oversight

Opportunities for Improving the Southern Monterey Country Rural Health Project, King City, California

Published by the Government Accountability Office on 1971-07-06.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

Oppsreu                    For improving
                        m Monterey County
                          Project
                         liforn iia 8.13O515
 Department  of Health,     Education,
   and Welfare
 Office   of Economic    Opportunity




BY THE COMPTROLLER GENERAL
OF THE UNITED STATES



                                         JULY   6,197X
              CQFvlP-i-ROLLER     GENERAL     OF      THE       UNITED   STATES

                                WASHINGTON.    D.C.         20548




B- 130515




To the President   of the Senate and the
Speaker  of the House of Representatives

         This is our report        on opportunities       for improving    the
Southern      Monterey      County Rural Health Project,           King City,
California.       Administration        of the project     has been trans-
ferred     from the Office       of Economic      Opportunity     to the De-
partment       of Health,    Education,      and Welfare.

        Our review  was made pursuant   to the Budget and Ac-
counting   Act, 1921 (31 U.S.C. 53), and the Accounting  and
Auditing   Act of 1950 (31 U.S.C. 67).

        Copies of this report    are being sent to the Director,
Office   of Management     and Budget; the Secretary   of Health,
Education,    and Welfare;    and the Director, Office of Economic
Opportunity,




                                                   Comptroller               General
                                                   of the United             States




                          50TH ANNIVERSARY                    1921- 1971
    COMPTROLLERGEliERAL '3                         OPPORTU;4ITIES FOR IMPROVIi'4G THE SOUTI-IER:j
    REPORT TO THE CONGRESY                         MONTEREYCOUNTY RURAL HEALTH PROJECT, KING
                                                   CITY, CALIFORNIA
                                                   Department of Health,  Education,   and Welfare
                                                   Office  of Economic Opportunity    3-130515


    DIGEST
    ----_-

    WHY THE REVIEW WAS MADE

             The Comprehensive    Health Services    Program is intended    to       find ways to
             break the cycle in which sickness       and poverty  reinforce         and perpetuate
             each other.    This grant-in-aid    program, under the Office           of Economic Op-
             portu.nity  (OEO), is a component of the Corrsnunity Action            Program autho-
             rized by the Economic Opportunity       Act.

             Funding of the program and changes           in administrative     responsibility      since
             its inception are as follows:

                   --For fiscal    years 1965 through    1970, OEO obligated     about    $220 million.
                      For fiscal   year 1971 $99 million    has been authorized.

                   --In  December 1970 responsibility    for 16 of 66 operational      projects
                     was transferred   from OEO to the Department   of Health,      Education,    and
                     Welfare   (HEW) which was to provide up to $30 million       in fiscal     year
                     1971 to support   those projects.

             The General Accounting  Office     (GAO) is making a series  of reviews    to de-
             termine  (1) the extent to which the objectives     of the program are being
             met and (2) how well (efficiently)      the program is being administered.

             This report    presents  GAO's findings    on the Southern Monterey County Rural
             Health Project,     King City, California.      The project is one of the 16 proj-
             ects transferred     to HEW and one of the few OEO-initiated     projects in
             which private    medical groups are involved      actively.

             The project    serves an agricultural     area, and about 35 percent of those
             eligible    to participate  in the project     are migratory    workers.     The proj-
             ect was funded by OEO beginning        in July 1967.     For fiscal    years 1968
             through 1970, OEO provided       grants of about $3 million       to the project.
             For fiscal    year 1971 $1.5 million     has been authorized.

             During the period covered by GAOIs/r(eview,          OEO's grants for the project
             were awarded to the Monterey County Medical Society,            composed of physi-
             cians who practiced     in Monterey County.        The medical society  delegated
             administration    of the project     to the Southern Monterey County Medical\
             Group, Incorporated,      a private    group which is the major provider      of
             medical services     to the project.       In October 1970 a new corporation,     jtiLX

I   Tear
    ___.-~ Sheet
I
     Rural Health Project,  Incorporated,                     was formed         to administer           the project
     in place of the medical group.

     GAO was assisted   in its review by a medical officer    from the U.S.                                     Public
     Health Service,   who evaluated  the quality  of medical care provided                                      to
     project enrollees    and the adequacy of patient  medical records.


FINDINGS AVD COI;JCLUSIOih5'

     The project        met certain      of its     short-range             objectives        by

        --enabling       low-income   persons to receive                    needed medical         care    similar
           to that      provided   to higher income area                    residents,

        --providing       employment         and training       to area         residents,

        --making use of several    existing     area                  health     care    agencies        and resources
           to provide needed services,      and

        --employing       new types of supporting               health         workers       to serve     its   en-
           rollees.       (See p. 16.)

     The individuals and families   enrolled    in the project    generally                                were satis-
     fied with the medical services    provided   to them.     (See p. 19.)

     The project's        value      would    be enhanced       if     it    were to

        --offer       a more comprehensive          range      of services,

        --give      its enrollees       a greater   opportunity                to participate           in the proj-
           ect's      development      and operations,

        --gain      the support       of area     residents          not enrolled        in the project,             and

        --devote  more effort   to developing a means for measuring its long-
           range impact on the health and economic status of its enrollees.
           (See pp. 17 and 18.)

     GAO found that opportunities     for improvement existed    in several    other
     aspects of the project.      The need for some of these improvements       was
     noted previously  by an OEO evaluation     team.   As a result,   some improve-
     ments had been made, but there was still       a need for further   actions,    as
     foil ows :

     Organization        structure

     The project' s organizational       structure       needed to be changed because it
     did not provide controls       necessary     to ensure that project     activities
     would be conducted effectively,         efficiently,      and free of potential    per-
     sonal and financial    conflicts     of interest,



                                                     2
            Changes made in the project's        organizational       structure, including    the
            establishment      of a new administering      agency in October 1970, to elimi-
            nate the close relationship       that existed       between the project    and the
            medical group, should provide        better    control    over the management of
            project    funds and activities     and should reduce the possibility          of con-
            flicts    of interest.    (See p. 24.)

            Preventive      care services
I           The project       needs to (1) give more emphasis to providing,            and encourag-
I
I           ing its enrollees        to seek, preventive       medical     cares such as physical     ex-
I           aminations      and immunizations,       (2) maintain     more adequate records       of such
I
I           care, and (3) undertake         efforts     to improve the environmental       conditions
I           which contribute       to the enrollees'       health   problems.     These activities,
I
I           although    difficult      and often sensitive       undertakings,    are essential     com-
I           ponents of a comprehensive           health services      program.    (See p. 25.)
i
I
I           Outreach      services
I
I
I           The project's     outreach    program--a    program to seek out and enroll        the
I           poor and to provide       them with needed health care and information--could
I
I           be more effective      if the project      were to overcome the medical group phy-
I           sicians'   reluctance     to involve     nonprofessional      home health   aides in the
I           program and if the project         were to attract       a sufficient    number of public
I           health   nurses to staff      the program.

            After    the close of GAO's'fieldwork,         the project  installed     a referral
            and follow-up     system which,      if made to work effectively,        also could im-
            prove the outreach       program.      HEW should monitor   the new referral         and
            follow-up    system to determine        whether it is effective       and should continue
            to assist    the project     to strengthen     the program.     (See p. 35.)

            EvaZuations       and operationa     data
I           Officials     at all levels would be able to better       manage the project    and
I
I           to better     assess its progress  if they had available      necessary  opera-
I           tional    data and adequate evaluations      of the quality   of medical   care pro-
I
I           vided to enrollees      and of the effectiveness    of other aspects of the proj-
I           ect.
I
I
I           OEO and project        officials      were taking    action    near the close of GAO's
I
I           fieldwork    to install         a new information      system which should assist        in ac-
I           cumulating     financial        and operational     data.     The project,     however, needs
I
I           to develop systematic            procedures     for evaluating     its effectiveness     and
I           for reporting       the results       of such evaluations       to management.       (See p, 40.)
I
            EZigibiZity       and use of existing       resources
I
            To ensure that project     funds        are used to the optimum       benefit    of the per-
I
I           sons eligible  to participate           in the project and that       existing    agencies
I
I
I   Tear
    _---- Sheet
     and resources       are utilized        to the maximum feasible       extent,    the project
     needs to (1) strengthen            its policies       and procedures    for determining      eligi-
     bility   for project        services,      (2) utilize    all available     county health ser-
     vices,   particularly        the county hospital,         and (3) seek out and claim all
     reimbursements        available      from established      health programs,      such as Medi-
     caid and Medicare,          and from other funding         sources,   such as the county
     and insurance       companies.         (See pp. 41 and 52.)

     Administration      of project     funds

     In its review of project  expenditures, GAO found that                      the following        ques-
     tionable  payments had been made to the medical group.

        --The project    paid the medical group between $37,500 and $50,000 more
           than it should have under grant terms for medical services           rendered
           to project   enrollees.      These overpayments   occurred  both because the
           medical group had billed       the project  at erroneous   rates and because
           billings   submitted    by the medical group at the physicians'      usual fees
           had been increased      by project  employees to higher rates.      (See p. 61.)

        --Through    February   1970 the medical society       authorized,    and the project
           paid, about $98,350 to the medical group without             OEO authorization
           and on a basis other than the OEO-approved fee-for-service                basis.
           These pa,yments were made to cover costs claimed by the medical group
           to have been incurred       as a result    of the project.      The project     did
           not adequately     evaluate   the validity    of these claims,     and the medical
           group was unable to provide GAO with adequate documentation                 support-
           ing them.     (See p. 64.)

     Also GAO is      questioning     a number of the          project's   salary     payments.       (See
     p. 68.)


RECOMMENL3ATIONS
            -- OR SVGGWl'IOi~S
     The Secretary      of HEW

        --should    require   and assist   the       project     to expand, improve,        and more
           adequately     document preventive         health     care services  (see       p. 32),

       --should    monitor    the outreach    program          periodically   and should continue
          to assist   the    project   in its efforts           to strengthen   the program (see
          PO 35L

       --should     encourage and assist          project   officials       to undertake   systematic
          evaluations       of project   activities       and to develop procedures          for re-
          porting     results   to management at all levels              for planning    purposes
          and for dissemination        to other federally            assisted   projects   (see
          P* 40),

       ---should   rcquir e and assist          the project      to strengthen       its policies     and
          procedures     for determining         eligibility       for project      services   (see
          p. 50); and

                                                4
             --should    stress  to the project   its responsibility       to make maximum fea-
                sible use of existing    agencies and resources,        including  the county
                hospital    (see pp. 55 and. 60).

        GAO also is recommending to the Secretary       of HEW that project   operations
        be more adequately    monitored   (see pp. 60, 63, and 72) and that actions
        be taken to correct    the questionable   administration   of project   funds and
        to determine   the amounts of and recover     unapproved and unauthorized     pay-
        ments.    (See pp. 63, 67, and 72.)

        GAO believes      that HEW and OEO should consider         certain   of these   recommen-
        dations  for     application to other comprehensive         health   services   projects.


AGENCY ACTIONS AND UNRESOLVED ISSUES

        HEW stated   that GAO's recommendations           for changes were well taken, that
        it would continue     efforts      to correct   the deficiencies,     and that it would
        provide assistance      to strengthen      all aspects of the project.          HEW stated
        also that this report        indicated    areas in which the effectiveness         and ef-
        ficiency   of similar     programs could be improved.           (See app. III.)

        OEO indicated  agreement with all but one of GAO's reccmmendations--that
        of using the county hospital    whenever appropriate--and    described     actions
        which had been taken,   prior  to the transfer   of the project    to HEW, to
        improve some of the activities    covered in this report.       OEO incorporated
        in its response some of the project     staff's  comments.    (See apps. IV
        and V.)

        With respect      to the use of the county hospital,      OEO stated    that the use
        of available      hospitals    must be considered   in the light   of individual
        cases and the       prevailing   conditions  and that both the needs of the pa-
        tient  and the      goals of the project    should be taken into account.

        OEO stated,   however, that the project's        policies and practices      in this
        regard had been under a continuing        review aimed at furthering       the use
        of the county hospital     when indicated      and that some project    patients
        had been referred    to the county hospital.

        GAO believes   that,  to conserve limited     program funds and to ensure that,
        in accordance with congressional      intent,    the actual cost of institutional
        care would not be financed     under this program except in highly       unusual
        circumstances,    a concerted  effort   should be made to identify    all cases
        in which the use of the county hospital        would be appropriate.     (See
        p. 56.)




Tear Sheet
--
MATTERS FOR COiVSIDzRATiOI~ 3Y THZ CONGRESS

     In view of the interest     shown by members of Congress in antipoverty             and
     health services   programs,   GAO is bringing      its findings    and observations           I ’
     to the attention   of the Congress for information          purposes and for con-
     sideration   by committees   having responsibility       for these programs.




                                           6
                                                                                               I
                         Contents
                                                               Page

DIGEST                                                           1

CHAPTER

  1       INTRODUCTION                                           7
              Comprehensive Health Services Program              7
              Rural Health Project                              10
              Medical facilities     and services   in
                target area                                     11
              Federal administration     of project             13

  2       OPPORTUNITIESTO INCREASEPROJECTEFFECTIVE-
          NESS                                                  16
              Impact of project                                 17
             Organizational    structure     changed to pro-
                vide better control      over project  ac-
                tivities                                        22
             Conclusion                                         24
             Need for improvement in preventive        care
                services                                        25
             Conclusion                                         31
             Recommendation to the Secretary of
                Health, Education,     and Welfare              32
             Qutreach program could be more effec-
                tive                                            33
              Conclusion                                        34
             Recommendation to the Secretary of
                Health, Education,     and Welfare              35
             Need to improve project       evaluations          36
              Conclusion                                        39
             Recommendation to the Secretary of
                Health, Education,     and Welfare              40

  3       POLICIES AND PROCEDURES      GOVERNINGELIGI-
          BILITY FOR PROJECT SERVICES SHOULDBE
          STRENGTHENED                                          41
               Need to strengthen     procedures used to
                 ascertain    family income                     42
               Uniform criteria     to be established  for
                 waiving income standards                       45
CHAPTER                                                        Page

                 Free care provided to persons who are
                   able to pay                                 46
                 Need to enroll project   beneficiaries
                    in Medi-Cal program                        48
                 Conclusion                                    50
                 Recommendation to the Secretary of
                   Health, Education,   and Welfare            50

   4       NEED TO INCREASEUSE OF EXISTING RESOURCES           52
              Project has replaced county hospital
                 services in target area                       52
              Conclusion                                       55
              Recommendation to the Secretary of
                 Health, Education, and Welfare                55
              Improvements needed to obtain available
                 reimbursements                                57
              Conclusion                                       59
              Recommendation to the Secretary of
                 Health, Education, and Welfare                60
   5       QUESTIONABLEADMINISTRATION OF PROJECT FUNDS         61
              Payments to medical group higher than
                provided by grant terms                        61
              Conclusion                                       63
              Recommendation to the Secretary of
                Health, Education,  and Welfare                63
              Payments to medical group not in accor-
                dance with grant provisions                    64
              Conclusion                                       67
              Recommendation to the Secretary of
                Health, Education,  and Welfare                67
              Questionable  salary payments                    68
              Conclusion                                       71
              Recommendation to the Secretary of
                Health, Education,  and Welfare                72
  6        SCOPEOF REVIEW                                      73
APPENDIX

  I        Characteristics   of project's   first-year   en-
             rollees                                           77
APPENDIX                                                            Page

  II       Medical facilities     and services      in King City,
             Greenfield,     and Soledad                             78

 III       Letter dated November 17, 1970, from the
             Assistant Secretary,  Comptroller,  Depart-
             ment of Health, Education,  and Welfare,
             to the General Accounting Office                       80

   IV      Letter dated January 22, 1971, from the Dep-
             uty Director,  Office of Economic Opportu-
             nity,  to the General Accounting Office                 81

       V   Letter dated February 22, 1971, from the
             Deputy Director,  Office of Economic Oppor-
             tunity,  to the General Accounting Office               85

  VI       Principal      officials   of the Department of
              Health,    Education,     and Welfare and the Of-
              fice of    Economic Opportunity      responsible
              for the    administration     of activities    dis-
              cussed    in this report                               88

                             ABBREVIATIONS

GAO        General    Accounting   Office

HEW        Department     of Health,   Education,    and Welfare

OEO        Office    of Economic Opportunity
COMPTROLLERGENERAL'S                    OPPORTUNITIES FOR IMPROVING THE SOUTHERN
REPORT TO THE CONGRESS                  MONTEREYCOUNTY RURAL HEALTH PROJECT, KING
                                        CITY,    CALIFORNIA
                                        Department of Health,  Education,         and Welfare
                                        Office  of Economic Opportunity          B-130515


DIGEST
--m--w


WHY THE REVIEW WAS MADE

     The Comprehensive    Health Services    Program is intended    to     find ways to           :
     break the cycle in which sickness       and poverty  reinforce       and perpetuate
     each other.    This grant-in-aid    program, under the Office         of Economic Op-
     portunity   (OEO), is a component of the Community Action            Program autho-
     rized by the Economic Opportunity       Act.

     Funding of the program and changes          in administrative    responsibility      since
     its inception are as follows:

         --For fiscal    years 1965 through 1970, OEO obligated     about       $220 million.
            For fiscal   year 1971 $99 million has been authorized.

         --In December 1970 responsibility   for 16 of 66 operational      projects
           was transferred from OEO to the Department   of Health,      Education,    and
           Welfare (HEW) which was to provide up to $30 million       in fiscal     year
           1971 to support those projects.

     The General Accounting  Office     (GAO) is making a series  of reviews    to de-
     termine  (1) the extent to which the objectives     of the program are being
     met and (2) how well (efficiently)      the program is being administered.

     This report    presents  GAO's findings    on the Southern Monterey County Rural
     Health Project,     King City, California.      The project is one of the 16 proj-
     ects transferred     to HEW and one of the few OEO-initiated     projects in
     which private    medical groups are involved      actively.

