Animal Care and Control Committee

Modify the budget system to allow the separate budgeting and accounting of school and non- school costs within each organizational unit or cost center.

Develop and document budget estimates of all major revenues and expenditures, including estimated staffing costs related to salary step increases and salary and benefit savings related to vacant positions.

Develop a budget procedure manual and annual budget instructions to distribute to organizational units throughout the District to facilitate compilation of the annual budget and improve budget documentation.

Develop a position control mechanism within the personnel management system to ensure that the number of positions authorized in the approved annual budget in any position classification is not exceeded in daily operations. The District reports that a position control system will be implemented within two years.

Develop a vacant position report within the personnel management system that is linked to the approved positions authorized by the annual budget and the payroll system.

Modify the payroll system to prevent payment for positions that are not authorized in the adopted budget or which exceed the total number of positions authorized in the position classification or organizational unit.

Develop monthly budget status reports for the Board of Education to provide more timely and detailed fiscal information to improve the Board’s ability to oversee the $6.0 billion LAUSD budget.

Develop specific quantifiable performance benchmarks and objectives for each of the 11 Local Districts and provide the Board of Education with quarterly performance reports.

Begin funding retiree health benefits by establishing a Retirees Health and Welfare Benefits Fund and separately invest these monies in pension fund type investments, including corporate bonds, common stock, real estate and other investments, as permitted by Government Code Sections 53620 to 53622. HEALTH CARE DELIVERY SYSTEMS C O M M I T T E E Andrew Bliss Chairperson William Kelley Violet Waldman TABLE OF CONTENTS Introduction................................................................................................................. Objective..................................................................................................................... Methodology.............................................................................................................. Findings.......................................................................................................................

61,000 1,000 H 66 68,000 1,030 J 41 62,000 1,512 Total 794 709,000 893 The 11 local districts were reportedly determined based on achieving a manageable number of students per district and school, the number of schools and school sites in each district, projected future enrollment growth, the proportion of permanent teachers in each district, existing student matriculation patterns, and other considerations. A description of the communities served by each district is shown in Attachment 2.3. Section 3: LAUSD Local District Superintendent Employment Contracts In order to determine what benefits, perquisites, and special working conditions have been provided to the LAUSD 11 Local District Superintendents, we requested copies of the employment contracts for these positions. The 11 Local District Superintendent contracts are identical, with the exception of salaries, and provide the following employment conditions: • Two year term of each contract from commencing July 1, 2000, and ending June 30, 2002. • Salary set at salary range 04J on the Master Salary Schedule for certificated employees. for Local District Superintendents; one is set at step two. This salary range has three steps. Ten of the 11 Local District Superintendents were appointed at step 1, which amounts to $136,000 annually. One Local District Superintendent salary was set at step 2, which amounts to $143,000 annually. The contract does not specify when promotion to step 3 would occur. Step 3 amounts to $150,007 annually. • The Local District Superintendent shall be entitled to all benefits and rights available to other twelve-month classified executive or administrative employees. These benefits include: - Medical, dental and vision insurance for the employee and qualifying dependents. - Life insurance in the amount of $25,000 - Retirement through the State Teachers Retirement System or Public Employees’ Retirement System - Thirteen (13) days sick leave and 24 days vacation annually. In addition to the benefits specified in the written contract, each Local District Superintendent receives an assigned automobile and a cell phone. Section 4: LAUSD Management System Problems During the course of the audit, we identified and staff reported various weaknesses in important management systems that are critical to the efficient day-to-day functioning of the District. Problem areas include the budget system, the personnel management system, the reporting and monitoring components of the accounting system and the payroll system. These systems are inadequately integrated to ensure cost centers do not exceed budgets and to avoid the overfilling of authorized positions. District staff reported that the District is in the process of replacing its budget and position control systems, and expects this project to be completed during FY 2001- 02. Although the analysis of these problems was outside of the scope of the audit, these issues are reported here in accordance with Section 7.46 of the United States General Accounting Office Auditing Standards. This auditing standard requires the disclosure of issues warranting further analysis and considered significant by the auditor, but the issues are not directly related to the audit and resources were not provided to pursue them. Examples of some of the problems encountered include the following: Budget System: • The existing organization of the budget cost centers does not separate school from non-school costs in all cost centers. Therefore, budget analysis and comparisons between school and non- school costs and staffing is not possible unless manually performed. • Salary and benefit costs are estimated based on broad average cost projections. Neither salary step increases for employees nor salary savings related to vacant positions and attrition are budgeted because these costs reportedly have offset one another in past years. However, the FY 1999-00 LAUSD audited financial statements indicate that actual FY 1999-00 salary and benefit savings amounted to $117.2 million, which amounted to 2.74 percent salary and benefit savings. • The FY 2000-01 CAFR shows that the final General Fund budget included total available resources of $5.279 billion and total authorized expenditures of $5.921 billion for a deficit of $642 million or 12.2 percent of budget. If fully realized, this budget would have reduced the District’s reserves by 98 percent from $655 million to $13 million. • The FY 2000-01 CAFR shows that savings on books and supplies amounted to $295.5 million or 43 percent of the $689 million budget. However, LAUSD staff reported that some of the unexpended amounts related to planned savings by various schools in order to accumulate sufficient funds to make specific large purchases. It was also reported that any teacher who does not have sufficient funds to purchase text books can access a general book purchase account that is available in the central administrative budget. • No budget procedure manual exists and no annual budget instructions are prepared and distributed to organizational units throughout the District to facilitate compilation of the annual budget. Personnel Management System: • There is currently no position control mechanism to ensure that the number of positions authorized in the approved annual budget in any position classification is not exceeded in daily operations. Therefore, it is possible for more persons to be hired in any position classification than are authorized and for which monies have been appropriated. • There is currently no capability to determine the number of budgeted positions that are vacant in any individual position classification or cost center. Payroll System: • The payroll system will accept positions that are not authorized in the adopted budget or which exceed the total number of positions authorized in the position classification or organizational unit. Fiscal and Performance Monitoring and Reporting: • The Board of Education currently receives two budget status reports during the year to exercise its oversight responsibilities related to the $6.0 billion LAUSD budget. These interim financial reports are presented at a highly summarized level and provide minimal narrative explanation of budget variances, corrective actions planned or taken, and other pertinent information. No information is provided regarding staffing, including vacant positions and use of temporary employees to fill permanent positions. • Although the reorganization of the LAUSD was implemented on July 1, 2000, approximately 11 months ago, the LAUSD Board of Education has not established specific quantifiable performance benchmarks and objectives for each of the 11 Local Districts created through the restructuring. Local District Superintendents reported developing such information independently. However, the specific performance measures, objectives and timelines for achievement have not been approved by the LAUSD Board of Education and the Board does not receive periodic performance reports to evaluate the results of the reorganization. The District Executive Administrator reported that such performance based measurement and reporting is planned for the future. • Each employment contract of the 11 Local District Superintendents includes two performance measures that the General Superintendent will use to assess the performance of the Local District Superintendents. However, the Board of Education should receive comprehensive performance information on a periodic basis