Please contact me if you have any questions and / or concerns.

Transcription

1 Chairman Linda H. South Secretary Department of Management Services Council Members Alex Sink Chief Financial Officer Department of Financial Services Lisa Echeverri Executive Director Department of Revenue Kurt S. Browning Secretary Department of State Akhil Agrawal President American Medical Depot Steven Evans Chief Operating Officer Florida TaxWatch Timothy Yandell President inetusa Henry Garrigo Executive Director 4050 Esplanade Way Suite 380.6X Tallahassee, FL Phone: Fax: May 21, 2009 Mr. Jimmie M. Smith Assistant Program Administrator / Contracting Office of Health Services Florida Department of Corrections 2601 Blair Stone Road Tallahassee, FL Dear Mr. Smith, Thank you for submitting your agency s outsourcing business case, Design, Build, Operation of an (Outpatient) Radiotherapy Treatment Center for the Council on Efficient Government s review. The initial electronic version of this business case was received by the Council on 28 January A revised version was received on 18 February Because this project involves construction, the submission of a business case is not required by Chapter Florida Statutes; however, the Department has recently adopted submission of business cases for outsourcing projects as a best practice. The Council welcomes this decision and looks forward to developing a mutually satisfactory relationship with the DOC. The above-referenced Statute also requires business cases be received by the Council 30 days prior to release of any procurement document(s). The Invitation to Negotiation (ITN) was released on 26 January 2009 and as indicated above, the original outsourcing business case was received by the Council on 18 January 2009 and a revision was submitted on 18 February After a thorough review of the business case, Council staff recommends this project proceed with modifications, and offers in the enclosed FINAL Advisory Report a business case summary as well as comments and recommendations. We trust you will find this information helpful as you proceed with procurement and contract period activities. Please contact me if you have any questions and / or concerns. Sincerely, Mission: The Council on Efficient Government reviews, evaluates and provides advice on agency outsourcing and best practices, as well as codifies lessons learned to improve government accountability. It is the Council s goal to define the process for reviewing business cases and implement standard processes for outsourcing initiatives. Henry Garrigo, Executive Director Council on Efficient Government cc: Mr. Walter A. McNeil, Secretary cc: Ms. Rosalyn M. Ingram, Procurement Manager Florida Department of Corrections Bureau of Procurement and Supply 2601 Blair Stone Road Florida Department of Corrections Tallahassee, FL Blair Stone Road Tallahassee, FL

2 Advisory Report Table of Contents I. Business Case Summary...3 II. Council Analysis A. Business Case Strengths 12 B. Business Case Potential Areas of Concern 15 III. Council Recommendations Council on Efficient Government Advisory Report FINAL Version May 2009

3 I. Business Case Summary 1. Proposed Project Design, Build, & Operate an (Outpatient) Radiotherapy Treatment Center for the Florida Department of Corrections (DOC, Department) at the Reception and Medical Center (RMC) located at Lake Butler, Florida (DOC Region II). The building shall be constructed on Departmental property and owned by the Department. Radiotherapy (also called radiation therapy, x-ray therapy, or irradiation) is the use of a certain type of energy (called ionizing radiation) to kill cancer cells and shrink tumors. It is the Council s understanding that the proposed facility will perform radiotherapy services only, and not in combination with, for example, chemotherapy services. 2. Provider Requirements The successful Contractor will be required to staff the radiotherapy center based on a forty-hour, five-day per week basis. In addition, the successful Contractor will be responsible for all costs associated with the provision of on-site radiotherapy services (as described in the Invitation to Negotiate (ITN)), including the designing and building of the treatment facility with all appropriate permitting. The facility is intended to be a turnkey project, ready to provide inmate treatment Current Providers Presently, inmate radiotherapy services are performed at hospitals and / or contracted outpatient cancer centers that require the DOC to transport inmates outside the institutions to the treatment locations. Radiotherapy services are contracted across the state by a total of four Contractors and one on-call provider in Region IV: a) Region I and the RMC in Region II are supported by two Contractors in the Region II area. b) Region III is supported by one contractor. c) Region IV is supported by one contractor and one on-call provider. 4. Governing Legislation re Department Responsibility for Care of Inmates a) The business case outlining the Department s responsibility for the supervisory and protective care, custody, and control of all inmates is in response to Chapter 945, Florida Statutes. b) Chapter , Florida Statutes, Continuing Contracts with Health Care Providers, allows the DOC to enter into continuing contracts with licensed health care providers, including hospitals and health maintenance organizations, for the provision of inmate health care services which the Department is unable to provide in its facilities. c) Chapter , Florida Statutes, Minimum Health Care Standards, designates the Assistant Secretary for Health Services as responsible for developing a comprehensive health care delivery system and promulgating all Department health care standards. Such health care standards shall include, but are not limited to, rules relating to the management structure of the health care system and the provision of health care services to inmates, health care policies, health care plans, quality management systems and procedures, health service bulletins, and treatment protocols. 5. Legal Citations Authorizing the Department s Performance of this Service or Activity a) Florida Administrative Code, Rule 60A-1.002, Purchase of Commodities or Contractual Services, states agencies are delegated the conditional authority to purchase commodities or contractual services. 1 ITN 08-DC-8031, Version 001, dated 01 January 2009, Florida Department of Corrections 3 Council on Efficient Government Advisory Report FINAL Version May 2009