     The project     serves an agricultural     area, and about 35 percent        of those
     eligible    to participate   in the project     are migratory    workers.     The proj-
     ect was funded by OEO beginning         in July 1967.     For fiscal    years 1968
     through    1970, OEO provided     grants of about $3 million       to the project.
     For fiscal    year 1971 $1.5 million      has been authorized.

     During the period covered by GAO's review,           OEO's grants for the project
     were awarded to the Monterey County Medical Society,             composed of physi-
     cians who practiced     in Monterey County,        The medical   society delegated
     administration    of the project     to the Southern Monterey County Medical
     Group, Incorporated,      a private    group which is the major provider      of
     medical services     to the project.       In October 1970 a new corporation,




                                             1
     Rural Health Project,  Incorporated,                   war: formed        to admin-ist.yr      the prnject
     in place of the medical group.

    GAO was assisted   in its review by a medical officer    from the U-S.                                 Pub? ic
    Health Service,   who evaluated  the quality  of medical care provided                                  to
    project enrollees    and the adequacy of patient  medical records.


FINDINGS AND COBCLUSIOTJS

     The project       met certain         of its   short-range           objectives     by

       --enabling       low-income   persons to receive needed medical                        care    similar
          to that      provided   to higher income area residents,

       --providing       employment         and training      to area residents,

       --making use of several    existing     area                 health     care    agencies     and resources
          to provide needed services,      and

       --employing       new types of supporting              health         workers    to serve     its   en-
          rollees.       (See p. 16.)

     The individuals and families   enrolled   in the project    generally                            were satis-
     fied with the medical services    provided to them.      (See p. 19.)

     The project's       value     would     be enhanced      if     it    were to

       --offer       a more comprehensive           range    of services,

       --give      its enrollees       a greater   opportunity               to participate        in the proj-
          ect's      development      and operations,

       --gain      the support       of area residents             not enrolled        in the project,          and

       --devote  more effort   to developing a means for measuring its long-
          range impact on the health and economic status of its enrollees.
          (See pp. 17 and 18.)

    GAO found that opportunities     for improvement existed    in several    other
    aspects of the project.      The need for some of these improvements was
    noted previously  by an OEO evaluation     team.   As a result,   some improve-
    ments had been made, but there was still       a need for further   actions,    as
    follows:

    Organization        structum

    The project's   organizational       structure       needed to be changed because it
    did not provide controls        necessary to ensure that project         activities
    would be conducted effectively,          efficiently,      and free of potential    per-
    sonal and financial     conflicts     of interest.



                                                    2
Changes made in the project's       organizational      structure, including    the
establishment     of a new administering      agency in October 1970, to elimi-
nate the close relationship      that existed      between the project    and the
medical group, should provide better          control   over the management of
project   funds and activities     and should reduce the possibility         of con-
flicts   of interest.    (See p. 24.)

Preventive      care     services

The project      needs to (1) give more emphasis to providing,          and encourag-
ing its enrollees       to seek, preventive      medical care, such as physical        ex-
aminations      and immunizations,      (2) maintain    more adequate records of such
care, and (3) undertake        efforts     to improve the environmental     conditions
which contribute      to the enrollees'       health problems.     These activities,
although    difficult     and often sensitive      undertakings,   are essential     com-
ponents of a comprehensive          health services     program.   (See p. 25.)

Outreach      services

The project's     outreach    program --a program to seek out and enroll         the
poor and to provide       them with needed health care and information--could
be more effective      if the project     were to overcome the medical group phy-
sicians'   reluctance     to involve    nonprofessional      home health aides in the
program and if the project         were to attract      a sufficient    number of public
health nurses to staff        the program.

After    the close of GAO's fieldwork,        the project  installed     a referral
and follow-up     system which,     if made to work effectively,        also could im-
prove the outreach       program.     HEW should monitor   the new referral        and
follow-up    system to determine       whether it is effective       and should continue
to assist    the project     to strengthen    the program.     (See p., 35.)

Evahations        and owerationa2   data

Officials     at all levels would be able to better       manage the project    and
to better     assess its progress  if they had available      necessary  opera-
tional    data and adequate evaluations      of the quality   of medical care pro-
vided to enrollees      and of the effectiveness    of other aspects of the proj-
ect.

OEO and project        officials      were taking action      near the close of GAO's
fieldwork    to install         a new information     system which should assist        in ac-
cumulating     financial        and operational    data.     The project,     however, needs
to develop systematic            procedures    for evaluating     its effectiveness     and
for reporting       the results       of such evaluations      to management.       (See p. 40.)

Eligibility       and use of existing      resources

To ensure that project     funds        are used to the optimum       benefit    of the per-
sons eligible  to participate           in the project and that       existing    agencies
     and resources       are titilized        to th3 nlaxistw:t -Feazii,lP ~P::~SIIX, tiw project
     needs to (1) strengthen             its policies       and procedures     for d?termi ring eligi-
     bility   for project         services,      (2) utilize    al 1 available    county health ser-
     vices,   particularI;/        the county hcspital,         and (3) seek out 'and claim all
     reimbursements         available      from established      health programs, such as Vledi-
     caid and Medicare,           and from other funding         sources,    such as the county
     and insurance       companies.          (See pp. 41 and 52.)

     Ach7Xstration        of   project     fimds

     In its review of project  expenditures, GAO found that                           the following   ques-
     tionable  payments had been made to the medical group.

        --The project    paid the medical group between $37,500 and $50,000 more
           than it should have under grant terms for medical services            rendered
           to project   enrollees.      These overpayments   occurred   both because the
           medical group had billed       the project  at erroneous   rates and because
           billings   submitted    by the medical group at the physicians'      usual fees
           had been increased      by project  employees to higher rates.      (See ps 61.)

        --Through    February 1970 the medical society        authorized,    and the project
           paid, about $98,350 to the medical group without            OEO authorization
           and on a basis other than the OEO-approved fee-for-service              basis.
           These payments were made to cover costs claimed by the medical group
           to have been incurred      as a result    of the project.      The project     did
           not adequately    evaluate   the validity    of these claims,     and the medical
           group was unable to provide GAO with adequate documentation                support-
           ing them,     (See p. 64.)

     Also GAO is questioning             a number of the project's           salary      payments.    (See
     p. 68.)


RECOMMENDATIONSOR SUGGi?STIOi'LS

     The Secretary      of HEW

        --should    require   and assist   the          project     to expand, improve,        and more
           adequately     document preventive            health     care services  (see       p. 32),

       --should    monitor the outreach   program                 periodically   and should continue
          to assist   the project  in its efforts                  to strengthen   the program (see
          P. 3%

       --should     encourage and assist         project   officials       to undertake    systematic
          evaluations      of project   activities       and to develop procedures          for re-
          porting    results   to management at all levels              for planning    purposes
          and for dissemination       to other federally            assisted   projects    (see
          P. 4OL

       --should    require     and assist          the project     to strengthen       its policies   and
          procedures     for   determining          eligibility      for project      services   (see
          p. 50); and

                                                   4
      --should    stress   to the project  its responsibility        to make maximum fea-
         sible use of existing     agencies and resources,        including  the county
         hospital     (see ppO 55 and 60).

    GAO also is recommending to the Secretary       of HEW that project    operations
    be more adequately    monitored   (see pp. 60, 63, and 72) and that actions
    be taken to correct    the questionable   administration   of project   funds and
    to determine   the amounts of and recover     unapproved and unauthorized      pay-
    ments.    (See pp. 63, 67, and 72.)

    GAO believes     that HEW and OEO should consider        certain   of these   recommen-
    dations   for   application to other comprehensive        health   services   projects.


AGENCYACTIONS AND UNRESOLVED
                           ISSUES

    HEW stated   that GAO's recommendations          for changes were well taken, that
    it would continue     efforts      to correct  the deficiencies,     and that it would
    provide assistance      to strengthen      all aspects of the project.         HEW stated
    also that this report        indicated    areas in which the effectiveness        and ef-
    ficiency   of similar     programs could be improved.          (See app. III.)

    OEO indicated  agreement with all but one of GAO's recommendations--that
    of using the county hospital     whenever appropriate--and     described    actions
    which had been taken,   prior  to the transfer    of the project    to HEW, to
    improve some of the activities     covered in this report.       OEO incorporated
    in its response scme of the project      staff's  comments.    (See apps. IV
    and V.)

    With respect     to the use of the county hospital,      OEO stated    that the use
    of available     hospitals    must be considered   in the light   of individual"
    cases and the      prevailing   conditions  and that both the needs of the pa-
    tient  and the     goals of the project    should be taken into account.

    OEO stated,   however, that the project's        policies and practices      in this
    regard had been under a continuing        review aimed at furthering       the use
    of the county hospital     when indicated      and that some project    patients
    had been referred    to the county hospital.

    GAO believes   that,  to conserve limited     program funds and to ensure that,
    in accordance with congressional      intent,    the actual cost of institutional
    care would not be financed     under this program except in highly       unusual
    circumstances,    a concerted  effort   should be made to identify    all cases
    in which the use of the county hospital        would be appropriate.     (See
    p. 56.)




                                    /*   ._   e..   ,a
      In view of the interest    shown by members of Congress in antipoverty            and
      health services   programs, GAO is bringing      its findings    and observations
      to the attention   of the Congress for information        purposes and for con-
      sideration   by committees having responsibility       for these programs.


'-.
-1
                               CHAPTER1

                            INTRODUCTION

      The Southern Monterey County Rural Health Project,  lo-
cated in King City, began operation  in July 1967. The proj-
ect has been financed by the Office of Economic Opportunity
under its Comprehensive Health Services Program through
grants awarded to the Monterey County Medical Society,

       Through September 30, 1970, the medical society,             com-
posed of physicians      who practiced     in Monterey County, del-
egated the responsibility          for administering     the project
to the Southern Monterey County Medical Group, Incorporated,
a private    group practice     which was the major provider        of
medical services to the project.           On October 1, 1970, Rural
Health Project,    Incorporated--a       new, private,    nonprofit
health organization --was named to replace the medical group
as the projectlsadministering         agency.    The medical society
continued as the grantee and the medical group continued
as the major provider       of services.      The project   is one of
the few OEO-initiated       projects   in which private medical
groups are involved actively.

      Effective   December 14, 1970, the responsibility         at the
Federal level for administering     the project,     as well as 15
other operational    OM> health services projects,        was trans-
ferred from OEO to the Department of Health, Education,            and
Welfare in accordance with a Presidential        directive.

       The purpose of our review was to evaluate the effective-
ness of the project's     operations   and the manner in which
grant funds for the project       were being administered,     We
were assisted by a medical officer        from the U.S. Public
Health Service, HEW, who evaluated the quality         of some of
the medical care provided and the adequacy of patient          medi-
cal records.     Our review covered selected operations       of the
project   for the period July 1967 through May 1970.

COMPREHENSIVE
            HEALTH SERVICES PROGRAM

       The Comprehensive Health Services Program, intended to
find ways to break the cycle in which sickness and poverty
reinforce   and perpetuate each other, was authorized  as a

                                     7
specific  component of the Community Action Program by the
1966 amendments to the Economic Opportunity    Act of 1964
(42 U.S.C. 2701).    In authorizing the program, the Congress
broadened the neighborhood health center concept which had
been supported by OM) in 1965 and early in 1966 under its
authority  to finance demonstration  projects  designed to test,
or assist in, the development of new approaches or methods
to combat poverty through community action.

       The existing   authority   for the program, section
222(a)(4)    of the act, as amended, states that the program
is to aid in developing and carrying        out projects   focused
on the needs of urban and rural areas having high concentra-
tions or proportions      of poverty and a marked inadequacy of
health services for the poor.        According to the act, the
projects    are to be designed to make possible,      with the
maximum feasible     use of existing   agencies and resources,     the
provision    of comprehensive health services and the necessary
related   facilities   and services.

       The act states also that comprehensive health services
are to include preventive          medical, diagnostic,     treatment,
rehabilitation,        family planning,     narcotic addiction    and
alcoholism      prevention    and rehabilitation,    mental health,
dental,     and follow-up     services.     The act states, however,
that, in rural areas which lack elemental health services
and personnel,       less comprehensive services may be established
first.

       In addition,    the act states that the services are to be
made readily     accessible    to low-income residents        of the area
and are to be furnished        in a manner most responsive         to their
needs and with their participation          and that the services may
be made available      to all residents    of an area on an emergency
basis or pending determinations         of eligibility,        Wherever
possible,    the services are to be combined with, or included
in,arrangements     for providing     employment, education,         social,
or other assistance       needed by the families        and individuals
served.

       Further,  the act states that, before approving any
project,    the Director of OM) is to solicit    and consider the
comments and recommendations of medical associations        in the
area and is to consult with appropriate       Federal, State, and


                                    8
local health agencies.       Also, the Director      of OEO is to take
such steps as may be required        to ensure that the projects
will be carried on under competent professional            supervision
and that existing     agencies providing     related   services are
furnished   with all assistance      needed to permit them to plan
for participation     in the program and for the necessary con-
tinuation    of the related   services,

       Prior to its transfer     of 16 projects    to HEM on Decem-
ber 14, 1970, OM) had funded 66 comprehensive health services
projects,    of which 47 were in urban areas and 19 in rural
areas, and had provided funds for planning 17 additional
projects,    including   four in rural areas.     The projects
either fully or partially       operational   at that time were es-
timated by OM) to have over 650,000 enrollees;          when fully
operational     the projects  are expected to have over 1 million
enrollees.

       From fiscal   year 1965, when the first    OEO health ser-
vices projects     were funded as research and demonstration
efforts,   through June 30, 1970, OEO obligated       about $220 mil-
lion for the program.       For fiscal year 1971 $99 million      has
been authorized.      HEM is to provide up to $30 million      in
fiscal   year 1971 to support the projects     transferred   to it.
RURAL HEALTH PROJECT

         The project       was established        in July 1967 to demonstrate
and evaluate        the feasibility          of providing     comprehensive,       ef-
fective,      high-quality         health    care to low-income        families
through     the purchase         of services,       on a fee-for-service        basis,
from an existing           private      group practice     and other health        care
providers.        The project's          main offices     are located      in a motel
in King City.          (See picture,         p. 14.)

        The grantee      for the project          is the medical       society.
During    the project's        first      3 program years,       the medical     so-
ciety    delegated     responsibility          for administering        the project
to the medical       group,      which was the major provider              of medical
services     to project       enrollees.         Effective    October     1, 1970, a
new, private,       nonprofit        health    organization,       Rural Health
Project,     Incorporated,         was named to administer           the project     in
place of the medical           group.       The new agency will         contract
with the medical         group and other providers             for necessary
health    services.

      Financial    assistance       provided   or authorized     by OEO for
the project's    first      4 program years and the amounts of pay-
ments to providers        for physician      and hospital    services  ren-
dered to project       enrollees      are as follows:

                                                                     Payments to
Program                    Period                        Total        providers
 year                      covered                       amount       (note a)

      1          7- 2-67      to     6-15-68        $      704,399     $563,211
      2          6-16-68      to     6-30-69            1,064,646       640,384
      3          7- l-69      to     6-30-70            1,194,791b      575,470b
      4          7- l-70      to     6-30-71            1,491,814       651,625

aThe difference        between the total       amount and the amount of
 payments      to providers      represents    primarily     funds used for
 administrative        expenses     and for salaries       and related     ex-
 penses of public         health    nurses and nonprofessional         aides
 who travel      throughout      the project's      target   area to seek out
 and enroll      the poor and to provide          them with health       infor-
 mation    and home health         services.
b
    Amount   authorized.


                                               10
       The project's      target area covers approximately    2,100
square miEes in the southern part of Monterey County.             Per-
sons living    in part of neighboring       San Benito County also
are served.      (See map, p. 12.)       Employment in the area is
agriculturally      oriented,    serving more than 230 corporate
farms, processing       plants,   and food distributors.    Much of
the work is seasonal;         employment expands during the peak
harvest periods by about 6,000 persons, mostly migrant farm
workers, to complement the resident          population  of about
15,000.

       Project officials       estimate that, at any given time, be-
tween 4,500 and 6,500 persons in the area, of whom the ma-
jority   are from families       whose members are employed either
as field workers or as workers in related vegetable-
processing    activities,      are eligible  under the project    for
 free health care.        Project officials    estimate also that
about 35 percent of those eligible          are migratory workers.
The project's     enrollees     are predominantly    Mexican and
Mexican-American.

       A project    consultant    reported that, at the time of en-
rollment,     about 3 percent of the adults and 20 percent of
the children     who had enrolled       during the project's      first
year had never visited         a physician    or, in the case of some
adults,    had not visited      a physician     since childhood     and
that about 35 percent of these adults and 77 percent of these
children    had never visited       a dentist    or had not visited     a
dentist    since childhood.        Other characteristics      of the fam-
ilies    and individuals     enrolled     in the project    during the
first   program year are listed         in appendix I.

MEDICAL FACILITIES AND SERVICES
IN TARGET AREA

      At the time of our fieldwork,      the medical facilities
in King City, which had a population        of about 4,000 persons,
included the (1) medical group's clinic        (see picture,    p. 14),
(2) George L. Mee Memorial Hospital,        a community, voluntary,
nonprofit   hospital, (3) Pioneer Hacienda Nursing and Con-
valescent   Home, and (4) Home Health Care Agency.         There were
also one optometrist,    three dentists,     and a pharmacy.




                                   11
         Greenfield,       a town 12 miles north of King City with a
population        of about 2,000,      had a pharmacy and a suboffice
of the medical          group staffed    by two physicians.        Soledad,
about 20 miles north of King City,               was included    in the proj-
ectQs target         area from time to time.         It had one physician
and a pharmacy to serve a population               of about 4,000.       The
facilities        and services     in King City,     Greenfield,    and Soledad
are described         more fully     in appendix   II.

         Monterey     County has offered           to its residents        various
health     services,       such as immunization           and tuberculosis
     .
clinics,      p ublic    health      nursing,    both inpatient       and outpatient
care at the county hospital,                  and sanitation      engineering      ser-
vices.      Also,     after     the project      was operational,        the county
began offering         family      planning     services     to county residents
living     outside     the target        area.