that is reflective of all of the important programs and objectives of the District. Section 5: Other Issues The LAUSD provides retiree health care benefits for retired employees pursuant to collective bargaining agreements. As of June 30, 2000, 29,916 retired employees met the eligibility requirements for these benefits. The cost of these benefits is funded on a pay-as-you-go basis from the various operating funds of the District. The total cost to the District for this benefit during FY 1999-00 amounted to $101,753,017. The LAUSD Comprehensive Annual Financial Report did not disclose the total estimated amount of this liability. However, the District should obtain an actuarial analysis of this liability, if it has not already done so. The total liability probably amounts to as much as $1 billion. If the District were to fund this liability in a Retiree Health and Welfare Benefits Fund and separately invest these monies in pension fund type investments similar to the investments made by the California State Teachers Retirement System (STRS), the Public Employees Retirement System (PERS), and other city, county and public agency retirement systems, LAUSD could increase its investment earnings substantially. As an example, PERS has earned an average of 12.22% during the past 18 fiscal years since 1983-84 (Attachment 5.1). This return is approximately equal to the median return achieved by the more than 50 defined benefit pension plans administered by the major cities and counties in California. Currently, more than $2.2 billion of LAUSD cash is deposited with the Los Angeles County Treasurer for investment, including over $1 billion of General Fund monies. Because of the restrictions on the investment of local agency surplus monies, the Los Angeles County Treasurer earned only 5.23% in CY 1999 and 6.10% in CY 2000. For each $100 million placed in a Retirees Health and Welfare Benefits Fund and invested on a long term basis consistent with the retirement obligation, LAUSD could earn additional investment income of at least $4 million to $6 million annually, based on achieving a net investment yield of 10.20% to 12.20%. The option to establish a Retirees Health and Welfare Benefits Fund and invest monies in retirement type investments, including corporate bonds, common stock, real estate and other investments, is provided for by Government Code Sections 53620 to 53622 (Attachment 5.2). If the District began a funding plan by setting aside $50 million per year over the next 20 years, once fully funded, the District would realize an annual benefit of $40 million to $60 million per year. Section 6: Conclusions and Recommendations Conclusions: The projected budget savings and reduction in budgeted positions that would result from the restructuring of the LAUSD as reported in the document entitled Eleven Local Districts, One Mission was misleading, inaccurate and substantially overstated. The reported budget reduction of 834 positions and savings of $46.10 million was more accurately only 278 positions deleted from the budget and savings of $29.96 million. Further, the actual change in administrative staffing since the organizational restructuring resulted in an increase of more than 100 positions and an additional cost of over $10 million. During the course of the review of the savings achieved from the reorganization, several needed improvements in management systems and reporting were identified. Budget, personnel, payroll and accounting system improvements, as well as fiscal and performance reporting enhancements, are needed. These improvements would strengthen internal controls, provide staff greater analytical capabilities and provide the members of the Board of Education with increased fiscal and performance information with which to oversee the District’s operations and formulate District policy. Lastly, the LAUSD could generate increased investment income of as much as $4 million to $6 million annually, by implementing alternative investment options for retiree health benefit monies available through Government Code Sections 53620-53622. The benefit from this alternative investment strategy could increase to as much as $60 million annually once LAUSD retiree health benefit liabilities are fully funded. Recommendations: It is recommended that the LAUSD: 1) Modify the budget system to allow the separate budgeting and accounting of school and non- school costs within each organizational unit or cost center. 2) Develop and document budget estimates of all major revenues and expenditures, including estimated staffing costs related to salary step increases and salary and benefit savings related to vacant positions. 3) Develop a budget procedure manual and annual budget instructions to distribute to organizational units throughout the District to facilitate compilation of the annual budget and improve budget documentation. 4) Develop a position control mechanism within the personnel management system to ensure that the number of positions authorized in the approved annual budget in any position classification is not exceeded in daily operations. The District reports that a position control system will be implemented within two years. 5) Develop a vacant position report within the personnel management system that is linked to the approved positions authorized by the annual budget and the payroll system. 6) Modify the payroll system to prevent payment for positions that are not authorized in the adopted budget or which exceed the total number of positions authorized in the position classification or organizational unit. 7) Develop monthly budget status reports for the Board of Education to provide more timely and detailed fiscal information to improve the Board’s ability to oversee the $6.0 billion LAUSD budget. 8) Develop specific quantifiable performance benchmarks and objectives for each of the 11 Local Districts and provide the Board of Education with quarterly performance reports. 9) Begin funding retiree health benefits by establishing a Retirees Health and Welfare Benefits Fund and separately invest these monies in pension fund type investments, including corporate bonds, common stock, real estate and other investments, as permitted by Government Code Sections 53620 to 53622. HEALTH CARE DELIVERY SYSTEMS C O M M I T T E E Andrew Bliss Chairperson William Kelley Violet Waldman TABLE OF CONTENTS Introduction................................................................................................................. Objective..................................................................................................................... Methodology.............................................................................................................. Findings....................................................................................................................... Recommendation ........................................................................................................ External Audit............................................................................................................ Appendices.................................................................................................................. HEALTHCARE DELIVERY SYSTEMS COMMITTEE INTRODUCTION The Committee was established by the Grand Jury to study and evaluate the significance of: • The role that governmental agencies play in the delivery of health care. • The large amount of the County’s Budget that goes for health care. • The critical importance of compliance with the 1115 waiver agreement (See Appendix III) entered into by the county with the state and federal governments. OBJECTIVES The Committee’s objective was to conduct a review of each of the healthcare delivery systems which are operated and provided by the County of Los Angeles in order to determine that they: • Are in place to meet the needs of the citizens to be served. • Meet or exceed community standards. • Are operated in a fiscally judicious manner. METHODOLOGY The committee pursued its objectives utilizing the following techniques / strategies: • Interview department heads and other departmental staff. • Visit and collect data from the facilities indicated: Hospitals Comprehensive Health Centers Health Clinics Public Private Partnerships Other contracted facilities/services • Interview and evaluate outside sources as research indicates. The committee anticipated that from their findings they would develop some short and long-term recommendations for improving the delivery of healthcare services. The committee further believed that it would find areas of excellence in the delivery of healthcare services, which would be highlighted. FINDINGS Trauma Centers There are 148 hospitals in Los Angeles County. Eighty-four of these have fully licensed Basic Emergency Departments accredited by the Joint Commission for Accreditation of Health Care Organizations (JCACHO). Thirteen are designated as full-service Trauma Centers. The County of Los Angeles operates three of these centers and the other 10 are owned and operated by public, non-profit hospitals. The trauma hospital system is designed to care for the critically injured. Los Angeles County officially began its trauma hospital system in December 1983, when the first eight Level I trauma hospitals were activated. Eventually, the Board of Supervisors designated 24 hospitals as trauma hospitals. Subsequently, eleven hospitals withdrew from the system citing financial losses associated with trauma hospital programs. The Board of Supervisors in 1990 appropriated its share of the discretionary hospital and physician funds to pay for trauma services provided to indigent patients. Other funds became available with the implementation of the Proposition 99 Tobacco Tax initiative. These funds were sufficient to stabilize the trauma hospital system. They were not sufficient to entice former hospitals back into the system. Today large portions of the County remain without a designated trauma hospital within an acceptable