4 b) Chapter , Florida Statutes, Continuing Contracts with Health Care Providers. The Department of Corrections may enter into continuing contracts with licensed health care providers, including hospitals and health maintenance organizations, for the provision of inmate health care services which the Department is unable to provide in its facilities. c) Chapter , Florida Statutes, Minimum Health Care Standards: The Assistant Secretary for Health Services is responsible for developing a comprehensive health care delivery system and promulgating all department health care standards. Such health care standards shall include, but are not limited to, rules relating to the management structure of the health care system and the provision of health care services to inmates, health care policies, health care plans, quality management systems and procedures, health service bulletins, and treatment protocols. d) Executive Order and Section (3), Florida Statutes, indicate the Department has the authority to perform construction projects. See additional statutory construction detail in Section II. A. 6, Green Trending. 6. Contract Term According to the Invitation to Negotiate (ITN), Section 2.6, Term of Contract, the Department anticipates the initial term of any Facility Operation Contract resulting from the ITN will be for a ten-year period. At its sole discretion, the Department may renew the Contract for one additional ten-year period. The renewal shall be contingent, at a minimum, upon satisfactory performance of the Contract by the Contractor as determined by the Department and subject to the availability of funds. If the Department desires to renew the Contract resulting from the ITN, it will provide written notice to the Contractor no later than 90 days prior to the Contract expiration date About the Florida Department of Corrections a) Departmental and Public Policy Considerations There are three areas of public policy concern given the current radiotherapy treatment options for inmates. These three areas of concern include the following, as shown below in Figure 1, DOC Public Safety Concerns: Figure 1: "DOC Public Safety Concerns" 1. Public Safety 2. DOC Personnel Safety Transporting inmates Transporting an inmate to outside the DOC off-site radiotherapy institutions for cancer services can involve several treatment poses a higher hours of DOC personnel risk to the public than time, particularly if the caring for inmates at their inmate has to be secure DOC institution. handcuffed and shackled. In addition, there is a cost in the depreciation to the Department s fleet, as well as gasoline and maintenance costs. On-site radiotherapy services pose the least safety threat to DOC personnel and alleviate fleet depreciation 3. Inmate Quality of Care In addition to the statutory requirements for inmate care, the DOC has generated six performance metrics deemed most crucial to the success of the overall desired service delivery. Also included are a Contractor s Self- Certification of Compliance, formal Corrective Action Plans (CAPs) for non-compliance issues, and liquidated damages for repeated instances of non- 2 Department of Corrections, ITN 08-DC-8031, Version 001, 26 January Council on Efficient Government Advisory Report FINAL Version May 2009

5 1. Public Safety 2. DOC Personnel Safety and maintenance costs. 3. Inmate Quality of Care compliance. These three elements comprise a very robust performance metrics monitoring program and should serve the Department well in its contract monitoring efforts. b) Appropriations The Department manages the third largest prison system in the United States, behind California and Texas. 3 For Fiscal Year (FY) , the Legislature appropriated the Department the resources shown below in Figure 2, DOC Legislative Appropriations FY : Figure 2: DOC Legislative Appropriations FY Full-Time Equivalents 29, c) Total Inmate Population General Revenue $2,606,642,860 Trust Funds $79,669,790 Total $2,686,312,650 Florida s current total inmate population is 100,105 (February 2009 data) 5, as indicated on the following page in Figure 3, Population by Year. The number of inmates has risen over 20 percent in the past five years, with a 4.3 percent increase in the last year (or up to four new prisons per year 6 ); a trend that is expected to continue to rise. In addition, as of January 2009, 161,894 offenders are on either community supervision or electronic monitoring. 7 The Department provided medical, dental, mental health, and pharmaceutical services to 92 percent of the inmate population as of January Office of Program Policy Analysis & Government Accountability (OPPAGA), Florida Department of Corrections, < Accessed 22 March CDC, Cancer Prevention and Control-State Cancer Facts, Florida. 5 Florida Department of Corrections 6 OPPAGA, Senate Criminal and Civil Justice Appropriations, March 19, 2009, < 09_Options_to_Reduce_Prison_Costs/ _Reduce_Prison_Costs_frame.htm.>. Gaitanis, Jason. Accessed 27 March Florida Department of Corrections, < Accessed 22 March Council on Efficient Government Advisory Report FINAL Version May 2009

