processes have since been implemented
that demonstrated improvement in DOC’s invoice reviews.
Figure 1: CCS’s Actual vs. Budgeted Operational Costsa

These amounts only address costs associated with the services provided and do not include the contractor’s management fees or
adjustments for penalties.

Our tests of CCS’s actual costs reported for five months in the three largest cost
areas did not find questionable costs or errors of a material nature. However,
DOC’s choice of a cost-plus-management fee contract places the financial risk on
the State. As a result, the contractor lacks incentive to minimize costs. For example,
inmates about to be released from the correctional facility are given “bridge”
medications until their next health care appointment. Instead of supplying the
exiting inmates with the on-hand supply of their medications, CCS returned these
medications to the primary pharmacy supplier and placed a new order with a
different supplier for the inmates to pick up from a community pharmacy. This is
not a cost-effective practice because the bridge medication supplier is more
expensive and CCS does not always receive credit for returned drug packages.
Page 2

Highlights (continued)

Objective 2 Finding

DOC’s monitoring of CCS’s performance against the contract requirements has been
mixed. DOC employed various mechanisms to oversee CCS’s activities, including
meetings at the executive and facility levels that are focused on health care quality,
and quarterly quality assurance audits by an independent contractor.
However, the department did not apply allowed (but not required) penalties to
prompt more timely contractor performance improvements until late 2012, even
though CCS had not fulfilled certain contractual requirements from many months
earlier. For example, DOC applied penalties for the performance periods August,
2010 – December 2011 in early 2013. In taking so much time to apply penalties for
performance deficiencies, DOC lost the opportunity to offer a monetary incentive for
CCS to correct its deficiencies in a timely manner. Some of these deficiencies
related to the submission of required operational reports for the evaluation of CCS’s
performance. According to DOC documentation, between 2010 and mid-2012 CCS
did not provide all required operational reports or provided reports that were
inaccurate or incomplete. For example, in May 2012 DOC sent CCS a letter stating
that it “requests the submission of all outstanding reports related to performance
guarantees some of which are 18+ months overdue despite multiple DOC requests
and CCS promises to deliver.”

What We Recommend

The lack of timely application of all allowable penalties appears to be due, at least in
part, to significant personnel and operational changes at DOC. In particular, from
November 2010 to January 2012, DOC had a vacancy in the health services director
position. During this timeframe, the chief nursing officer served a dual role filling in
as the interim health services director. Further, the contract monitor changed and
Tropical Storm Irene caused DOC’s central office to relocate. Since the health
services division only has five staff positions (another DOC staff member in the
business office helps monitor the contract), such significant changes can be more
difficult to absorb than in a larger organization. DOC hired a new contract monitor
in October 2012, who implemented a process to systematically track contractor
performance against the contract’s guarantees. Since December 2012, the contract
monitor has been reducing payments to CCS for assessed penalties, when applicable.
We recommend short-term cost-containment and monitoring improvements related
to medications and insurance as well as longer-term recommendations, including
using a more cost-effective contracting type than cost-plus-management fee.

Page 3

Background
DOC’s Health Services Division oversees the provision of all medical
services (physical and mental health) for inmates housed in-state. There are
five positions in this division,3 including a director and chief nursing officer.
DOC operates eight in-state correctional facilities, two of which are work
camps. In fiscal year 2012, DOC housed an average daily population of instate inmates of 1,583, 4 which included both sentenced offenders and
detainees.5
According to the Public Consulting Group (PCG),6 the unique structure of
Vermont’s correctional system makes it difficult to make comparisons to the
health care expenditures in other states’ correctional systems. In particular,
Vermont correctional facilities perform both prison and jail functions,7 and
the State has a small population of in-state inmates in a relatively large
number of in-state facilities.8 According to PCG, these attributes contribute to
the high cost of Vermont’s inmate health care because they 1) increase
staffing needs and 2) do not take advantage of economies of scale available to
larger facilities.
In January 2010, DOC entered into a contract with CCS for a three-year
period, beginning on February 1, 2010, to provide comprehensive healthcare
services for Vermont inmates. CCS, in turn, subcontracts for some services,
such as pharmacy and off-site services (off-site services include, for example,
dialysis procedures and emergency room visits). In February 2013, DOC and
CCS agreed to extend this contract two years and it is now scheduled to end
in January 2015.

There is also a staff member in DOC’s business office that provides contract monitoring support to
the Health Services Division.

The fiscal year 2012 average daily population of all DOC inmates, including those housed in out-ofstate correctional facilities, was 2,103.

Also known as a detentioner, this is a person committed to the Commissioner of Corrections by the
court or other authorized person or entity, who is confined in a correctional facility until he/she is
sentenced or released.

In October 2011, DOC hired PCG to perform an analysis of its health care delivery system and
provide recommendations.

A jail houses inmates for less than a year.

PCG found that only North Dakota had a smaller number of in-state inmates.
Page 4

DOC paid CCS $53.3 million for the first three years of the contract. As
shown in Figure 2, a little over half of these costs were for salaries and
benefits and about 9 percent was for CCS’s management fee.
Figure 2: Breakout of Major CCS Costs for First Three Years of Contract, in Millionsa

Numbers do not add to $53.3 million due to rounding.