time frame for ground transport. Critically injured patients are airlifted, when possible, to the nearest trauma hospital. Proposition 99 funds have dwindled to such a degree that this source of funding can no longer sustain the trauma hospital system. A funding crisis threatens the viability of the trauma hospital system due to the 30% decline in Tobacco Tax dollars in addition to a 79% decline in the California Healthcare for Indigents Program (CHIP) both, which have sustained the system for the last ten years. County Hospitals /Medical Centers The committee visited each of the County Hospitals/Medical Centers. Before making the visits the committee reviewed the following documents for each facility: • A functional Organizational Chart • The facility’s last two Joint Commission for Accreditation of Health Care Organizations (JCACHO) Surveys • Any outside Fiscal or Management Audits completed in the last year • The facility’s Re-engineering Plan and a current status report • A Risk Management/Loss Prevention Report The facilities latest JCACHO Survey indicated improvement over the previous review. There were deficiencies noted for which a plan of correction was completed and approved by the accreditation organization. The Committee observed during their visits to some of the facilities a lack of attention to cleanliness, to the general up-keep of the physical plant, to the safety of person and property and to patients’ rights. Although the offending facilities’ survey report indicated that when the surveyors were there, that was not the case. On inquiry, it was found that the facilities go through a major clean up just prior to a survey. It was further explained that the reason for operating this way was insufficient staffing. LAC-USC Medical Center During the visit to LAC-USC Medical Center, the Jury observed an overcrowding condition in the psychiatry emergency room. This room, 1234, has bed accommodations for eight patients. The room has been consistently overcrowded since July 2000 with a high of up to twenty-nine patients. Such overcrowding violates patients’ rights by: • Not providing for individual privacy, for patient examination, patient – physician dialogue and treatment. • Not allowing for the separation of the males and females, nor adults from adolescents. • Creating unsafe conditions for patients, visitors, and staff. Two plans prepared by the staff for the resolution of the problem have been addressed to the Administration: one in July 2000 and the second in February 2001. No definitive action or resolution has resulted. In addition, the facility has received a deficiency notice from the state-licensing agency as a result of its visit on January 31, 2001. Ingleside Psychiatric Facility was visited as part of the review of LAC-USC Medical Center. This facility is managed and operated by the Psychiatric Service of the Medical Center. These 40 beds are leased as replacement for those beds lost in the 1994 earthquake. These beds are fully utilized at all times. Therefore, patient overflow from 1234 cannot be accommodated. The management of this facility seems to be very satisfactory in terms of meeting patient needs. Martin Luther King Jr./Drew Medical Center The committee was made aware that Martin Luther King Jr./Drew Medical Center would be having its JCACHO Survey in May 2001. During 2000 MLK successfully completed the American Association of Blood Banks Inspection and the College of American Pathologists Review. The committee was impressed with the Department of Internal Medicine’s 4-year grant of $689,269 annually to establish an Adult Protective Services Program, and the County Productivity Investment Award of $750,000 to the Oral and Maxillofacial Surgery Department to fund a Mobil dental unit. The Medical Center is to be commended for its Women’s Health Center and the School-Based Clinics Program. The Psychiatric Services are provided in an adequate space and with the appropriate staffing. On the committee’s visit we did not note any overcrowding. We were advised that the 20 adolescent beds are managed by the medical staff from LAC-USC Medical Center. Rancho Los Amigos National Rehabilitation Center The Committee found that Rancho Los Amigos National Rehabilitation Center continues as a center of excellence in Medical Rehabilitation. The committee observed there was unoccupied space that might be used for additional patient care activities or health services programs. Olive View-UCLA Medical Center The committee’s visit to Olive View-UCLA Medical Center was informative as it provided a picture of the reengineering effort. The development of their two projects, Bed Management and Outpatient Flow, indicate a need for improvement. Olive View staff, as other hospital staffs, pointed out to the committee the major problems effecting improvement and change. Those problems consist of the following: • The excessive number of entities involved in approval to effect a change. • The inflexibility of the budget process in terms of changes. • The overall resistance due to a stagnant culture and environment. • Inability to reduce staff and realize full savings. • Delayed process due to unfamiliarity by other county agencies with reengineering. Harbor UCLA Medical Center The visit to Harbor UCLA Medical Center gave the committee an insight into the Department of Health Services strategies to reduce the deficit and Harbors’ contribution to this effort. The strategies that are being explored are the following: • Increase County Funds allocated to Health Services • Increase State and Federal Revenues • Reduce demand through improved health • Reduce costs and increase efficiencies • Reconfigure and/or reduce services • Outsource selected services • Achieve 1115 waiver (See Appendix III) goals to avoid sanctions In order to ensure achievement of the 1115 waiver (See Appendix III) goals and to avoid sanctions, Harbor will need to develop the following strategies: • To exceed its ambulatory care visit target, • To successfully implement the itemized data collection program, • To improve overall performance by getting staff involved, • To successfully implement the clinical resource management program, • To seriously address supply consumption. The visit included a review of the psychiatric emergency unit and the inpatient service. They both had the necessary space and staffing. They are able to separate the men from the women and the adults from the adolescents. They did advise that when experiencing overload they are able to arrange timely transfers to other mental health providers. High Desert Hospital During the visit to High Desert Hospital the committee was able to see a vastly different healthcare delivery system. The hospital is actively involved in outreach activities with the Antelope Valley Health Care District. The district provides the building and the county provides the staffing for the clinics in Palmdale. They also have a mobile clinic that moves around the area to provide well baby services. Health care is being provided in the Kepal Union School District and there are plans for a 30,000 sq. ft. urgent care facility in the region. The facility notes the adverse affect of the 70/30 hiring freeze particular on a small operation such as theirs. They are projecting a severe nursing shortage in the near future thereby reducing job stability. MENTAL HEALTH The committee met with members of the department of mental health executive staff. The crisis in psychiatric services was made more evident as a result of this meeting. Los Angeles County relies upon four large public psychiatric emergency rooms. Three of the four Department of Health Services emergency services have specially constructed psychiatric emergency rooms that provide some measure of safety and dignity for patients and staff. LAC-USC, however, has operated out of a small room (1234) since the LAC-USC Psychiatric Hospital was closed after the 1994 earthquake. This room is smaller than the original psychiatric emergency room and is poorly equipped. It was originally constructed as a temporary measure. However, no additional space has been allocated for the emergency service since that time, despite repeated requests. The configuration of the emergency room stands in stark contrast to that of the other 3 medical centers. CONCLUSIONS The conclusions that follow are based not only on the committee’s visits and interviews, but also on reviews of reports and documents as described in appendix II. The Grand Jury’s Health Care Delivery Systems Committee, as further validation of previous findings, offers some of these conclusions for emphasis of their importance. • It is questionable that the department will meet the terms and conditions of the 1115 Waiver. • There will be insufficient or no funds to care for the patients receiving services under the provisions of the 1115 waiver when it expires. Furthermore it is not anticipated that the group of patients will be absorbed into the private sector. • The service delivery systems are in need of improvement, especially in providing easy access to primary care physicians, specialists and service facilities. • The department does have excellent service providers, however, they are not easily accessible; in fact the existence of some is not generally known. to the public at large. • The department needs to develop an integrated data collection and management reporting system that allows the client, provider and staff easy access to the data necessary for the care of the client. • The Department of Health Services needs are not being adequately addressed by other County Departments. • The Department of Health Services tends to focus on short-term, crisis- based solutions rather than productive, long-term results. • The Department of Health Services lacks system-wide operational leadership. • There are many providers of health care, both public and private, with some of the private being non-profit and others free. However, availability and access are varied and unknown. • The County lacks a clear written Public Policy