6 Figure 3: Population by Year 8 Population by Year 120, ,000 80,000 60,000 40,000 20,000 0 Population d) Inmate Facilities Inmates are housed in a total of 134 prison facilities, including 59 major institutions (six are privatized), and 75 other facilities, including road prisons, various work / forestry camps, treatment centers, and work release centers. The classification of inmates into these different facilities takes into account the seriousness of their offenses, length of sentence, time remaining to serve, prior criminal record, escape history, prison adjustment, and other factors. The most serious offenders with the longest sentences and those least likely to adjust to institutional life are placed in more secure facilities. e) DOC Health Services The Department provided medical, dental, mental health, and pharmaceutical services to over 91,237 inmates 9 (92 percent of the inmate population) as of January Inmates typically are not as healthy as the general population (due to pre-existing conditions such as poverty, drug and alcohol abuse, mental illness, and lack of adequate nutrition). Also, the aging inmate population presents with both acute and chronic serious medical conditions that require expensive treatment options. f) Incidence of Cancer among Inmates The Department indicated that approximately Florida inmates have cancer (0.1 percent to 0.2 percent, respectively). This incidence of cancer compares to a cancer rate of 0.5 percent in Florida 10 among the unincarcerated population, and a national non-incarcerated population cancer rate of 7.2 percent 11 8 Florida Department of Corrections 9 OPPAGA, Florida Department of Corrections. 10 Department of Health and Human Services, Center for Disease Control and Prevention, Cancer Prevention and Control - State Cancer Facts, Florida. < Accessed 08 April DOC 6 Council on Efficient Government Advisory Report FINAL Version May 2009

7 8. Project Support of the Agency Mission and Vision Department s Mission and Vision: Mission: To protect the public safety, to ensure the safety of Department personnel, and to provide proper care and supervision of all offenders under our jurisdiction while assisting, as appropriate, their reentry into society. 12 Vision: To utilize effective and innovative correctional strategies that make Florida s Department of Corrections the best in the world. 13 Health care services to inmates are not only directed under Florida Statutes but are also viewed as critical to meeting the Department s goal of successful inmate supervision and preparation of inmates for reentry into society. The availability of radiotherapy services inside an institution is seen as having a positive effect not only on the inmate but the DOC security staff and public as well. Additionally, the access to radiotherapy, especially outside normal business hours and weekend shifts, affords an inmate enhanced continuity of care with minimal impact to DOC security, transportation, and public safety. This is especially important to those inmates and DOC employees located at the more isolated DOC facilities without nearby radiotherapy services. Florida is only the second state in the U.S. to centralize cancer care for inmates, taking an innovative approach to fulfill its vision of utilizing effective and innovative correctional strategies. The DOC is the only agency in the state that contracts specifically for health care facilities for the treatment of convicted Florida inmates. 9. The Department s Health Care Delivery System Inmate healthcare services are a constitutional right; 14 consequently, the state is responsible for providing offenders with a constitutional standard of care as mandated by the Federal Government when they are admitted to DOC s prisons, in accordance with Section A(2), Florida Statutes. The Department s Health Care Delivery System is managed by the DOC Office of Health Service (OHS) and provides comprehensive medical, dental, mental health, and pharmaceutical services, including health education, preventative care, and chronic illness clinics. The current scope of health services ranges from emergency care to inpatient hospitalization, to specialty care, as required. All major correctional institutions provide basic infirmary services (nursing care), including the monitoring of long-term patients who although are not acutely ill, cannot live among the general population. 15 In early 1990, OHS began exploring alternative health care delivery systems. As a result, the OHS currently functions in a managed care mode, similar to a health management organization (HMO). The OHS closely monitors utilization of all medical services provided to inmates with particular emphasis on high cost and invasive procedures, both diagnostic and surgical. Through contracts, networks of physicians provide discounted specialty and diagnostic care and procedures and are used whenever possible. Hospital care must be used on holidays and weekends, as the contractors are only available Monday through Friday. As resources have permitted, the OHS has consolidated complex and difficult disease entities such as renal dialysis, acquired immune deficiency syndrome (AIDS), tuberculosis, cardiac, and other 12 DOC website < Accessed 16 April DOC website < Accessed 16 April Costello vs. Wainwright, Inmate Michael V. Costello filed the now famous Costello vs. Wainwright lawsuit which addressed issues of overcrowding, sanitation, food and health care in Florida prisons. It took 21 years before the case was settled, leading to, among other reforms, court oversight of inmate health services. 15 Office of Program Policy Analysis & Government Accountability (OPPAGA), Steps to Control Prison Inmate Health Care Costs Have Begun to Show Savings, Report No , January Council on Efficient Government Advisory Report FINAL Version May 2009