FEDERAL ADMINISTRATION             OF I'ROJECT

         The Director     of OEO is responsible             for administering
and coordinating        programs       for combating        poverty.        He is re-
sponsible      also for establishing          basic policies            governing        OEO
operations       and programs       and for planning,          directing,         con-
trolling,      and evaluating        OEO programs.          The Office        of Health
Affairs,     a part of OEO's headquarters                organization,          is re-
sponsible      for directing        and coordinating          all OEO activities
concerned      with health      and medical      activities,          including        the
Comprehensive        Health   Services      Program and the projects                 as-
sisted     under that program.            For the 16 projects            that were
transferred       to HEW, the Secretary          of HEW has delegated                au-
thority     for their      administration       to the Administrator               of the
Health     Services    and Mental Health Administration.

       On September         30, 1970, we requested       the comments of the
Secretary       of HEW, the Director      of OEO, and the medical            so-
ciety     on the matters       discussed  in this report.          By letter
dated November 17, 1970 (see app. III),                the Assistant       Secre-
tary,     Comptroller,       HEW, stated  that,   although      certain    prin-
cipal     objectives      had been achieved,     changes were needed to
meet other        important    objectives   and to generally         improve op-
erations,       as well as to take corrective          actions.

       He stated       also that, since the project               would     be under
the   sponsorship       of HEW, HEW would continue               efforts     which
RURAL HEALTH PROJECT OFFICES
    KING CITY, CALIFORNIA




    CLINIC OF SOUTHERNMONTEREY
    COUNTY MEDICAL GROUP, INC.
        KING CITY, CALIFORNIA




              14
had been started to correct       the deficiencies      and would make
every effort    to provide assistance      to strengthen     all aspects
of the project.      He  stated  further   that  the  timeliness   of
the report would allow HEW to take actions to improve the
effectiveness     and efficiency    of similar   programs,

       By letters   dated January 22 and February 22, 1971 (see
apps. IV and V), the Deputy Director       of OEO provided us with
OEO's views,      The Deputy Director  stated  that the comments
received from the project      staff had been reviewed by OEO.

     We noted that selected comments from the project    staff
had been incorporated    into OEO's comments. We have included,
where appropriate , portions   of OEO comments in the body of
the report.
        Because HEW is responsible for the project,  recommenda-
tions    in this report are being made to the Secretary of HEW.




                                    15
                                CHAPTER    2


        OPPORTUNITIESTO INCREASEPRO.JECTEFFECTIVENESS

        Evaluating     the effectiveness      of a comprehensive health
services project requires           a measurement of how well the
project has achieved both its long-range objectives                 and its
 short-term     objectives.      Long-range objectives       comprise im-
proving the health,         social,   and economic status of the proj-
ect's beneficiaries         and changing the system of providing
health care, including          changes in long-standing       professional
practices     and in existing       community attitudes.       Short-term
objectives     comprise providing        comprehensive,    continuous,
family-centered,        accessible,    acceptable,    and high-quality
health care to low-income individuals              and families;    using
existing     agencies and resources to the maximum feasible              ex-
tent; and giving target-area           residents    an opportunity     to be
employed by the project and to participate               in decisions    con-
cerning its operations.

       The project has not operated long enough to fully mea-
sure achievement of its long-range objectives.           It has oper-
ated long enough to measure the extent to which it has
achieved some of its short-term     objectives,      the adequacy of
its plans, the direction     of its efforts    toward achieving its
long-range objectives,    and the provisions      it is making for
permitting   a more complete evaluation     of the achievement of
its objectives    at some later date.

        Our review, which included a review of patient medical
records by a Public Health Service medical officer,           showed
that the project had enabled low-income persons needing med-
ical care to receive care similar         to that offered to higher
income residents       by a private  group practice   and by other
providers,     such as Mee Hospital and the nursing home. The
project    also had provided employment and training        to target-
area residents;      had utilized   several of the existing    'health
care agencies and resources in the area; and had employed a
pediatric     nurse-practitioner    and physician assistants,     two
of the newer types of supporting        health workers, to serve
its enrollees.

      Opportunities existed,    however, for improving the ser-
vices offered to project     enrollees  and for improving other

                                    14
aspects of project     operations,   such as its organizational
structure,    its preventive    care and outreach activities,         and
project evaluations,      to enhance its value as a health care
provider   and as an experimental     effort.     The need for some
of these improvements, which would enable the project              to
more effectively    meet its objectives       and those of the Com-
prehensive Health Services Program, was disclosed             previously
by an OEO evaluation      team, Although some actions had been
taken by OEOand project,officials         and although some im-
provements had been made, further        efforts   were still     needed
to accomplish all the necessary improvements.

       In commenting on a draft of this report,    the Deputy
Director   of OEO stated that most of our conclusions    and rec-
ommendations were in line with OEO findings     but that the
project's   development, operations,  and accomplishments   must
be considered in the context of:
      --OEOls mission to develop and support innovative    ex-
         perimental projects,  in this case within the frame-
        work of an existing   private  system of providing health
         care.

      --The difficulties       frequently     encountered in developing
         health projects     in rural areas, such as shortages of
         accessible    medical resources and backup; long dis-
         tances; inadequate transportation;           and local atti-
         tudes adverse to new social programs, to persons on
         welfare,   and to minority       groups.

      --The objectives   of the Comprehensive Health          Services
         Program to support local efforts   that seek         to learn
         how to reach the goals set by OEO's program            guide-
         lines under a variety  of diverse conditions           and eir-
         cumstances.
IMPACT OF PRQJECT

        The project    provided medical services which were gener-
 ally accessible     to the individuals   and families    that it had
'enrolled   and with which the enrollees      were generally    satis-
 fied.    The project,     however, did not offer a full range of
 comprehensive services.        Also the enrollees   were not given
 the opportunity     to fully participate    in decisions    concerning

                                    17
the project's   development and operations.  Fbrther,    the
project had not gained the support of target-area     residents
not enrolled  in the project,  and it was not devoting much
effort  to developing a means for measuring its hong-range
impact on the health and economic status of its enrollees,

     We recognize that the project has made medical services
more readily  available  to,low-income    persons in the target
area; but, in our opinion,     the project has shown only lim-
ited improvement in methods of providing       health care,

Services   provided   to target    population

      Project officials     estimate   that,    at any given time,
between 4,500 and 6,500 individuals          eligible     for enrollment
in the project reside in the target area.              From July 1967
through February 1970, about 3,000 families             representing
10,319 individuals      were enrolled    in the project.       Project
records did not show the number of enrollees             who had re-
ceived services,     but project officials        estimated that about
60 percent of the individuals        enrolled during the first         30
months of the project had received some medical care.

       Mental health services were provided by a visiting    con-
sultant.     Dental services were not provided during the proj-
ect's first    3 program years because OEOwould not approve
the project"s    proposal to pay the local dentists  for pa-
tients who missed their appointments.

      Project officials      informed us that the incidence of
missed dental appointments by projectenrolleeswould                have
been quite high because enrollees werereluctant             to take time
off from work to go to the dentist           or to take a family mem-
ber.   For its fourth program year which began July 1, 1970,
the project   intended to routinely         provide dental services--
in the project's    proposed dental trailer         or, on a limited
basis, in private     dentists'    offices--to     eligible  children
between the ages of 4 and 14 years and to others on an emer-
gency or follow-up      basis.

      Physician services at the King City clinic     and the
Greenfield    suboffice and laboratory   and X-ray services at
Mee Hospital were offered from 9 a,m. to 5~30 porn., 5 days
a week. Evening clinic     hours generally   were maintained from

                                   18
May through         October at the King City clinic.        Service after
clinic      hours     and on weekends was available      to enrollees    at
Mee Hospital's          emergency room. Medical specialists         and
consultants         from cities  outside the target area visited         the
clinic      on a    scheduled basis.    When  requested,    the  project
provided its          enrollees with transportation      to the medical
facilities.

       Our interviews   with 52 systematically       selected persons,
each representing     a family enrolled      in the project,  indi-
cated that they were generally       satisfied    with the health
care that they or their families       had received through the
project,

Quality     of care provided

       Members of an OEO evaluation    team, on a 2-day visit        to
the project in March 1968, made a medical audit of the medi-
cal group's records on both private       and project patients.
The team also reviewed program operations,         management and
fiscal   operations,  community action,    and the role of the
medical society.     The team stated in its December 1968 sum-
mary report that there was no essential       difference      in the
medical care provided to private and project         patients    at
the medical group's clinic     and that, as far as the care went,
it was good. The team reported,       however, that certain addi-
tional medical services should have been provided and that
some services that had been provided had not been needed.

      The team reported also that the services of a pediatri-
cian and an obstetrician       particularly   were needed.      Subse-
quently,  a pediatrician      and a pediatric   nurse-practitioner--
the first   in California--were       hired.  Physician coverage for
adequate obstetrical      care deemed essential     by the OEO team,
however, had not been provided up to the time that we com-
pleted our fieldwork.

        The team reported further   that improvements especially
were needed in preventive     health services and that the clinic
staff's    coordination  with aides and outreach workers, or a
team approach to care, was not evident from the records that
it had reviewed.
               In March 1970 the Public Health Service medical offi-
       cer who assisted us in our review examined the clinicss
       records on 127 patients       selected at random and found that
       most of the deficiencies       cited by the OEO evaluation team
       still    existed,    The records examined included those of 78
       project    enrollees   and 49 private patients.

       Participation    of the poor

              The poor participated     in the project through training
       and employment but were not given the opportunity          to fully
      participate    in decisions     concerning the development and op-
       eration of the project,      contrary to OEOguidelines.        Project
      enrollees    were not permitted to select representatives         to
      the project's    policymaking     boards, nor were they given ade-
      quate opportunities       to select representatives    to the con-
      sumer advisory council,       which was to be composed of target-
      area residents    eligible    for the project and which was to
 7    function    in an advisory capacity on all aspects of the proj-
.:    ect.     Of the 52 persons whom we interviewed,       33 stated that
. .

      they had not been aware of the council or its meetings or
3     that there was a lack of information         about the council,

              OEO informed us in January 1971 that the governing
      board of the new administering      agency would consist of rep-
      resentatives     of the project's  enrollees    as well as represen-
      tatives    of the medical society,   the county's community ac-
      tion agency, the county supervisors,         and Mee Hospital's  aux-
      iliary.

      Support    of general   community

            Project officials     made only limited progress in obtain-
      ing support for the project       from target-area     residents    who
      were not enrolled     in the project.      Generally,    such residents
      were opposed to the project.         Project officials     told us that,
      to lessen the impact of this negative reaction,            they had
      attempted to carry out the project         in an inconspicuous      man-
      ner.   Medical group officials       told us that the project had
      caused some ill feelings      among its private patients        and
      that, as a result,      some of their patients were going else-
      where for medical treatment,




                                          20
Long-range   impact

       Regarding the project's     impact on the health and eco-
nomic status of its enrollees,        project officials     have
stated in project proposals that, over a period of time,
declines   in mortality  and morbidity       rates and in loss of
work time and income can be expected to result           from the op-
eration of the project.       Only  limited     data, however,   was
being accumulated by the project         for measuring its impact
in terms of these indicators.




                                  21
ORGANIZATIONAL STRUCTURE CHANGED TO PROVIDE
BETTER CONTROL OVER PROJECT ACTIVITIES

        The OEO-approved     organizational        structure     through
which the project       was administered        during     the period
covered by our review        did not provide         the controls      neces-
sary to ensure that project          activities       would be conducted
effectively,    efficiently,      and free of potential           personal
and financial     conflicts     of interest.        Certain    individuals
who held major administrative            and management positions
with the project       and/or whose salaries          were paid in whole
or in part by the project         were

        --major    stockholders  in, or persons who held key posi-
           tions   with or were employed by, organizations     from
           which   the project  purchased  services and space;

        --persons   closely related    to those holding                 key posi-
           tions with such organizations;      or

        --members     of committees       having major policymaking       and
           evaluation    responsibilities        for project  activities.

      Following the conclusion    of our fieldwork,         a number
of changes were made in the project!s        organizational       struc-
ture,  and on October   1, 1970, a new administering          agency
was designated  to provide    more extensive     and effective       pro-
gram and management direction     and control.

        The act provides       that,    to receive       financial        assistance
 to carry out a project,          the grantee        observe,      and require        or
encourage      other participating         agencies      to observe,         stan-
dards of organization,           management,       and administration            which
will    ensure,    so far as reasonably         possible,        that all proj-
ect activities        will   be conducted      effectively,         efficiently,
and free of personal          or family     favoritism.         The grantee         is
to adopt,      for itself     and other agencies           using funds or ex-
ercising     authority     for which it is responsible,                 rules    de-
signed to guard against           personal     or financial         conflicts       of
interest.

      In the original      application   for the project,     the medi-
cal group stated      that it intended     to be the grantee.     When
the medical  group was notified        by OEO that it could not be


                                          22
the grantee because it was a profitmaking    enterprise,   the
medical society agreed to become the grantee and the medi-
cal group was designated as the administering     agency.   Un-
der this arrangement the medical society was responsible
for the project  but the medical group controlled      it.

      The medical group is the major provider       of medical
services to the project,     which also purchases medical ser-
vices from Mee Hospital     and the nursing home. During its
first    3 program years, the project    purchased medical ser-
vices from these providers     at a cost of about $1.8 million.
For its fourth program year, the project        budgeted about
$650,000 for such services.       In fiscal   year 1969 project
patients    accounted for 34 percent of the medical group"s
work load.

       From initiation        of the project     through the period
covered by our review, the chairman of the board and medi-
cal director     of the medical group was also the project
director    and a member of the project            committee, the major
policymaking     body for the project.           In addition,    he was the
medical director        and a board member of Mee Hospital;           the
administrative       officer     of the nursing home; and a principal
stockholder     in a real estate investment company and a data
processing center, which leased office                space and sold data
processing     services,      respectively,    to the project.       He also
was a member of the eight-man health care projects                  commit-
tee of the medical society,            which was responsible      for over-
seeing project       activities.       As project     director,  he had
primary responsibility           for administration       of the project,
including    the development of overall            plans and of direc-
tions and procedures for implementing the plans.

       During the same period the medical group's administra-
tor was also the project's        financial    officer   and a member
of the project      committee.    In addition,      he had an ownership
interest    in the data processing       center and his wife was the
administrator     of the nursing home. As the project's             finan-
cial officer,     the medical group's administrator          was respon-
sible, with the project        administrator,      for coauthorizing
all project    expenditures.

       Obviously,  under such conditions         the organizational
structure    did not provide the controls         necessary to ensure

                                     23
the most efficient    use of OEO funds    and the   effectiveness
of the project.

      The project's    April 1970 application      to OEO for fund-
ing its fourth program year proposed that a new organiza-
tion, to be known as Rural Health Project,           Incorporated,  be
formed and be named as the administering         agency in place of
the medical group.      In September 1970 OEO approved the pro-
posed change, and on October 1, 1970, it was accomplished.
Also we were informed by OEO officials        in October 1970 that
the project   director   and the financial    officer     referred to
herein were no longer connected with the project.

Conclusion

     The project's     organizational   structure    through Septem-
ber 1970 raised questions of conflict        of interest    and did
not provide the controls      necessary to ensure the efficient
use of project    funds and the effective      achievement of cer-
tain objectives    of the Comprehensive Health Services Pro-
gram and of the project.

      The changes that were made in the organizational      struc-
ture after September 1970 should provide better control over
the management- of project    funds and activities  and should
reduce the possibility     of similar questions arising  regard-
ing conflicts  of interest.




                                  24
NEED FOR IMPROVEMENTIN
PREVENTIVE CARE SERVICES

        The project  needs to (1) give more emphasis to provid-
ing, and encouraging its enrollees        to seek preventive     care,
such as physical     examinations    and immunizations,    (2) main-
tain more adequate records of such care, and (3) undertake
efforts    to improve the environmental     conditions   which con-
tribute    to the enrollees'    health problems.     Preventive    care
services generally      are recognized to be especially       needed
in poverty settings.

       The initial      application     stated that the project          would
provide the medically          indigent   with comprehensive medical
and surgical       care, including      preventive     care services.
Physical examinations          were to be given to persons enrolling
in the project,        and the enrollees       were to be encouraged
thereafter    to have periodic         physical    examinations.       Also
preventive    care was to be practiced           by emphasizing nutri-
tion; immunization;         and prenatal,      postnatal,    infant,     and
child care.       Project enrollees       were to be educated on pre-
ventive health measures and on environmental                 sanitation.
Subsequent applications           for funds to continue the project
have repeated the need for, and the intention                  to provide,
preventive    health care.

Physical    examinations

       The project's     records showed that, during the first
2 program years when 8,169 persons were enrolled,             2,058
physical    examinations     had been given to project      enrollees.
Information     on all the 2,058 physical      examinations     was not
readily   available.      The project's   records,   however, showed
the following     information     on 842 physical  examinations
given to enrollees       during the first    10 months of the second
program year, during which time about 3,500 persons were
enrolled    for the first     time.

                 Type of physical   examination                      Number
        Complete examination of a new patient                         448
        Initial or subsequent examination for     a problem           347
        Complete reexamination                                         27
        Annual physical examination                                    20



                                         25
       The OEO evaluation     report issued in December 1968
stated that it did not appear that the project had made a
concerted or planned effort         to give complete physical      ex-
aminations to project       enrollees   during the early months of
their care at the clinic       but that components of such exarni-
nations had been given during enrollees'          periodic  visits.
The report recommended that the project          consider a policy
of offering     or scheduling complete physical       examinations
sometime within the first        3 months of enrollment    for all
patients    planning to remain enrolled.