Objective 1: DOC’s Monitoring of Health Care Costs Has Not
Ensured that Costs Are Minimized, but Improvements Have Been
Made
DOC’s monitoring of CCS’s health care costs has not ensured that these costs
are minimized since the contractor spent $4.2 million more than was
budgeted in the first three years of the contract. Since DOC signed a costreimbursement contract, the department is responsible for (and has paid) this
overage. Cost-reimbursement contracts carry a risk of wasteful spending,
since entities pay for expenses as incurred instead of agreeing upfront on a
fair and reasonable fixed price for the delivery of a service, and so it is
prudent to implement robust monitoring processes. DOC’s cost monitoring
was not robust during the earlier years of the contract but has improved since
Page 5

late 2012. Moreover, DOC provided evidence that it expressed concerns to
CCS about cost overruns during the course of the contract and has explored
ways with the contractor to control costs. Nevertheless, we found that CCS
had not implemented a cost-effective approach to medications provided to
released inmates. A consultant (PCG) reported that it does not recommend
that the State continue with its cost-reimbursement model in the long-term,
and DOC is exploring new delivery models for providing inmate health care.

CCS Costs
DOC’s agreement with CCS is a cost-plus-management fee contract.9 Under
a cost-reimbursement contract, contractors are paid based on the incurrence
of allowable costs, as opposed to the delivery of a completed product or
service. DOC’s choice of a cost-plus-management fee contract means that the
State generally absorbs cost overruns because this type of contract places the
financial risk on the State rather than the contractor. As a result, this type of
contract lacks incentive for the contractor to minimize costs.
The maximum amount payable on the original three-year contract was
$49,094,656, split between a budgeted amount for the annual cost to provide
health care services and an annual fixed management fee. Taken together,
these costs were the contractor’s base compensation. Table 1 provides a
schedule of the estimated costs outlined in the contract versus what was paid
in the first three years of the contract. During this timeframe, the State paid
CCS $4.2 million more than what was budgeted in the contract—8.5 percent
more than the contracted price.
Table 1: Schedule of Budgeted and Actual Costsa

Year 1
Budgeted costs for health care services

Year 2

Year 3

Total

$14,219,581

$14,671,912

$15,053,163

$43,944,656

1,700,000

1,750,000

5,150,000

Total base compensation

$15,919,581

$16,371,912

$16,803,163

$49,094,656

Actual costs for health care services

$15,677,276

$16,204,264

$16,742,118

$48,623,659

1,643,333

1,586,667

1,437,450

4,667,450

Total, actual cost and management fee

$17,320,610

$17,790,931

$18,179,568

$53,291,109

Amount actual costs exceeded budget

$1,401,029

$1,419,019

$1,376,405

$4,196,453

Fixed management fee

Actual management feeb

a
b

Amounts may not add due to rounding.
We subtracted from this line item: 1) a management fee reduction DOC assessed in years one and two and 2) penalties DOC
assessed in year three.

A cost-plus-management fee contract is a type of a cost-reimbursement contract.
Page 6

CCS has consistently exceeded its budget throughout the course of the first
three years of the contract. Figure 3 illustrates that CCS was over budget in
the cost of providing health care services (i.e., not including the management
fee) for all but two of the first 36 months of the contract.
Figure 3: Comparison of CCS’s Actual and Budgeted Health Care Services Costsa by
Contract Month

These amounts only address costs associated with the health care services provided and do not include the
contractor’s management fees or adjustments for penalties.

DOC Cost Monitoring
Cost reimbursement contracts carry significant risk of overspending taxpayer
resources, so it is important that the contracting entity have appropriate
monitoring in place to provide reasonable assurance that the contractor is
applying efficient methods and effective cost controls.

Page 7

Invoices
According to state and federal internal control best practices, invoices should
be reviewed for accuracy.10 Invoice reviews ensure that services were
actually received, the amounts billed are allowable, and the government is not
incurring claimed costs that are inadequately supported. Every quarter, CCS
is required to submit an invoice that includes a summary of its actual costs
(called the quarterly true-up).11 To support their invoices, CCS sends DOC a
monthly budget-to-actual financial report that delineates the costs for specific
line items, such as salaries, benefits, pharmacy supplies, and off-site
expenses. This report can then be validated using underlying support, such as
third-party invoices.
Until late 2012, however, the level of validation that was occurring was
unclear and appeared to be lacking. The records that DOC provided related to
cost performance in the first two years of the contract showed limited
evidence of invoice reviews. Turnover of the DOC contract monitors may
account for these limitations. The first contract monitor retired in December
2011. While the second contract monitor took over in this same month, she
was only in this position until April 2012.12 The position then remained
vacant until the current contract monitor was hired in October 2012.
According to DOC’s financial director, although they searched for records
related to financial documentation from the earlier time periods of the
contract, they did not find many.
Since late 2012, DOC has implemented improved invoice review procedures
including:
•

Obtaining explanations and support for variances in the budget-toactual financial report;

Purchasing: Internal Control – Best Practices (Vermont Department of Finance and Management,
April 2007) and Contract Management: Extent of Federal Spending under Cost-Reimbursement
Contracts Unclear and Key Controls Not Always Used (U.S. Government Accountability Office,
GAO-09-921, September 30, 2009).

The CCS contract requires the contractor to bill the state monthly for 1/12 of the annual base
compensation (budgeted costs and management fee). Every quarter CCS submits an invoice that
summarizes the actual costs for the prior three months and reconciles this amount to that which had
been previously billed. If the reconciliation shows that actual costs were greater than what had been
paid, DOC pays the difference (DOC would receive a credit if the actuals were less than what was
paid).

According to the DOC financial director, the second contract monitor continued to provide part-time
monitoring assistance on the CCS contract until the next contractor monitor was hired even though
she had taken a new position.
Page 8

•

Questioning the allowability and accuracy of the amounts that are
shown on the monthly budget-to-actual financial report;

•

Obtaining actual invoices for two of the largest expenditures—
pharmacy and off-site expenses—which are provided by CCS
subcontractors; and

•

Reconciling anomalies with the contractor through explanations from
the CCS financial office or obtaining contractor-prepared
reconciliations when the invoices do not match the financial statement
detail.

