Sunday, June 28, 2009




What happens when ordinary citizens use a newspaper column to expose at least $100 million, and possibly much more, in government waste at a time when critical state services are being cut because of the most serious cash crunch in generations?

Not very much, at least not yet.

Almost precisely six months ago, readers through this column alerted the court-appointed receiver who runs California's prison health care system to several areas where big money was being wasted in his bailiwick.

"We paid attention, we knew you'd follow up," said the receiver, University of Pacific law Prof. Clark Kelso. "We've made some changes and we're going to make others. But we've also had some problems."

Among those difficulties:

-- Community hospitals near state prisons have been reluctant to negotiate rate agreements with the California Department of Corrections and Rehabilitation (CDCR) similar to deals they have with myriad insurance companies. As it stands, prisons pay far higher prices for hospital services than ordinary citizens with health insurance.

"We're paying at least $100 million more - maybe much more than that - than we should be," Kelso said. "Since this was pointed out, we've contracted with a major consulting firm that negotiates with hospitals, but they've had only modest success. There's not a lot of medical competition in the rural areas where most prisons are. Plus, we as a department tend to pay late. So the hospitals are reluctant to negotiate with us."

-- A 30-year-old information system with few electronic files and large stacks of paperwork which can make it take months for Kelso to find out things like how often the state is double-billed by hospitals and doctors. "This is very frustrating," Kelso said.

There has been substantial progress, though, in one kind of waste readers revealed. That was in physician referrals for outside hospitalization and major tests like MRIs and CT scans.

In February, a prison nurse told this column that CDCR doctors fearful of prisoner lawsuits order excessive hospitalizations, blood tests and diagnostic scans. Dr. Terry Hill, then chief medical officer of California Prison Health Care, confirmed this and added that "We have some physicians who have been sued by inmates 100 times or more. One doctor even got sued because he didn't give an inmate long underwear. So the doctors are very defensive." Hill estimated excessive tests and referrals were costing the state $10 million per year or more.

That's on the way to being fixed, Kelso reports. "We now have a utilization management plan similar to what many health maintenance organizations use," he said. "Before a doctor can send an inmate out for treatment, he must now use a standard protocol." This system offers doctors protection from lawsuits, but also limits their options.

"Doctors initially resist the system," Kelso says. "But we're being aggressive in pursuing it. We don't yet know how much we're saving, because we have a three-month delay getting information because of that antiquated data system."

Similarly, Kelso doesn't know how much benefit has resulted from a recent contract with Correct Care - Integrated Health Inc., a major medical bill-processing company, to audit all prisoner care invoices from outside hospitals and doctors to make sure the state is neither billed more than once for the same service nor charged excessive amounts. "We also will work to bundle charges for each patient, rather than having separate bills for every service and item they use," he said. "That should reduce costs."

But Kelso says he cannot do much about wasteful prison rules requiring two guards to remain with every hospitalized prisoner whose crime requires the state to consider him or her a risk to public safety. That rule applies no matter how old or crippled or feeble the inmate might have become, even to those who are paraplegic or brain dead. Kelso and Hill earlier confirmed a report from a community hospital nurse exposing the fact that multiple guards often while away days and weeks sitting near such incapacitated prisoners, costing the state more millions of dollars.

"That's required by state law," Kelso says. Legislators, are you reading? If you want money to keep other programs going, you can find some here. All you need do is rewrite a few regulations that don't just enable boondoggles, but require them.

The bottom line: Kelso is plainly trying to save money, as evidenced by his reducing the projected cost of prison hospital improvements demanded by the judge who put him in place from $8 billion to about $3.2 billion. That will mostly be done by converting existing prison structures into hospitals rather than building new ones. Only $1.9 billion of the cost will come from the state's strapped general fund over the next 10 years, with the rest provided by prison bonds approved years ago by the voters.

Movement toward stopping waste in the prisons is surely slower than would be ideal, but at least there are signs of some effort to cut unneeded costs. Readers who know of other significant waste in state government are encouraged to email

Email Thomas Elias at For more Elias columns, visit

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