       OEO health officials     worked with the project  staff to
act upon the recommendation, but the Public Health Service
medical officer,   who reviewed patient records in March 1970,
found that the problem still       existed and that very few rec-
ords showed that complete physical        examinations had been
given to project patients.        He stated that the physical ex-
aminations that had been given usually had been requested
by the patients'   employers.      He stated also that many pa-
tients had visited     the clinic many times for various prob-
lems without ever having been given complete physical         exa-
minations.

      The former project director  told us that, because of
the limited medical staff available,    the project's     goal of
giving physical  examinations to all enrollees      could not be
met. We were told that more physical      examinations   could
be given if the project and the medical group had a system
whereby physical  examinations could be scheduled throughout
the year.
Inrmunizations

       It generally  is recognized among medical professionals
that immunizations     are one of the most effective     forms of
long-term preventive      care.   One-time immunizations    are con-
sidered effective    in providing    protection against certain
diseases;   a series of immunizations and periodic       boosters
usually are considered necessary for complete protection
against other diseases.

        Available   records showed that many project   enrollees
had been given immunizations against such diseases as diph-
theria,    d-moping    cough, tetanus, smallpox, measles, and

                                 26
pa1ic.1 but that the number of enrollees  receiving the pre-
scribed range and number of imr~unizations considered nec-
essary for ,grotection  against certain of these diseases had
been relatively    Pow.

      For example, the California     State Department of Public
Health recommends that, for protection      from diphtheria  and
tetanus,  a series of three combined shots (four for children
under 5 years of age) be given during a l-year period fol-
lowed by a booster every 5 years for children       and every 10
years far adults,    For children    under 5 years of age, a per-
tussis antigen for protection     from whooping cough is to be
added to the combined shots,

      Project records showed that, during the first      2 program
years when 8,169 persons were enrolled,      1,369 combined shots
had been given for protection    from these diseases.      Qf the
1,369 shots, 538 were given at mass imunization       clinics
and the remainder were given during normal office visits.
Project record s were not maintained adequately to determine
which of the shots or boosters,     except those given at the
mass immunization clinics,    had been given to each patient.

       Further,  the need for a more adequate immunization pro-
gram was noted by the OEO evaluation        team which reported
that only two of the 21 children      included in its review of
pediatric    care had received al.1 the immunizations     that
should have been given.      The team recommended that a pa-
tient immunization checklist      be established,    but such a
checklist    had not been established    at the time of our field-
work e
Sanitation   and housing

       Program guidelines    state that sickness and poverty
reinforce    each other and that the poor usua11y live in eon-
ditions,    such as crowded and unclean housing and inadeq,o.ate
heating and sanitary      conditions,     which undermine physical
and mental health,      Therefore,     the guidelines    state that
the concern of the project        staff for the health of the tar-
get population    should include work with the community to
promote needed changes in the target-area           environment.
Pictures of some of the farmworkerss labor carr~ps and housing
that we observed are on pages '28 and 29.


                                27
.,.                          __./       -;

      ‘..-:                                    .
                  “..            j!.’
              :         \   .;




                                               FARMWORKERLABOR CAMPS
                                             NEAR KING CITY, CALIFORNIA




                                                       28
       FARINWORKER     HOLE ING
NEAR    KING   CITY,    CALIFORNIA
       The project's  health education supervisor        told us that
crowding and unsanitary      conditions     were a health problem in
the target area.     s1-le said that the labor camps in the area
originally   had been set up for single men who came from
Mexico to work under the bracero program--a foreign labor
import program ended in December 1964, under which Mexican
nationals   entered the United States to work as agricultural
laborers.     Some of the buildings      were erected during World
War II.    When the bracero program ended, families           began to
migrate into the area to work during the growing and har-
vest seasons; these families        were housed in the same build-
ings that had been used by braceros.           The supervisor    stated
that many labor camp owners required that a certain minimum
number of workers live in each structure          and that therefore
many units and food preparation         areas were shared by several
families.

       Project officials        told us that they had not made any
direct efforts        to improve the environmental    conditions   of
the target population         because such efforts  would risk con-
frontation     with the ranchers and labor contractors,          They
said that any efforts         to improve the poor conditions     might
result    in loss of the project's       access to the ranches and
labor camps and in increased resentment of the general com-
munity toward the project,          which would cause a further    loss
of private     clinic    patients.

       A medical society official     informed us that he did not
believe that the project was qualified        to handle the non-
medical aspects of health,      such as sanitation    and housing.
The associate project director      told us that the project had
not become involved in the housing problem because no money
had been budgeted for such activities.




                                 30
Conclusion

       Available    project  records      indicated  that physical        ex-
aminations had been given to a            large number of project         en-
rollees   but that the project's          goal of providing     initial     and
periodic    physical    examinations      to all project    enrollees      had
not been accomplished.

        The project   lacked the records necessary to determine
the extent to which its enrollees         had been protected  against
diseases through immunization.          Available records indicated,
and the OEO evaluation        team pointed out, that the project
had not given adequate emphasis to the dmelopment of an ef-
fective    immunization    program.

       Project officials   recognized   that the poor environmental
conditions    in which a large segment of the target popula-
tion lived were conducive to poor health,         but they had not
undertaken,     as part of a preventive    health program, system-
atic efforts     to improve sanitation    and housing.

      We recognize that the poor traditionally                have sought
and used health services on an emergency basis or for spe-
cific   illnesses      and that changing their attitudes           and prac-
tices is not an easy task.             Also effecting      improvements in
environmental       conditions     that undermine physical        and mental
health is an expensive,          difficult,      and often sensitive     under-
taking.      Providing     preventive       care services,   encouraging
the poor to use them, and attempting               to improve environ-
mental conditions,         however, are integral         and essential   com-
ponents of a comprehensive health services program.

       Immunizations     and early diagnoses through physical     ex-
aminations are of great benefit         in attempting  to prevent
disease and disability       and can reduce the need for more
costly care, such as hospitalization.           Also improving the
environmental     conditions   in which a person lives can have
a major and long-range       beneficial   effect on his physical
and mental health.




                                     31
          Therefore     the project      should

           --give   closer   attention     to preventive   care services,

           --encourage   its enrollees   to seek and use available
              health services on a regular and systematic     basis
              rather than on the traditional    emergency basis,

          --maintain   adequate       preventive  care records to show
             the care required        and received by each project  pa-
             tient,  and

           --make an effort  to improve the environmental           condi-
              tions in which project  enrollees live.

     HEW should assist the project    in these efforts  and should
     encourage project  officials   to work with State and local
     agencies having responsibility     for improving environmental
     conditions.

     Recommendation to the Secretary           of
     Health, Education,  and Welfare

            HEW, through the Health Services and Mental Health Ad-
     ministration,    should require and assist the project   to make
     a concerted and systematic     effort to expand, improve, and
     more adequately    document the preventive  care services pro-
     vided to its enrollees.



             The Deputy Director of OEO stated that OEO agreed with
."   the recommendation and that substantial     staff and consultant
.:   efforts    had been aimed at helping the project  to achieve its
     goals.




                                          32
OUTREACHPROGRAM
              COULDBE MOREEFFECTIVE

       Under the project's     outreach program, public health
nurses and nonprofessional        home health aides were to travel
throughout the projectIs       target area to seek out the poor,
encourage them to enroll,       and provide them with needed health
information   and home health care.         The health care aspects
of the program were not very effective,          however, because
 (1) the medical group physicians        were reluctant   to involve
the nonprofessional     home health aides in the health care
system, (2) the project had been unable to attract           a suffi-
cient number of public health nurses to the area to staff
the program, and (3) a referral        system by which the physi-
cians could routinely      request the outreach workers to
follow-up   on patients    in their homes had not been developed,
The need for a more effective        outreach program was reported
previously   by the OEO evaluation       team,

      Outreach services have been funded by OEO since initi-
ation of the project.        According to project proposals and
OEO publications,    outreach services are important in provid-
ing preventive    and follow-up      health care and education and
in encouraging and assisting         eligible    persons in the target
area to seek available        services,      Also the nonprofessional
aides can contribute      firsthand     information    on the problems
of the target area and its people.

        Further,    using outreach workers for home follow-up      ef-
forts can reduce demands on the time of the more highly
skilled     members of the health care team and in some instances
can reduce the patient's         length of stay in a hospital   or
other institution        by permitting  him to remain at home or to
return home sooner than otherwise would be possible.            To be
effective,      outreach services should be adequately staffed
and fully     coordinated    with the professional   medical staff
so that the physicians        can use the outreach workers to con-
tact and follow up on patients.

      At the conclusion   of our fieldwork,      six of the 67 proj-
ect employees --one public health nurse and five health edu-
cation aides --were directly     involved in outreach health ser-
vices, such as visiting     patients    in their homes, conducting
health education classes, and assisting         at tuberculosis  and
immunization clinics.     In addition,     12 employees--nine

                                   33
community health           aides and three drivers--provided            non-
health-related          outreach    services,    such as determining        eligi-
bility,      conducting       a census,    and providing    transportation,
A public      health     nursing    program,    essential   to providing
health-related          outreach    services,    had not been initiated,
however,      because the project          had been unable to attract          a
sufficient      number of nurses.           Also health   teams had not been
established,        although     the approved grants      provided      for such
teams.

        We were informed         in our interviews      with project        em-
ployees,     and the Public        Health    Service   medical    officer     who
assisted    us in our review noted,             that coordination        between
the professional        medical     staff    and the project's        outreach
workers    had been negligible.             There appeared to be two major
reasons for this.           First,   necessary      mechanisms,     such as a
routine    referral     system by which the physicians             could request
outreach    workers     to follow      up on patients,      had not been de-
veloped.       Second, the physicians          would not have received
fees for the time that they might have spent involving                        out-
reach workers        in the health       care system.      Also the former
project    director     informed     us that the use of nonprofessionals
to provide      health    care would have added to the risk of mal-
practice    charges.

         The OEO evaluation         team reported           that the project's           out-
reach workers,        although      highly       motivated,       had been under-
utilized      and that increased           use of these workers               for refer-
rals and home follow-ups             might have resulted                in greater      ben-
efits     to the patients,          The team recommended to project                     of-
ficials     that (1) the roles           and functions           of ancillary        and
paramedical       employees,      including        the outreach           workers,    be
reassessed       so that their        activities        would be more effective
and more closely         related     to physicians'            activities        and (2)
an administrative          program be undertaken               to increase         commu-
nication      between the physicians              and the paramedical              employ-
ees.

        We were informed     by the former project      director    that
each physician     had determined     the extent     to which he relied
upon the aides.       We also discussed     outreach    efforts    with
several    clinic  physicians     and other project     officials,      who
agreed that the outreach        concept had not been fully         imple-
mented.


                                             34
Conclusion

        The health care aspects of the project's         outreach pro-
gram were not very effective         because (1) the physicians     were
reluctant    to involve the outreach workers in the health care
system, (2) the project       had been unable to attract       enough
public health nurses       to staff the program, and (3) a refer-
ral system had not been developed.            In a draft of this re-
port   s we expressed   the belief    that OEO, which had responsi-
bility    for the project    at that time, should make every ef-
fort to assist the project         (1) to recruit   the personnel re-
quired for an effective       home health care program, (2) to in-
clude the outreach workers in the health care system, and
 (3) to increase the outreach workers' coordination            with the
professional     medical staff.      Accordingly,   we made proposals
to that effect.

        OEO informed us in February 1971 that it agreed with
our proposals and that the OEO staff had made continuing              ef-
forts to help the project        strengthen    its outreach services,
OEO stated that the project         staff recently   had completed
installation      of a referral    and follow-up   system, that one
facet of the system was the education of the medical profes-
sionals concerning      the skills     of the outreach workers, and
that the outreach workers were being given additional             train-
ing to enhance their skills.
       We believe that HEW, to which responsibility          for admin-
istering    the project    was transferred      in December 1970, should
monitor the project's       recently   installed    referral and
follow-up     system from time to time to determine whether it
is effective      and should continue to assist the projetit      in
its efforts     to strengthen    its outreach program.

Recommendation to the Secretary          of
Health, Education, and Welfare

       HEW, through the Health Services and Mental Administra-
tion, should monitor the project's    outreach program period-
ically   and continue to assist the project   in its efforts  to
strengthen    the program.




                                    3s
NEED TO IMPROVE PROJECT EVALUATIONS

        Although       an OEO team evaluated            the project       in March
1968,     internal      and external       evaluations        planned by the proj-
ect either       were not made or were limited                  in scope.     The re-
sults     of the evaluations          that had been made by the project
were not reported            formally    to officials         responsible     for ad-
ministering        the project.         Also the project          did not develop
adequate procedures             for accumulating,          analyzing,      and report-
ing base-line          and operational       data necessary           for monitoring
and evaluating--         either     by project      officials      or by others--
its progress         in carrying      out approved plans and in achieving
objectives.

        Officials       at all levels       would be able to better          manage
the project         and to better       assess its progress       if they had
available        necessary     operational      data and adequate       internal
evaluations         of the quality       of medical     care provided      to en-
rollees      and of the effectiveness            of such other aspects          of
the project        as its accessibility,           acceptability,     comprehen-
siveness,        enrollee    involvement,       and use of available         manpower
and existing         resources.

        Evaluations     in themselves     do not necessarily         improve
projects;      however,    if based on accurate        and reliable      data
and if properly       made and reported,        they should apprise         man-
agement of the achievements           of a project       and should pinpoint
those aspects which could be improved.                 In addition,      the
results     of evaluations       of demonstration-type       projects,      such
as this one, can be beneficial            to other ongoing projects           as
well as to planning          for new projects,

         The Congress amended the Economic Opportunity                        Act in
1967 to require             the continuing       evaluations      of antipoverty
activities,         including       health    projects.       The initial       applica-
tion of the project--             as a demonstration         project--stated
that project          officials      would arrange        for a number of evalua-
tions,      including        medical    audits    of the services         provided.

       According     to the application,     these evaluations       and
medical    audits    were to cover such aspects         as the quality,
adequacy,     coordination,   and continuity       of health   care;     the
completeness      and clarity   of medical     records;    the reasonable-
ness of costs and charges;         the extent     of patient   satisfaction;


                                           36
and the adequacy of the overall                program9 including     enroll-
ment procedures,        eligibility        policies,    scope of services,
qualifications       of staff,       quality     control measures, staffing
patterns,      accessibility,        and relations      between staff and
patients,       Tn addition,        the application      stated that the proj-
ect would accumulate and analyze base-line                   and operational
data, such as statistics             on the incidence of disease, dis-
ability,     and infant mortality;           the number and characteristics
of persons enrolled           and treated;       and the services provided,

       The evaluations,     according to the application,     were to
be made by a medical care consultant;          the medical society;
the medical staffs of the medical group, Mee Hospital,            and
the nursing home; and the consumer advisory council com-
prising   project   enrollees.      These evaluations,   with few ex-
ceptions,    were not made or were limited        in scope.

        A limited   evaluation   was made by a medical group physi-
cian who had reviewed patient         records during the initial
stages of the project        to determine their completeness and
clarity.       This evaluation   was one of those provided for in
the application,        He told us that some of the records did
not show such information        as the patient's    major complaint,
the diagnosis,      the treatment,    and the physician's    impressions.
He said that he had attempted to encourage the other physi-
cians to record this information          but that his efforts    had
not been productive       because the physicians     would not cocp-
erate. He stated that he had discontinued           the review due
to the lack of cooperation         and to his increasing    work load
but that he was planning to resume the review with the as-
sistance of the medical group's medical records supervisor.

        Another medical group physician        informed us that he had
initiated     a review of the length of patientsO hospital           stays
because the amount of OEQ funds that could be used for hos-
pitalization      was limited,     The length of hospital     stays was
one of the aspects of the project          bearing on costs and
scope of services which was to be evaluated according              to the
application.        The physician   stated that he had not made any
formal reports but that he had confronted            the attending    phy-
sicians in an effort        to reduce the length of project       patients1
hospital     stays.




                                      37
            He stated that, according to the statistics,      his efforts
     had been successful.       Our analysis  of project records on
     hospitalization    showed that the average length of hospital
     stay for project    enrollees   had decreased from 5.8 days dur-
     ing the period July 1967 through June 1968, to 4.3 days
     during the period July 1968 through June 1969, and to 3.7
     days during the period July through December 1969.

            The OEO evaluation     team commented on the limited     inter-
     nal evaluations    of the project's    medical aspects.      The team
     reported that little      effort  had beem made in internal     medi-
     cine to set up formal case reviews or audit procedures.
     The team recommended to project       officials that a medical
     audit and review committee be established       for critical      chart
     reviews and case studies and that an organized program be
     undertaken   to encourage the improvement of medical practice.

            The Public Health Service medical officer   who assisted
.I   us noted that neither    the medical society nor the medical
i    group had made any quality    control and program reviews above
     a perfunctory    level, He stated that "The absence of ongoing
     internal   reviews not only fails to monitor quality     but also
     serves to isolate physicians     from one another ***.I'

              A medical society official     told us that the medical
     society had not made onsite reviews of medical records which
     were planned but that, after January 1970, a committee of
     eight physicians     was to begin such reviews.        In May 1970 the
     official     told us that these reviews had been initiated        but
     that a formal system for reporting          weaknesses to management
     for corrective     action had not been developed.        The project's
     budget for its program year which began July 1, 1970, in-
     cluded funds for activities         to expand the medical society's
     medical audit and review functions.
            Regarding the accumulation     and analysis Q$ base-line
     and operational    data, the project's    medical care consultant
     issued a report in March 1970 summarizing background infor-
     mation on persons who had enrolled       in the project during its
     first   program year,    He disclaimed responsibility   for the
     accuracy of much of the data, however, because of errors in
     interviewing,    coding, card punching, or translation.




                                       38
       Also, in response to OEOrequirements,       the project
submitted quarterly     management reports   to OEO showing opera-
tional    data, such as the number and characteristics       of per-
sons enrolled    and treated;   the number of patient    encounters
with physicians,    nurses, or other project    employees; the
number of referrals     to other providers   of service;    and
the number and type of X-ray examinations,       laboratory     tests,
immunizations,    and diagnoses.