We conducted tests of CCS’s actual costs reported for September 2010, April
2011, July 2011, November 2012, and January 2013,13 in the three largest
cost activities (salaries and benefits, off-site services, and pharmacy supplies)
and did not find material questionable costs or errors.
Financial System and Internal Controls
According to the U.S. Government Accountability Office, costreimbursement contracts involve significantly more government oversight
than do fixed-price contracts.14 Accordingly, the federal government requires
that the contractor’s accounting system be adequate for determining costs
related to the contract and that government monitoring provide reasonable
assurance that efficient methods and effective cost controls are used.15
DOC relies on the accuracy and completeness of CCS’s financial reports in
its monitoring of the contractor’s costs. However, DOC has not substantiated
that it can rely on CCS’s financial systems and internal controls to ensure that
the reported costs are accurate and complete.
The importance of understanding how a contractor accounts for its financial
activities related to the contract is demonstrated by CCS’s approach to
available discounts in its former and current pharmacy supplier subcontracts.
These subcontracts allowed CCS to take a 1 percent discount for prompt
payment. A CCS financial official told us that CCS generally takes these

These tests were generally focused on three facilities—Southern State Correctional Facility,
Northern State Correctional Facility, and Chittenden Regional Correctional Facility.

Contract Management: Extent of Federal Spending under Cost-Reimbursement Contracts Unclear
and Key Controls Not Always Used (U.S. Government Accountability Office, GAO-09-921,
September 30, 2009).

We used criteria from the federal government because the state does not have requirements or
guidance pertaining to the monitoring of cost-reimbursement contracts.
Page 9

discounts. The official informed us that DOC and CCS have an “informal”
agreement for the current subcontract such that the discount will be passed on
to DOC if Vermont pays its monthly invoices within the payment terms. CCS
provided a spreadsheet showing that CCS passed on $8,331 in discounts for
the January-June 2013 timeframe. However, CCS did not pass on any of the
discounts that it took under the pharmacy supply subcontract that was in
place from February 2010 to October 2012 (estimated at $1,300 a month).
According to the CCS official, the discounts under the prior subcontractor
were not passed through to Vermont because there was no agreement in place
for this to be done. However, the contract defines an actual cost as those costs
that are incurred as recorded in the books and records of the contractor, so we
believe that any discounts taken by CCS should have been passed through to
DOC. Although these amounts are not large in the context of the total
contract, they demonstrate the risk taken under a cost-reimbursement contract
when the contractor’s financial methods are not understood and monitored
carefully.

Page 10

DOC’s approach also entails a risk that it could be relying on financial reports
that are generated by systems or internal control processes that have
weaknesses. For example, during our walkthroughs of controls related to
pharmacy supplies at three correctional facilities, we found a weakness in how
CCS controls their unused and expired medications. At all three facilities, at
least once a month unused and expired medications were returned to the
primary pharmacy subcontractor16 (see Figure 4 for a picture of a box of
medications to be returned to the pharmacy subcontractor). This process
reduces DOC’s costs because in certain circumstances, the pharmacy
subcontractor will credit CCS invoices for returns.17
Figure 4: Box of Medication in Blister Packs at the Chittenden Regional Correctional
Facility To Be Returned to Pharmacy Subcontractor

•
•
•

CCS’s policy states that medications placed in the box for return to the
pharmacy subcontractor should be documented on a return form. CCS health
service administrators (HSAs) noted that the return form was created when the
box was full and ready to be returned. However, none of the facilities tracked
what went into the box while awaiting return. As a result of this control
weakness, we could not validate that all unused and expired medications were
returned as intended, which indicates that there is a risk that DOC’s costs were
not being adequately reduced by the subcontractor’s return process. Moreover,
there is a risk that medications could be diverted.

This process does not apply to controlled substances (e.g., narcotics), which are sent to a
subcontractor for disposal.

Under the current pharmacy supply subcontract, credit is issued for returned pharmacy items that are
reusable under applicable federal and state laws and regulations. For example, credit is issued on full,
unopened manufacturer’s unit-dose packaged medications and full, unopened commercially prepackaged bulk containers.
Page 11

According to DOC’s health services director, the department did not have a
“how to” manual on how to monitor a cost-reimbursement contract, but since
January 2012 it has implemented cost validation and monitoring processes to
more fully understand what is being charged. We agree that DOC’s recent
documentation shows evidence of more rigorous monitoring of costs. This
more rigorous monitoring, coupled with the limited length of time remaining
until the contract ends, partially mitigates the risk associated with not doing a
full evaluation of CCS’s financial systems and internal controls.

Opportunities for Cost Savings
According to the federal Office of Management and Budget, there is a risk of
wasteful spending when entities pay for expenses as incurred instead of
agreeing on a fair and reasonable fixed price upfront for the delivery of a
service. DOC’s documentation (e.g., correspondence, emails, and meeting
minutes) indicates that it expressed concerns to CCS about cost overruns and
explored ways with the contractor to control costs. For example, in an April
2013 meeting between DOC and CCS executive staff, there was a discussion
about staffing cost overruns, and the DOC health services director requested
that CCS provide options to lower these costs. Nevertheless, during the course
of our audit, we identified changes in CCS’s approach that could reduce the
State’s costs related to inmate health care.
Bridge Medications
NCCHC standards state that for planned discharges, health staff should
arrange for a sufficient supply of current medications—called bridge
medications—to last until the inmate can be seen by a community health care
professional. The DOC contract with CCS and CCS’s policy are consistent
with this standard (we did not identify a DOC policy that specifically
addresses bridge medications). Both the contract and the CCS policy indicate
that medication supply would be for a period of 7-30 days. The CCS policy
allows the facility to provide inmates with their available blister package(s) of
medication upon release if the quantity is less than or equal to the quantity
being provided to the inmate upon release.
Instead of providing the inmate with the existing supply of his or her
medication, CCS local health care officials return those drugs to the supplier
and order a new prescription for the inmate to pick up at an community
pharmacy. This is not a cost-effective practice because the bridge medication
supplier is more expensive and CCS does not always receive credit for
returned drug packages.
For example, using their January 2013 invoices, we identified 28 medications
from the primary pharmacy subcontractor and the bridge medication
Page 12

