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Audit of Prison Health Contractors, NY State Comptroller, June, 2007

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Thomas P. DiNapoli
COMPTROLLER

OFFICE OF THE
NEW YORK STATE COMPTROLLER
DIVISION OF STATE
GOVERNMENT ACCOUNTABILITY

Audit Objective............................... 2
Audit Results - Summary............... 2
Background..................................... 3
Audit Findings and
Recommendations....................... 4
Monitoring Contractor
Performance...................................... 4
Recommendations........................... 11
Contract Award and Negotiated
Price Increase ................................. 11
Recommendations........................... 12
Audit Scope and Methodology..... 12
Authority ....................................... 13

NEW YORK CITY
DEPARTMENT OF HEALTH
AND MENTAL HYGIENE

CONTRACTED HEALTH
CARE SERVICES FOR NEW
YORK CITY PRISON
INMATES

Reporting Requirements.............. 13
Contributors to the Report .......... 14
Exhibit A ....................................... 15
Appendix A - Auditee Response .. 16
Appendix B - State Comptroller’s
Comments on Auditee
Response .................................... 26

Report 2005-N-5

AUDIT OBJECTIVE
A contractor overseen by the New York City
Department of Health and Mental Hygiene
(Department) is responsible for providing
health care services to New York City prison
inmates. We audited the Department to
determine whether (1) monitoring of the
contractor’s performance provided adequate
assurance that health care services were in
accordance with contract requirements, (2)
award of the $359.4 million, three-year
contract was done in an open and competitive
manner, and (3) there was adequate written
support for the $9.2 million in service
enhancements
negotiated
after
the
contractor’s proposal was accepted.
AUDIT RESULTS - SUMMARY
Under its contract with the Department,
Prison Health Services, Inc. (PHS) provides
various health services to an inmate
population that averages about 14,000 daily.
The Department uses performance indicators
as a critical instrument to monitor whether
PHS’s delivery of health care services
complies with the contract.
When the
indicators show that PHS is not delivering
services as required, the Department uses
corrective action plans and liquidated
damages to address the need for
improvement.
Nevertheless, we found that, in many
instances,
the
Department’s
contract
monitoring and follow up efforts have not
provided adequate assurances that health care
services are delivered in compliance with the
contract.
For example, for the 39
performance indicators that the Department
established and monitored quarterly under the
contract, we found PHS did not achieve
required levels of service delivery in
consecutive quarters for 10 (25.5 percent).
[Pages 4-5]

Report 2005-N-5

One reason why the Department’s monitoring
and follow-up efforts are not as effective as
they ought to be may be that the liquidated
damages (penalties) are not significant
enough to be an incentive for compliance.
For example, PHS’s administrative fee from
the contract in calendar year 2005 was $4.75
million on total contract payments of $102
million. For this same period, assessed
penalties totaled $250,000 or about 5 percent
of the administrative fee. We recommend
that the Department consider a number of
strategies, including more substantial
liquidated damages, when the contract expires
and is either extended or rebid at the end of
2007. [Page 6]
In addition, because formal monitoring takes
place quarterly and corrective action plans are
only designed after this is completed,
necessary improvements become delayed.
We recommend ongoing performance
monitoring and corrective action planning
during each quarter along with the formal
monitoring that is used as a basis for
determining penalties at the end of each
quarter. [Pages 7-10]
We found that the Department used an open
and competitive process to award the contract
to PHS. However, the Department did not
provide us with sufficient written support and
analysis for the $9.2 million of service
enhancements negotiated into the contract
after PHS’s proposal was accepted.
According to Department officials, the
increase was to cover costs of services that
were not identified when bids were solicited
for the contract. [Page 11]
Our report contains 11 recommendations
which, if implemented, will improve the
Department’s contract monitoring of health
services provided to prison inmates. The
Department agreed with several of our
recommendations and disagreed with others.

Page 2 of 26

This report, dated June 25, 2007, is available
on our website at: http://www.osc.state.ny.us.
Add or update your mailing list address by
contacting us at: (518) 474-3271 or
Office of the State Comptroller
Division of State Government Accountability
110 State Street, 11th Floor
Albany, NY 12236

performance indicators.
Specifically, the
Department performs daily reviews of the
medical files for a sample of inmates and
determines whether the inmates received the
health care services covered by the contract in
accordance with the applicable performance
indicators. Each quarter, the Department is to
summarize the results of these reviews and
report on PHS’s performance for that quarter.