      The project's      data processing    supervisor,  who was in-
volved in preparing       these reports from project     records,   in-
formed us that the reports contained          inaccurate  and mislead-
ing information     because necessary data had not been obtain-
able, had not been obtained,        or had not been included in
the reports.     Project officials      told us that they did not
use the reports     in their managaent of the project.           OEO
health officials      informed us that the quarterly      reports had
proven to be almost worthless         and that changes were being
made in the report format and requirements.,

       The OM) evaluation   team expressed concern over the lag
in the project's    data collection      and processing   system and
recommetided that the project       staff pay more attention       to the
collection   of data and give a higher priority         to the develop-
ment of computer programs for processing patient           history
and care data.

        During the latter     part of our fieldwork,   OED initiated
action to install,       with the aid of a contractor,     a new in-
formation      system for the project.     In January 1971 OEO of-
ficials     informed us that the system had been installed         and
that the project      was reviewing bids for a local contractor
to process the data.         The new system, which also is being
installed      at several other OEO health service projects,         is
designed to provide financial        and operational   data on a
uniform basis.

Conclusion

        In addition  to providing    high-quality   health care, the
project    is intended to demonstrate and test new and different
ways of providing      such care to the poor.      Therefore it is
essential    that evaluations     be made of project    operations    and
of the extent to which the project         is achieving    its objectives.


                                   39
Such evaluations,      if based on accurate and reliable      data and
if properly    made and reported,     should be useful in improving
project   operations--     such as the reductions  in the length of
patients"   hospital     stays achieved as a result of the medical
group physician's      review-- and should be beneficial    to other
ongoing projects      and to planning for new projects.

      The new information      system should assist in accumulat-
ing necessary financial       and operational   data.     The project,
however, needs to develop and follow systematic procedures
for evaluating    its effectiveness--including        such aspects
as the type and quality      of care provided--and      for reporting
the results    of such evaluations      to management.
Recommendation to the Secretary        of
Health, Education, and Welfare
       HEW, through the Health Services and Mental Health Ad-
ministration,     should encourage and assist project       officials
to undertake    systematic evaluations     designed for measuring
the extent to which the project        is meeting its objectives
and to develop procedures for reporting         the results    to man-
agement at all levels for planning purposes and for dissemi-
nation to other federally      assisted projects,      The Deputy Di-
rector of OM) said that OEO agreed with our recommendation.
In January 1971 OEO informed us that the project's           budget
for its fourth program year which began July 1, 1970, had
included funds to expand the grantee's        medical audit and
review functions.




                                  40
                                 CHAPTER3

                 POLICIES AND PROCEDURES
                                       GOVERNING

                 ELIGIBILITY     FOR PROJECTSERVICES
                        SHOULDBE STRENGTHENED

       The project's      policies      and procedures governing deter-
minations of eligibility           for project    services should be
strengthened       to preclude (1) families        whose incomes exceed
applicable      income limitations        being determined to be eligible
for free cares (2) inconsistencies              in decisions  regarding
whether standards should be waived to permit certain                  indivi-
duals to receive free care, and (3) persons being provided
with free care who, according to State standards,                are con-
sidered to have sufficient            financial   resources to pay for
certain portions       of their medical care costs,          In addition,
project    officials     should continue the systematic         efforts     be-
gun in January 1970 to help persons appearing to meet cri-
teria for assistance        under other programs to establish            eligi-
bility    for such assistance,

       Program guidelines       provide that all persons receiving
OEO-assisted health services meet a test of need by reason
of circumstances    of poverty and that only persons residing
in the designated     target area may receive regular care,          The
determination    of eligibility        is to be made in a manner that
will maintain the dignity          of the individual.    Although deter-
minations do not have to be made when the need for medical
care is acute, determinations            are to be made as soon there-
after as feasible.
       In making eligibility        determinations,    the guidelines
provide that each project          establish    income criteria   and that
one of the following       criteria     be applied:
       1. OEO's poverty-line        index.

       2. Standards     of the State Medicaid        program,

       3. Standards of other local antipoverty    health             and wel-
          fare programs which are integrally   involved              in the
          project's  operations.

                                       41
            in addition,    the guidelines     state that persons why ap-
     parently    meet the criteria     for assistance     unt':er the State
     Medicaid or other p~lic        assistance     programs and who are not
     so certified     shouLd be helped to establish        eligibility    for
     such assistance.
.B
.*          The project"s    applications,     which were approved by OEO,
.I
     stated that eligibility        for services would be based on in-
     come and famik:y-size      standards of Medi-Cal--California's
     Medicaid program-- and that calculations          of income would be
     made on the basis of the U-month period prinr to the per-
     son!s or family"s     date of application      for enrollment.   The
     applicants"    representations      of income were to be accepted
     without substantiating        documentation.

             Exceptions to the standards were to be made in cases of
     current destitution     or very serious medical problems so that
     the family would not be forced into serious deprivation       be-
     fore being eligible     for project  services.   Also persons po-
     tentially    eligible for Medi-Cal benefits    were to be encour-
     aged to apply for such benefits.

     NEED TO STRENGTMEX  PROCEDURES
     USED TO ASCERI'AIN FAMILY INCOME

            Because project officials     generally  did not question or
     independently   verify applicants"     reported family incomes9
     families   with incomes substantially      over applicable income
     standards were enrolled     in, and received free care from, the
     project.

            Project officials    informed us that information         on a fam-
     ily's   annual income generally      was obtaimed from a respon-
     sible family member by a community health aide at the time
     of application     or when a family's       eligibility   status was re-
     evaluated.     The family's    annual income often was reported by
     the applicant    as a single amount although members of the
     family may hav e worked for many employers.             Project officials
     informed us that the reported income amowts rarely were
     questioned    or independently    verified.

           To determine the accuracy of family incomes reported at
     the time of ini"sfa1 application     or reevaluation      of eligibil-
     ity,  we obts!*rcti income information    for  86  families   from


                                       42
employers’   records and other records.    The number of fam-
ily members in these families    ranged from oneto14.    For 17
families   we were unable to obtain information   on the incomes
of all family members, although we did obtain information     on
the incomes of the members who appeared to be the principal
wage earnerso

       In analyzing    the available    information     for the 86 fam-
ilies,   we found that 19 families        each had an annual income
exceeding the applicable       standards by at least $1,000.         Of
these 19 families,       15 had reported incorrect        incomes to the
project   interviewer;     adequate information      was not available
in project    records to enable us to determine the accuracy
of reported incomes for the other four.             Information   on these
19 families     is shown below.
                                                           Amount by which ac-
                                                Income     tual income exceeds
           Number                     Re-    eligibility      Re-
              of         Actual    ported     standard     ported   Eligibility
Family    persons        income    income      (note a>    income    standard
    A            9      $14,616    $4,844        $5,220    $9,772     $9,396
    B            9       12,386     5,173         5,220     7,213      7,166
    C           14       12,014     5,600         6,540     6,414      5,474
    D            9       10,377     4,760         5,220     5,617      5,157
    E            2        7,760     4,151         3,372     3,609      4,388
    F           11        6,931       (b)         5,748       (b)      1,183
    G            7        6,817     1,500         4,692     5,317      2,125
    H            8        6,653       (b)         4,956       (b)      1,697
    I            5        6,515     4,000         4,164     2,515      2,351
    J            8        6,435       (b)         4,956       (b)      1,479
    K            6        6,225     4,000         4,428     2,225      1,797
    L            4        6,126       (b)         3,900       (b)      2,226
    M            2        6,186     3,400         3,372     2,786      2,814
    N            3        6,030     3,500         3,636     2,530      2,394
    0            4        5,734     4,000         3,900     1,734      1,834
    G            12       4,878
                          5,030     2,000
                                    1,650         1,944     3,380      3,086
                                                  3,372     2,878      1,506
    R            3         4,695    4,500         3,636         195    1,059
    S            1         4,173    1,800         1,944     2,373      2,229

 "Per Medi-Cal        standard.

b Information     not available.




                                            43
      Our analysis  of the above differences showed that they
generally  had occurred because incomes of one or more fam-
ily members had not been reported and/or only parts of some
family members' incomes had been reported.

       Project officials      stated that their procedures for ob-
taining    information    OLI family incomes did not ensure com-
plete disclosure       of income and that families     having incomes
substantially      above those allowed had been enrolled       on the
basis of erroneous statements,          while families  who were
barely over the applicable         income standards and who had cor-
rectly   reported their incomes were generally         not enrolled.
The officials      stated also that their policy of not question-
ing statements of income had evolved as a result of QEO's
policy of not erecting barriers          to needed health services.




                                44
UNIFORM CRITERIA TO BE ESTABLISHED
FOR WAIVING INCOME STANDARDS

       The project     did not have uniform           criteria       to be used
in determining      whether,      because of financial            problems      or
medical   needs, families         whose incomes exceeded applicable
income standards       should be enrolled.            As a result,        some fam-
ilies   in such situations         were enrolled,         while other       families
who appeared     to have equally          severe problems         or needs were
not enrolled.        In addition,       decisions     to include        or not in-
clude certain      family    members'       incomes in the total          family
income were made on a case-by-case                basis.       Project    officials
informed   us that uniform         criteria      for making such determi-
nations   would be established.

       In   implementing      the policy      of not forcing          families       into
serious     deprivation     before    extending       aid, project        officials,
on a case-by-case         basis,   enrolled       families      with incomes ex-
ceeding     applicable     standards     who were destitute             at the time
of application         or who had very serious            medical     problems.
During the second program year,                for instance,        40 of the ap-
proximately       1,075 families      who were initially            enrolled       re-
ported    incomes exceeding        the applicable           standards     by $56 to
$1,700.      Enrollment      of these families           appeared     to be war-
ranted    on the basis of their           financial       problems      and medical
needs.      However, a number of families                who appeared to have
equally     severe problems       or needs were not enrolled.

       In one cases for example,         a four-member         family   applied
for enrollment    in the project      on two occasions--in             April
1969 when the father       was hospitalized        and in May 1969 when
it was learned    that he could not work for at least                  a year.
On both occasions,     the project       determined      that this       family
was not eligible     because the father's          reported       income for
the preceding    12 months had exceeded the applicable                   income
standard   by $600.     In  January    1970    the   family      again   applied
for enrollment    in the project       and was enrolled;            by that time
the father    had worked only 3 of the preceding                 12 months and
not at all after     May 1969 and his reported              income for that
period   had been only $800.

       Also eligibility      determinations      for families having
several     major income-producing        members were not handled
consistently.         For example,   in the case of a family     of'four--


                                             45
which included two working sons aged 24 and 25, who lived
at home-- the reported total family income of $6,300 ex-
ceeded the standard of $3,600 by $2,700.         The 24-year-old
son who reported earnings of $3,500 was considered sepa-
rately    from the family and was determined to be ineligible.
The combined reported       income of the other family members,
including     the 25-year-old    son, was then below the standard
and they were determined to be eligible.

       The supervisor    responsible    for eligibility         determina-.
tions, who was hired in late 1969, took steps to apply uni-
form standards to those applications          which required special
attention.     We also discussed this matter with the project
administrator,     who told us that he would take action to
correct    the inconsistencies      in determining.eligibility.

FREE CARE PROVIDEDTO PERSONSWHO
ARE ABLE TO PAY

      Because it did not fully follow the eligibility       stan-
dards it had adopted and because it did not maintain ade-
quate records,    the project    enrolled and provided free medi-
cal care to some persons who,according       to State standards,
had sufficient    financial   resources to pay for certain por-
tions of their medical care and for whom the State was re-
sponsible    for paying the remainder.

         Under Medi-Cal standards,        persons needing financial
assistance        for medical care are placed in one of two groups.
Persons who need full financial             assistance      are placed in
group I,     and     persons  who,  because   of   their    income and/or
existing     assets,      need only partial     financial      assistance     are
placed in group II.           For each person in group II, the State
establishes,         on a monthly or quarterly        basis, an amount--or
deductible--which          the person must pay before Medi-Cal as-
sistance can be received.            The project,      however, although
it adopted Medi-Cal income standards as its criteria                      for
eligibility,         does not make a distinction         between group I
and group II persons.

       Project records showed that at least 25 families      were
enrolled    in Medi-Cal's   group II and that these families   had
monthly or quarterly      deductibles under that program ranging
from $13 to $157. These families       were enrolled  in the


                                       46
project    and were therefore    eligible    for full    financial    as-
sistance     from the project   for the cost of their        medical   care.
Because    of the fragmented    billing   records,    we did not at-
tempt to     analyze each case to determine        the full    cost to the
project    for medical   care provided    to these persons.

        In analyzing      one case, however,         we found that the pa-
tient    was certified        as eligible      for Medi-Cal   benefits       ef-
fective     May 1, 1969, at which time the State determined
that the patient        had the ability          to pay the first     $69 of his
medical     costs each month.           During May 1969 the patient           re-
ceived medical        services    at the clinic        that cost $94.50.          In
addition     to paying the patient's             $69 Medi-Cal   deductible        be-
cause a distinction           had not been made between group I and
group II persons,          the project      also paid the remaining          $25.50
for which the State was responsible,                 because project       records
had not shown that this amount was in excess of the patient's
deductible.

       Project  officials      told us that it was their          policy     to
pay all medical       expenses of persons who met the eligibility
requirements    of the project.         They stated       that the person's
deductible,    which the project        did not recognize,        occurred
because other health        programs    considered     a person's      assets,
whereas the project        based eligibility       solely     upon income.




                                          47
NEED TO ENIKLL PRXECT BENEFICIARIES
IN MECI-CAL SIi&XWi   -

       During it, first      2-l/2 years, the project did not m.ike
 a systematic effort       or establish    formal procedures to iden-
'tify  eligibl, a families    and aid them in enrolling           in the
 Medi-Cal program.       Because program funds cannot be used to
 finance services for which support is already available,
 program guidelines      provide that CEO-assisted projects              help
 persons who apparently meet the criteria            for assistance un-
 der the State Medicaid or other public assirtance                  programs,
 and who are not so certified,          to establish    eligibility       for
 such assistance,

        Because the project did not have the necessary records,
we were not able to determine the total number of project
enrollees     who were eligible    for Medi-Cal but who were not
enrolled     or the cost of medical services provided to these
enrollees,      We noted, however, in reviewing the applicati~ms
of 211 families     who were initially     enrolled during the
3-month period ended March 15, 1969, that the applications
of 44 families     with dependent children       indicated  that the
fathers of the families       were unemployed at the time of ap-
plication--one     of the criteria     for Medi-Cal eligibility.

      Of these 44 families,   eight had informed the project
or the clinic   that they were enrolled   in the Medi-Cal pro-
gram. The records for the other 36 families      did not indi-
cate that the project had made an effort     to determine their
Medi-Cal status and, if they appeared to be eligible      but
were not enrolled,   to assist them in enrolling    in the Medi-
Cal program.

        We discussed these 36 cases with county welfare depart-
ment officials     who, at our request, reviewed the depart-
ment's files.      They found that six of the families were en-
rolled at that time in the Medi-C,al program.             Neither the
project nor the medical group's clinic,            however, had a
record of their enrollment,          The county officials      stated
that the remaining 38 families,           on the basis 0: information
in the applications         for the enrollment    in the project,     ap-
peared to have been eligible         for Medi-Cal at the time that
their applicatEons        for enrollment    in the project were sub-
mitted,     The officials      were able to determine from their

                                    48
files  that 11 of these 30 families had been enrolled            in the
Medi-Cal program at one time or another.

       Because project records were not always maintained    on
a family basis, we could not readily     determine the total
amount that the project had paid for medical services pro-
vided to these 36 families;     however, in reviewing two cases
we noted that the project    had paid $276 for medical services
provided to the families    during the time that they were eli-
gible for Medi-Cal,
        The project hired a person with prior county welfare
department experience,      and in January 1970 he initiated          a
review of enrollee     records to identify     families   potentially
eligible    for the Medi-Cal program.      He identified    35 such
families    and took action to assist them in applying for the
Medi-Cal program.      Project officials    informed us in Novem-
ber 1970 that the procedure had been continued           in subsequent
months.

        Project and medical society officials        informed us also
that complying with Medi-Cal procedures and filling           out ap-
plication     forms were complicated     and time-consuming   for the
applicant     because his eligibility     had to be redetermined
monthly.       The officials stated also that the county welfare
department would not identify         for them the residents    of the
project's      target area who were enrolled     in the Medi-Cal pro-
gram.



       Project officials       told us that they would initiate      ac-
tion to correct the several weaknesses in determining             eligi-
bility    that we had noted during our review.          They pointed
out, however,       that   the solution  to these  problems  was not
simple and that they had to consider OEO's policy of not
erecting     barriers    to needed services as well as the more
stringent     State and county policies      regarding   free health
care under the Medi-Cal program,

     OEO health officials informed us that they recognized
that the project might be paying for medical services ren-
dered to persons eligible for Medi-Cal benefits  but that the



                                   49
difficulties     and barriers   in applying       for   the Medi-Cal     pro-
gram should     also be considered,

CONCLTJSION

       The project    did not establish      adequate policies     and
procedures governing eligibility,            Thus families   whose in-
comes substantially       exceeded established      income limitations
received free care; decisions          on waiving standards in cases
of need were inconsistent;        and persons received free care
who, according to State standards,           had the means to pay for
portions    of their care.     Also the project      did not maintain
records adequate for ensuring that the State was billed                for
medical care for which it had the responsibility             to pay, and
only a limited     effort   was made prior to January 1970 to as-
sist persons potentially       eligible    for health programs to en-
roll   in them.

        We recognize that there are difficulties          and barriers
 in applying for the Medi-Cal program and that, in making
eligibility     determinations      for care under the project,      some
flexibility     is needed so that persons who are destitute            or
who have very serious medical problems are not denied needed
medical care.       These considerations,      however, were not ger-
mane to all the cases coming to our attention,             nor should
they be used by project        officials    as a basis for not making
greater efforts      to assist applicants      in applying for enroll-
ment in other health programs.