pharmacy subcontractor that had common National Drug Codes.18 The bridge
medication subcontractor’s price was more expensive in every case.19 To
illustrate, for two inmates who were released from the Chittenden Regional
Correctional Facility in January 2013, one received four bridge medications
and the other three bridge medications for which CCS returned unused stock.
The cost of these bridge medications was $1,329, and CCS returned the
unused stock to the primary pharmacy subcontractor for a credit of $97. We
estimate that DOC paid about $1,100 more than it would have if CCS had
used their supply of the medications for the two inmates rather than ordering
from the bridge medication supplier.20
The CCS health staff at the three facilities we visited stated that they were told
not to provide on-hand medications to inmates upon release. Concerns cited
were related to offenders that later denied receiving the medications and the
lack of child-proof containers. However, CCS’s written policy states that an
inmate’s existing medicine supply could be provided to the released inmate.
Moreover, offenders used to sign a CCS form (including witness signature)
acknowledging receipt of the medication and their responsibility for keeping
the medication away from children. The CCS regional manager stated that the
changes in how bridge medications were to be handled were discussed during
a CCS monthly operational meeting but that the written policy had not
changed.
Although there was documentation indicating that DOC was aware of this
practice change, we found no evidence of DOC’s approval of the change. The
CCS contract requires DOC approval of the contractor’s policies and
procedures and states that they are subordinate to DOC policies and
procedures. DOC’s health services director stated that she has been
communicating with CCS about this issue and has asked for support for
CCS’s position that medications that have already been purchased and are onsite at the correctional facility cannot be given to the exiting inmate.
It also appears that some inmates are given a greater quantity of bridge
medications than may be required. For example, of the 524 prescriptions for

The National Drug Code is a unique, three-segment number that serves as the universal product
identifier for drugs.

For example, for a 30-day supply, 1) Abilify® 20 MG tablets (used as an add-on treatment with antidepressants) cost $826.15 from the primary pharmacy supplier and $965.49 from the bridge
medication supplier and 2) Humulin® R U-100 insulin solution (used to treat diabetes) cost $73.11
from the primary pharmacy supplier and $87.44 from the bridge medication supplier.

We included in our estimate the amount of medication that would have to be ordered from the bridge
medication supplier to address those cases in which DOC returned a partial package of drugs to the
primary pharmacy supplier.
Page 13

bridge medications billed in November 2012 and January 2013, 447 (85
percent) were for a 30-day supply. In one of the three facilities that we visited,
the HSA stated that the practice at that facility was to automatically place an
order for a 30-day supply of bridge medications without consideration as to
the inmate’s next medical appointment.
Finally, inmates that are in a correctional facility for only a few days may
receive bridge medications, even though they could have valid prescriptions at
their pharmacies or at home. We found no DOC or CCS policy that
distinguishes between short- and long-term inmates with respect to supplying
bridge medications and, according to the CCS regional manager, there is no
difference in the process for supplying bridge medications. One HSA told us
that short-term inmates are provided with a 30-day supply of medications
upon release although she noted that she will sometimes direct the applicable
nurse not to submit the order if she becomes aware that the inmate has a
supply at home.
Providing release medications to short-term inmates is significant because,
according to DOC data, in almost 70 percent of the 7,479 releases from
incarceration in fiscal year 2013, the inmate’s length of stay was between 1-30
days.21 Also, many offenders are on medication when they enter a DOC
facility. For example, according to PCG, in September and October 2011,
about 56 percent of all inmates processed into DOC were on at least one
medication. Providing medications to inmates that may already have filled
prescriptions at home not only increases DOC’s costs, but it also adds to the
risk that these extra medications could be misused in the community.
According to the federal Drug Enforcement Administration, the abuse of
prescription drugs is a serious social and health problem in the United States.
Insurance
DOC policy states that inmate resources, such as insurance coverage, will be
used to meet medical expenses incurred for care of the offender beyond
services provided by employees and contractors of the department.
Accordingly, for complex cases, the contract requires CCS to ascertain
whether the inmate has health insurance and to pursue collection on the
State’s behalf. In addition, CCS is responsible for helping inmates complete a
Medicaid application.

The length of stay was between 1-3 days for 2,963 releases, 4-7 days for 811 releases, 8-15 days for
731 releases, and 16-30 days for 698 releases.
Page 14