BACKGROUND
New York City provides health care services to
inmates at 11 City-operated prisons, ten of
which are serviced by PHS. Nine of these
prisons are located on Rikers Island, while the
tenth is located in Manhattan. On average,
about 14,000 inmates a day are housed in the
prisons.
The health care services are provided by PHS
under a contract with the Department. The
health care services provided include routine
and specialized care, dental care and
pharmaceutical coverage. While some of these
services are provided directly by the contractor,
other services are provided by local medical
service providers who are selected and
reimbursed by the contractor.
Under the contract, PHS is required to fully
meet up to 40 performance indicators. These
indicators relate to various health care
services, some of which are to be provided to
all inmates (e.g., a physical examination and
medical history upon admission to the New
York City prison system) and others which
are to be provided only when needed (e.g.,
prenatal care or treatment for chronic medical
conditions). These indicators are a critical
measure of PHS’s performance under the
contract. To meet the standards, PHS must
satisfy criteria that are specified for each
service.
The Department is required by the contract to
monitor PHS’s compliance with these

Report 2005-N-5

The quarterly reports are used to assess PHS’s
performance in terms of the 40 performance
indicators. For example, if 100 of the inmates
whose files were sampled in that quarter
should have received “HIV rapid testing at
admission,” to the prison system, the report
would note how many of the required 100
tests were actually performed. While PHS is
expected to provide the required services to
fully meet each of the performance indicators,
it is not assessed liquidated damages and not
required to develop corrective actions unless
it does not “substantially meet” a performance
indicator.
To substantially meet a performance
indicator, PHS must achieve a certain
compliance rate for that indicator. For most
indicators, the minimum required compliance
rate is 95 percent. Compliance rates as low as
92 percent can be considered substantial
compliance due to a statistical margin of
error. If PHS does not substantially meet a
performance indicator in any quarter, the
Department can assess liquidated damages
and require PHS to develop a corrective
action plan to ensure that the indicator is met
in the future. Such plans are to be reviewed
and approved by the Department.
The $359.4 million contract covers the threeyear period January 1, 2005 through
December 31, 2007. The contract, which was
awarded to PHS in a competitive process, was
initially expected to cost $350.2 million.
However, subsequent to the preliminary

Page 3 of 26

selection of PHS, increases were made to the
required staffing levels, and PHS and the
Department negotiated a $9.2 million increase
in the awarded contract amount.
AUDIT FINDINGS AND
RECOMMENDATIONS
Monitoring Contractor Performance
We found that the Department is monitoring
and assessing PHS’s compliance with the
performance indicators contained in the
contract.
We also found that these
assessments can be relied on, as the
assessments we tested appeared to be
accurate.
However, according to the Department’s
assessments, PHS’s performance continues to
need improvement in a number of areas. We
found the Department is generally requiring
that corrective action plans be developed for
these areas, and has imposed liquidated
damages. We examined the effectiveness of
these actions and found that while in certain
of these areas, PHS’s performance did
improve, many of the indicators not met in
one quarter continued not to be met in
subsequent
quarters
even
after
implementation of these actions.
Delays in developing and implementing the
plans may have been partly responsible for
the lack of significant improvement, and we
recommend actions that could reduce such
delays. A lack of documentation of the
discussions held by the Department with PHS
for arriving at the necessary corrective actions
precluded us from evaluating this process.
We also note that corrective actions might be
needed even when performance indicators are
substantially met, as the non-compliance in
those areas could be significant enough to
warrant such action.

Report 2005-N-5

(In its response, the Department listed other
activities beyond performance indicators that
it uses to monitor PHS contract compliance.)
Auditor’s Comment: We focused our review
on the performance indicators as they are
contractually agreed to measures of PHS
performance. The Department developed the
performance indicators and the substantial
compliance levels for each, presumably with
due care, because it believed they represented
required levels of service. The basic premise
of the contract was that PHS would provide
these services at the agreed-upon levels or be
penalized.
In addition, the Department
expends significant resources to determine if
these indicators are being met.
Assessing Contractor Performance
The Department’s contract with PHS
commenced on January 1, 2005, and covers
the three-year period ending December 31,
2007. The contract requires that PHS meet or
substantially meet each of the performance
indicators in each quarter. (See Exhibit A for
a list of the Performance Indicators.) At the
time of our audit field work, the Department
had issued three quarterly reports assessing
PHS’s performance under the contract. The
reports, covering the period January 1, 2005
through September 30, 2005 show that PHS
needs to improve in a number of areas.
According to these reports, PHS:
• fully met between 7 and 9 of the 39 1
performance indicators each quarter
(i.e., PHS met these performance
indicators for each of the inmates
sampled that quarter, and thus
achieved a compliance rate of 100
1

Although the contract lists 40 performance
indicators,
one (“Chronic Care Encounters Timeliness”) was not yet reportable pending
development and implementation of a new
Chronic Care Management Model.