       Appropriately     applied eligibility        standards provide
equitable    treatment not only for persons in similar                economic
circumstances      but also for persons in varying economic cir-
cumstances within the overall         eligibility       limits.      Enrolling
ineligible     persons or using project         funds to pay for care
which should be paid for by the individuals                or by a third
party diverts      funds from the target population             which the
program was designed to serve.

RECOMMENDATIONTO THE SECRETARYOF
HEALTH, EDUCATION, AND WELFARE

       HEW, through the Health Services and Mental Health                Ad-
ministration,     should require and assist the project     to
strengthen    its policies   and procedures for determining


                                     50
eligibility     for project   services,    to maintain records ade-
quate to ensure that the State is billed           for medical care
for which it has the responsibility           to pay, and to continue
efforts     to assist enrollees     in applying for programs for
which they are eligible,



        OEO agreed with our recommendation and stated that the
revised eligibility    procedures instituted    during January
1970 were part of a concerted effort       to improve the adminis-
trative   procedures of the project.




                                  51
                                       --CEM'TER 4

            NEED TO INCRIL4SE-I___
                                USE OF EXISTING RESOURCES

        Because program        funds     may not be used to support            health
care services3       facilities,         or equipment     for which support           is
available     from other         sources9     the act and program guidelines
provide    that a project          seek out and use existing            resources
to the greatest        possible       extent.     Our review      showed that the
project    had rt.:placed        some services     that had existed         in the
target    area prior       to the projectIs        being established          and
that the project        needs to make additional             efforts      to obtain
reimbursements       from other sources responsible                 for making
medical    care payments.            These matters     are discussed        below,

PROJECTHAS REPLACEDCOUNTYHQSPT.TALSERVICES
m??i@kAREA      --
        Rather than utilize      existing       services     available        at the
county hospital--     as required       by the act, program guidelines,
and conditions      of the grant--the         project      substantially           re-
placed the county hospital          as a source of institutional                    care
for its enrollees.        The medical        society     submitted       certifi-.
cations     to OEO that project       services       would be in addition
to, not in substitution        for,     services      previously       provided
without     Economic Opportunity        Act assistance.

       The act requires         that the Director           of OEO satisfy       him-
self,   before    approving       assistance      for such programs as the
Comprehensive       Health     Services     Program,      that the services         to
be provided     will    be in addition         to, and not in substitution
for,   services     previously       provided     without     Federal    assis-
tance.     Further,     the act and program guidelines                call   for
comprehensive       health     services     to be provided       with the maxi-
mum feasible      use of existing          agencies     and resources.

       In accordance   with the intent       expressed      by the Senate
Committee    on Labor and Public    Welfare      in its report        on the
1966 amendments to the act which first             authorized     the Com-
prehensive    Health  Services  Program,      program guidelines          pro-
vide that the actual      cost of institutional         care not be fi-
nanced with program funds except in highly              unusual     circum-
stances.
        The grant agreements        state   that program funds are the
last-dollar       source and that the project"s          agreements   with
public      and private    agencies    which purchase     or provide    health
services       or supplies   to low-income      persons   in the target
area are to be designed           so that the project       does not bear
health      care costs which would otherwise           be the responsibility
of such agencies.

        The county has the responsibility             to provide          medical
care to county residents           who do not have the ability                to pay,
In addition,       the county has agreements          with hospitals,            in-
cluding     Mee Hospital     in King City,     under which the county
provides     reimbursement     with certain      limitations,           for the
cost of emergency care rendered             to persons       eligible       for free
county hospital        care.   The project,      however,        did not make
appropriate       use of the county hospital           services       and did not
develop     procedures     to ensure that the clinic             and Mee Hospi-
tal billed      the county,    rather    than the project,            for services
which had been rendered          to project     enrollees        but for which
the county had been responsible             for payment.

        During      its first        3 program years,         the project       spent,
exclusive        of clinic        physicians8      fees,    about $627,000 for in-
patient       services      provided       to project      enrollees      at Mee Hos-
pital.        Project     officials        told us that patients            were not re-
ferred      to the county hospital               because it was 50 miles dis-
tant,    the patients          would lose continuity             of care,     and the
county had established                a policy     of billing       patients     for all
services.         Although        these are mitigating           factors,     we believe
that,     in view of the costs incurred                  for hospital        services
and the provisions              in the Senate report            and program guide-
lines,      these factors           should not be the sole determinants                of
where a patient           is provided         with inpatient        care,

        The project     provides      transportation           to the clinic        and
Mee Hospital      for its enrollees,           some of whom live              35 miles
from King City.         For nonemergency           hospitalizations            and those
which are not of a highly             unusual      nature,       transporting       en-
rollees    to the county hospital,             a distance          of 50 miles or
less for most prefect           enrollees,       seems not be a major prob-
lem.     We recognize       that continuity         of care is an appropriate
and desirable       objective,      but we believe           that such an objec-
tive must be balanced           against     the limited          amount of program
funds.


                                            53
       Regarding      the county's        policy      of bil.lizg    patients       for
ali services?       project.    officials        told us that the county had
an oRLigation       to provide        medical      ser vices to the needy but
that liens      were required         by the county if the patient                owned
real   property     and that all patients              not eligibY..e     for welfare
were billed      for services         provided.        These officials         also
said that the county tended to reduce its services                           to the
extent    that another       activity       was willing        to provide      them.
These officials         told us also that the county had expressed
an unwillingness          to pay for care provtded               to patients      cov-
ered by the project.

        We discussed      with project    personnel   some cases in which
it appeared       that persons could have been referred          to the
county hospital.           In two of these cases, which cost the
project    over $6,000,        the persons were enrolled      in the proj-
ect after      being admitted       to Hee Hospital.    Although    proj-
ect personnel        agreed that the county hospital        would have
provided     treatment       in most of such cases, they stated        that
an effort      had not been made to send these persons to the
county hospital         because the project     would pay for the ser-
vices o

         OEQ officials   told us that these problems         were symptom-
atic     of OEO health   service   projects,     They said that,      where
existing     services  in the target       area are considered     inade-
quate,     OEO health  programs should provide        the services
needed.      They agreed,    however,    that reimbursements     should
be sought from other health          programs whenever the responsi-
bilities     of such programs are being met by an OEO health
program,

       In responding     to our request     for the comments of his
department    and the county hospital         on this matter,      the Di-
rector   of Public    Health     of the Department     of Public     Health,
County of Monterey>          by letter  dated October 27, 1970, in-
formed us that,      notwithstanding     the provisions      of the act,
it 'was, and continued        to be, the county@s understanding
that the project      was experimental      and that i.t was intended
to replace    the modest program of health          services    that were
being provided     by the county to residents          of the project%
target   area at the time the project          was inaugurated.




                                          54
        The director    stated, however? that the county hospi-
talQs contract with Mee Hospital for the provision                  of emer-
gency hospitalization         services still     existed and that the
county health department, which previously               had conducted
immunization clinics        in the project's       target area, supplied
the materials      for the conduct of the clinics           but that the
vaccine was administered          by the projectIs      representatives.
He stated also that a representative             of the county health
department's     nursing division       previously     had periodically
visited    persons in the area having a need for her services
but that,with      the advent of the project,          such visits    were
stopped, since the county had determined that there was no
longer a need for nursesO visits.
Conclusion

      Rather than utilize     existing    available   services--as      re-
quired by the act, program guidelines,           and conditions     of the
grant agreements-- the project has paid for institutional
care for its enrollees     that traditionally       has been provided
by the county to those unable to pay for such care.               Fur-
ther, the project has not required the institutions              provid-
ing the care--the   clinic    and Mee Hospital--to      seek reim-
bursement for these services,        contrary to the terms of the
grants.

       To limit the use of already scarce program funds, the
project   should attempt to fully utilize    county hospital ser-
vices and should require the clinic      and Mee Hospital to seek
reimbursements from the county for medical services which
the county is responsible   for providing.

Recommendation to the Secretary            of
Health, Education, and Welfare
        HEW, through the Health Services and Mental Health Ad-
ministration,     should require the project   to develop proce-
dures to ensure that the county, rather than the project,
is billed whenever appropriate      for care rendered at the
clinic    and Mee Hospital and that the county hospital    is
utilized    for nonemergency hospitalizations    and those which
are not of a highly unusual nature.



                                     5.5
        The Deputy Director   of CEO stated that OEO was in par-
tial    agreement with our recommendation.     He stated also
that, although substantial      resistance  had been encountered,
efforts    were being continued to obtain reimbursements     from
the county and others for care rendered at the clinic        and
Mee Hospital.

       With respect to use of the county hospital,          however,
the Deputy Director       stated that the appropriate      use of the
available     hospitals   must be considered in the light of the
nature of individual        cases and the prevailing     conditions
and that both the needs of the patient          and the goals of the
project    should be taken into account.        He stated further     that
the policies      and practices   of the project    in this regard
had been under a continuing        review and discussion      aimed at
furthering     the use of the county hospital       when indicated.
He stated,     for example, that 68 project      enrollees   had been
referred    to the county hospital,      63 for outpatient      care and
five for inpatient       care, between January and December 1970.

       We realize    that the nature of individual     cases and the
prevailing    conditions   must be considered in determining       the
use to be made by the project       of the county hospital.       We
continue to believe,      however, that consideration     must also
be given to the limited      amount of program funds and the in-
tent expressed by the Senate Committee on Labor and Public
Welfare in its report on the program"s authorizing          legisla-
tion that the actual cost of institutional         care not be fi-
nanced under this program except in highly unusual circum-
stances.

       The fact that some persons have been referred            by the
project    to the county hospital   indicates     that utilization     of
the county hospital     sometimes is appropriate.        We believe,
therefore,    that a concerted effort     should be made to iden-
tify those cases in which utilization          of the county hospi-
tal would be appropriate      and consistent     with the provisions
of the Senate report and program guidelines           and to refer
these persons to the county hospital         for care,
IMPROVEMENTS NEEDED TO OBTAIN
AVAILABLE F!.EIMBURSEMENTS

       The project        did not establish        procedures        adequate       for
ensuring      (1) that it would be adequately               reimbursed       during
its first      program year by other programs responsible                       for
payment for services           rendered     to project      enrollees       and
 (2) that,     during     subsequent     program years,        claims     would be
submitted      promptly      by the clinic       and Mee Hospital,         before
being submitted         to the project,        to other health         programs         or
organizations        responsible      for paying      for medical        care.,       In
addition,      the project       did not take steps to submit claims
to, or to have the clinic             and Mee Hospital         submit claims
to, private       insurance      companies     and the county,         which are
responsible       for payment for medical            services      rendered       to
some project        enrollees.

        As previously       stated,     the act and program guidelines
require     that health      projects      make maximum feasible         use of
existing      agencies     and resources       and provide      that program
funds be used as a last-dollar               resource.       Both the guide-
lines     and the conditions         of the grant require          that health
projects      make arrangements         to obtain     reimbursements      for
 services     which are provided          by them but which should be
paid for by other          sources that are responsible              for provid-
ing financial        assistance      for such medical        care.

        Due to a lack of reliable             project   records,    we were
unable to determine          the full     cost paid by the project          for
services     provided     to project      enrollees    who were eligible
for financial       assistance       under other health        programs,    such
as Medicare       and Medi-Cal,        or from other      sources,    such as
private    insurance      companies      and the county.         It appeared,
however2 that savings           of program funds could have been re-
alized    had the project        fully    utilized    these other programs
and sourcesc

         During    its first    program year,       the project     paid the
clinic     and Mee Hospitalforall            services    rendered     to its en-
rollees,        The clinic     and Mee Hospital        were to seek reim-
bursements       from other health        programs,     primarily     the Medi-
Cal program,         and remit    the amounts so collected          to the
project.        The project,     however,     did   not  maintain     records   to
show the reimbursements             due from the clinic         and Mee Hospital,

                                           57
     and therefore    it was unable to ensure that all amounts due
     were received.     We were unable also to make this determina-
     tion.

           In October 1967 a medical society official    suggested
     that the project establish    procedures adequate for record-
.:   ing reimbursement receivables.      The need for such proce-
     dures was discussed by the project's     auditor in a letter
     dated March 12, 1968, to the medical society.      Such proce-
     dures, however, were not established     during the first    pro-
     gram year.
           Instead, project  officials    changed the existing    reim-
     bursement arrangements at the end of the first        program year
     to provide that the clinic      and Mee Hospital initially    bill
     the other programs and bill the project only for those ser-
     vices and those enrollees     not covered by the other health
     programs.

           To determine whether the revised arrangements were
     working satisfactorily,    we reviewed bills     for $6,000 for
     services provided to 20 project     enrollees     (randomly se-
     lected) who were eligible    for the Medi-Cal or Medicare pro-
     grams at the time services were provided.          Had adequate
     procedures been in effect,     the project    should not have paid
     any medical services provided to these persons if the ser-
     vices were covered by the other programs.
            For 12 of the 20 persons, however9 the project had
     been billed     and had paid about $1,000 for drugs and for
     hospital     and physician  services which should have been paid
     for by the Medi-Cal or Medicare programs.            The clinic's   ad-
     ministrative     personnel told us that these erroneous billings
     had been caused by the clinic's        lack of current Medi-Cal
     and Medicare eligibility      information      and that project en-
     rollees    had not always properly     identified     themselves as
     being eligible     for these programs.

           Also some services      which should have been paid for by
     Medi-Cal were paid for      by the project because the clinic
     had not submitted the      claims to Medi-Cal within the pre-
     scribed time limits.,      Again, because of the inadequate re-
     cords, we were unable      to determine the full amount of such
     payments,
      Further,    the project had not developed procedures
adequate for obtaining,      or for having the clinic  and Mee
Hospital   obtain,   reimbursements available  from such sources
as the county and private      insurance companies.   (The situa-
tion with respect to the county was discussed previously.)

       Private insurance plans often cover at least part of
the cost of medical services,        the recovery of which would
reduce the amount of program funds expended by the project.
The project,     however, made little    effort  to obtain reim-
bursements from private     insurance companies.      Although, be-
cause of inadequate records, we were unable to determine
the full amount which the projectmighthave          realized   from
private    insurance companies, we noted a number of cases in
which project enrollees     had been covered under private        in-
surance plans but in which no effort         had been made to seek
reimbursement.
      For example, in one case the project paid $775 for
medical services provided to an enrollee whose husband was
employed by a local business firm.    We estimated that about
$220 of this amount was recoverable   under the firmvs in-
surance policy which covered the family.,    The project's re-
cords, however, did not show that the family had private
insurance coverage, and therefore   a claim had not been made.

      Project personnel informed us that, in the past, the
methods used to identify    those persons covered by private
insurance plans had not been effective.         They stated, how-
ever,   that the  project was making   an effort   to identify in-
surance coverage of project enrollees.        They stated also
that the project had determined that 65 of the approximately
235 local employers provided insurance coverage for their
employees and that the project     planned to take action to
see that claims were directed     to the insurance companies
when appropriate.

Conclusion

       The project  did not establish   procedures adequate for
ensuring that all available     reimbursements were obtained
from other health programs and organizations       responsible
for payment for medical services rendered to project         en-
rollees.    As a result,  program funds were used to pay for

                                  59
services    which    should    have been paid       for   by these    other   re-
sources.

        In previous    reports     to the Congress      (B-130515,
March 18, 1969, and B-130515,             December 19, 19691, we stated
that there was a need for OEO to assure itself                 that,    in ac-
cordance    with conditions        of the grant,    reimbursements
available     from other     sources were obtained        by health    proj-
ects whenever possible.            Accordingly,    we  recommended     that
the Director,       OEO, through     his cognizant     program office,
ensure that health        projects     claim reimbursements        from third
parties    where appropriate.

        In commenting      on this matter       in October      1969, OEO in-
formed us that its health           staff     had been working       with HEW
and local      officials    in helping      to complete      arrangements       to
collect     Medicaid,    Medicare,     and other reimbursements.             OEO
stated     that the substantial        resources      devoted to this ef-
fort    had resulted     in the completion          or development       of ar-
rangements      for obtaining      Medicaid     reimbursement       for 42 of
OEO's then-existing         44 health     projects,     including      its King
City project.

        The arrangements      that have been made, however,         are of
little    value if the health          projects   do not make vigorous,
continuous,      and timely     efforts      to seek out and obtain    the
available     reimbursements.

Recommendation    to the Secretary          of
Health, Education,     and Welfare

         HEW, through     the Health   Services    and Mental Health      Ad-
ministration,        should reemphasize      to the project      its respon-
sibility      to seek out and obtain       reimbursements      from third
parties      where appropriate      and monitor    the project's     per-
formance      in this regard.

                                    - - - -

             OEO agreed with our recommendation             and indicated
that efforts     to encourage   and facilitate      billing     of Medi-
Cal, Medicare,      and other third-party      sources had received
substantial    attention    and would be continued.
                             CHAPTER5

         QUESTIONABLEADMINISTRATION OF PROJECT FUNDS

        The following   questionable  transactions    came to our
attention     in our review of selected aspects      of the adminis-
tration    of project   funds.

PAYMENTSTO MEDICAL GROUP
HIGHER THAN PROVIDEDBY GRANT TERMS

       The project paid the medical group an amount--estimated
by us at between $37,500 and $50,000--for      medical services
rendered to project enrollees    at rates higher than those
provided by grant terms, because billings      had been made at
erroneous rates or because billings     submitted at lower rates
had been increased to maximum rates by project       personnel.
OEO began negotiating   with the medical group in early 1970
for the repayment of a part of these overpayments.         OEO in-
formed us in January 1971 that the negotiations       were contin-
uing.

       According to the approved grants,      the fees paid by the
project   to the medical group and other providers       of medical
services were not to exceed,    without   the   written  approval
of OEO, rates charged to private     patients    or rates under the
Medi-Cal program, whichever were lower.