8 chronic illnesses at select locations to maximize quality and minimize cost. Inmates with these illnesses are then transferred to these specialty locations for the duration of their treatment. The current ITN for the Design, Build, and Operate Radiotherapy Treatment Center is another such attempt to consolidate treatment for a complex, expensive, and difficult-to-manage disease (cancer), a disease that requires an interdisciplinary team effort of specialists from surgery, medical oncology, radiology (radiotherapy), endocrinology, immunology, and pain management. An important distinction for the radiology treatment center is that it will be designed, built, and operated by a Contractor. The other centralized healthcare facilities were built and are currently being operated by the Department. Facilities operated by the DOC, as opposed to the six private Florida prisons operated by the Department of Management Services, are grouped into four regions, as illustrated below in Figure 4, DOC Regional Prisons Map: 16 Figure 3: DOC Regional Prisons Map 1. Region 1: Panhandle 2. Region II: North Florida 3. Region III: Central Florida 4. Region IV: South Florida Access to health care for inmates is also provided at various other satellite facilities located throughout the four regions. 10. Current Providers / Procurement Market Presently, inmate radiotherapy services are performed at hospitals and / or contracted outpatient cancer centers that require the DOC to transport inmates outside the institutions to the treatment locations. Radiotherapy services are contracted across the state by a total of four Contractors and one on-call provider in Region IV: a) Region I and the RMC in Region II are supported by two Contractors in the Region II area: (1) Integrated Community Oncology Network (ICON), and, 16 FDOC 8 Council on Efficient Government Advisory Report FINAL Version May 2009

9 (2) North Florida Cancer Center. b) Region III is supported by one contractor: (1) Community Cancer Center of North Florida. c) Region IV is supported by one contractor and the on-call provider: (1) RADM Corporation, and, (2) Mark Pomper, M.D., doing business as Horizon Medical Services. The Department confirmed it pays in excess of $2.7M annually for inmate radiotherapy services. Annual Contractor costs for 2008 are shown below in Figure 5, Current Radiotherapy Contractor Costs: Figure 5: Current Radiotherapy Contractor Costs Contractor Name Annual Costs to DOC Community Cancer Center of North Florida $3, Integrated Community Oncology Network, LLC $205, North Florida Cancer Center, Lake City, LLC $2,561, Mark Pomper, M.D., Horizon Medical Services $0 RADN $0 TOTAL DOC ANNUAL RADIOTHERAPY CONTRACTOR COSTS: $2,771, Radiotherapy Services Radiotherapy services outside the norm (e.g., gynecological oncology) are individually contracted according to the needs of the inmates and are paid based upon agreements between the Department and the Contractor. Although the four Contractors named above provide statewide coverage for the Department, this model does present several problematic issues for the DOC. These Contractor services are provided only on weekdays. Should inmates require treatment on weekends or holidays, it is either postponed or deferred to a more costly hospital setting. a) Limited DOC staff is challenged to provide inmate treatment transport services, particularly on weekends and holidays. For staff working outside the standard 8 a.m. to 5 p.m. shift, when staff numbers are even more limited, the situation is worsened. b) The DOC currently pays a premium in personnel and security costs (although the Department was unable to quantify this), and much of this goes to overtime for inmate transport. c) There is a relative need for transport vehicles at many of the correctional institutions. (Again, the Department did not quantify this.) d) As offenders age and more females enter into the system, more specialized services are required, which are difficult, if not impossible, for the Department to provide in an institutionalized setting. e) There is increased danger to public safety when inmates are transported outside the institutions. 12. Procurement Vehicle The state has therefore issued an Invitation to Negotiate (ITN), seeking a Contractor to design, build, and operate a radiotherapy treatment center and provide comprehensive radiotherapy services that may include other specialized diagnostic radiographic services as required to the 9 Council on Efficient Government Advisory Report FINAL Version May 2009

10 Department s inmate population statewide. The Contractor shall provide services at the Reception and Medical Center (RMC) at Lake Butler in Region II, in a building of their construction upon Department property. The building shall be the property of the Department. The Department anticipated five responses to the ITN, and received three. 13. Contractor Requirements Contractor requirements include: a) Provide comprehensive radiotherapy services that may include other specialized diagnostic radiographic services as required to the Department inmate population statewide. b) All services will be delivered on-site. c) On-site delivery shall be provided by stationary-based equipment. d) Emphasis shall be placed on timely and accurate radiotherapy practices. e) Radiotherapy services shall meet a minimum level of constitutional adequacy with all radiotherapy services delivered being medically necessary, appropriate, reasonable, and legally sufficient to address the inmate s needs. f) The Contractor shall provide a digital-based turn-key radiotherapy or comparable service where the Respondent provides for all aspects of the service. g) The successful contractor will be required to staff the radiotherapy section on a fortyhour, five-day per week basis. h) The Contractor shall provide on-site medical supervision by a qualified physician specialist, or an agreed upon arrangement, to support inmates before, during, and after radiotherapy. i) The successful Contractor will be responsible for all costs associated with the provision of on-site radiotherapy services as described in the ITN, including the designing and building of the treatment facility with all appropriate permitting. j) There is no requirement for any specified staffing level. The Department is committed to ensuring an acceptable level of healthcare, within recognized professional standards, to all inmates. Emphasis will be on timely and accurate radiotherapy services, with all services delivered being medically necessary, appropriate, reasonable, and legally sufficient to address inmate needs. In the event urgent care is needed, inmates will be transferred to the RMC hospital facility. 14. Expenditures and Operations a) The Council was provided limited costing data, making it difficult to fully determine current expenditures. The department identified general cost areas that were used to develop an estimate of current costs and to help identify cost savings of proposed options. These cost categories include Medicare reimbursement rates, therapy delivery, transportation, staffing, utilities, and management and startup costs. b) The Department spends an estimated $2.7 million per year on radiotherapy outpatient services. These costs include only medical treatment costs. c) The Department states it transfers cancer inmates for treatment using current DOC transportation policies.17 The Department advised the Council that at least 1,000 inmates are transferred between DOC facilities on a daily basis; therefore, transferring radiotherapy patients to RMC would appear to have a marginal impact on the Department s inmate transport costs. The Department s motor vehicle fleet consisted of more than 3,000 vehicles with recorded costs of $41 million as of 31 January 17 Current DOC transportation policies were not provided to the Council by the Department. 10 Council on Efficient Government Advisory Report FINAL Version May 2009