on how personal health services are to be provided in this county. RECOMMENDATIONS The following three Recommendations are offered for the short term in order to begin to restore and stabilize the affected areas. • That the Board of Supervisors require the Department of Health Services to provide adequate patient care accommodations for the psychiatric emergency room patients at LAC-USC Medical Center in accordance with applicable state regulations. Furthermore, that they require the Department of Mental Health to provide the necessary funds for this added census load. • That the Board of Supervisors require the immediate lifting of the hiring freeze and the elimination of the 70/30 restrictions on filling vacancies. • That the Board of Supervisors seek appropriate Federal and/or State approvals for realignment of fiscal incentives and reimbursement mechanisms. The following recommendations should be implemented in order to ensure the viability of the trauma hospital system: • Seek State Legislation that would provide the County with a permanent funding source for the operation of the Trauma System. • Develop a physician reimbursement plan that reduces the time lag to no more than 30 days from billing date. For the long term the following is recommended: • That the Board of Supervisors establishes a Community-Wide Study Group to formulate a public policy on the provision of personnel health care services to the Los Angeles County Residents. Public Private Partnership Program Management Audit Report Introduction The 2000-2001 Civil Grand Jury of the County of Los Angeles (CGJ) performed a management audit of the Public Private Partnership (PPP) program within the County of Los Angeles Department of Health Services (DHS). Objectives and Scope The purpose of this audit was to: q Examine contractors’ records to ensure compliance with their contract, including all applicable regulations, rules and standards, either stated in the contract or implied by the services they are providing under the terms of the contract. q Examine the Department’s records to establish the completeness of the monitoring activity, with particular attention to quality of care issues in conformance with the Department’s Quality Assurance Program. It was also the intent that this management audit discern if the needs of the County’s indigent are met and are at or above the standard of care in the community. Methodology The methodology employed in this management audit had three major components: q Review and audit of selected documents and files q Interviews with senior DHS management personnel q Site visits and interviews with selected PPP contractors Document Review In addition to background material about the PPP program available on the County’s web site, the following documents pertaining to the PPP program were reviewed: q RFP I (August 15, 1995) q RFP II (December 14, 1995) q RFP II – Scope of Work Proposal (February 16, 1996) q RFP III (February 28, 1997) q RFP IV (October, 2000) q The Public/Private Partnership – General Relief Health Care Programs Provider Manual (August 21, 1998 Revision) q Draft Public/Private Partnership (PPP) Program – General Relief (GR) Health Care Program Provider Manual (April 2001 Revision) q Fact Sheet for the Medicaid Demonstration Project q 1115 Waiver Factsheets (1995 – 2000) q 1115 Waiver Factsheets for Project Extension (2000 – 2005) q Annual Status of Contract Monitoring Report for July 1, 1999 through June 30, 2000 (Draft) q DHS Fact sheets on: ◊ Medicaid Demonstration Project – 1115 Waiver ◊ Public/Private Partnerships – Partners for the Health of Los Angeles ◊ Financing the Los Angeles County Department of Health Services – Unstable and Declining Revenues Threaten the Future ◊ The Future of the Los Angeles County Department of Health Services –Long Term Stability Calls for Greater Partnerships with the State and Federal Governments ◊ Los Angeles County Department of Health Services q Program Overviews and Organizational Charts on: ◊ Medicaid Demonstration Project ◊ Family Health Programs and External Relations ◊ Office of Managed Care/Community Health Plan ◊ Office of Managed Care/Medical Administration ◊ Office of Managed Care/Financial Services Division ◊ Office of Managed Care/Operations Division ◊ Office of Ambulatory Care ◊ Inspection and Audit Division ◊ Contracts and Grants Division q Internal Memoranda from the Department of Auditor-Controller regarding the Public/Private Partnership Program Review (including Follow-up Memoranda). DHS Interviews Nine senior management personnel from several DHS departments involved with the PPP program were interviewed, representing: q Office of Managed Care (OMC) q Office of Ambulatory Care (OAC) q Inspection & Audit Division, Health Services Administration q Contracts & Grants Division q Medicaid Demonstration Project Office. PPP Contract and Monitoring File Review OMC provided CGJ a list of all PPP contracts, from which 31 contracts were randomly selected for review. Since PPP providers/contractors may have multiple contracts (i.e., one contract for each facility or site), the 31 contracts reviewed represented 17 providers. OMC’s Contract Monitoring Files for these 31 contracts were then reviewed. The Contract Monitoring File contains the documentation of the most recent OMC audit of the contract/contractor. This random selection of contracts was determined to be representative of the entire set of contracts in terms of the following variables: q Location (Supervisorial district) q Service Provider Area (SPA) q Size of facility q RFP utilized to solicit provider participation q For-profit v. non-profit status q PPP funding allocation. In addition to reviewing OMC’s contract monitoring files on these 31 contracts, all of the contract monitoring files, dating back to approximately 1997, for four selected providers were reviewed. The purpose was to conduct a longitudinal (over time) assessment of OMC’s monitoring activity of the four providers who over the past two years either became insolvent or had their PPP contracts terminated by OMC for cause. PPP Site Visits Ten contractor sites were randomly selected for on-site visits and management audit of their facility and operation under the terms of their PPP contract with DHS. Before scheduling the on- site management audit, DHS terminated two of the contracts. DHS then advised CGJ that absent an in-force contract, these providers could not be audited. As a result, this reduced the survey sample to seven providers operating at eight different sites. During the course of the on-site management audits, CGJ deleted another site from the target group based on the determination that the survey sample would be representative after seven site visits. Third-Party Administrator Site Visit The site of the contracted third-party administrator (TPA), American Insurance Administrators, Inc., was also visited. In the course of the site visit, the Claims Manager responsible for administering claims for the PPP program was interviewed and the claim adjudication process and the various reports AIA provides OMC and DHS were reviewed. Background The PPP program and, therefore, the observations noted in this management audit need to be understood in the context of Los Angeles County’s 1115 Waiver. The County’s web site describes the waiver: An "1115 Waiver" refers to section 1115 of the federal Social Security Act, which allows the Secretary of Health and Human Services to waive any provision of Medicaid law for demonstration projects that test a program improvement or innovate a new idea of interest to the Health Care Financing Administration (HCFA). For example, under a section 1115 waiver, a state may be exempt from compliance with usual requirements or may receive federal matching funds for expenditures not ordinarily eligible under Medicaid. All 1115 waiver demonstration projects must be budget neutral, that is, they cannot result in greater federal expenditures than would have otherwise been spent in the absence of the waiver. Because waivers can only be granted to states, the State of California submitted the proposal in collaboration with and on behalf of Los Angeles County. The PPP program is one of the initiatives of the demonstration project. Part of the project was to decrease inpatient spending for indigent patients by making primary care more accessible to this population by developing partnerships with the private sector. The current target for Los Angeles County is a total of 3 million outpatient visits each year; the PPP program accounts for approximately 700,000, or 23%, of the visits. Several divisions within DHS are responsible for managing or administering certain components of the PPP program. The Office of Ambulatory Care is responsible for all policy-related activity for outpatient services; PPP falls within this responsibility. OMC is responsible for the monitoring activity of PPP contractors. The Medicaid Demonstration Project Office ensures that the PPP program meets the requirements of the waiver. Contracts and Grants process the PPP contracts. Many of the issues and observations arising out of this management audit apply beyond the PPP program itself. Evaluation of the PPP program cannot be entirely isolated from larger issues facing DHS. Findings: Current Situation Findings are set forth under four headings, corresponding to the four major foci of the management audit’s activities. These headings are: q Contractor/Site Audit q AIA (Third-party claim adjudicator) Audit q Contract File Audit q DHS Management Personnel Contractor/Site Audit Findings When the management audit commenced, there were 74 primary care PPP contracts representing 103 sites and 67 partners. These providers are located throughout Los Angeles County. These findings represent CGJ’s audit of six providers operating at seven sites. Contractors are committed to serving the low income or indigent population in their service areas. Without exception, management staff at the sites visited, exhibited a high level of professional commitment and