Correctional Managed Care Accomplishments & Funding

Mar 30, 2017, 15:37 PM by Ben Raimer
Ben’s Blog 2017 (#6); Mar30

Correctional Managed Care FundingCorrectional Managed Care

In the last Ben’s Blog, I covered where things currently stand in the House and Senate with regard to funding for education and indigent care. This post focuses on current funding proposals for a major strength of UTMB: correctional care.

On the Senate side, UTMB will see tremendous challenges related to Article V (TDCJ – Correctional Health Care) funding. 

The good news is that the Senate recommended the following for correctional care:

  1. Expansion of unit infirmary beds: $2 million
  2. Adjustment to unit staff salaries: $37.9 million
  3. Additional staff for nursing and mental health: $20.9 million


But, the Senate also recommended the adoption of the following changes in how the correctional care programs are funded:

  • Change in offender care reimbursement methodology from TEFRA to SDA: TEFRA is a cost-based reimbursement set independently by the Centers for Medicare and Medicaid based on the “cost report” that UTMB files with CMS. It covers only the cost for the patient care, so it does not afford UTMB a margin to reinvest in the program.
  • SDA is much less than TEFRA and will result in UTMB incurring losses in providing care to offenders.
  • The loss of TEFRA funding also results in a $20 million reduction in funding used to pay for 125 resident positions at UTMB; this will result in the loss of 125 residency positions for the state of Texas at a time when our growing state needs to keep physicians practicing here. One way to do that is to ensure ample residency slots, because physicians tend to practice in the state where they completed their graduate medical education.
  1. Legislation limits use of funds to “only in CMC”
  2. Designated UTMB as owner of Hospital Galveston, requiring UTMB to assume all costs related to repairs, maintenance and upkeep, including security systems for what is essentially a prison. Some background:
    • The hospital was constructed in 1983 and has had no internal renovation since then except for the modernization of equipment that UTMB has done.
    • Falling brick led the Legislature to provide $10 million in 2006 to re-clad the building.
    • Current renovations and repairs are estimated to require approximately $200 million.
    • TDCJ requested $22 million for repairs to UTMB HG for the next biennium; this request was disallowed by the Senate Finance Committee.
    • UTMB does not get reimbursement for repairs, renovations, equipment or other hospital upgrades. 
  3. UTMB has been allowed a 3.9 % indirect cost reimbursement; the proposed Senate budget reduces that to 3%. Indirect costs are used to fund human resources, personnel services, payroll, legal services for offender lawsuits, finance, purchasing, logistics, information systems, computer services, and other necessary business expenses incurred through the operation of a 3,000-plus-employee enterprise. It appears that the state expects UTMB to absorb the cost of all of those services without funding from TDCJ or other state resources.
  4. Reserved funding “may be used to provide or support the provision of health care to inmates of TDCJ at UTMB Hospital Galveston when necessary”
    • Previously there was a “firewall” between Article III (Education) and Article V (Correctional Care) revenue; this provision effectively removes that restriction and opens the door for UTMB to assume the cost of care for offenders from its Article III appropriation.
  5. Neither the House nor the Senate provided an adjustment to the base funding for CMC, which is an estimated $150 million that would cover the $80 million shortfall from FY16/FY17 and a projected additional $70 million needed for FY18/FY19 operations. Cost growth is associated with the aging offender population that needs treatment for more serious, more expensive, chronic diseases such as cancer, heart disease, hypertension, diabetes and dementia, as well as offenders with chronic mental illness, hepatitis C and HIV.
  6. The House did include $80 million in General Revenue funding in HB-2 for supplemental appropriations request to cover past biennial expenses.
  7. And, the House also placed $22 million in HB-2 for renovations and repairs for the UTMB Corrections Hospital.


The following examples of CMC’s successes put in perspective what Texas has gained through the current correctional care system:

  • $80M of 340B pharmacy benefit per year provided to state via UTMB’s hospital status
  • 3rd lowest cost per offender per day in the nation, with high-quality clinical outcomes in a medically complex population
  • 125 residency positions supported through the TEFRA-funded reimbursement contract
  • Unique training experience for health professions students, residents and fellows
  • Centralized care coordination and management based on national best practices many of which have been created by UTMB corrections staff.
  • Centralized formulary and pharmacy distribution system, which is totally automated for efficiency and cost-effectiveness
  • Security and flexibility of a maximum-security safety-net prison hospital
  • Limited public exposure to offenders in free-world hospitals and clinics across the state, decreasing the likelihood of escapes and security breeches
  • Reduced TDCJ security coverage and cost in free-world medical care setting (at least two correctional officers are required to guard each offender per shift, for a total of six officers per day; for offenders with greater security needs, that can grow to nine officers per day)
  • Litigation support and provision of expert witnesses
  • Electronic Medical Record and Dashboard
  • Clinical expertise for program management
  • Sub-specialty tele-health programs (>110,000 visits per year)
  • Centralized care programs for OB-Gyn, vascular surgery and radiology, which have produced exceptional outcomes for high-risk populations
  • Centralized programs for management of hepatitis C, HIV, infectious diseases, kidney failure, dialysis, psychiatry and other chronic diseases
  • Utilization review and case management programs
  • Standardized and consistent sub-specialty care (such as cancer management, surgical care)
  • Professional benefits CMC employees garner from being part of a major academic health sciences center, including medical education offerings for employees that guarantee a well-educated and professional workforce


While there is no question that the state faces budgetary challenges this session, there is also no question that the correctional health programs managed by UTMB for the past 23 years has provided a tremendous return on investment for Texas. We will continue to closely monitor how the budget for this important endeavor shapes up over the next couple of month.