11 The proportional maintenance costs, fuel costs, and depreciation of the vehicle fleet should also be considered as a cost to the Department for this service delivery. d) Additional costs for correctional officers overtime to transport inmates for radiotherapy treatment on weekends and holidays are also associated with the costs of current treatment. No estimates were provided for the cost of the fleet service; however, the Department indicated correctional officers overtime is $22.22 per hour.19 The number of hours correctional officers spend transporting inmates to radiotherapy services is unknown. What is known is that overtime is a necessary component to providing secure correctional institutions as well as ensuring public safety. In 2001, the Department spent $16 million annually in overtime for probation and correctional officers Public Policy Issues a) Corrections security should be considered in making changes to service delivery. Although radiotherapy services are available and provided to the inmate population, these services are limited by operating hours and limitations on the availability of security staff. Presently, inmates are seen and treated during the week, with weekend and holiday treatments either postponed or referred to a hospital setting. However, the availability of the service can be time limited. Furthermore, these facilities run a semi-rigid appointment schedule which can affect the security transportation of inmates in the community. This is especially difficult to security staff working other than 8-5 shifts and those assigned weekend duties. A contributing factor is the limited staff and the relative need for transport vehicles at many correctional institutions. Having access to radiotherapy on-site at an institution would have a positive impact on operations at every facility. b) Public safety is of concern due to the transportation of inmates to outside facilities for treatment. The potential for security issues increases when inmates are transported outside of the corrections facility. This is especially important to those institutions at the more isolated facilities without nearby radiotherapy services, forcing more lengthy travel conditions. c) Quality of care for the inmates is part of the Department mission. The availability of radiotherapy services inside an institution is seen as having a positive effect not only on the inmate but the security staff and public. Secured access to radiotherapy, especially outside normal business hours and weekend shifts, afford an inmate enhanced continuity of care with minimal impact to security and transportation. 18 Florida Auditor General, Operational Audit Motor Vehicle Maintenance, Use and Accountability, Florida Department of Corrections, Report Number Mitchell, Stan and Gaboardi, Charles. November DOC 20 Florida Auditor General (AG) Information Brief, Improvements Needed in Cost Management for Corrections Health Services and Overtime. AG Report Number , November Council on Efficient Government Advisory Report FINAL Version May 2009

12 II. Council Analysis A. Business Case Strengths 1. Probability for Success The original development outsourcing business case was received by the Council on 18 January Following a consultation with the client and several subsequent s and telephone calls, a revised initial business case was submitted to the Council on 18 February The Department has adopted as a best practice the submission of business cases to the Council for all outsourcing projects. The Council welcomes this decision and looks forward to developing a mutually satisfactory relationship with the DOC. The DOC s decision to develop business cases in support of outsourcing is an excellent process improvement, particularly because the Department is exempt from writing business cases in accordance with Chapter , Florida Statutes. Staff conducted a thorough analysis on the business case submission and projects a fair probability for attaining the desired result, primarily due to the majority of project risk shouldered by the winning ITN bidder, and the fact that once the facility is completed in June 2010, the Department will have immediate radiotherapy services savings, based on the cost figures provided by the Department (that the Council was unable to validate). In summary, cost savings will be positively and significantly impacted by four known factors: a) Reduced transportation costs to transport inmates from institutions to off-site radiotherapy treatment centers and hospitals; b) Reduced overtime pay for correctional officers at $22.22/hour 21 ); c) Reduced Medicare reimbursement costs to the Department, as the current reimbursement rate ranges from 105 percent to 150 percent (150 percent is the norm), and the ITN-negotiated rate will be 125 percent or below; and, d) Reduced risk to both correctional officers and the public, because inmates requiring radiotherapy cancer treatment will have no need to leave the institution for healthcare services. All of the above factors point to a potentially significant savings for the Department, and the Council confirms this project will save the state money in both the short- and long-term. In fact, as the radiotherapy facility continues to provide services over the initial ten-year contract proposed in the ITN, the Department stands to save a considerable amount of money, given statistics indicating the Florida inmate population continues to increase 22 both in number and age. 2. Department Capabilities Department staff made several of the modifications suggested by the Council to its initial Business Case for the Radiotherapy Project. In addition, Department staff was readily available to consult with Council staff regarding this business case during the analysis and writing phases for the Initial Business Case. This type of collaboration is very much appreciated by the Council and serves to enhance the professional working relationship between the Department and the Council. 21 Florida Department of Corrections 22 U. S. Department of Justice, Office of Justice Programs, Bureau of Justice Statistics, Prison Inmates at Midyear 2008 Statistical Tables, West, Heather and Sabol, William. March Council on Efficient Government Advisory Report FINAL Version May 2009

