Scott Stymied on Outsourcing as Florida’s Prison Health-Care Plan Falters

Florida’s plan to outsource health care in the third-largest U.S. prison system to save $30 million has stalled, hindering efforts by Governor Rick Scott and lawmakers to hire private operators for state services.

Requests for proposals on the prison work were withdrawn last month less than a week after they were issued. Days later, an outside adviser overseeing the process and Corrections Secretary Edwin Buss left. Lawmakers also cut funds to check inmate care.

“There certainly have been snags,” said Senator Mike Fasano, Republican chairman of the budget subcommittee on criminal and civil justice appropriations. Ken Tucker, the new corrections secretary, “has his work cut out for him.”

Scott, 58, a Republican former hospital executive, campaigned on promises to cut costs by hiring companies. He wants them to run all prison activities in South Florida, build roads and bridges and care for 3.1 million recipients of Medicaid, the federal and state health insurance for the poor.

Florida, with more than 100,000 prisoners, would be the largest system to hire private providers for inmate medical care. It would join 23 states, including Michigan and Illinois, using companies, according to a March 28 report from MHM Services Inc. (MHMI), a health-care provider to state and local governments. Arizona passed a bill April 27 allowing private services.

Rising Costs

Average health-care costs per prisoner more than doubled for 22 states from 2000 to 2009, according to a November study by Michigan’s Senate Fiscal Agency. Florida’s expense rose 37 percent from 2000 to 2008, according to Corrections Department annual budgets.

Florida lawmakers heard from four companies in March about how they could lower costs for prisoner care: MHM Services, Wexford Health Sources Inc., Prison Health Services Inc. and Correctional Medical Services Inc. The latter two have merged to form Corizon Inc.

On May 7, the Legislature passed a fiscal 2012 budget that authorized private prison care to save 7 percent, or about $30 million, from 2010 levels by fiscal 2013. Scott signed the measure May 26.

Last month, Florida issued and then withdrew requests for proposals to run the service in three of its four corrections regions. The requests were pulled on Aug. 15 for “interagency review and consultation,” Jo Ellyn Rackleff, a Corrections Department spokeswoman, said in a Sept. 6 e-mail.

Adviser Fired

On Aug. 22, the 10-month contract of the adviser on the process, Elizabeth Gondles, was canceled two months early. Her solicitation required that any company hired be accredited by the American Correctional Association, whose executive director is her husband, James.

“My understanding was that it was terminated on direction of the governor’s chief of staff, allegedly for the ‘conflict of interest’ of being married to the executive director of ACA,” Gondles said in an e-mail.

She said the accreditation requirement wasn’t in her draft of the invitation for proposals and that it was added later because it’s “routine policy” for all Florida prisons.

Gondles left by “mutual agreement,” said Rackleff, the Corrections Department spokeswoman. She had “completed her work,” Rackleff said.

The departure of Gondles was followed on Aug. 24 by that of Corrections Secretary Buss, hired by Scott in December.

The governor had praised Buss for negotiating the “nation’s lowest medical per diem rate” and using company partnerships when he was commissioner of Indiana’s prisons. In a statement about Buss’s resignation, Scott cited “differences in philosophy and management styles.”

‘No Brainer’

Buss didn’t make a statement at the time. In an interview on Aug. 15, he called health-care outsourcing a “no brainer.”

It “will deliver the best medical care to the offenders as well as offer the lowest cost to taxpayers,” he said.

Buss’s departure hasn’t changed plans for prison health care, said Lane Wright, a Scott spokesman. A new date for proposals will likely come “soon,” he said.

Should the outsourcing proceed, there will be one less agency keeping tabs on the company chosen. Lawmakers seeking to close a $3.8 billion deficit in the 2012 budget didn’t provide $717,680 to fund the independent Correctional Medical Authority.

The agency was unlikely to catch any “emergency issues” because it inspects prisons only once every three years, said Representative Matt Hudson, the Republican sponsor of the bill killing the authority.

Previous Attempt

In a truncated attempt in 2001 to use companies for inmate care in South Florida, the Correctional Medical Authority found “numerous start-up difficulties,” including “unacceptable” pharmacy systems, “poor or non-existent” tracking mechanisms, and lack of internal controls, according to its 2002 annual report.

To protect itself in the new effort, Florida asked for a $100 million performance bond from winners of the three regional contracts. The state would be able to draw on the money should a company not fulfill its obligations.

The requirement may limit competition for the work, said Lori Roscoe, president of Correctional Healthcare Consultants in Monticello, Georgia, which advises prisons.

“A performance bond of that size would be prohibitive for many companies,” she said in a telephone interview.

In the South Florida outsourcing of 2001, the performance bond was $1 million for a contract about a third the size.

Wendelyn Pekich, a Wexford spokeswoman; John Van Mol of Corizon, and Bob May of MHM Services declined to comment on the performance bond.

Difficult Goal

Florida, which provides most prison health services in- house, spent $414.7 million on inmate care in 2010, according to a department budget summary. Under the state budget passed in May, it must pay 7 percent less to a contractor, which would decrease outlays by about $30 million a year.

Those savings may be difficult after the state already cut costs by 9 percent in the previous two years. Indiana estimated it saved about 6 percent, or $5 million annually, in 2010 by expanding its contract with Correctional Medical Services.

Scott, who aims to lower prison expenses by a cumulative $1 billion over seven years, said any new company bids for inmate care must produce the desired result.

“We have to make sure that it saves the state money,” he said at an Aug. 19 news conference in Miami. “You’ve got to make sure it’s right.”

To contact the reporter on this story: Simone Baribeau in Miami at sbaribeau@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.

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