Page 4 of 26

percent for these performance
indicators), substantially met between
19 and 22 performance indicators each
quarter, and
• did not substantially meet between 10
and 12 performance indicators each
quarter (i.e., did not achieve the
required substantial compliance rate
for these indicators).
The Department’s assessments of PHS’s
performance are based on daily reviews of
selected inmate medical files and other
medical records. The number of files and
records reviewed each day varies depending
on the number of inmates admitted. The
reviews are performed by nurses in the
Service Delivery Assessment Unit (SDA
Unit) of the Department’s Bureau of
Correctional Health Services (CHS). The
nurses determine whether the selected inmates
received health care services in accordance
with the applicable performance indicators.
To determine whether PHS’s compliance with
these performance indicators was accurately
assessed in these daily reviews, we tested the
SDA Unit’s assessments for 6 of the 39
performance indicators. We selected for our
test six of the performance indicators that
were found to be substantially met in the first

Report 2005-N-5

and second quarters of 2005 (four from the
first quarter and two from the second quarter).
Our selection process was judgmental, as we
focused on areas where the services to be
provided were critical and PHS’s compliance
rate was not less than 92 percent, which can
be considered substantial compliance due to a
statistical margin of error.
For each of the 6 selected performance
indicators, we reviewed 25 of the medical
files that had been assessed by the SDA Unit
in that quarter. We randomly selected these
25 files from all the files in which PHS was
found by the Unit to be in compliance with
that performance indicator for that quarter.
We then reviewed the 150 files to determine
whether the Unit’s assessments appeared to
be accurate. We based our determination on
the information in the medical files and the
criteria for each performance indicator, all of
which were included in an attachment to the
contract.
We found that the assessments made by the
SDA Unit appeared to be accurate for all 150
files we reviewed. Therefore, on the basis of
our test results, we conclude the Department’s
assessments of PHS’s performance were
reliable.

Page 5 of 26

The following table summarizes the Department’s assessments of PHS’s performance for the three
quarters. It should be noted that in any given quarter, for each category, some of the performance
indicators may be the same as in a prior quarter.
2005
Quarter

Fully
Met

1
2
3
Total

8
7
9
24

Percent
Fully
Met
20%
18%
23%
21%

Substantially
Met

19
22
20
61

We note that it took Department officials
several weeks to locate certain inmate
medical records. In response to our
preliminary findings, Department officials
explained their efforts to improve controls
over inmates’ medical records and related
medical documentation with the development
of electronic medical records for each inmate.
We recommend the Department expedite
those efforts.
We also note that no one validates, even on a
sample basis, the nurses’ daily assessments of
PHS’s performance. While our test indicates
that the assessments during our audit period
were valid, they may not always be so in the
future, especially if there are changes in the
circumstances surrounding the assessments
(e.g., new nurses may be hired). We therefore
recommend that periodically the Department
validate a sample of daily assessments.
Department officials concurred with our
recommendation.
Effectiveness of Corrective Action Plans
The contract requires PHS to develop a
corrective action plan for each performance
indicator that it does not substantially meet in
any quarter. These plans are submitted to the
Department for approval. We examined the

Report 2005-N-5

Percent
Substantially
Met
49%
56%
51%
52%

Not
Substantially
Met
12
10
10
32

Percent Not
Substantially
Met
31%
26%
26%
27%

effectiveness of the corrective actions plans
developed by PHS, focusing on the plans that
were developed in response to unmet
performance indicators in the first and second
quarters of 2005. We did not review plans
developed in response to third-quarter
performance results because, to evaluate the
effectiveness of these plans, we needed to
examine PHS’s performance in at least one
subsequent quarter and such performance
statistics were not available at the time of our
audit field work.
We found that PHS
developed corrective action plans for the
unmet performance indicators, and that PHS’s
performance did improve in more than half of
these areas after development of such plans,
but often not enough to raise its performance
to “Substantially Met”.
According to the Department’s assessments of
PHS’s performance, during the first and/or
second quarters of 2005, PHS did not
substantially meet 15 distinct performance
indicators. Therefore, there was a need to
improve the provision of contractuallyrequired
medical
services
and
the
maintenance of important medical-related
records. A list of those indicators requiring
action plans in the first and second quarter of
2005 follows:

