This can’t be right, thought Rita DeHerrera. The Pueblo County Jail, where she’d recently been recruited as health services administrator, was paying 75% of billed charges to local hospitals for the services they provided to jail inmates. As CEO of a health services management firm that helped the state of Colorado reduce its Medicaid program expenses, DeHerrera knew a thing or two about health services pricing and reimbursement.

In fact, that’s why the jail administration invited her to bid on its health services contract. The jail was far beyond official bed-space capacity, inmate health care costs were skyrocketing and budgets were being slashed by up to 30%, according to jail Cmdr. Barbara Williams.

Although she had no experience with correctional health care, DeHerrera saw similarities between the Medicaid population and the inmates receiving health services in the county jail, so she accepted the challenge in early 2002. After a glance at the numbers, she immediately implemented some basic cost-cutting measures.

But it was DeHerrera’s solution to the problem of steep reimbursement rates demanded by hospitals and other community providers that broke new ground. Working with a couple of key contacts in the state legislature, she gained unanimous passage of a bill that, among other things, requires any provider that receives state money to charge county jails the same reimbursement rates that it receives from the Medicaid or other state program. Since August 6, when the law went into effect, Pueblo County and every other county jail in the state have been paying about 35% of provider charges, rather than the 75% or more they used to pay.

That the bill (SB 03-141) passed unanimously in both the Senate and the House—an event unprecedent in Colorado legislature history—is just icing on a cake that will benefit jails’ bottom lines in other ways, as well. A second provision of the law permits county jails to obtain care from the Colorado Mental Health Institute in Pueblo, a state-run facility licensed to provide medical and surgical services. Previously available only to the mentally ill or to inmates of state and federal correctional facilities, the CMHIP by law can charge only its cost.

The third provision streamlines existing judicial processes that enable counties to recoup jail costs from sentenced inmates after their release. Applicable not only to health care but to all costs of prosecution and confinement, this measure is not expected to bring immediate financial relief, but is viewed as a long-term solution that holds the inmate accountable and discourages recidivism.

It’s too soon to know the law’s full financial impact, but DeHerrera is closely tracking numbers and expects immediate and significant savings.

Troubling Contracts
The financial situation at Pueblo County Jail was dire when DeHerrera entered the picture. Heavy nurse turnover required extensive use of temporary staff, which not only was costly but also led to health service overutilization since the temp nurses were unfamiliar with the unique demands seen in correctional settings.

“We were taking 15 to 20 inmates to the hospital every week, whether or not they really warranted hospital care,” says Williams. ER visits were averaging 30 per month, another big hit to the budget.

Liberal prescribing practices meant that many inmates were taking pricey brand name drugs such as Vicodin, which further escalated expenses.

These problems were fairly easy to remedy through simple yet proven measures such as better pharmacy management and emergency room utilization. For example, while maintaining an open formulary, tighter prescription management lowered average pharmacy costs from $14,000 to $6,500 per month. In 2002, the jail’s health care expenses were 22% lower than the year before.

“But those provider contracts kept bothering us,” says DeHerrera. “We were paying more than even commercial payors.”

Still, enacting a law wasn’t the first tactic that she thought of when she decided to go after reimbursement rates. Because she had established relationships with hospitals, specialty groups, laboratories and other providers that serve the Medicaid program, DeHerrera thought they’d be willing to extend Medicaid rates to the jail. After all, she reasoned, the inmates, who were ineligible for Medicaid due to their incarcerated status, comprised an indigent population for which the taxpayers ultimately were footing the bill.

DeHerrera asked the attorney for the county sheriff’s office to renegotiate the contracts. To make the offer more palatable, she offered to pay 10% above Medicaid.

The response: Unequivocal refusal, even from the radiology group that insisted on 100% reimbursement of their gross charges.

DeHerrera called the providers and said, “This is no different from a Medicaid population, so why won’t you accept a Medicaid rate?” Her argument fell on deaf ears. “Of course they loved their contracts, but they were robbing the taxpayers.”

Broad Coalition
What the hospitals and other providers didn’t know was that DeHerrera had an ally in the state legislature, Sen. Abel Tapia, of Pueblo. She also recruited to her cause Rep. John Salazar, who represents a district in the southern part of the state.

With the support of a coalition comprised of the sheriff’s department, county commissioners, the district attorney’s office, CMHIP and others, DeHerrera helped to draft a bill that was introduced under the bipartisan sponsorship of Tapia, Salazar and 13 other legislators.

“The logic is that if these patients weren’t in jail and needed hospital care, the hospital would have to service them under Medicaid rates,” says Tapia.

Not surprisingly, community hospitals balked. According to DeHerrera, they argued that the section of the bill concerning reimbursement was unfair because hospitals already absorb many of the costs of treating indigent patients.

The hospitals pressured the legislators to remove that part of the bill and almost succeeded. However, when DeHerrera saw that language missing from a draft she reviewed, she insisted that it was the most important part.

DeHerrera knew that politically this was a touchy matter, so she tried to find middle ground. She convinced the bill’s sponsors to agree to restore the controversial language if the Colorado Hospital Association would agree to support it. The CHA did just that, and the bill was back on track.

“We were concerned that the hospitals would be left holding the bag” for the entire cost of care, says Marty Arizumi, the CHA’s vice president of public affairs and policy analysis. “The way it was written, with a provision that the hospitals will be paid, we didn’t have a problem with it.”

Hospitals were the most visible targets of the legislation, but its impact is more widespread. Across the state, county jails now pay far less for everything from durable medical equipment to drugs and even oxygen.

While Pueblo County Jail is reaping the savings from paying Medicaid rates, in some cases they can trim health care expenses even more by sending patients to the Colorado Mental Health Institute.

“It’s nice because I can compare and see which is least expensive, the private hospital’s Medicaid rate or the state hospital,” says DeHerrera.

While some distant county jails saw no advantage to gaining access to the CMHIP, DeHerrera points out that even if they have to transport a patient 200 miles, it may be worth it since the institute’s own officers will guard the patients. As well, jails can take advantage of rock bottom rates for lab tests and other services.

More importantly, with the growing incidence of mental health problems in the jail population, the need for care such as that provided by the CMHIP has never been greater.

Next on the Docket
Encouraged by her success with Senate bill 141, DeHerrera has set her sights on legislative solutions to other health care problems, such as the vicious cycle of recidivism among individuals with mental illness, which she says has reach crisis levels. Because these people often fail to receive adequate mental health care after release, she is supporting proposed legislation that would give counties the right of first refusal on state funding for jail-initiated mental health programs that provide for continuity of care in the community.

She may not stop there. On the federal level, says DeHerrera, the biggest injustice is the provision in the Social Security Act that deprives inmates of Medicare and Medicaid. “That’s the most ridiculous law on the books. It puts entire cost burden on counties, which is the entity of government that can least afford it.”

Rita DeHerrera is CEO of Management Team Solutions, Pueblo, CO. She presented a session on this topic at the 2003 National Conference on Correctional Health Care. To purchase a recording of the session, titled Legislative Healthcare Action and Solutions for County Jails, visit Nationwide Recording Services online at www.nrstaping.com/ncchc.