dedication to the objectives of the PPP program. All of the providers affirmed their desire to provide medical services to all who need them, regardless of the patient’s ability to pay. The mission statements provided affirmed such ideological commitments; two examples follow: The mission of [Contractor] is to provide coordinated, continuous care to improve the health status, access, and health awareness of medically underserved and low-income people in Los Angeles County. This is to be accomplished by providing culturally sensitive and quality comprehensive health services at affordable costs and by encouraging and educating people to take a proactive role in maintaining their own health. To respond to the current and future health needs of the greater [Contractor Area] Los Angeles area by providing access to a range of high quality, affordable health services in a financially responsible manner. When asked what would happen if the contractor exhausted their PPP funding allocation before the end of the contract period, all said they would continue to provide care to these patients, and would make up the funding shortfall “somehow.” None of the providers interviewed indicated that they viewed PPP funding for contracting services as a means for generating revenue for their facility. Most providers pointed out that the PPP fixed reimbursement amount typically does not cover 100% of the costs of services provided, especially if the facility provides radiology and laboratory services or dispenses pharmaceuticals. All of the providers evidenced a high level of dedication to providing medical care to their indigent population. At a smaller facility this was demonstrated by the hands-on management style of the facility’s Executive Director, who was negotiating to obtain more space to accommodate a patient load that exceeds the facility’s current capacity. At another site, the Executive Director was negotiating with the city government for additional land to build a new building and increase their capacity. At yet another site, the Executive Director had resigned unexpectedly and a Board member had volunteered to step in; this was in addition to his regular employment. Since this Board member has been in the position, he has brought in other Board members to volunteer on projects to improve processes at the clinic. Funding Affects Range of Facilities Seven different sites, located in Pasadena, Highland Park, Pomona, West Covina, Bell Gardens, Baldwin Hills and Santa Monica, were visited. These facilities represented a range of size and quality. The smallest was a storefront facility of approximately 2,000 square feet, with a single examining room. Only a small sign on the door facing the primary boulevard identifies this facility. The largest facility was a multi-story facility previously occupied by Los Angeles County offices. This facility has multiple examination rooms and provides both primary care and specialty care services. Mid-range was a large, single-story facility occupying a significant piece of land with ample parking in the rear. While all of the facilities were clean, some were clearly better organized and used available space better than others. This variability in the quality of facilities appears to be a function of the level of funding. All of the contractors audited depend on funding sources other than the PPP program to sustain their budget requirements. The larger facilities usually have staff dedicated to grant writing and other development activities, while the smaller facilities do not. Typically, in the smaller facilities, the executive director or chief executive officer wears several hats, including that of development officer/fund raiser. Such dual roles limit the contractor’s time and ability to raise any funds in addition to governmental and public sources. Therefore the smaller contractors tend to be more dependent on PPP (and other public) funding sources for their operating budgets, leaving relatively less funding available for facility expansion and improvement. At the same time, other factors may limit the ability of a contractor to maximize their delivery of medical services to the target population. One contractor has been negotiating with a local jurisdiction for over a year on obtaining building permits to erect a new building on their existing site. The delay in processing the paperwork has cost this particular contractor a significant amount of money, and reduced the efficiency with which they could be delivering services under the PPP program to their target audience. Facility constraints in turn may affect the provider’s ability to provide ancillary services, such as radiology, laboratory or pharmaceutical dispensing services. Several contractors commented during the course of our site visits on just such constraints. Such constraints, however, impact the PPP program only in terms of providing services to the patient in the most convenient and efficient manner. There is no net cost differential to the program whether the PPP patient receives primary care and any related ancillary services at the contractor’s site, or whether the PPP patient must go elsewhere for such ancillary services. In either case, the contractor bills the PPP program for all of the primary care and related ancillary services rendered in connection with that particular patient visit, whether ancillary services were delivered on-site or off-site. If ancillary services were rendered off-site, the contractor is responsible for reimbursing the provider of ancillary services out of the reimbursement received under the contractor’s PPP contract with DHS. Contractors Claim the PPP Claim Process Impacts Them Negatively in Terms of Reimbursement Levels and Timeliness of Payment. Under the terms of the PPP contract, a patient’s eligibility for services received under the PPP program is based solely on income. PPP contractors typically operate under several public funding programs, including the PPP program. Different levels of income will qualify a patient for different public funding sources. Accordingly, when a patient visits the contractor’s facility, the contractor’s first concern after medical triage is to determine which funding program to bill for reimbursement. Patients self- assess their eligibility for PPP funding by completing a one-page questionnaire called a “Certification of Indigency” or COI. This form asks the patient to identify the number of people living in the household and to state the total monthly income for all people living in the household. If the total monthly income attested does not exceed certain limits based on the total number of people living in the household, the patient automatically qualifies for PPP funding, if no other sources of private or public funding are available. This form does not ask for a Social Security Number (SSN), California driver’s license number, Medi-Cal ID number or any other identification that could be used to verify employment or income. The contractor’s sole responsibility is to confirm that the family members and net family income are within the PPP program guidelines. If they are, the eligibility screener flags the patient file so that any bill generated for services rendered on that date of service will be forwarded to the PPP claim adjudicator. All of the contractors stated that Medi-Cal coverage is the most common reason that the claim adjudicator, AIA, denies claims. If AIA matches the name and gender on a PPP claim to their Medi-Cal eligibility file, they will deny the claim. The contractor then has a limited window of opportunity in which to research the claim and submit evidence that the patient treated is not the same individual as the person identified by the Medi-Cal number on the AIA claim register. Given the large percentage of Hispanic patients, such false positive matches for Medi-Cal eligibility are not uncommon and are a source of on-going frustration to the PPP contractors. Since PPP funding is intended for patients who do not qualify for any other public funding, contractors attempt to identify Medi-Cal eligible patients and assist them in applying for Medi- Cal benefits. Several of the contractors we visited have a DPSS employee on-site for this purpose. Some contractors also reported that some of the DPSS personnel were less than satisfactory, either because of limited multi-cultural ability (non-Spanish speaker), high turnover rates, or poor customer-relations skills. Providers have 45 days from the date of service to submit claims to the PPP program. AIA’s contract with DHS requires them to deny all claims submitted after the 45-day cutoff period. Providers may submit claims to AIA either electronically or manually on HCFA Form 1500. All of the providers audited attempt to submit claims twice during each monthly cycle, typically on the 15th and 30th. Claims for services rendered in the first half of the month are submitted by the 15th of the following month; claims for services rendered in the second half of the month are submitted by the 30th of the following month. This schedule ensures that AIA receives claims within 45-days of the date of service. AIA holds all claims for services rendered in a particular month until they receive the Medi-Cal eligibility information for that month from DHS. DHS provides AIA a Medi-Cal data cartridge once a month for the prior month’s eligibility. The timeline for submitting and processing a claim is as follows: q Patient seen by contractor under PPP program on 3/1 q Contractor generates claim and forwards it to AIA on 3/30 (within 45 day window) q AIA receives claim and holds it pending receipt of Medi-Cal data from DHS q AIA receives Medi-Cal March eligibility data from DHS on 4/10 q AIA processes claim, and if approved, sends Remittance Advice (RA) to OMC on 4/30 q OMC receives RA and authorizes Auditor-Controller to issue a payment voucher q Auditor-Controller issues payment voucher on 5/10 This timeline shows that it may take 70 days from the time a contractor treats a PPP patient to the time DHS reimburses