Page 6 of 26

Indicators Not Substantially Met in the First or Second Quarters of 2005
Quarters Not
Performance Indicator
Substantially Met
Intake History and Physical Examination
Both
Mental Health Documentation - Completeness
Both
HIV PCP and MAC Prophylaxis within 48 hours
Both
Dental Services
Both
Medical Records - Problem List
Both
Medical Records - Transfer Summary Sheet
Both
Specialty Housing
Both
Diabetic Care - Aspirin Therapy
First
Mental Health Suicide Watch Documentation
First
Radiology
First
On-Island Specialty Care
First
Mental Health Medication Orders - Timeliness
First
Off-Island Specialty Care
Second
HIV Viral Load & T-Cell Follow-Up/Treatment
Second
Medical Follow-Up Timeliness
Second
As contract administrator, the Department
needs to take prompt, corrective action in
response to such failures in contractor
performance. The Department is authorized
by the contract to take such actions, as it may
assess liquidated damages and require PHS to
develop a corrective action plan whenever a
performance indicator is not substantially met
during a quarter. The contract requires
liquidated damages of $5,000 to be assessed
against PHS for the first quarter in which an
indicator is not met. The amount can be
increased to $10,000 in subsequent quarters at
the Department’s discretion. We found the
Department generally imposed such damages.
The Department assessed damages of
$250,000 in 2005, or only five percent of
PHS’s administrative fee of $4.75 million for
that year. The Department did not collect
these damages until 2006.
If a corrective action plan is needed, the plan
is developed by PHS and submitted to the
Department for approval. The Department’s
Quality Improvement Council (which
includes doctors and other personnel in CHS)

Report 2005-N-5

is responsible for helping PHS develop such
plans. Council representatives meet with PHS
to discuss specific aspects of the plans, and
CHS must approve all such plans before they
become effective.
We note that PHS is often aware of needed
improvements before its performance is
assessed at the end of a quarter, as it receives
interim biweekly performance reports from
the Department.
These interim reports
summarize the results of the SDA Unit’s daily
reviews of inmate medical files during each
two-week period and can be used by PHS to
devise corrective actions.
However, no
formal action is required on the part of PHS
until it receives the formal quarterly report.
We examined whether corrective action plans
were required and developed for 15
performance indicators not substantially met
during the first two quarters of 2005. We
found that the Department required, and PHS
developed, corrective action plans for the 15
unmet performance indicators.

Page 7 of 26

One other performance indicator was not
substantially met during the first and second
quarters. According to the performance
indicator “Chronic Care Encounters Timeliness,” inmates with certain medical
conditions are to have the condition examined
within 14 days of their admission to the
prison system or, if the condition is identified
subsequent to admission, within 14 days of
the identification of the condition, and are to
be referred to the health care coordinator
specified by the contract. PHS did not come
close to meeting this indicator in either the
first or second quarter, as its compliance rates
in those two quarters were 39 percent and 52
percent, respectively.
However, the
Department did not officially report the
results of this indicator, did not require a
corrective action plan and did not assess
liquidated damages for either quarter (PHS’s
compliance rate in the third quarter was better
- 77 percent - but it was still well below the
substantial compliance rate for this indicator).
Department officials indicated that they are
working with PHS to improve the contractor’s
performance in this area, as a new chronic
care management model is being developed.
The officials also indicated they decided not
to require corrective action plans and not to
assess liquidated damages until the new
model is in place.
We recommend
Department
officials
expedite
the
development of the new chronic care
management model, as PHS’s performance in
this area has fallen significantly short of
substantial compliance, and as a result,
services required by the contract have not
been provided.
To determine whether corrective action plans,
developed for the other 15 performance
indicators that were not substantially met
during the first two quarters of 2005, were
effective, we examined whether PHS’s
performance in these 15 areas subsequently

Report 2005-N-5

improved. We found that, in most of these
areas, PHS’s performance did improve, but
the improvement was not always significant
enough to enable PHS to substantially meet
the performance indicator in a subsequent
quarter. We note that in no instance did the
corrective action plan improve performance
so that in a subsequent quarter the indicator
was fully met.
We also noted that it
sometimes took two quarters before any
improvement was shown. Our findings can
be summarized as follows:
•

In 7 of the 15 areas, PHS’s
performance improved and the
improvement was significant enough
to
enable
the
contractor
to
substantially meet the performance
indicator in a subsequent quarter or
quarters.

•

In 6 of the 15 areas, PHS’s
performance improved, but not
enough to enable PHS to substantially
meet the performance indicator in the
subsequent quarter or quarters.

•

In 2 of the 15 areas, PHS’s
performance did not improve at all, as
both its second-quarter compliance
rate and its third-quarter compliance
rate were lower than its first-quarter
compliance rate.