We tested whether off-site services for inmates that were enrolled in Medicaid
1) had claims submitted to Medicaid for applicable services22 and 2) did not
result in payments by DOC and Medicaid for the same services. We identified
no cases in which DOC and Medicaid both paid for the same service.
However, we identified one instance in which Medicaid was not billed for an
inmate who was hospitalized at a cost to DOC of $84,000. We traced the
inmate referenced to the Medicaid Management Information System and
found that the inmate was enrolled in Medicaid and that no Medicaid claim
had been filed for the period in which he received services. According to the
DOC contract monitor, this occurred because the claim was incorrectly coded
and it was bypassed as being eligible for Medicaid.
With respect to other types of insurance, we saw evidence in one of the
months used for our tests that CCS had established a receivable associated
with workers’ compensation insurance for an inmate who had been injured
prior to being incarcerated. However, we did not see evidence in the test
months of other types of private insurance being billed for inmate health care.
A CCS senior vice president reported that the contractor seeks to collect this
information. We asked the senior vice president to provide documentation
illustrating that private insurance had been billed, when applicable. On August
22, 2013, he reported that CCS had no record that they had billed a third-party
insurer other than Medicaid nor had the subcontractor that CCS uses to
process claims for off-site services. The senior vice president also stated that
the claims processing subcontractor for off-site services has not received any
refunds from other insurers. Considering that CCS and its off-site services
claims subcontractor have been in place since February 2010, the lack of any
billings to a third-party insurer indicates that an effective process to identify
other payers that could reduce DOC’s costs is not in place.
Implementing an effective process to bill insurance companies is becoming
increasingly important. According to legal advice sought by the health
services director, under the Affordable Care Act, beginning in January 2014, a
detainee may enroll in a qualified health plan prior to conviction and this plan
can be billed to cover the inmate’s health care costs. Accordingly, it would
behoove DOC to ensure that CCS is collecting insurance information and
billing for appropriate claims.

Potential New DOC Approach
Act 41 (2011) required the Agency of Administration, in conjunction with the
Joint Fiscal Office, to conduct a study of how the State can best provide

Medicaid does not pay for inmates’ health care except for certain off-site care (e.g., inpatient
hospitalization or nursing home care).
Page 15

quality health care to persons incarcerated in Vermont at a cost savings to the
State. In response to this requirement, DOC hired PCG in October 2011 to
provide 1) a comprehensive and detailed analysis of all aspects of the
correctional health care system, 2) recommendations to reduce costs and
maintain a clinically appropriate level of care that can be implemented under
the current DOC model, and 3) a long-term plan for a healthcare delivery
system. PCG completed its work in January 2012.
As part of its analysis, PCG stated that it would not recommend that the State
continue with its cost-reimbursement model over the long-term. PCG found
that this approach does not allow for the contractor to develop new or
innovative approaches. In addition, the PCG study outlined multiple
operational models and various strategies for DOC to consider for reducing
costs without sacrificing quality.
As part of the next phase in its Act 41 study, in March 2013, DOC contracted
with Community Oriented Correctional Health Services to conduct analyses
identifying strengths, weaknesses, opportunities, and threats in eight areas for
five potential health care delivery models.23 The eight areas are: 1) staffing; 2)
continuity of care; 3) care planning; 4) capacity for data sharing; 5)
procedures for prior approval, quality assurance, and utilization management,
6) data collection and metrics; 7) governance; and 8) finance. This contract’s
deliverables are expected to be completed by March 2014.

Objective 2: DOC’s Monitoring of Contractor Performance Was
Mixed, but Has Improved Recently
DOC’s monitoring of contractor performance was mixed because although
DOC employed various mechanisms to oversee CCS’s activities, the
department did not apply allowable penalties to prompt timelier contractor
performance improvements. With respect to DOC’s monitoring, the contract
required CCS to submit regularly scheduled operational and financial reports,
hold multidisciplinary inter-organizational meetings, and establish a quality
assurance process. In addition, the contract includes performance guarantees
that allow DOC to apply penalties if this monitoring determines that the

The five models are the use of 1) OneCare, a joint venture between Fletcher Allen Health Care and
Dartmouth-Hitchcock Medical center as the contractor, 2) Bi-State Primary Care Association of
Federally Qualified Health Centers in Vermont and New Hampshire as the contractor, 3) a new nonprofit or limited liability corporation that distributes services between local providers near each jail, 4)
state employees hired by DOC, and 5) the Green Mountain Care Board as the organizational entity for
correctional health care rather than DOC.
Page 16

contractor did not meet certain performance expectations. DOC did not begin
to reduce payments to CCS for penalties until December 2012, even though
CCS had not fulfilled certain contractual requirements from many months
earlier. Moreover, the penalties that were assessed did not cover all of the
deficiencies. Accordingly, DOC did not effectively use one of the tools that it
had available to prompt performance in accordance with contract
requirements. Since DOC began assessing penalties, it has continued to apply
them to monthly performance periods, when applicable.

DOC’s Performance Monitoring Process
DOC’s contract with CCS requires that the contractor provide a series of
operational and financial reports. These reports are intended to provide DOC
with basic information regarding health services activity in the facilities and a
means to evaluate performance. Examples of these reports include those that
address staffing levels at the facilities, how long it took for CCS to administer
prescribed drugs or complete required health assessments, and how quickly
CCS responded to inmates’ requests for health care services.
CCS did not always provide required operational reports or the reports did not
contain all required information. DOC provided evidence that they brought
reporting deficiencies to the attention of CCS and attempted to resolve these
deficiencies during the course of the contract. For example, in December
2010, DOC sent CCS a summary of the first year of the contract in which it
stated that “there are a number of inaccuracies in both CCS financial and
statistical reports and this is not acceptable. Data parameters that were agreed
upon … have not been reported. As a result, data that would greatly assist in
delivery management are not available.” (Further discussion of this issue is
contained in the subsection labeled Assessment of Performance Guarantees.)
DOC also regularly held a variety of meetings with CCS. According to the
contract, these multidisciplinary, inter-organizational meetings are intended to
identify inmate problems and opportunities for improvement, as well as to
communicate quality improvement findings and to describe actions taken to
resolve problems that are specific to health services. For example, since the
inception of the contract, DOC and CCS have held monthly meetings at the
executive level (called the Executive Health Committee) and quarterly
meetings at the facility level (called the Medical Administration Committee)
that are focused on health care quality. On the financial side, DOC and CCS
hold executive business meetings. Other ad hoc meetings were also held to
address specific operational issues.
Another critical monitoring piece is quality assurance. Since August 2010,
DOC has used a contractor to perform quarterly independent audits of specific
health-related indicators. The Vermont Program for Quality in Health Care
Page 17