       During the period covered by our review, the Medi-Cal
program provided that payments for each medical procedure
be based on the physician's     actual fee, which was not to ex-
ceed a rate established     by formula.    The formula (California
Relative Value Studies) provided for assigning        a unit value
to each medical procedure and for a conversion        factor,     ex-
pressed as a dollar amount, which might vary by county or
area.    The conversion  factor for Monterey County was $6.
The unit value, when multiplied      by the conversion    factor,
resulted    in the maximum rate allowed in the county under
Medi-Cal for a given medical procedure.

     For the 15-month period from June 1968 through August
1969, however, the medical group's bills    to the project were
based on a conversion  factor of $7, or, in some cases, more
than $7. The certified    public accountant who reviewed the

                                   61
second-year grant (CEO requires that grantee records be au-
dited by independent accountants)     reported to OEO in Octo-
ber 1969 that project  administrative     personnel had estimated
that overpayments of between $30,000 and $40,000 had been
made during the U-month period ended June 30, 1969, be-
cause of the use of higher conversion factors.       Therefore
we estimate that, for the entire 15-month period, overpay-
ments of between $37,500 and $50,000 were made by the proj-
ect.
        We were informed by the project's  former financial   of-
ficer,   who was also the medical group's administrator,     that
billing    the project at the higher rates had been an error
but that the medical society,     which was to review all
charges to the project,    had not informed him until    June 1969
that the wrong conversion factor had been used.

       Despite the medical society's    notification, however,
the project     did not take action to have the medical group
discontinue     this practice or recover the overpayments.     The
project   continued to make payments at the higher rates
through August 1969. Early in 1970 OEO began negotiating
with the medical group regarding the amount to be refunded.
OEO informed us in January 1971 that the matter was still
being negotiated.

        Additional    costs were incurred also because, during the
period September through December 1969, the former project
administrator      instructed      the project clerks to raise all
medical group bills        to the maximum amounts allowed by Medi-
Cal.     For example, a bill         for $4 for a routine office        call
submitted by the medical group would be raised to $6, the
maximum allowable for this type of service.                  The former
project    administrator      told us that he had directed          the in-
creases because he believed that, since the medical group's
billings     could not exceed the maximum allowable rate, it
should not bill at a lesser rate.               According to our calcula-
tions, during the month of September these additional                  costs
totaled about $630.         We   did    not determine    the  amounts   for
the other 3 months.

      We informed the former project   administrator   that the
approved grant stipulated   that the project    pay the lesser
of the physician"s   fee or the Medi-Cal rate, and in

                                    62
January 1970 he instructed   the staff to discontinue   increas-
ing the amounts billed.    The project, however, had not made
an effort,  through the close of our fieldwork    in May 1970,
to obtain  refunds from the medical group for these overpay-
ments.

Conclusion

        Because of noncompliance with the conditions   of     the
grant, arbitrary    administrative  determinations,  and    the
failure    of the medical society to promptly carry out       its
responsibilities,    the project paid the medical group      more
than it should have for medical services rendered to         proj-
ect enrollees.
Recommendation to the Secretary     of
Health, Education, and Welfare
        HEW, through the Health Services and Mental Health Ad-
ministration,      should take action to determine and recover
the full amount of the projectIs      overpayments to the medical
group for services rendered to project        enrollees  and make
periodic     reviews of project  expenditures   to ensure that
billings     are correct and that overpayments are avoided.



        The Deputy Director,   OEO, stated that OEO agreed with
our   recommendation;   that the project   had sought to recover
the   excess payment to the medical group; and that OEO, pend-
ing   the resolution   of this matter, had withheld   funds to
the   project.




                               63
PAWS     TQ I!EDIC& GRQUP
NIT IN AGCORBANCE  WITH GRANTPROVISIONS

       Provisions  of the grants limited   the projeetBs payments
to the medical group to amounts billed under the fee-for-
service concept unless otherwise authorized        by OEQ. Through
February 1970, however3 the medical society had authorized
and the project had paid $98,350 to the medical group on
other than a fee-for-service     basisa and without OEO authori-
zation,   for costs which the medical group claimed it had in-
curred as a result of the project.       These payments were made
without an adequate evaluation     by the project    of the valid-
ity of the claims, and the medical group was unable to pro-
vide us with adequate supporting      documentation   for them.

      The provisions   of the grants required that all payments
made by the project    to the medical group be on a fee-for-
service basis and that project     funds be spent in accordance
with the QED-approved budget.      The grants further  stipulated
that any proposed revisions    in the budget items be submitted
to QEO in writing    and be approved by GE0 in advance of the
proposed expenditures.     These stipulations  were not met for
the payments in question,    nor was there any written    justifi-
cation showing the basis for the medical society"s      authoriz-
ing the payments.

       Of the $98,350 in question,   project records showed that
the project   had paid $31,000 on the basis of the medical
groupBs claim that it had incurred losses due to hiring         six
physicians   on a temporary basis in 1967 and 1968 to serve
project patients    at the clinic  during evening hours.     The
remaining $67,350, according to the project's      reeords,repre-
sented payments amounting to 20 percent of the medical
group"s indirect    salary costs (salary costs of nonmedical or
supportive   personnel)   from June 16, 1968, through Febru-
ary 28, 1970, to cover increased overhead costs claimed by
the medical group.

      Regarding the $31,000, we were informed by the proj-
ect's former financial    officer, who was also thk medical
group@s administrator,    that only two of the six physicians
had staffed   the evening clinic.   Also the project had paid
the medical group for the services of the six physicians      on


                                64
a fee-for-service      basis.  Nevertheless the medical society
authorized     the entire $31,000 to be paid from project   funds.

       The project"s   former financial    officer    informed us that
he had computed the loss of $31,000 on the basis of the dif-
ference between the six physicians'        salaries    plus related
overhead costs     and the total billings     made for the services
rendered by the six physicians        to both project     and private
patients.    He was unable to provide us with documentation
supporting   his computation.      Also medical society officials
did not have any records showing the basis on which the med-
ical society had authorized      this payment.
       The only record provided to us of any discussion    with
OEO officials    on the payment of the $31,000 was the former
project   administrator's  memorandum of his telephone conver-
sation with an OEO project     analyst during the same week that
the medical society had authorized     the payment.   This memo-
randum stated:

     "There is no objection     to the principle     of OEO
     paying for losses incurred by the Group through
     the hiring of short-term      medical staff.    *** [The
     OEO project  analyst]   pointed out the fee-for-
     service is supposed to cover such costs, but
     agreed that in some situations       it might be rea-
     sonable to pay for losses directly.          However,
     without specific   authorization     from OEO, funds
     spent for such a purpose would probably be disal-
     lowed."
Medical society and project officials  were unable to provide
us with any evidence that OEO had specifically   authorized
the payment.

      Project and medical society officials also were unable
to provide us with any evidence that the payments of $67,350
for claimed increased overhead costs had been discussed with
or specifically  approved by OEO officials.

      In response to our written request for information  on
these payments, the medical society informed us by letter
dated March 17, 1970, that:



                                 65
      sDThe approval to reimburse the Southern Monterey
      County Medical Group the $3l,OOO you ~~~estioned
      was based on direct     out-of-pocket   cost to the
      group.    By terms of the grant we were required to
      maintain a night clinic      and, to do this, physi-
      cians had to be brought in on whatever basis they
      were able to be obtained.        It was the feeling  of
      the SocietyOs committee that this was a legitimate
      reimbursable    expense and should be paid.

     "The approval to reimburse the Medical Group 20
     percent of their payroll   costs was based on a re-
     view of their appropriate   records, knowledge of
     time being spent by their staff,    and consultation
     with the GroupBs consultamt **.

     '"Both of these matters    were discussed   verbally
     with [two OEO officials]     ***.

     ol*** Expenditures   such as the ones    you are inquir-
     ing about were not anticipated,    but    we could find
     nothing within the grant conditions       that excluded
     authorizing   reimbursement for these     costs."

       To obtain additional   funding for increased costs, the
project,   in its proposal for the third program year which
began July 1, 1969, budgeted $76,500 to reimburse the medi-
cal group for increased overhead, based primarily       on rising
salary costs.     QED allowed the item to remain in the ap-
proved budget but attached to the grant a special condition
which required    specific  QEO approval before payments could
be made. The proposal did not disclose        that the project   had
been making payments representing      20 percent of the indirect
salaries   to cover increased overhead or that it intended to
continue making such papents,

       On December 23, 1969, the former project    director    re-
quested OEOgs approval to pay the $76,500 to the medical
group.    On February 6, 1970, OEO authorized   the release of
$40,000, subject to future audit.     In its fetter,    QEO agreed
that it appeared that there had been an increase in the med-
ical group"s costs but stated that the documentation        that
had been provided was inadequate for determining       the nature
and magnitude of the increases,


                                66
      OEO health officials informed us in May 1970 that they
were not aware that payments for the short-term    physicians
and increased overhead costs had already been made or that
the project was continuing   to make payments for increased
overhead costs based on 20 percent of indirect    salaries.

Conclusion
        The project's  payments to the medical group for losses
that it claimed it had incurred due to hiring physicians        on
a temporary basis and for overhead costs computed as a per-
centage of indirect      salary costs were not in accordance with
provisions     of the grants, were not included in the approved
budgets,    or  were not otherwise approved by OEO as required.
In addition,     the medical group did not furnish adequate jus-
tification     to show that these costs were necessary and in
direct support of the project.
     Regarding the      amount budgeted for the third     program
year to reimburse      the medical group for increased      overhead,
the medical group      should be required to furnish     adequate
data to substantiate      that the costs claimed for     reimburse-
ment are necessary      and in direct   support of the   project.
Recommendation to the Secretary        of
Health, Education, and Welfare

       HEW, through the Health Services and Mental Health Ad-
ministration,     should require the medical group to reimburse
the project    for payments made on other than a fee-for-
service basis that were not approved by OEO and to ade-
quately support any claims for reimbursement of overhead
costs   charged to the grant during the third program year.



      OEO agreed with our recommendation and said that          it   had
requested HEN to follow up on these matters.




                                  67
QUESTIQNAl3LESALAKY PAYMENTS
       OEO funds were used to pay all or part of the salaries
of certain persons although (1) the indicated     portions  of
the persons' time spent on project activities     had not been
commensurate with the parts of their salaries     paid with OEO
funds, (2) persons whose full salaries    had been paid with
OEO funds had generated income for the medical group by
treating  private patients,  or (3) the project had reimbursed
the medical group on a fee-for-service    basis for services
rendered to project patients    by these persons,

Former project   director

       For its third program year, the project budgeted,and
OEO approved, funds of $24,000 for the former project direc-
torts salary on the basis that 80 percent of his time would
be spent on project        business.    The amount had been increased
from the project's       first   program year when the former proj-
ect director      had received no salary from the project but
when 20 percent of his time was budgeted for project busi-
ness.      During the second program year, the former project
director's      budgeted salary of $14,400 was based on 40 per-
cent of his time being spent on project          business,

      The former project director  had not maintained records
to show how much of his time he had spent on project busi-
ness and how much he had spent carrying out the responsibil-
ities of his positions   with the medical group, Hee Hospital,
and the nursing home.

       The former project   director informed us that much of
the time he had charged to the project had been spent on
speaking engagements and on writing      articles for medical
journals    concerning the project.   Project records showed
that he had delivered     a number of speeches but that much of
the writing    of the speeches and the journal articles   had
been done by another person who was paid about $2,700 from
OEQ funds for services provided from September 196% to Jan-
uary 1970.




                                68
Associate    Droiect     director

       The project reimbursed the medical group during the
third program year for two thirds of the salary that the
medical group paid to one of its physicians            who had acted as
the project's     part-time    associate project    director.   The as-
sociate project     director    informed us that he did not 'keep
time records but that he scheduled about 16 hours of his
regular wor'kweek for project        business,,   He told us that he
spent the remainder of his time seeing both project            and pri-
vate patients     on a fee-for-service      basis at the medical
group's clinic,     working at the clinic       on an on-call  basis,
and visiting    patients     at Mee Hospital.

      In addition to paying the medical group for two thirds
of his salary for administrative   duties,  the project   also
paid the medical group on a fee-for-service    basis for ser-
vices rendered by him to project   patients  at the clinic.

Secretary    to former     pro-ject   director

       The project     paid the entire salary of $7,000 of the
former project     director's       secretary,    although,  according to
the former project        director,     the secretary    had spent a por-
tion of her time on nonproject             business.    The project's     for-
mer financial     officer     told us that the secretary"s         entire
salary had been charged to the project               to help cover added
overhead costs incurred by the medical group due to the
project.

Former financial       officer

        During the second and third program years, the project
budgeted and OEO approved payments of $15,375 to reimburse
the medical group for 50 percent of the salary that the med-
ical group paid to its administrator,      who also had acted
during that time as the project's     financial   officer.  The
percentage had been increased from the 20 percent for the
first    program year in which 10 percent of his salary had
been OEO-funded and 10 percent had been provided as a con-
tribution     to the project.

     The former financial officer  informed us that he had
not maintained records of the time he had spent on project


                                      69
business but that project-related    work had taken a signifi-
cant amount of his time.     Medical group records showed that
about 35 percent of the medical group's patientswereproject
enrollees.

Pediatrician
       OEO approved the use of grant funds to pay the salary
of a pediatrician    who worked at the medical group's clinic
from October 1968 to November 1969. The pediatrician,            whose
total salary for the employment period was about $17,000,
treated both private and project patients.          The medical
group billed    both private  patients    and the project   for her
services on a fee-for-service      basis.    Over the  period   of her
employment, the total billings       by the medical group for her
services amounted to about $31,000, of which, at the time
of our fieldwork,    the medical group had reimbursed the proj-
ect about $2,600.

      After we inquired   into this matter, the project was re-
imbursed an additional    $12,500 for a total of $15,100 or
about half the pediatrician's     total billings.

Physician      assistants

       OEO funds also were used to pay the salaries     of two
physician    assistants who worked at the clinic.     One was em-
ployed from October 15, 1968, to October 31, 1969, at a to-
tal cost to the project    of $8,125.   The other, initially
employed on August 5, 1969, was receiving      a salary of $1,250
a month at the time of our fieldwork.

       These physician     assistants   worked at the medical group's
clinic   and treated both private        and project     patients.    The
medical group billed       both private    patients     and the project
for their services on a fee-for-service             basis.    The project
was not reimbursed for time spent by these assistants                in
treating    private  patients,     and although it was paying the
assistants'     full salaries,     the project    paid the medical
group on a fee-for-service         basis for services they had ren-
dered to project     patients.

      The medical society advised OEO in October          1969 of the
employment of the second assistant  and indicated          that the
medical group would pay a portion     of his salary.     An OEO
official,   however, approved the use of OEO funds to pay the
full salary of the assistant.      Provision  was not made for
the project    to be reimbursed for the billings    generated by
the assistant.



        OEO health officials        informed us that they had approved
the payment of the former project            director's salary for the
third program year on the basis of his administrative              rc-
sponsibilities        and his value to OEO in publicizing      the Com-
prehensive      Health Services Program and the project.          GE0
officials      stated, however, that it did not appear that the
former project        director   had fully met his administrative
responsibilities         with respect to the operations     of the proj-
ect.

       OEO officials      informed us that they were not aware of
the differences      between the parts of salaries             paid from OEO
funds and the portions          of time spent on project           activities
by the associate       project     director,      the former project        di-
rector's    secretary,      and  the   former     financial   officer      or   that
the project     was being charged on a fee-for-service                 basis for
services rendered to project             patients     by persons whose sal-
aries were being paid, in whole or in part, with OEO funds.
       Regarding the salary         of the second physician    assistant
being paid entirely     with       OEO funds with no provision     for the
project's    being reimbursed         for services provided by him, the
OEO official     who approved       the arrangement stated that he had
done so because of OEO's           interest   in developing new roles in
the health field.

Conclusion

       Grant funds were used to pay all or part of the sala-
ries of certain persons employed by the project without re-
gard to the time they actually       had spent on project   activi-
ties and, except for one case, without having reimbursed the
project   for the time these persons had spent rendering        ser-
vices to nonproject   patients.      In addition,  the project
paid the medical group on a fee-for-service        basis for ser-
vices rendered to project     patients   by persons whose


                                        71
salaries   were being paid,    in whole or in part,     with   grant
funds.

      Also OEO's approval of the project's   paying the entire
cost of the salary of the second physician    assistant     with
program funds without requiring   reimbursement for services
rendered by him is contrary   to program guidelines     which pro-
vide that health projects   must obtain reimbursements when-
ever possible.

Recommendations to the Secretary
---                                    of
Health, Education, and Welfare

       HEW, through the Health Services and Mental Xealth Ad-
ministration,       should determine and recover from the medical
group for the cases cited above (1) the amount of the differ-
ences between the part of salaries         paid and the part of the
salaries     that should have been paid on the basis of the
amount of time actually        spent on project   activities,   (2) the
reimbursements       due the project  for services rendered to non-
project    patients    by persons whose salaries    were paid, in
whole or in part, with program funds, and (3) the amounts
paid the medical group on a fee-for-service           basis for ser-
vices rendered to project patients        by persons whose salaries
were paid, in whole or in part, with program funds.

       HEM should also provide for more adequate       monitoring  of
project  operations   to preclude such situations      from occur-
ring in the future.



      The Deputy Director of OEO, in his somments, stated
that OEO agreed with our recommendation and that it had re-
quested H.EWto follow up on these matters.




                                72
                              CHAPTER6

                           SCOPEOF REVIEW

      Our review was concerned primarily      with the policies,
procedures,   and practices followed in the administration       of
the project   in King City,  We   were assisted    in our review
by a United States Public Health Service medical officer
who reviewed the medical records to evaluate the quality
of medical care and treatment.

       We reviewed the basic legislation       authorizing    the pro-
gram and various OEO policy and guidance publications             and
documents.     We examined pertinent    records and documents and
interviewed    officials    at OEO's headquarters,     Washington,    D.C.,
and at the offices       of the medical society,    the project,    the
medical group, and the community action agency, all of which
are located in Monterey County.        We also interviewed       52 proj-
ect enrollees.