13 The business case to outsource via ITN is strongly supported by the Department s capabilities and experience in issuing ITNs and Requests for Proposals to seek Providers who not only have the interest but also the capability to provide required services. The Department has been outsourcing healthcare services since July 2001, beginning with Region IV. 3. Procurement Market The Department anticipated five responses to the ITN and, as indicated previously, received three. Two are from experienced Contractors who are currently under contract to the Department and have built existing radiotherapy facilities in Florida. 4. Transition Plan The Department indicated the transition plan would be developed in concert with the winning Contractor. The DOC must proceed cautiously in this area to ensure the seamless transition of operations to the Contractor. Transition plans, critical for successful projects, should include the following: a) Work Transition Plan: Ensuring continuity of service from the vendor to the state (and vice versa) should there be a breach of contract or other calamitous event. b) Employee Transition Plan: Identifying new employee responsibilities for those impacted by the outpatient radiotherapy treatment clinic. c) Outsource/In-sourcing Transition Plan: Developing a plan for the project to either remain outsourced or brought back into the Department s management activities once the contract has expired. 5. Green Trending The Department has given due diligence to green trending. Pursuant to Executive order , Section (3), Florida Statutes, and Senate Bill 7135, the Department requires the facility be designed and constructed in accordance with green building standards. Respondents are instructed to demonstrate knowledge and experience with the United States Green Building Council s Leadership in Energy and Environmental Design (LEED) rating system, or a nationally recognized, high-performance green building rating system as approved by the Department. Other green trending requirements of the Contractor include: a) Project team members accredited in the LEED program are preferred; b) The facility should obtain LEED Silver certification; c) Respondents should list any LEED building experience; d) Respondents must supply a checklist indicating which LEED (or equivalent) points they will be looking to obtain in the Design/Build process. This checklist will be used in the evaluation process and will be binding for the successful Respondent s contract. The above green trending requirements are the strongest of any business case received by the Council, and the Department is to be commended for its due diligence in this area. 6. Health Insurance Portability and Accountability Act (HIPAA) of 1966 The Department deliberated carefully to ensure full HIPPA compliance from the Contractor. The ITN in Section ensures the Contractor will comply with HIPPA and all associated regulations. Further, the Department incorporates into the ITN Attachment 8, Business Associate Agreement for HIPAA, which provides three pages of Privacy Act compliance instructions. The Department also does not allow the Contractor to disclose any information concerning inmates, specifically concerning inmate transfers/referrals, to parties outside the Department. In Section of the ITN, the Department provides an encryption requirement 13 Council on Efficient Government Advisory Report FINAL Version May 2009

14 for any transmitted electronic protect health information. The encryption scheme provided by the Contractor is subject to Departmental approval. The above HIPAA compliance requirements are the strongest of any business case received by the Council, and the Department should be commended for its due diligence in this area. 7. ITN Section 3, Statement of Services Sought Overall, the Statement of Services Sought provides a thorough, detailed description of the work to be performed by the Contractor (requirements). In particular, three sections stand out for their clarity and use of industry standard best business practices: a) Contractor Staffing Requirements: Assignment of both a Construction Project Manager and two Administrative Project Managers The Department exhibited due diligence when it decided to separate the roles of Construction and Administrative Project Managers. The Construction Project Manager will have corporate responsibility for the construction of the facility to meet contractual requirements. The Administrative Project Managers (one for Design/Build and the other for Operations) will have corporate responsibility for the administration of the contract. Each project manager can thus focus on his / her area of expertise and more likely accomplish the many responsibilities of each position. Although not indicated in the business case, the Department will require a Professional Engineer (PE) designation for the Construction Project Manager and a Project Management Professional (PMP ) designation for the two Design / Build and Operations project managers. Professional certifications such as the PE and PMP indicate a solid understanding and expertise in the areas of engineering principles and project management and also serve to lower project risk. It is prudent of DOC to mandate these certified positions as part of this project. b) Performance Metrics and Goals The ITN in Section details six specific performance metrics and in Section provides five additional requirements critical to the success of the project, for a total of eleven performance metrics. Eleven metrics are an appropriate number for collecting key project performance outcomes, standards, and measures, which the Department also specifies for each metric. The metrics will be measured quarterly and annually based on the monitoring methodologies (see below) used by the Department. c) Performance Monitoring Plan including Corrective Action Plan (CAP) and Liquidated Damages The Contractor is allowed to address deficiencies by means of a Corrective Action Plan (CAP), to be produced within ten days from the date of receipt of the Department s written monitoring report. Repeated instances of failure to meet either the Performance Outcomes and Standards or Other Contract Requirements Outcomes and Standards or to correct deficiencies may result in both liquidated damages and breach or termination of contract. The Department s performance monitoring plan is quite thorough and includes both Corrective Action Plans (CAPs) as well as liquidated damages as a penalty for Contractor non-performance. Each metric and requirement includes timeframes and costing information, and provides sufficient detail for performance expectations as well as timeframes for liquidated damages. 14 Council on Efficient Government Advisory Report FINAL Version May 2009