We therefore conclude improvements are
needed in the processes used in developing
and implementing corrective action plans so
that substantial compliance is reached. For
example, in the first quarter of 2005, PHS did
not substantially meet the performance
indicator “Mental Health Documentation Completeness,” as its compliance rate that
quarter was 90 percent. PHS developed a
corrective action plan for this area, but PHS
continued not to substantially meet this
performance indicator, as its compliance rates

Page 8 of 26

in the second and third quarters were 88
percent and 87 percent, respectively. The
Department imposed liquidated damages of
$5,000 in the first quarter and $10,000 in the
second and third quarters.
According to the initial corrective action plan
for this area, “with the hiring of more clinical
supervisors particularly on the weekend…
compliance rate should improve because more
attention will be paid to clinical oversight and
the quality of documentation.” However, the
second corrective action plan for this area,
which was prepared after performance did not
improve in the second quarter, noted that one
of the reasons for this failure was “the
shortage of weekend supervisory clinician
coverage.”
It thus appears the initial
corrective action plan may not have been fully
implemented, as there was still a need for
more clinical supervisors.
Also, in the first quarter of 2005, PHS did not
substantially meet the performance indicator
“Intake History and Physical Examination,”
as its compliance rate that quarter was 65
percent. PHS developed, and CHS approved,
a corrective action plan for this area, but PHS
continued not to substantially meet this
performance indicator, as its compliance rates
were 59 percent in both the second and third
quarters. The Department imposed damages
of $5,000 in each of the first three quarters of
2005.
We attempted to review the process that was
followed by the Department and PHS in
developing the corrective action plan for this
area, but were unable to evaluate the
adequacy of the process because minutes of
the meetings between PHS and CHS are not
maintained. The absence of such minutes
also prevented us from assessing the
processes that were used in developing
corrective action plans for other areas. We
recommend such minutes be maintained and

Report 2005-N-5

be reviewed for improvement opportunities
when corrective action plans prove to be
ineffective.
(In its response, Department officials stated
that the corrective action plans are achieved
through interaction of various clinical and
professional staff, and it would not be
programmatically productive to maintain
minutes.)
Auditor’s Comment: We reiterate our belief
that meeting minutes would assist both parties
in documenting the reasons behind the failure
to substantially meet performance indicators,
both before and after corrective action plans
have been implemented. The minutes would
also document the process by which the
corrective action plans were constructed.
The need for a corrective action plan is
identified when the Department issues a
quarterly report assessing PHS’s performance
for the most recent quarter. Neither the
contract nor Department procedures require
that these quarterly reports be issued within
any particular timeframe (e.g., within 30 days
of the end of each quarter). Department
officials told us that quarterly reports are
usually issued two to three months after the
end of each quarter, because the SDA Unit
needs a certain amount of time to summarize
the results of its daily reviews and
Department officials must meet with PHS
officials to resolve problems relating to
certain performance indicators. As a result,
there is up to a one-quarter delay before a
corrective action plan can take effect. Thus, a
corrective action plan developed in response
to poor performance in the first quarter will
not take effect until the third quarter. We
believe this built-in delay is partly responsible
for the ineffectiveness of some of PHS’s
corrective action plans in the second and third
quarters of 2005.

Page 9 of 26

To
expedite
the
development
and
implementation of corrective actions, we
recommend the Department and PHS use the
interim biweekly performance reports. These
reports could assist in the identification of
areas of concern before the end of a quarter,
and when such concerns were identified,
corrective action plans could be developed,
approved and initiated without delay. There
would be no need to wait until the end of the
quarter. Subsequent interim reports could
then be monitored to determine whether the
corrective action plans were effective. We
also recommend that actions be taken to
expedite the issuance of the quarterly reports.
In some instances, corrective action plans
might be needed even when performance
indicators are substantially met. For example,
PHS had a cumulative compliance rate of 93
percent for the performance indicator
“Medical Follow-Up Timeliness.” While this
was considered substantial compliance, it still
meant that the contract requirement was not
fully met in an estimated 5,600 instances
during this nine-month period.
We
recommend the Department routinely review
all substantially met performance indicators to
determine whether the number of instances of
non-compliance for any standard is significant
enough to warrant corrective actions.
(In its response, Department officials agreed
they should review the data and performance
standards and cited that, on at least two
occasions, they have directed PHS to prepare
corrective action plans even though the
performance indicators were substantially
met.)

sufficient improvement in PHS’s performance
to reach an acceptable level. We make eight
recommendations to improve the oversight
process. We also suggest that the Department
reassess the effectiveness of the liquidated
damages provision of the contract.
In addition, the Department needs a strategy
for strengthening the effectiveness of the
contract. This is an opportune time to
establish a strategy as the contract will expire
at the end of 2007. Some of the questions the
Department needs to address when
establishing the strategy include:
•

Is 95 percent a reasonable minimal
substantial compliance rate?

•

Are the indicators themselves
appropriate measures of effective
service delivery?

•

Are penalties too low?

•

Should there be independent oversight
of the monitoring process?