the provider for those services. This would be the case even if the contractor were able to submit claims to AIA sooner. For example, if AIA received a PPP claim on 3/5 for services rendered on 3/1, AIA would still be unable to process the claim until mid- April, after receipt of the Medi-Cal data for March. PPP providers, therefore, operate under several constraints: First, they operate under a fixed deadline for submitting claims to AIA. Claims submitted after that deadline are automatically denied by AIA. Second, even if the contractor expedites the submission of claims, their timeliness does not expedite AIA’s processing of claims, because AIA cannot process claims until the Medi-Cal data from DHS is received. Third, even if the claim process works as efficiently as is possible, providers claim the actual reimbursement is generally significantly below the costs of services provided. For primary care services, the reimbursement amount is currently set at $83.82. This includes the physician’s professional fee and all ancillary services provided (prescription drugs dispensed, laboratory work performed and radiology test provided). Since the target population is indigent and uninsured residents, PPP patients tend to exhibit chronic illnesses that require significant levels of ancillary services. One contractor reported that upwards of 40% of their PPP patient population is chronically ill. For this contractor, PPP reimbursements cover approximately 85% of the cost of care provided. Another contractor reported that PPP reimbursement covers approximately 67% of the cost of care provided. In addition, a third contractor reported that PPP patients account for 12% of all patient visits, but generate only 5% of all revenue. OMC’s Audit Process Is Inconsistent and Inefficient. OMC audits all PPP contractors annually according to the PPP Provider Manual. OMC begins the audit process by sending the contractor a notice of the upcoming audit. This notice must be at least 14 days before the scheduled audit, and indicates the date a particular site/facility will be audited. A copy of the audit/monitoring instrument is also included with the notice. The audit team typically consists of two people: an analyst and an RN. The on-site audit requires from four to six hours to complete. The audit team then summarizes their findings. OMC then notifies the contractor of the findings and indicates the date the Corrective Action Plan (CAP) is due. OMC then reviews the CAP, and when all of the action items identified in the audit have been addressed, OMC sends the contractor a letter indicating that their CAP has been accepted/approved. Undergoing a facility/site audit is a time consuming process for the contractors. Staff must be available to answer questions from the audit team during the site visit and to provide requested records, files and other paperwork. Responding to OMC’s request for a CAP is similarly time consuming. CAPs typically request the correction of such deficiencies as: adding DHS to insurance policies as an additional named insured, updating business licenses and certifications, creating and updating procedure manuals and providing missing documentation in personnel or medical record files. All of the contractors CGJ audited indicated varying levels of frustration with the DHS audit process. While acknowledging the necessity for an audit process, they reported that they often undergo multiple audits. Multiple audits may be required when a provider has multiple contracts with different Los Angeles County departments or program offices. Each department or program office may require their own audit. Thus, if a provider has contracts with Los Angeles County under the PPP, GR, and LA Care programs, they can expect separate audits for each. CGJ reviewed OMC’s entire record of audit activity for the PPP program, with particular attention to the audit history of the four providers who became insolvent or whose contracts were terminated for various reasons. One of the providers, Los Angeles Native American Center (LANAC) began participating in the PPP program on October 10, 1997. OMC conducted their initial audit of this contractor on April 22, 1998. LANAC submitted a CAP to OMC on August 4, 1998. On October 19, 1998, LANAC ceased providing services to patients. This cessation of business apparently took OMC by surprise. The file CGJ reviewed did not indicate any OMC concerns about this provider prior to their cessation of business. The OMC file does contain an internal OMC memo dated, December 3, 1998, six weeks after the cessation of business. In this memo an OMC staff analyst asks Medical Administration within OMC to document their concerns regarding this contractor. OMC terminated the LANAC contract effective February 18, 1999. OMC’s audit activity for the other three providers are summarized in the following tables. The following findings are noteworthy: q OMC conducted multiple audits of the same facility in intervals of less than one year q Intervals between OMC audits ranged from one week to 19 months q OMC requested CAPs from 100% of these sites 108 q OMC’s notification to providers that their CAP was approved range from 20 days to 182 days OMC’s management of the audit process is uneven. OMC has scheduled audits with a frequency not allowed for in the PPP Provider Manual. OMC routinely requests CAPs and advises providers when they are past due in providing the CAP. Yet, OMC has taken up to six months to notify the provider of the acceptance of the CAP. Such delays mitigate the value of the audit/CAP process. Based on these findings, the contractors’ frustration with the audit process appears justified. AIA Audit Findings American Insurance Administrators, Inc. (AIA) is the third-party claim administrator (TPA) for the PPP program. AIA’s Procedures Are Logical, Follow Standard Industry Practices And Are Customized to Meet the Needs of the PPP Program, But Some PPP Requirements Delay Finalizing Claims. PPP providers submit claims to AIA either electronically or by mail. AIA then processes the claims following procedures typical of third-party claim payers, i.e., logging in claims, determining patient eligibility, determining eligible expenses and authorizing payment. However, AIA’s claim adjudication process is not as involved as it might otherwise be, because of the reimbursement agreement under the PPP contract. DHS reimburses PPP contractors a flat amount depending on the type of service rendered. The reimbursement for a PPP office visit is currently $83.82 per visit (inclusive of all ancillary services provided in connection with that visit). Where the provider also has contracted with DHS to provide Case Management (CM) services, the provider is also entitled to a flat $27.00 per month (not per visit) for CM services rendered. AIA’s claim adjudication process therefore focuses on four elements of the claim: 1. Patient eligibility for Medi-Cal 2. Condition treated during the billed PPP visit 3. Whether or not CM services were billed 4. Whether or not the provider contracts under the PPP program to provide CM services. AIA does not need to adjudicate the claim in terms of reasonable and customary fees or coordination of benefits (COB), two factors typical of major medical claims processing routines that are both labor and time intensive. These two elements are obviated by the nature of the PPP program’s reimbursement provisions. AIA screens PPP claims for possible Medi-Cal coverage, because Medi-Cal is the State program most likely to provide an alternative source of funding for medical services for the indigent and uninsured population targeted by the PPP program. AIA must deny PPP claims for patients they determine are enrolled in Medi-Cal. Once AIA confirms that the PPP patient is not enrolled in Medi-Cal, AIA’s adjudication process focuses on determining the appropriate level of provider reimbursement. This is first of all a function of the condition treated during the billed PPP visit. Certain kinds of services, or services in connection with certain diagnoses, are not reimbursable under the PPP contract. Mental health services, podiatry services, and chiropractic services are among the services excluded from coverage under the PPP program. Diagnostic codes (ICD-9 codes) are shown on the PPP bill. AIA reviews these diagnostic codes to determine which claims are for treatment of conditions not eligible for reimbursement under the PPP program. Where the ICD-9 codes indicate an ineligible condition, AIA must deny the claim. Once AIA confirms that the condition causing the office visit is eligible for coverage under the PPP program, AIA’s adjudication process then determines the appropriate level of reimbursement for the services provided. If the billing indicates that CM services were provided, AIA then determines: (1) if the provider is contracted to provide CM services; and (2) if the condition treated (ICD-9 code) is eligible for CM services. Where both conditions are satisfied, AIA then reimburses the provider a flat amount of $27.00 for the month for CM services, in addition to the flat PPP program reimbursement amount of $83.82 for the visit. Where either condition is not met, AIA denies the CM reimbursement fee and authorizes only payment of the flat PPP program amount of $83.82 for the billed visit AIA then generates a claim report, which goes to the PPP provider. This report identifies which patients’ claims were denied, with explanatory notes showing the reason for the denial. AIA also generates a Remittance Advice, which goes to OMC where it is processed and forwarded to the Auditor-Controller of DHS to generate a payment warrant for the PPP provider. As indicated above, PPP providers must submit claims to AIA within 45 days of the date of service. AIA must deny claims received after this 45-day window has closed. However, AIA’s ability to process claims in a timely manner does not depend solely on the timeliness of claim submission by the providers. Regardless of when the PPP providers submit claims to AIA, AIA