15 B. Business Case Potential Areas of Concern 1. Business Case Costing Summary a) No Cost-Benefit Analysis Provided The Department, due to a shortage of available resources, was unable to provide the Council with complete costing data and did not submit a cost-benefit analysis. The Council was therefore unable to complete a robust cost-benefit analysis for this business case. The data the Department did provide, however, was of good quality, and Department staff has been readily available to answer the Council s questions and provide substantiation. b) Reduction of Medicaid Reimbursement The current radiotherapy contracts are reimbursed from 105 percent to 150 percent of Medicare, with the higher end being the norm. (Medicare is a federal health insurance program for people aged 65 and older; people under age 65 with certain disabilities; and, people of all ages with End Stage Renal Disease.) With the new contract, the DOC will pay a negotiated contract of no more than 125 percent of Medicare reimbursement guidelines. c) Medicare Current Procedural Terminology (CPT) Codes Payment for these services is based on Medicare Current Procedural Terminology (CPT) codes. These codes define the service performed and the reimbursement authorized under the federal Medicare guidelines and paid by the DOC to Contractors. The Department provided the Council access to the Florida Medicare website; 23 more than 25 radiotherapy codes exist for Ft. Lauderdale, Miami, and the rest of Florida under the category Non-Facility Price, which is used by the Department to determine cost basis. As an example, two Health Care Procedure Codes (HCPAs) for radiotherapy, Codes and 77776, were entered for Ft. Lauderdale, Miami, and the rest of Florida. As shown below in Figure 4, Radiotherapy Reimbursement Rates: 2008 and 2010 Post-ITN Award, the following pricing data was returned for Apply interstitial radiation complex, (abdominal radiation), indicating both the current 150 percent Contractor reimbursement rate and the 25 percent basis points post-itn award reduction and cost savings to the Department. 23 U.S. Department of Health and Human Services, Centers for Medicare and Medicaid Services, < Accessed 24 March Council on Efficient Government Advisory Report FINAL Version May 2009

16 Figure 4: Radiotherapy Reimbursement Rates: 2008 and 2010 Post-ITN Award HCPC Code Medicare Procedure Name 7776 Apply Interstitual Radiation Complex 7776 Apply Interstitual Radiation Complex 7776 Apply Interstitual Radiation Complex 7778 Apply Interstitual Radiation Complex 7778 Apply Interstitial Radiation Complex 7778 Apply Interstitial Radiation Complex Medicare Procedure Cost Contractor Current Reimbursement 150% of Medicare Cost Contractor post- ITN Contract Award Reimbursement 125% of Medicare Cost Savings $ $ $ $ $ $ $ $62.15 $ $ $ $41.73 $ $1, $1, $ $ $ $ $ $ $ $ $62.28 There are more than 25 radiotherapy HCPC codes (the actual number is unknown both to the Department and the Council); however, the Department indicated it did not have available resources to research this data. Given the estimated costing information, coupled with no real certainty of the number of inmates with cancer (either 100 or 200, according to a Department source), the Council could only perform a rudimentary cost estimate, as shown below in Figure 5: Estimated Option Values for DOC Radiotherapy Outpatient Treatment Center: 16 Council on Efficient Government Advisory Report FINAL Version May 2009

17 Figure 5: Estimated Option Values for DOC Radiotherapy Outpatient Treatment Center Option Value Transportation Fleet Depreciation Fleet Maintenance Fleet fuel costs Correctional Officer Overtime Pay Medicare Reimbursement Variable Percentage Reimbursement Rates Reimbursement Rates range between 105 to 150 percent Radiotherapy Services Option 1 Reliance on Availability of Services Limited or No Services Option 2 Status Quo: Maintain Current Outsourced Contracts Option 3 Issue ITN to Negotiate for Services at RMC Little to no transportation costs. High transportation costs. No transportation costs after initial transfer of patients to RMC. Little to no overtime pay. Contractors reimbursed at highest reimbursable Medicare rate: 150 percent. Little to no services costs, depending upon number of inmates served. High overtime costs at $22.22/hour. Contractors reimbursed at highest reimbursable Medicare rate: 150% percent. High services costs; most contractors are reimbursed at 150% of Medicare reimbursable rates. No overtime hours and no inmates to transport. Contractors reimbursed at lower reimbursable Medicare rate: 125% or less, a decrease of at least 25 basis points. Services costs reduced due to Contract negotiation for rates. DOC Startup Costs No startup costs. No startup costs. Moderate Start up costs. DOC Management & Oversight Costs Little to no DOC Management & Oversight Costs Same as current. DOC would need to add Management & Oversight tasks and dollars to this project. DOC Utility Costs No additional utility costs. No additional utility costs. DOC pays new facility utility costs or charges back to Contractor. Public Policy Danger to public when inmates are removed from institutions for services. Danger to correctional officers who escort prisoners from institutions to radiotherapy treatment. Little to no danger to correctional offers and the public. Potentially significant danger to correctional officers and the public. No danger to correctional officers and the public. The only option generating potential savings for the Department is Option Three, Issue ITN to Negotiate for Services at RMC. d) Contractor Cost Response Respondents to the ITN are to provide a single rate, per radiotherapy procedure, per service delivery mode, at or below 125 percent of the current Florida Medicare global/bundled rate. e) Full-Risk Contract The ITN calls for a full-risk contract without any caps or aggregate levels (minimum guaranteed patient load) after which costs are shared. Although some ITN bidders have requested a minimum guaranteed patient load, the Department has officially and unequivocally denied these requests. This, like 17 Council on Efficient Government Advisory Report FINAL Version May 2009

