North Carolina lacks controls to rein in prisoner medical expenses that could save the state tens of millions of dollars annually, State Auditor Beth Wood's office said Thursday after its review said correction officials are at the mercy of outside hospitals when it comes to setting payment rates.
The fiscal control audit of prisoner medical services at the Department of Correction examined 131 of the largest payments to hospitals for individual inmates' treatment during the second half of 2008 and found that 16 exceeded $100,000.
In six of the 131 cases, hospitals were overpaid at a combined cost of almost $171,000 to the state -- mostly due to administrative errors. The charges for those prisoner billings were, on average, 467 percent of the reimbursement rate for Medicaid or Medicare patients, the audit found.
For the highest 20 prisoner bills, hospitals were paid two to more than eight times the reimbursement rate for government health insurance, according to the report.
In one case, the department paid $482,000 to WakeMed hospital in Raleigh for treatment of an inmate who suffered "multiple significant trauma" when the government rate would have paid about $120,000, according to the audit and a department spokesman.
In a formal response to the audit, correction officials acknowledged they had problems getting a handle on the medical expenses and pushed for cost-containment legislation that was approved last year, only to be changed in the final days of the General Assembly session. Overall prisoner health-related expenses were $231 million last year.
The department works out deals with individual hospitals and medical practices on the cost of treating inmates. Without the authority to compel public hospitals or providers to treat inmates, "the department is forced to negotiate contracts with each provider individually, at rates which are favorable to the provider," the audit response read.
But a spokesman for the North Carolina Hospital Association said using Medicaid or Medicare rates to compare what hospitals charge to care for inmates is misleading because those reimbursements don't cover treatment costs.
The state usually ends up with a discount compared to the base rate in the hospital's contract, Don Dalton said, but higher rates still are billed because the patients pose a risk.
"We're talking about the criminal element of our society, who are more dangerous, more costly to manage, more often sicker and more costly to treat," Dalton said.
The General Assembly approved a budget bill last summer that would have required hospitals and doctors to be paid based on rates set by the state employee health insurance plan. That would be lower than current contracted rates.
But Blue Cross Blue Shield of North Carolina -- the health plan's claims processor -- later questioned the legality of the provision, particularly whether prisoners could be treated like plan members and if Blue Cross could compel providers to participate according to its current contract, officials said Thursday.
Legislators replaced the provision with a watered-down version on the final day of the legislative session in August after last-minute input from Blue Cross.
The audit pointed to states such as New Hampshire and South Carolina that set inmate medical reimbursement rates above the rates the federal government pays for Medicare services -- levels below what North Carolina current pays.
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