(VPQHC) conducted audits at the eight correctional facilities and provided
DOC with quarterly and biannual reports. Examples of the health-related
indicators reviewed by VPQHC include whether: 1) health assessments are
completed within seven days of an inmate’s intake, 2) the medical
administration record matches the doctor’s orders, and 3) sick call requests are
triaged within the timeframes outlined by the contract. In addition, the CCS
contract requires that the contractor maintain a continuous quality
improvement program, which entails having the eight facilities conduct selfaudits every month of samples of medical records for adherence to
requirements. DOC’s Health Services Division’s quality assurance
administrator checks the validity of the facility self-audit reports.

Assessment of Performance Guarantees
According to Vermont’s contracting policy,24 penalties should be considered
for failure to meet standards or deliver products. The policy goes on to state
that penalties should generally be assessed and reflected in the next invoice
payment. Performance guarantee penalties were included in the CCS contract
for times when the contractor failed to meet certain requirements, but
assessment of penalties was at the discretion of DOC.
For the first three years of the contract period, DOC assessed a total of
$331,100 in performance guaranty penalties and reduced the payments to CCS
in the same amount. However, the first time DOC reduced payments to CCS
as a result of assessed penalties was in the December 2012 quarterly true-up
invoice. These penalties encompassed the performance period of January-June
2012. DOC sent CCS a letter announcing these penalties on July 31, 201225—
about two years after the performance guaranty clauses came into effect.26
DOC applied additional penalties for the performance periods August, 2010 –
December 2011 and July 2012 – December 2012 in the next quarterly true-up
invoice.27
This is not the timely assessment of penalties as called for in Vermont’s
contracting policy. Moreover, the significant delay in assessing penalties may

Vermont Agency of Administration’s Bulletin 3.5, Contracting Procedures (July 15, 2008).

CCS disputed some of these penalties and requested that they be reconsidered. DOC later agreed to
abate some of the penalties.

The contract did not allow penalties to be assessed in the first six months of the performance period,
which was considered to be a breaking-in period.

This quarterly true-up invoice encompassed the performance period November 2012 – January 2013.
It was submitted and paid in March 2013.
Page 18

account for CCS not addressing some of DOC’s concerns. For example, in a
September 2012 email, the DOC health services director observed:
“It seems that the whole notion of creating reports for
the purpose of documenting care and services and
assessing performance were [sic] not taken seriously by
CCS. There was no expectation that they would be
paying penalties.”
In taking so much time to apply penalties for performance deficiencies that
had occurred many months earlier (in some cases about two years earlier),
DOC lost the opportunity to offer a monetary incentive for CCS to correct its
deficiencies in a timely manner.
DOC also did not assess all of the penalties allowed under the contract. To the
extent data was available, we recalculated the penalties that could have been
applied for CCS’s performance at three facilities for five months. Our results,
summarized in Table 2, demonstrate that DOC could have applied an
additional $11,371 in penalties in these limited circumstances alone.
Table 2: DOC and SAO Calculations of Penalties for CCS Performance At Three
Facilitiesa During Five Monthsb

Performance Guaranty

Amount
Assessed
by DOC

No more than 100 inmate trips statewide for medical
purposes of a non-emergent nature in any month.
(Penalty = twice the actual costs for trips over 100)

Provide/administer pharmaceutical drugs for routine
administration of on-going care within two hours of
scheduled time. (Penalty = $500 per occurrence)
Provide/administer medications ordered statc within 1
hour of the provider's order for medications immediately
accessible onsite. (Penalty = $500 per occurrence)
Provide/administer medications for which a prompt
administration order has been given within two hours of
the provider's order if stock supply is not available and a
backup pharmacy must be used. (Penalty = $500 per
occurrence)
Pharmacy must deliver newly ordered prescriptions
within 48 hours Monday-Friday; 72 hours Saturday and
Sunday. (Penalty = $500 per occurrence)

Page 19

Amount
Calculated Difference
DOC’s Rationale
by SAO
0
$9,271
$9,271 The DOC health services
director reviewed and
determined the trips were
medically necessary and
that no penalties would be
assessed.
0
$1,500
$1,500 DOC abated the penalties
based on subsequent
explanatory information
provided by CCS.
0
0
0

Performance Guaranty

Amount
Amount
Assessed Calculated Difference
by DOC
by SAO
$17,500
$17,400
($100)

DOC’s Rationale

Failure to achieve a passing score (90 percent) in the
quarterly independent quality assurance audit. (Penalty =
$100 per failed indicator; maximum of $2,500 per
quarter)
Maintain NCCHC accreditation for every current and
0
0
0
future facility in the state system. (Penalty = $500 per
day per non-accredited facility)
Meet dental staffing requirements or adequately control
0d
0d
0
the size of the waiting list. (Penalty not to exceed
$500/day for not providing adequate access to dental
services)
Qualified health care professionals to be hired to fill all
Neither DOC nor SAO could calculate whether penalties on this
posts in accordance with staffing standards and coverage
measure should have been assessed as CCS did not provide
schedules. (Penalty not to exceed $500 for each
reports that would support such a calculation
uncovered shift)
Provide timely response to inmate requests for health
$50
$750
$700 DOC did not calculate
care services. (Penalty = $50 per request outstanding 48
penalties on exceptions it
hours Monday-Friday; 72 hours Saturday and Sunday)
determined to be
reasonable.
Provide specialty services in a timely fashion (agreed0
0
0
upon target date). (Penalty = $500 per day until services
commence or $2,500 per incident if no resolution)
Meet mortality documentation submission timelines and
0
0
0
other mortality review requirements. (Penalty = $2,500
per occurrence)
Develop an individualized treatment plan for each
$1,750
$1,750
0
inmate diagnosed with serious mental illness. (Penalty =
$250 per occurrence)
Provide prescription drugs and/or other services in
0
0
0
accordance with the mental health treatment plan.
(Penalty = $250 per occurrence)
Provide required operational and financial reports within Not applicable to test. Penalties for reports are issued on a DOCprescribed time periods. (Penalty = $500 per report per
wide basis, not for individual facilities. See the following
month)
paragraph for information on penalties associated with reports.
a
b
c
d