•

Should Department of Correction
officials
be
consulted
when
developing the Request for Proposals?

•

Should the Department of Correction
be involved in the development of the
rating criteria and evaluation of
contract proposals for the next
contract award?

(In its response, Department officials stated
that they will consider certain of the
suggestions we cited.

Our audit demonstrates that the Department
does attempt to enforce the contract
requirements and, through its monitoring,
attempts to improve PHS’s performance.
However, our audit also shows that the
Department’s actions are not resulting in

Report 2005-N-5

Page 10 of 26

Recommendations
1. Expedite efforts to develop electronic
medical records.
2. Periodically validate a sample of the SDA
Unit’s daily assessments.

(The
Department
agreed
with
Recommendations 1, 2 and 4, and agreed, in
part, with Recommendations 8 and 9. The
Department disagreed with Recommendations
3, 5, 6, and 7.)
Contract Award and Negotiated Price
Increase

3. Recommendation Deleted.
4. Expedite the development of the new
chronic care management model, and
require PHS to implement this new model.
5. Expedite
the
development
and
implementation of corrective action plans
by (a) reducing the delays in the issuance
of the quarterly reports and (b) using the
interim biweekly performance reports to
officially report areas of concern before
the end of a quarter.
6. Develop an ongoing process for
monitoring the effectiveness of corrective
action plans. In this process, use the
interim biweekly performance reports to
monitor PHS’s performance in the areas
addressed by the plans.
7. Maintain minutes of the meetings held to
develop corrective action plans, and
review these minutes for improvement
opportunities whenever a plan proves to
be ineffective.
8. Routinely review all substantially met
performance indicators to determine
whether the number of instances of noncompliance for any indicator is significant
enough to warrant corrective actions.
9. Establish a strategy for strengthening the
effectiveness of the contract for periods
beyond 2007. Address the questions
presented in this report when establishing
the strategy.

Report 2005-N-5

New York City Procurement Policy Board
rules require that contracts should be awarded
in an open and competitive manner to a
responsive and responsible bidder. The bid
documents and rating sheets we reviewed
supported that the award to PHS was through
an open competitive process and that PHS
was a responsive and responsible bidder. In
our examination, we relied on the decisions
made by the Department’s seven evaluators in
awarding points to each of the four bidders.
PHS’s rating was substantially above the
rating of the three other bidders.
The contract requires PHS to employ certain
types of medical personnel and to provide
certain levels of coverage with these
personnel. After PHS was selected as the
winning bidder, the Department modified
some of these staffing configurations, as it
determined that higher-level medical titles be
substituted for certain lower-level titles and
seven-day coverage be provided instead of
five-day coverage for certain job titles. CHS
officials told us that when they reviewed the
staffing patterns in the Request for Proposal
more closely, they determined that there was
a need for upgraded staffing and additional
coverage.
They stated they decided to
negotiate a price with the winning bidder for
this upgraded staffing and additional
coverage, and noted these negotiations would
have been necessary no matter which firm
was awarded the contract. After the contract
was awarded, these negotiations took place
and resulted in a $9.2 million increase in the
awarded contract amount.

Page 11 of 26

CHS was unable to provide documentation
supporting its analysis for the need for the
service enhancements. However, CHS
officials instead provided us with cost
estimates and other documents that had been
prepared by PHS. In the absence of any
documentation showing that CHS officials
had prepared detailed analyses of the service
enhancements needed by PHS to comply with
contract terms, neither we nor Department
executive management can be assured CHS
officials properly justified the $9.2 million
increased cost associated with the service
enhancements. CHS officials stated that they
did not believe it was necessary to keep
records of the negotiation process or records
showing an analysis used to formulate their
opinion that the staffing reconfigurations were
necessary.
Recommendations
10. Ensure that service enhancements in
contracts are supported by detailed written
analyses showing the additional services
are needed.
11. Maintain records of all meetings in which
important procurement decisions are
made.
(In its response, the Department stated that
the enhancement did not benefit PHS, did not
compromise the integrity of the contracting
process, and was approved by all participants
in a close and independent review.)
Auditor’s Comment: When a contract is
changed after it has been awarded, we believe
it is incumbent on management to document
the reasons and analysis that support the
changes. Such documentation adds to public
accountability.