cannot adjudicate the claims until they receive the Medi-Cal eligibility data from DHS. AIA reported during our audit that DHS typically provides the Medi-Cal eligibility data between the 10th and the 20th of the month following the claim cycle. That is, DHS would send AIA the Medi-Cal eligibility data for the month of March 2001 between April 10 and April 20, 2001. During the audit, CGJ asked AIA to provide a report showing the dates AIA received the Medi- Cal eligibility data from DHS for the past year. The data are shown below. Data Received From DHS: February 2001 3/21/01 January 2001 3/15/01 November and December 2000 12/20/00 October 2000 11/17/00 September 2000 11/08/00 August 2000 08/31/00 July 2000 08/10/00 June 2000 07/31/00 May 2000 07/05/00 April 2000 05/04/00 March 2000 04/05/00 February 2000 03/08/00 According to AIA’s data (above), DHS provided the Medi-Cal eligibility data by the 20th of the following month for 6 out of 12 months (50%). DHS provided data beyond the 20th of the following month five times out of 12 (42%). For the month of August, DHS provided the data to AIA at the end of that month. This history indicates that 42% of the time, the providers’ obligation to submit PPP claims to AIA within 45 days of service (as stipulated in the PPP-GRHC Programs Provider Manual) is rendered moot by DHS’s delay in providing the Medi-Cal eligibility data to AIA in a timely manner. For example, a contractor must submit claims for services rendered January 1, 2001 by February 15, 2001 (45 days from the date of service). However, DHS did not provide AIA the Medi-Cal eligibility data for January 2001 until March 15, 30 days after the submission cut-off date. Similarly, claims for services rendered on September 1, 2000, had to be submitted to AIA by October 15, 2000 (45 days). But DHS did not provide AIA the Medi-Cal eligibility data for September 2000 until November 8, 24 days after the submission cut-off date. Contractor File Audit Findings As part of CGJ’s management audit of the PPP program, the contract monitoring files that OMC maintained on 31 PPP contractors were reviewed. These files contained only the most recent OMC audit of the PPP contractor. Thus it was not possible to perform a longitudinal assessment of OMC’s monitoring activities for these contractors. However, these files did furnish a panoramic “snapshot”, as it were, of OMC’s monitoring activities of the contractors involved in the PPP program. OMC’s Monitoring Process Is Primarily Manual. Each monitoring file typically contains the following items: q A “Confirmation Letter” from OMC/Medical Administration. This letter notifies the PPP provider of an upcoming site visit/audit. This letter satisfies the notice requirement to the PPP contractor under the PPP contract (cf. Sec. 31.C of the Contract). This letter also specifies the name of the facility, the facility address, and the date of the scheduled site visit/audit. q A copy of the Monitoring Instrument and related Worksheets, which OMC/Medical Administration will use to evaluate the provider’s facility and operations. q A “Findings Letter” from OMC reporting the results of the site visit/audit to the PPP contractor. In each case, the site visit/audit discovered “deficiencies” sufficient to require that the contractor prepare a “Corrective Action Plan” (CAP) by a due date specified in the “Findings Letter.” q A copy of the OMC’s “Assessment Team Report Summary.” This report summarizes the findings of the site visit/audit, and indicates the magnitude of any deficiencies noted. This report also cross-references the applicable sections in the Monitoring Instrument and related Worksheets used by the audit team in generating the Report Summary. q A copy of the completed Monitoring Instrument and related Worksheets. Part of the instrument is a document that is always a computer-generated; the remainder is completed manually. q A copy of the “Corrective Action Plan” filed by the contractor. q Copies of additional correspondence to or from the contractor regarding the status of the requested CAP or amendments to the CAP. q A copy of the CAP “Acceptance Letter” from OMC to the contractor acknowledging OMC’s approval of the CAP. In addition, contract monitoring files may contain additional supporting documentation regarding facility licenses, insurance policies, certifications, waste management contracts, and copies of the providers’ Articles of Incorporation. Difficulty Accessing Files Limited the Ability to Validate Some of the Work Performed by DHS. OMC would not allow CGJ to review the original contract monitoring files. OMC took the position that the original files contained patient-specific information, which was subject to various confidentiality requirements mandated by state and federal law. Accordingly, OMC devoted staff resources to copying the original files to redact all such patient-specific information. This delayed CGJ’s receipt of the file copies by about two weeks. Similar concerns surfaced during our site visits. OMC personnel accompanied the management audit team on these site visits, to ensure at least in part that patient-specific information was not disclosed to or copied by the CGJ management audit team. This prevented us from conducting any meaningful document review at the provider site. OMC’s Monitoring Files Are Inconsistently Documented And Show Delays in Notifying Providers of CAP Approval. The review of the 31 files identified the following: q Fourteen files had CAPs requested in April 2001; therefore, there had not been time to receive the CAP and processing timelines could not be measured for these files. q Four files lack sufficient documentation to determine the date OMC notified the provider of CAP approval or the elapsed time from OMC’s approving the CAP to OMC notifying the provider of approval. q OMC notified five providers within 30 days of CAP approval. q OMC notified one provider within 60 days of CAP approval. q OMC took from over three months to over five months to notify six providers of CAP approval. These findings indicate that OMC’s management of the CAP approval process is problematic, since in 38% of the cases audited, OMC took more than 90 days to issue an approval. Similar gaps in file documentation and delays in notifying providers of CAP approval were demonstrated during the management audit of the four providers who either became insolvent or whose contracts were terminated within the past two years. Assessment Summaries and Measures Are Inconsistently Applied and Documented In the files reviewed, 31 contract monitoring files contained 25 “Assessment Team Report Summaries.” OMC uses this form to summarize the findings of the Assessment Team Survey after they complete their site audit and review of a PPP contractor’s facility. It provides a concise overview of the findings reported on the more lengthy monitoring instruments and worksheets. These facility site audits were conducted between February 16, 2000, and February 15, 2001. However, over this 12-month period, the Report Summaries used by OMC indicated three different matrices of measurable standards for the facility site review component. These ranged from 10 standards to 12 standards. Of the 31 files audited, five did not contain an assessment team report summary of any kind. Three of the files lacking the summary were for contractors whose contracts had been terminated. In addition, two other files lacked a facility site review, which is to be done annually. The dates of site audits reflected on the 25 Report Summaries also fail to indicate any kind of intentional evolution from a simpler summary to a more complex summary, as shown below: q 12 Standards: site visits between 4-27-2000 and 12-13-2000 q 13 Standards: site visits between 4-25-2000 and 2-15-2001 q 16 Standards: site visits between 2-16-2000 and 2-22-2000 Conclusions, Opportunities For Improvement And Recommendations Although these recommendations may appear simplistic on the surface, they actually represent major structural and process changes that can significantly improve the PPP program. More important, however, is the potential jeopardy to the PPP programs once the 1115 Waiver and associated funding ends. DHS is aware of this problem and is striving to find alternative funding strategies. Although some PPP-funded programs may have had operational, fiscal and health care difficulties, the majority is highly committed to serving low income and indigent populations. If such funding were to be discontinued, the DHS clinics and any surviving non-County clinics would have to absorb these patients currently served by the PPP-funded clinics. These recommendations and the need to pursue replacement funding are critical and will be extremely difficult to achieve. Establish accountability by identifying one organization responsible for the program. Several different offices manage the PPP program. It is incorporated in the operations of functions of several divisions: q The Office of Managed Care/Community Health Plan (OMC/CHP) manages aspects of the PPP program through various internal divisions: ◊ Financial Services is responsible for monitoring financial performance of PPP program contractors. ◊ Medical Administration is responsible for administering the clinical and medical components of the PPP program. ◊ Member Services supports OMC’s product line and provider network expansion efforts for all OMC programs, including the PPP program. ◊ Network Administration (within the Operations Division) administers the PPP program. q The Office of Ambulatory Care (OAC) manages other aspects of the PPP program. The OAC tracks, monitors, analyzes and plans the performance of PPP program contractors in order to meet the Performance Standards established by the 1115 Waiver Office within DHS. Specifically the OAC is responsible for: ◊ Maintaining an ambulatory care visit level under the PPP program of 700,000 visits per year during the five-year life of the 1115 Waiver extension (to June 2005). ◊ Improving the effectiveness of the referral centers. ◊ Seeking Federally Qualified Health Center status for PPP contractors. q The Inspection and Audit Division of DHS oversees the Waiver Office’s quarterly reports on the progress of the 1115 Waiver commitments, some of which involve the PPP program. q The Contracts and Grants Division of DHS provides contract support services to the PPP program by interfacing with OMC and OAC. With this distributed responsibility, a contractor’s history is not available in one place. q OMC maintains one set of contract files and the current year monitoring file on site. q Prior years’ monitoring files are stored, some on-site and some off-site. q No single document captures the general contours of a contractor’s history from entry into the PPP program to the present. Responsibility for the program as a whole should be assigned to one entity or person within DHS. This recommendation does not mean that duplicate processes or structures should be implemented. The role of this person or unit should be the focal point for the program. This function would include coordinating with the persons performing activities related to PPP in other divisions and ensuring that PPP issues are followed to their conclusion. To some extent the Office of Ambulatory Care functions in this role; however, information about the PPP contracts does not reside in this office in its entirety; often one needs to ask in several offices before obtaining the requested information. This also means no one person has a complete understanding of the issues of the program. Evaluate staffing and training needs for ongoing compliance with monitoring requirements. Both Medical Administration and Finance indicated that they did not receive additional resources when responsibility for PPP program monitoring was assigned to OMC. In addition, the processes appear to be primarily manual. Monitoring the PPP contracts is only a part of OMC’s responsibility. At the inception of this management audit, OMC’s inventory of contracts to monitor totaled 264; of these, 74 were PPP primary care contracts. Through its various divisions, OMC is also responsible for monitoring: q Medi-Cal Managed Care enrollment and utilization q Healthy Families Program enrollment and utilization q County Temporary Employees Health Care Program q General Relief Health Care Program q Pharmacy Services q Quality Management q Utilization Management q Case Management q Credentialing/Site Certification. Responsibility for the PPP contracts was transferred to OMC in 1997. Management indicated that this occurred without any additional staffing being allocated to OMC. Currently Medical Administration has eight monitors and the Financial Services Division has two. DHS should evaluate the staffing requirements along with the system support that monitoring requires. This evaluation should include consideration of the training necessary to audit effectively and what is the best model for the staff mix on an audit team Address morale issues arising from the leadership and fiscal instability of DHS. We have already discussed the organizational characteristics that contribute to fragmented management of the PPP program. This fragmentation supports an environment in which everyone is focused on their own narrowly-defined area of responsibility. This is exacerbated in an organization in which leadership is often in flux and everyone fears for the continued existence of their job. Executive leadership at OMC has been unstable. OMC provided a listing of Executive Directors and Medical Directors of the division. This listing showed that: q Eight individuals have served as Executive Director of OMC since 1992. Prior to that, one person served for 11 years. Since then, there have been changes each fiscal year and several of these Executive Directors were on interim status. q The current Interim Director has been in place since October 2000. q Since fiscal year 1995, there has been turnover in the Medical Director position every year. q The current Chief Medical Officer has been in place since February 2000. q The current Chief Financial Officer has been with OMC since September 1998. Moreover, DHS is operating in a financially unstable environment. The County’s financial crisis in 1995 was the impetus for the 1115 Waiver. Funding from this will disappear in three years. DHS is implementing a strategic plan focused on responding to this decrease in revenue. Much of the plan calls for staff reductions. The County should place a high priority on devising ways to creating a work environment that fosters teamwork and shared goals. Coordinate the audit function within the County. DHS’s audit function is not coordinated among County departments or DHS divisions: q Most programs within DHS have their own audit process. q Providers with multiple contracts (for different programs) are subject to multiple audits. As noted earlier in this report, one provider who has several County contracts is frequently subjected to audits by the different offices responsible for the various programs. This is a cost to the provider and the County; the provider repeatedly prepares information, much of which is duplicative, for different auditors and the County uses staff resources on duplicate data collection, analysis and reporting. Therefore, the County should consider centralizing contract monitoring. Centralized contract monitoring will require involvement of each of the programs that have monitoring requirements to ensure that all necessary factors are monitored. Transfer fiscal monitoring from OMC Financial Services to the coordinated function. Fiscal monitoring currently resides with the Financial Services Division of OMC. Financial Services had at most two staff persons dedicated to the PPP program. While the focus is different from the program and clinical monitoring, there are duplicate procedures. Additionally, Finance has indicated that they do not have adequate resources to complete all monitoring within the timeframes required. At the beginning of our management audit, the current year’s goal was to complete monitoring for half the contractors. Since that time, additional staff resources were temporarily provided and the division is currently expecting to complete all monitoring by June 30, 2001. None of the files reviewed included documentation of fiscal monitoring. The County should consider adding fiscal monitoring to the previously recommended central audit function. Articulate the philosophy behind the County’s relationship with the PPP partners. The success of the PPP program depends to some extent on the tone of the relationship with the private partners. DHS does not appear to speak with a single voice about this relationship. Are the providers who have PPP contracts true “partners” in the County’s endeavor to provide care to the target population? True partnership involves collaboration in planning, monitoring, quality improvement processes, etc. Are these providers true partners or contractors who accept the terms of the contract and operate entirely independently of the County? A successful partnership takes time and resources to achieve. Are DHS staff or provider staff able to make this commitment? What are the benefits and drawbacks to each of the relationship models? The program’s operation will improve if all parties understand their respective roles. Providers will not receive conflicting information from different offices and DHS staff will focus their efforts toward one goal. Therefore, DHS should undertake a dialogue, both internally and with community groups, to define the relationship. Review Contract Terms for Take Over Facilities. One of the clinics we visited occupied a portion of a County-owned building. The clinic has a 40-year rent-free lease. The clinic is responsible for property taxes, utilities and any other assessments along with improvements, which will revert to the County at the termination of the lease. This contractor receives the same reimbursement for services that providers who operate in their own space, receive. The County should review these agreements to ensure that they are in the best interests of the County, as well as the PPP program as a whole. Encourage contractors to share best practices such as the decision tree used at one site. Periodic meetings for providers to receive or share information do take place. Provider practices, which are particularly successful, should be shared with the providers in these meetings or by another method. Providers may identify these practices themselves or DHS monitoring staff may identify them in the course of their audit activities. Evaluate ways to improve the impact of the reimbursement process on providers. Several parts of the reimbursement process have a negative impact on providers. The 45-day claim submission window is short of industry standards. One of the main reasons Finance believes this deadline is necessary is that visit levels can be monitored on a timely basis to ensure targets are met. Not only do numbers of visits paid for by the PPP program need to be monitored, but also unused resources need to be allocated to over-performing providers on a timely basis. Finance indicated near the end of the management audit that they allow exceptions to the deadline, but they involve appeals from the providers and staff time at OMC to approve the requests and forward instructions to AIA. Finance was in discussions with provider representatives to evaluate how to best meet everyone’s needs. They should conclude these discussions and implement changes as quickly as possible. Some providers indicated that reimbursement levels are too low for the services they provide to PPP patients. Their perception and OMC’s regarding the level of services, therefore the cost of serving this population, are not congruent. OMC should ask providers to provide OMC with the underlying patient and cost data so that reimbursement levels can be evaluated. H E A L T H FOOD SERVICES I N S P E C T I O N C O M M I T T E E Delores Munoz, Chairperson Robert Bagwell Richard Salazar Victoria Small