The three facilities were Southern State Correctional Facility, Northern State Correctional Facility, and Chittenden Regional Correctional Facility.
The five months were September 2010, April 2011, July 2011, November 2012, and January 2013.
According to the contract, stat generally confers the presence of an emergent or urgent situation.
In the earliest three test months, CCS did not provide documentation to DOC that would allow a determination of whether this standard was met.

Since DOC was relying on the contractually required operational reports as
part of its performance monitoring of the contract, we also evaluated the
penalties assessed on the timeliness of the required reports for all correctional
facilities between September 2010 and January 2013. However, we could not
perform a calculation of the amount of penalties that could have been applied
because DOC’s records would not support such an analysis. According to
DOC documentation, between 2010 and mid-2012 CCS did not provide all
Page 20

required operational reports or provided reports that were inaccurate or
incomplete. In May 2012 DOC sent CCS a letter stating that it “requests the
submission of all outstanding reports related to performance guarantees some
of which are 18+ months overdue despite multiple DOC requests and CCS
promises to deliver.” Subsequent to this letter, CCS submitted all but four
required reports dating from August 2010 to December 2011. DOC penalized
CCS $105,000 for the four missing operational reports. We could not
determine what the penalty amount should have been because DOC’s records
were insufficient to determine which reports were not provided in a timely
fashion or which reports DOC did not consider usable for each month of the
contract—the information needed to calculate potential penalty amounts.
According to the health services director, DOC management decided not to
implement the full penalty amount because of turmoil between DOC and CCS
surrounding the format and submission of operational reports that are used to
assess contract performance. The director went on to state that animosity
surrounding the report requirements and objections by CCS over penalties
were beginning to taint negotiations for a contract extension, which were
occurring at the same time. In addition, according to the health services
director, DOC management forgave penalties for report delinquencies in
exchange for a reduction in management fees in the last two years of the
amended contract and a waiver of inflationary increases in future years
(although this waiver only pertains to the CCS budget and not to actual costs
that are reimbursable).
In addition, the contractor lacked an incentive to provide some reports where
the penalty for not meeting the standard was likely greater than the penalty for
not providing the report. The penalty for not submitting a report is $500 a
month. However,
•

CCS can incur a penalty of $500 per occurrence if it does not
administer pharmaceutical drugs for routine administration of ongoing care within two hours of the scheduled time. For a single
month—September 2012—CCS incurred a $2,500 penalty.

•

CCS can incur a penalty of $250 per occurrence if it does not develop
an individualized treatment plan for each inmate diagnosed with
serious mental illness. In March 2012 CCS incurred a $3,500 penalty.

•

CCS is supposed to meet a minimum staffing requirement or else it
can incur a penalty of up to $500 for each uncovered shift. This is
significant because the agreed-upon staffing levels at each facility are
based on the clinical needs of the inmate patients and the volume of
care and nature of services to be provided. According to the DOC
contract monitor, January 2013 was the first time that CCS provided a
Page 21

usable report to DOC that allows the department to determine whether
this requirement is being met.
The lack of timely application of all allowable penalties appears to be due, at
least in part, to significant personnel and operational changes. In particular,
from November 2010 to January 2012, DOC had a vacancy in the health
services director position. During this timeframe, the chief nursing officer
served a dual role filling in as the interim health services director. Further,
there were also changes in the contract monitor and Tropical Storm Irene
caused DOC’s central office to relocate. Since the health services division
only has five staff positions (another DOC staff member in the business office
helps monitor the contract), such significant changes can be more difficult to
absorb than in a larger organization. According to the interim health services
director/chief nursing officer, her primary focus was on the clinical delivery
and critical health care needs of the inmates.
DOC hired a new contract monitor in October 2012, who implemented a
process to systematically track contractor performance against the contract’s
guaranties. Since December 2012, the cost monitor has been reducing
payments to CCS for penalties associated with monthly performance periods,
when applicable.

Conclusions
Cost-plus-management fee contracts are high risk contracting mechanisms for
the State and require strong oversight to ensure that the State’s objectives are
met and its resources are used wisely. DOC did not initially implement an
effective cost monitoring process and the first three years of the contract
produced a cost overrun of $4.2 million. Moreover, CCS changed its practice
for supplying bridge medications to one that is more expensive—passing
those costs onto DOC. With respect to performance monitoring, DOC
established a process that relied on CCS reports, meetings, and independent
quality assurance audits. Nevertheless, monitoring was lacking because CCS
did not provide complete and accurate reports in a timely manner and DOC
did not assess penalties until many months after the performance period in
which the deficiency occurred.
DOC has made substantial improvements to both their cost and performance
monitoring processes in the past year. Nevertheless, to ensure that the State is
not paying excessive amounts for the services that it is purchasing, DOC can
take short-term actions to reduce its current costs and improve internal
controls as well as long-term actions to reduce its risks in the implementation
of health care delivery models under current consideration.
Page 22

