Following the Money

One reason Riley might not have wanted the high-pressure job of TDCJ director was that he had other things on his mind, in particular working behind the scenes on a new direction in prison health care. In January 1993, state Comptroller John Sharp had released a massive audit of the prison system called Against the Grain; buried in the back of it was a three-page recommendation to create the managed health care system Texas has today. Included in the recommendation was the creation of not just a board of officials from the medical schools and TDCJ, but also a "managed care administration position" -- which eventually resulted in jobs for Lynaugh and Riley.

When asked how the prison managed care system's unique organizational structure was created, Riley would say only that it was the conclusion of the comptroller and the will of the Legislature. But the specific recommendations were invented by someone, and Riley's name appears in the footnotes of Sharp's report as assistant director for health services. Most close observers believe that Riley and Lynaugh masterminded the creation of the CMHCAC, with the politically connected Lynaugh as the brains of the operation -- which may explain why he makes $18,000 more a year than Riley, the man he reports to.

During the last legislative session, state Representative Todd Staples of Palestine introduced a bill to change the board structure of TDCJ's managed care system. His bill would have replaced the vendor-dominated board with a board of outsiders. Riley and Lynaugh spent a good deal of time in Austin fighting the bill, and it died at the end of the session.

Staples says he became concerned about prison health care when some of his constituents -- who happened to be prison employees -- questioned the costs of transporting inmates from northeast Texas to the UTMB hospital in Galveston, when local hospitals were available. He says he questioned Riley and other officials about how the system was saving money, "and they couldn't tell me. They did bring a lot of data, but it was just not information that got to the heart of the matter."

Defenders of UTMB claim that the hospitals in Staples's district simply want a piece of the action. And there's no question that managed care for inmates is a hot trend. And for good reason: According to the recent state audit, in fiscal year 1996 UTMB and Texas Tech made about $25 million in profit from their contract for correctional health care. About $9 million was set aside in "catastrophic reserve funds"; the other $14 million went to the medical schools. That helps make it clear why, as teaching hospitals find it harder and harder to compete with other hospitals for paying patients, an inmate population with a fixed fee from the state looks more and more attractive.

UTMB has also been bidding on prison health care in other states, though it's hard to see how that has any connection to its mission as a teaching, research and public service medical center funded by the state of Texas. Last spring, UTMB tried to capture a contract for the New York City jails worth $300 million annually, a contract it lost to a New York hospital. But it's continuing to bid on prisoner contracts in other states.

According to James Cook, a former hospital administrator who was still working for UTMB last May, the medical center, when putting its bids together, relied heavily on prison health care employees who were paid by the state.

"Leon Clements [UTMB's managed care administrator] was pushing it," says Cook, "and I know damn well they worked on it on TDCJ time."

Clements said that employees of UTMB Managed Care did work on the contracts, but that their hours were carefully tracked and assigned to proper categories. State auditors, though, found that UTMB's allocation of staff time was based on estimates and not time sheets, and that without "an accurate cost allocation system in place, there is no protection against subsidization of commercial managed care initiatives."

Who is most likely to benefit from UTMB's ambitions in prison health care? Probably a new cadre of highly paid administrators. In the words of the prison inmates, it looks like the officials of the Correctional Managed Health Care Advisory Committee have cut themselves a fat hog.

-- Michael Berryhill

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