18 almost all other aspects of this project, will be another risk assumed by the Contractor. f) Contractor Payment The Contractor payment will be made by the DOC on a monthly basis in a fee-for-service manner. The Department reserves the right to re-negotiate rates based on significant increases in the number of inmates serviced by the contract. The Department also reserves the right to offer the Contractor the connection of the facility to the Department s electric and sewage lines, as well as payment for these utilities, in exchange for a lower Medicare reimbursement rate. g) Contracted Facility The completed building will be the property of the State of Florida and the State may take ownership anytime upon award of the contract resulting from the ITN. 2. Chapter , Florida Statutes re Release of Procurement Documents This outsourcing business case was not received by the Council in accordance with the required timelines stated in Chapter , Florida Statutes. This Statute states that a business case must be received by the Council 30 days prior to release of any procurement document(s). The ITN was released on 26 January 2009 and the anticipated effective start date of the contract will be 01 July Affected Stakeholders The Department included three project stakeholders; however, there are additional stakeholders, listed below, who will be impacted by the creation of the radiotherapy outpatient treatment center and the transfer of inmates (increased population) to the RMC facility: a) Convicted Florida Inmates and their Parents and / or Guardians and Families; b) Department Staff, including Security Guards, Transport Guards, and Health Service Personnel and their families; c) Specifically, Department staff assigned to RMC; d) Residents of Lake Butler and Bradford County, Florida; e) The Police Department of Lake Butler, Florida; f) The Sheriff s Department of Bradford County, Florida; g) Specifically, the Citizens of Lake Butler and Bradford County, Florida; h) The current four Contractors and one on-call Provider; and, i) The Citizens and taxpayers of Florida. 4. Detailed Costing Data To understand the true cost, savings, and value of designing, building, and operating this outpatient radiotherapy treatment center, detailed costing data should be included in the business case. Unfortunately, the Department lacked available resources to fully document cost and savings data. Necessary components of the costing data include the following: a) Costs usually charged directly: Project professional staff, Project Consultants, Project supplies, Publications, and, Travel. b) Costs either Charged Directly or Allocated Indirectly: Telephone charges, 18 Council on Efficient Government Advisory Report FINAL Version May 2009

19 Computer Use, Project clerical personnel, Postage and printing, and, Miscellaneous office supplies. c) Costs usually Allocated Indirectly: Utilities, Rent, Audit and legal, Administrative staff, and, Equipment rental. The Council s calculations, however, indicate that because Option 3 is the only option that could save the Department money, it is appropriate to move forward with this radiotherapy treatment center, as indicated in Section II. C., Figure 5, Known Departmental Cost Elements for Options One, Two and Three: DOC Radiotherapy In-Patient Treatment Center Business Case." d) The Department should consider including the following items in its business case submission: Cost Benefit Analysis(CBA), Return on Investment (ROI), Cost Price Analysis, and, Earned Value (EV), and, Internal Rate of Return (IRR). Please refer to the Council s website for Schedules XIIA-1, XIIA-2, and XIIA-3 (cost benefit analysis forms) required to support the business case: 5. Disaster Recovery Plan The ITN does not require the Contractor to write a Disaster Recovery Plan. Most businesses, including state agencies, depend heavily upon technology and automated systems, and their disruption for even a few days could cause severe financial loss and threaten survival. The continued operations of an organization depend on management s awareness of potential disasters, their ability to develop a plan to minimize disruptions of critical functions, and the capability to recovery operations expediently and successfully. A Disaster Recovery Plan is a comprehensive statement of consistent actions to be taken before, during, and after a disaster. The plan should be documented and tested to ensure continuity of operations and availability of critical resources in the event of a disaster. A risk analysis and business impact analysis should be conducted that include a range of possible disasters, including natural, technical, and human threats. Other objectives of disaster recovery include the following: a) Providing a sense of security; b) Minimizing risk of delays; c) Guaranteeing the reliability of standby systems (e.g., Offender Based Information System (OBIS)); d) Providing a standard for testing the plan; and, e) Minimizing decision-making during a disaster. The Disaster Recovery Plan should be defined in the ITN as a Contractor requirement and not a Departmental burden. 19 Council on Efficient Government Advisory Report FINAL Version May 2009