Recommendations
Short-Term Recommendations
We recommend that the Commissioner of the Department of Corrections:
1. Evaluate CCS’s process for controlling unused and expired
medications and ensure that controls are in place to provide safeguards
that medications designated for return to the pharmacy subcontractor
are accounted for and returned.
2. Develop a policy that minimizes the cost of bridge medications and
directs CCS to ensure that this policy is consistently followed at all of
the correctional facilities. This policy should include, at a minimum: 1)
providing inmates with their on-hand medications upon release, where
possible; 2) limiting the amount of bridge medication provided to the
inmate to no more than that which is needed until a scheduled
appointment date with an outside provider; and 3) establishing
guidelines for when it is, and is not, appropriate to provide bridge
medications to short-term inmates.
3. Ensure that CCS is collecting inmates’ insurance information and
billing their insurance for appropriate claims.

Long-Term Recommendations
As part of evaluating a new service delivery model for providing health care
services to inmates, we recommend that the Commissioner of the Department
of Corrections:
1. Select a more cost-effective contracting type than cost-plusmanagement fee.
2. Include a plan for a monitoring process at the outset of any new
contract to provide reasonable assurance that effective cost and
performance controls are in place as soon as the contract is enacted
and that applicable penalties are assessed in a timely manner.

Management’s Comments
On October 15, 2013, the Commissioner of the Department of Corrections
provided a letter commenting on a draft of this report. Appendix III contains a
reprint of the letter and our evaluation of one of the department’s comments.

Page 23

- - - - In accordance with 32 VSA §163, we are also providing copies of this report
to the secretary of the Agency of Administration, commissioner of the
Department of Finance and Management, and the Department of Libraries. In
addition, the report will be made available at no charge on the state auditor’s
website, http://auditor.vermont.gov/

Page 24

Appendix I
Scope and Methodology
In addressing both of our objectives, we reviewed 1) DOC’s contract with
CCS, which included the request for proposal and CCS’s best and final offer;
2) the State’s contracting requirements and internal control guidance; and 3)
monitoring requirements or guidance for cost reimbursement contracts issued
by others. We also reviewed DOC directives that address inmate health care
services.
Regarding the DOC’s monitoring of CCS’s costs, we obtained, reviewed, and
summarized the contractor’s invoices and monthly budget-to-actual financial
reports for the first three years of the contract (February 1, 2010 to January
31, 2013). We discussed the DOC monitoring process with the health
services director and current and former contract monitors and reviewed
emails and other correspondence between DOC and CCS regarding cost
issues.
We focused our review on three major cost areas: salaries and benefits, offsite services, and pharmacy supplies, which in total accounted for about 78
percent of the contract’s costs in the first three years of the contract. We
discussed how CCS tracks these costs with CCS central office officials. We
also reviewed applicable CCS policies and performed walkthroughs of the
time reporting process and off-site service and pharmacy supply invoice
review process with CCS officials at three correctional facilities—Southern
State Correctional Facility, Northern State Correctional Facility, and
Chittenden Regional Correctional Facility. We chose these facilities because
they had incurred the highest costs in the first three years of the contract.
We also performed testing related to costs associated at these three facilities
for five of the 36 months of the original contract period, focusing on the three
major cost categories. The months for which we performed tests were
September 2010, April 2011, July 2011, November 2012, and January 2013.
The following are examples of the tests that we performed:
• Confirmed that CCS’s invoices were based on their reported costs.
• Confirmed that CCS had documentation that supported the facilityspecific budget-to-actual financial reports.
• Compared the CCS staff members for the site listed in the payroll
system used by CCS to the timekeeping system and confirmed that
the timekeeping system provided support for the staff members and
number of hours worked at the site.
• Confirmed that inmates listed on the pharmacy subcontractors’
invoices were incarcerated at the facility at the time and that the CCS
Page 25

Appendix I
Scope and Methodology
medical records system supported that the drug on the invoice was
prescribed and administered for 75 transactions.
• Confirmed that charges for off-site services were for patients who
were in fact incarcerated at the time and that their medical records
confirmed that off-site services were provided for 75 transactions.
• Compared the invoices from the off-site services subcontractor to
recipient eligibility data in the Medicaid Management Information
System to confirm that DOC was not charged for Medicaid claims.
With respect to our performance monitoring objective, we identified the
various performance requirements in the contract and determined which had
penalties that could be applied for non-conformance. For those requirements
that included potential penalties, we obtained DOC documents pertaining to
penalty calculations that they had performed and assessed. Based on
documents provided by DOC, we independently calculated the penalties that
could have been assessed and 1) verified DOCs calculations or 2) obtained an
explanation for those penalties that were not assessed.
We also discussed the DOC performance monitoring process with the health
services director, chief nursing officer, contract monitor, and quality
assurance administrator. We obtained and reviewed the minutes of meetings
held with CCS throughout the course of the contract period and reviewed the
results of reviews of specific health-related indicators by DOC’s independent
quality assurance contractor, the Vermont Program for Quality in Health
Care.
Our audit work was performed between January and early September 2013 at
DOC headquarters in Williston, CCS’s regional office in Waterbury,
Southern State Correctional Facility in Springfield, Northern State
Correctional Facility in Newport, and Chittenden Regional Correctional
Facility in South Burlington. We conducted this performance audit in
accordance with generally accepted government auditing standards, which
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.

Page 26

Appendix II
Abbreviations
CCS
DOC
HSA
NCCHC
PCG
SAO
VPQHC

Correct Care Solutions
Department of Corrections
Health Service Administrator
National Commission on Correctional Health Care
Public Consulting Group
State Auditor’s Office
Vermont Program for Quality in Health Care

Page 27