Report 2005-N-5

AUDIT SCOPE AND METHODOLOGY
We audited the Department to determine
whether: monitoring of the contractor’s
performance provided adequate assurance that
health care services were in accordance with
contract requirements; award of the $359.4
million, three-year contract was done in an
open and competitive manner; and there was
adequate written support for the $9.2 million
in service enhancements negotiated after the
contractor’s proposal was accepted. Our audit
covered the period January 29, 2004 through
January 6, 2006. We did our performance
audit in accordance with generally accepted
government auditing standards.
To accomplish our audit objectives, we
interviewed Department officials to confirm
and enhance our understanding of the
processes used in awarding the contract to
PHS and monitoring PHS’s performance
under the contract. We also reviewed the
contract and other records relating to the
contract award and contract monitoring
processes. In particular, we reviewed and
analyzed the Department’s quarterly reports
addressing PHS’s compliance with the 40
performance indicators for the first three
quarters of the 2005 calendar year.
In addition, we reviewed some of the inmate
medical files and medical records reviewed
by the Department during the first three
quarters of the 2005 calendar year as part of
the contract monitoring process.
We
reviewed the medical files to determine
whether the Department’s assessment of
PHS’s compliance with six selected
performance indicators appeared to be
reasonable. Additional details about our
selection and review of these medical files are
provided in the section of this report relating
to the Department’s contract monitoring
process. We also reviewed the corrective

Page 12 of 26

action plans developed in response to PHS’s
performance in the first two quarters of 2005.
In our examination of the contract award
process, we did not assess the reasonableness
of the criteria used by the Department in
evaluating the four bids, and we did not assess
the reasonableness of the decisions made by
the Department’s evaluators in awarding
points to each of the four bidders. We also
did not evaluate whether the contract
complies with a New York State requirement
which states that for-profit corporations
providing medical services (such as PHS)
must be owned and controlled by doctors.
According to published reports at the time of
our review, this aspect of the contract was
being investigated by the State Education
Department, which licenses doctors practicing
in New York State.

In addition to being the State Auditor, the
Comptroller
performs
certain
other
constitutionally and statutorily mandated
duties as the chief fiscal officer of New York
State, several of which are performed by the
Office of Operations.
These include
operating the State’s accounting system;
preparing the State’s financial statements; and
payments.
In addition, the Comptroller
appoints members to certain boards,
commissions and public authorities, some of
whom have minority voting rights. These
duties may be considered management
functions for purposes of evaluating
organizational independence under generally
accepted government auditing standards. In
our opinion, these management functions do
not affect our ability to conduct independent
audits of program performance.
AUTHORITY

As is our practice, we requested a
representation letter from Department
management. The representation letter is
intended to confirm oral representations made
to the auditors, and to reduce the likelihood of
misunderstandings.
Agency officials
normally use the representation letter to assert
that, to the best of their knowledge, all
relevant financial and programmatic records
and related data have been provided to the
auditors. They affirm either that the agency
has complied with all laws, rules and
regulations applicable to their agency’s
operations that would have a significant effect
on the operating practices being audited, or
that any exceptions have been disclosed to the
auditors. However, officials of the Mayor’s
Office of Operations have informed us that, as
a matter of policy, Mayoral agency officials
do not provide representation letters in
connection with our audits. As a result, we
lack assurance from Department officials that
all relevant information was provided to us
during this audit.

Report 2005-N-5

The audit was done in accordance with the
State Comptroller’s authority as set forth in
Article V, Section 1 of the State Constitution
and Article III of the General Municipal Law.
REPORTING REQUIREMENTS
A draft copy of this report was provided to
Department officials for their review and
comment. Their comments were considered
in preparing this report, and are included as
Appendix A. Appendix B contains State
Comptroller’s Comments which address
matters of disagreement contained in the
Department’s response.
The Department
agreed with some of our conclusions and
recommendations and disagreed with others.
We cited those areas of disagreement
throughout the body of this report and in
Appendix B.
Within 90 days of the final release of this
report, we request that the Commissioner of
the Department of Health and Mental

Page 13 of 26

Hygiene report to the State Comptroller,
advising what steps were taken to implement
the recommendations contained herein, and
where
recommendations
were
not
implemented, the reasons therefor.

Report 2005-N-5

CONTRIBUTORS TO THE REPORT
Major contributors to this report include
William Challice, Albert Kee, Michael
Solomon, Stuart Dolgon, Robert Tabi,
Raymond Louie, Joseph Giaimo, Jean Estime
and Dana Newhouse.

Page 14 of 26

EXHIBIT A
CONTRACTOR PERFORMANCE INDICATORS
Performance
Indicator
Pap Test Screening
Pregnancy Counseling
Prenatal Exam
Pregnancy Sonogram
HIV Rapid Testing at Admission
HIV Post Rapid Test Counseling
HIV Confirmatory Testing
HIV Viral Load and T-Cell Testing
HIV Mental Health Follow-Up
HIV Viral Load & T-Cell Follow-Up/Treatment
HIV PCP and MAC Prophylaxis within 48 hours
Diabetic Care - Fundoscopic Exam
Diabetic Care - Aspirin Therapy
Asthma Care - Peak Flow
Asthma Care - Patient Education
Intake History and Physical Examination
Tuberculosis - TST Read
Sexually Transmitted Disease Testing
Sick Call
Radiology
Lab (SMA/CBC)
Medical Follow-Up Timeliness
Mental Health Referrals Timeliness
Mental Health Documentation - Timeliness
Mental Health Documentation - Completeness
Mental Health Encounter - Progress Notes
Mental Health Medication Orders - Timeliness
Mental Health Suicide Watch Documentation
Dental Services
Specialty Housing
Off-Island Specialty Care
On-Island Specialty care
Confidentiality
Sharps
Pharmacy Medications
Medical Records - Problem List
Medical Records - Transfer Summary Sheet
Medical Records - Chart Availability
Medical Record Requests
Chronic Care Encounters - Timeliness

Report 2005-N-5

Page 15 of 26

APPENDIX A - AUDITEE RESPONSE

Report 2005-N-5

Page 16 of 26

*
Comment
1

*
Comment
2

* See State Comptroller Comments, page 26.

Report 2005-N-5

Page 17 of 26

*
Comment
2

* See State Comptroller’s Comments, page 26.

Report 2005-N-5

Page 18 of 26

*
Comment
3

*
Comment
4

* See State Comptroller’s Comments, page 26.

Report 2005-N-5

Page 19 of 26

*
Comment
5

*
Comments
5, 6

* See State Comptroller’s Comments, page 26.

Report 2005-N-5

Page 20 of 26

*
Comments
1, 6

*
Comment
7

* See State Comptroller’s Comments, page 26.

Report 2005-N-5

Page 21 of 26

*
Comment
8

* See State Comptroller’s Comments, page 26.

Report 2005-N-5

Page 22 of 26

*
Comment
7

*
Comment
9

*
Comment
10

* See State Comptroller’s Comments, page 26.

Report 2005-N-5

Page 23 of 26

*
Comment
10

* See State Comptroller’s Comments, page 26.

Report 2005-N-5

Page 24 of 26

*
Comment
11

*
Comment
11

*
Comment
12

*
Comment
11

*
Comment
11

* See State Comptroller’s Comments, page 26.

Report 2005-N-5

Page 25 of 26

APPENDIX B - STATE COMPTROLLER’S COMMENTS ON AUDITEE RESPONSE
1. While our audit did find some degree of
improvement, it also found that many
performance indicators continue to be
either not fully met or not substantially
met, even after implementation of
corrective actions. For example, the chart
on page 6 of our report shows that 27
percent of such indicators were not
substantially met during our review
period.
2. Performance
indicators
are
an
instrumental part of the contract and are
integral to assuring health care quality
improvement.
Our audit staff was
sufficiently capable to assess compliance
with the measures.
3. While we recognize that the Department
employs other means to monitor PHS, the
performance indicators are the heart of its
monitoring system. They are also the
only ones required by the contract for
which penalties for nonperformance are
assessed. Further, the Department devotes
nine nurses to verify, on a daily basis,
PHS’ provision of these services. These
nurses statistically sample, more than
30,000 medical records every quarter to
perform this verification. These reviews
drive the improvements to the health care
provided to inmates.
4. Our report does not generalize that
services were substandard or that patients
lacked medical services because of lack of
achievement of a performance measure.
5. The 95 percent criteria was established by
the Department and agreed to by PHS,
therefore, we measured PHS’ performance
against that standard. As our report points
out, the Department, going forward, needs
to consider if 95 percent is a reasonable
minimal substantial compliance rate.

Report 2005-N-5

6. Our audit shows that 8 of 15 indicators
were still not met two quarters later.
7. We saw no indication that corrective
actions were initiated prior to the issuance
of final quarterly reports, which were
often issued three or four months after the
quarter reported on.
8. We
did
not
misunderstand
the
performance
indicator
but
were
suggesting that, separate and apart from
the indicator, the Department assure that
the inmate actually receives his or her
prescribed medications.
Since the
Department believes this to be the case,
we have deleted this concern and
recommendation from our final report.
9. The results of the audit clearly
demonstrate that the Department’s
existing monitoring systems need to be
improved.
10. The Department misunderstood our
recommendation. It says to routinely
review the results, and then make a
determination as to whether or not
corrective actions are needed.
11. We revised our report, as appropriate, to
reflect the information provided by the
Department.
12. The Department is correct. When we
learned that there was insufficient
documentation to reach a conclusion on
the original objective, we reworded the
objective to permit us to comment to the
extent that we could on this matter.

Page 26 of 26

 

 

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