                                   73
APPENDIXES




  75
                                                                 APPENDIX I

         CHARACTERISTICS OF PROJECT'S FIRST-YEAR ENROLLEES (note a>


                                                   Number
                                                  (note b)              Percent
AGE:
       Under 19                                     2,142                  53
       19 to 54                                     1,433                  36
       Over 54                                         460                 11
ETHNIC GROUP:
    Mexican-American                                2,094                  54
    Mexican                                         1,184                  31
    White                                              558                 14
    Black                                                7
    Other                                               41                   1
BIRTHPLACE:
    Mexico                                          1,150                  30
    California                                      1,139                  29
    Texas                                              991                 25
    Other                                              603                 16
RESIDENCE IN TARGET AREA--ADULTS
  ONLY:
    Under 12 months                                   460                   30
    12 to 23 months                                   184                   12
    Over 23 months                                    905                   58
CITIZENSHIP STATUS--ADULTS ONLY:
     Citizen of United States                          987                  60
     Not Citizen of United States                      651                  40
EDUCATION--ADULTS ONLY:
    None                                               208                  13
    1 to 6 years                                       743                  47
    7 to 8 years                                       258                  16
    9 to 11 years                                      242                  15
    12 years or over                                   127                   8
MONTHSWORKEDIN LAST YEAR:
    Male head of household:
         None                                           86                  12
         1 to 7 months                                 152                  22
         8 to 12 months                                468                  66
    Female head of household:
         None                                          108                  45
         1 to 7 months                                  68                  28
         8 to 12 months                                 63                  26

a'Ihis data was extracted     from a study,prepared    by a project  consultant,
  entitled    "One Thousand and Nine Poor Families,"     March 1970.
b
  The number of enrollees     in related  categories,   such as those showing
  adults only, may not agree in total because the necessary data may not
  have been obtained for each enrollee       or because errors may have occurred
  in translating    or coding the data.


                                       77
APPENDIX II


                     MEDICAL FACILITIES            AND SERVICES

                 IN KING CITY,        GREENFIELD,        AND SQLEDAD

MEDICAL GROUP'S CLINIC

        The medical    group's clinic,     built    in 1963, is located
in King City in an attractive,         air-conditioned,       modern,
single-level     structure.    It houses a private        group practice
composed of nine physicians.

        The practice     was initially       established    in 1945 as a
father-and-son       partnership.         It was incorporated    in October
1969 with an executive            committee   of three physicians;    the
seven permanent       physicians       at that time were the sharehold-
ers.

          On April     1, 1970, the physician             staff    included       a sur-
geon 9 an internist,           a pediatrician,           and six general          prac-
 titioners.         In addition,        during    the project's         first     3 pro-
gram years,         several    full-time        and part-time        physicians
joined        and left   the medical         group.      Several     medical      special-
 ists and consultants            from cities        outside     the target        area
visit       the clinic     on a scheduled         basis.

GEORGE L. MEE MEMQRIAL HOSPITAL

       Mee Hospital,        which was built       in 1962 adjacent      to the
clinic     and which was accredited            by the Joint    Commission    on
Accreditation        of Hospitals,      is   the  only  hospital   within    45
miles of King City.           Mee Hospital,       which averaged    about
50-percent     utilization       during    the 4-year    period   1966 through
1969, provides         basic inpatient       care as well as outpatient,
laboratory,      and X-ray services.

PIQNEER HACIENDA CONVALESCENT
AND NURSING HOME

        The nursing   home is a 25-bed facility     licensed      by the
State.     It is located    in King City 3 blocks     from the clinic-
hospital     complex.    It has consistently    been fully   utilized
and most of its revenue has come from sources other than the
project.



                                            78
                                                                           Al?PENDIX II


HOME HEALTH CARE AGENCY

       This     agency is located      in King City adjacent        to the
project     offices.       It was originally     established      under the
project     in April     1968 and had one registered          nurse to pro-
vide home health         care.     It was taken over by the medical
group in early         1969, but, due to continued         losses   from its
operation,        it was transferred      back to the project        in April
1970.      At that time,       it was staffed    by a registered       nurse,
a home health        aide,    and a secretary.

GREENFIELD MEDICAL FACILITY

        The medical   group's    suboffice,      located   in Greenfield,
was opened in 1951.         It is staffed       by two general    practi-
tioners,    one of whom serves as the anesthesiologist               at Mee
Hospital.     At the time of our review,            the other practitioner
was president      of the medical      society.

SQLEDAD MEDICAL FACILITY

        In    January   1968 the project               opened a suboffice         in
Soledad.          Due to staffing         difficulties,        it was necessary          to
close it        in the latter        part of the second program year.
Soledad       residents    were excluded             from the project        for the
first     5   months of the third             program year,       after     which the
project       decided   to provide          transportation        for eligible
Soledad       residents    to the clinic             at King City.        Also the
project       made arrangements           with a private         physician      in
Soledad,        whowasnot      affiliated           with the medical        group,    to
provide       care to project          patients        on a fee-for-service          basis.




                                              79
                DEPARTMENT      OF   HEALTH,            EDUCATION,         AND     WELFARE
                                 OFFICEOFTHESECRETARY

                                     WASHINGTON.          D C.   20201



                                       NOV 17 1970



Mr. Philip      Charam
associate      Director
Civil    Division
United States General Accounting
   Office
Washington,       D.C.  20548

Dear Mr. Charam:

We appreciate     the opportunity     to review the draft   report on the GAO's
review of the operations        of the Southern Monterey County Wural Health
Project,    King City,   California,    funded by the Office of Economic
Opportunity     under the Comprehensive Health Services Program.          You may
know that this and 15 other comprehensive          health services  projects   will
be transferred      from the OEO to this Department as of December 14, 1970.

We noted that while certain         principal     objectives     had been achieved,       changes
were needed in order to meet other important                objectives     and to generally
improve operations      as we&l as to take corrective            actions.      The recommenda-
tions of the GAO for changes are well-taken.                 Since the project       will be
under the aegis of the HEW soon, we will continue efforts                     which have been
started    to correct   the deficiencies       and will make every effort           to provide
assistance    to strengthen     all aspects of the project.             Further,    the time-
liness of this report       indicates     areas in which we can take action in order
to improve the effectiveness          and efficiency      of similar      programs.

Please   send us a copy of the final                report         when it        is released.

                                                    Sincerely            yours,




                                                    Assistant            Secretary,      Comptroller




                                                   80
                                                                 APPEND IX          IV


                                                 EXECUTIVE   OFFICE   OF THE PRESIDENT
                                                              WA%#lINCTON,     D.C. 20506




JAN 22 1971      .

Mr. Henry Eschwege
Associate   Director
United States General Accounting
  Office
Washington,    D.C. 20548

Dear Mr. Eschwege:

As requested    in your letter   of September 30, 1970, we have reviewed
in detail    the draft  report  on the Southern Monterey County (California)
Rural Health Project.       We have also provided   copies to the Rural
Health Project    staff  and have received   and reviewed their  comments.

Comments on the draft     report   are enclosed.   These statements          include
both general observations       and comments on particular    points.

We would be pleased     to discuss   any of these   comments further         with
G.A.O. staff.
innovative            expexiluentaj                       Comprehensive          Health        Services         Programs.              In the

case of RHP, tilis                          effor         : is being       at.tempted        within          th? framework             of an

existing        private               de1 ive -y service.                      The Monterey            Couacy Medical              Society

and the        Southern               Monter ty County                  Medical         Group are amIng the                    few private

medical        groups           in the              c juntry        to join      actively           ‘in the experiment                 to

develop        new methods                     of Ilealth           care    so as to incorporate                    the poor           into        the

health       service           system               011 an equal           basis.         The Society,            the Group,            and

the original                 Project            Director            have shown courage                 and leadership              in       their

work     in this             area           and hilvt:        progressed            significantly             in learning          from

these       early           endeavors.                    [See GAO note          1, pU 84.1


In addition,                 the activi-<i.es                  and accomplishments                    of the RHP should                 be

considered            in      the conte::t                  of the difficulties                 encountered              in    the development

of health           projects                 in all         rural     areas      throughout            the     country.          Conditions

frequently           encountered                     in these          types     of undertakings                include         shortages

of accessible                 medical               resources         and back-up,             pressure         of patient             loads,

insufficient                 supply            of health            personnel,          long    distances,              inadequate

transportation,                   difficulty                  of recruitment              of skilled           staff,         and local

attitudes           adverse                 to ntlc: social           programs,           to persons           on welfare,             and to

minority        groups.                     [See GAO note              1, pa 84.1


Most     conclusions                  and rccmmendations                       of     the GAO report              are     in    line        with     OEO

iindings,            Tile      Sui.ct’s’:            of     k11e RHP, lmwever , must                  be viewer!          in terms            of    the
objectives         of the CHS Program                      - to support           local       offorts         tllat          seek to learn

how to reach            the    goals         set by the Program                 GuidelLiie;           under        a variety               of

diverse       conditions             and circumstances.                   The Program            Guidelines                  for    Comprehensive

Health       Services         set goals             against      which      the progrcs;              and problems                  this

project       has experienced                  should        be measured,          rather         :han as established

standards        to which              the project           must correspond              inunc~liatcly.


The RKP has made important                           gains     and shows significant                      promise             in identifying

and documenting               existing           health       problems         and establ          shing         new and more

responsive         methods           of care         in a Lrivately             owned medj.cal              group            practice

which     serves        persons          of differing             income and cultural                   backgrounds.                     Learning

has been linked               with       the experimentation                   ana.service            delivery;               some of

thelearning         h.as been positive                     and some negative.


The work of the RHP has received                                recognition          from many professional                              groups.

An evaluation            of the RHP by an eleven                         man evaluation                 team from              the California

Medical       Association               is     attached        [see     GAO note          1, p, 841.

                                                                                                                      page         841
The draf't       GAO Audit              Report        also     documents,         [see GAO note              l,/               some of the

accomplishments               of the project.                    Progress         is noted       in       two areas                of need for

many people         +&had              never     had access            to them before:             quality             medical             care

and permanent             employment             with        an adequate          income.
                                             note     p* 841
                                                      2,
The comments             [see GAO/              of the audit report                 must especially                    be viewed                in light

of the conditions                 discussed             above.         The provision            of comprehensive                         services

 in a remote        rural         area         is a matter            of such complexity                  that        full         accomplishment

 is only       possible         in terms             of many years             of efiort.             Progress           has to be

measured        in the Light                 of small         steps      toward     constructuring                    a unified

program,        such as employment                      of a pediatrician,                  utilization               of a nurse

                                                                          83
prncLiI     iont‘r,            j!fiLi,;ti          1r1 r~r   a    physlcjan's            assist-an:.,            dcvelapment         of dental

services,             considerztiol                   of a drug        formulary,            and mar? other                significant

gains.       Each         3f         the<?        ;teps      moves towards              the goal           cE comprehensive               services

once      the problem                  was i3entir'ed,               the need assessed,                    and implementation                of

a solution             begun.                As 1 particular             short-term             goal       (i.e.,       a pediatrician

attracted             to the area.                 a major         accomplishment               in its2l.f)            is accomplished,

an important              new capability                     is    established           which          lea.!s      to the resol‘ution

of other        problems.


The complexities                        involred          in stimulating               and facilitating                 changes      in     the

existing        system              of delivery              of health          care     services           is      staggering,        especially

when the project                        is a limited              experimental           one.           Participation             of poor

consumers             in planning                and operations              is one of the key elements                            of this

complexity             and has been encouraged                          in      line     with      the      Guidelines            towards

which      OEO and RHP are                       attempting           to work.           The RHP consumers                     have progressively

developed          an increasing                     voice        in the project;               the degree             of that      voice     has

undergone          continual                  redefinition           and meaningful                expansion            during      the     short

three      years        of       the Project,

                                                          [See GAO note           3.1


GAO notes:
  1. Deleted material  referred    to exhibits   accompanying   the Deputy Director's
     letter  which were considered     in the preparation    of our final  report   but
     which are not reproduced    herein.

   2. Deleted            page references                     refer     to pages of draft                    report.,

   3. Deleted material   pertained  to specific  comments by OEO which were
      considered in the preparation    of our final  report but which are not
      reproduced herein.




                                                                          84
                                                                 APPENDIX V




                                                    FEB 22 1971



Mr. Henry Eschwege
Associate   Director
United States General Accounting
   Office
Washington,    D.C. 20543

Dear Mr.       Eschwege:

In line with the request     by your staff,   there are forwarded       additional
comments on each of the specific     recommendations      included    in the draft
GAO Report on "Opportunities     for Improving    Services     to the Poor and
Administrative  Efficiency    of the Southern Monterey County, California,
Rural Health Project".

Sincerely,              ,,           I
                  ' ,        1   .



Deputy       Director
              /




                                         85
   APPENDIX v




[See GAO note     1,
p. 87.1        FU!~C;jc’t.                                                      cornrucI~t
              .--    --


                                    Ay,recm+-t!t.    Substantial      staff      and                            consultant
                                    effo1-1 s r--LK!    bee11 aimed     at aiding                                Project
                                    Personnel      to achieve    these      goals.


                                    A~l‘crl,wIlt..
                                                      -----    Cnntinuing                    staff     efforts        have
                                    sought              (0 help     Project                  personnel         to   strengthen
                                    these             services    ~



            Evnl.uation             &rz~~~nt~                      [See    GAO note      2,~.            87.1
                                                                             substantial                 progress        has     been
                                    made             in   I-his      regard.



            Eligibility             &rrcment                .       Revised      eligibility                 procedures       i;ere
                                    instituted                    during      January,              1970,      as part      of a
                                    concerted                   effort      to improve               the     administrative
                                    procedures                    of the project.



            J!ospital.       Care    Part j aJ Arrrccc~cnt-,
                                    -.-.---,u.----.---                         Coiitinui-ng          efforts         have
                                     been made LO obt--in                      County        and other-          rcimbursc-
                                    nients         for     care       rendered         at the clinic               and Piee
                                     HosP~Lal           but       substantial            resi.ctarme           ha< been en-
                                     countered.                 [see GAO note 2, pa 87.1
                                                           it     is believed            the approprjate                 use of
                                     the available                  hospitals          must      be considered              in
                                     light         of the nature               of individual               cases       and the
                                     prevailing               conditions,            taking        into      account        both
                                     the needs             of the patient                and the goals               of the
                                    pr0jcc.t.             The poJicies               and practices               of I he Rural
                                    Health           Project          in this        regard        have been           under
                                    conf inuing               A-evicw      and discussion               ~~.4ich has aimed
                                     at f~~rtl~cri              g the use of the County                        Hospital        r;hen
                                     intl ic ;it:ed ; Lor example                    6P project            patic     xtts were
                                    rcfel-:-cd          t-o I-I-IF County            Hospj ~21         between         January,
                                     l?iO       ~Ml rkcein1,cr,               1970.        63 were outpatients,                    5
                                    were        fripaiicnis.
                                                                                                      APPENDIX V




[See GAO
note   1.1       subject

             Ovcrysyment        for              AgrcemcnV.     The J:ural Health Project    has soug!:L
              services                           to recover    the c~xccss pnymcnt to the Kcdical
                                                 Group.   OEO has witlrhc~ld   funds to the Project
                                                 awaiting   the rcsolutioo   of this matter.


                                                   reemrnt.      The PubJic JJcslth Service,            kp:rtmtint
             Overpayment     for                 &
                                                 of licnlti~,   Education    iiod k!elfarc,                  resp~u-
              salaries    and in-                                                             to who:;r

              direct   costs                     sibility    for administration        of this grant was
                                                 transferred     on Deccmbrr 14, 1970, has been rcqucstcd
                                                 to fol.lon   up on tflcse     items.



             Advance?      Payments
                                                                             [See GAO note     3.1




             Salary     Payments                 Ay,rccmcn
                                                       -__._---At .     The Public   Health  Servjcc   has        been
                                                 requested            to folJ.olg up on thcsc matters.




                                                   [See GAO note           3.1




              GAO notes:
                1. Page references       which      referred          to pages of the draft      report    were
                   deleted.

                 2. Deleted material  referred  to portions of the Deputy Director's                           letter
                    of January 22, 1971, which were considered    in the preparation                         of dur
                    final  report but are not reproduced herein.

                 3.    Deleted material   pertained      to matters              included   in the draft    report
                      which are not included     herein.




                                                                 87
     APPENDIX VI

                        PRINCIPAL OFFICIALS OF
            THE DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
                AND THE OFFICE OF ECONOMICOPPORTUNITY
:;        RESPONSIBLEFOR THE ADMINISTRATION OF ACTIVITIES
_
                       DISCUSSEDIN THIS REPORT

                                                 Tenure of offise
                                                 From            -TO

i            DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE

     SECRETARYOF HEALTH, EDUCATION,
       AND WELFARE:
         Elliot L. Richardson             June      1970     Present

     ASSISTANT SECRETARYFOR HFALTH
       AND SCIENTIFIC AFFAIRS:
         Roger 0. Egeberg, M.D.           July      1969     Present

     ADMINISTRATOR, HEALTH SERVICESAND
       MENTAL HEALTH ADMINISTRATION:
         Vernon E. Wilson, M.D.        May          1970    Present

                    OFFICE
                    w_ .I" OF ECONOMICOPPORTUNITY
     DIRECTOR:
         Frank C. Carlucci                Dec.      1970    Present
         Donald Rumsfeld                  May       1969    Dec. 1970
         Bertrand M. Harding   (acting)   Mar.      1968    bY      1969
         R. Sargent Shriver               Oct.      1964    Mar. 1968
     ASSOCIATE DIRECTOR, OFFICE 0.F
       HEALTH AFFAIRS:
         Carl A. Smith, M.D. (acting)     May       1971    Present
         Thomas E. Bryant, M.D.           Sept.     1969    Apr. 1971
                                                           APPENDIX VI


                         OFFICE OF ECONOMICOPPORTUNITY

ASSISTANT DIRECTOR, OFFICE OF
  HEALTH AFFAIRS (note a):
    Thomas E. Bryant, M.D.
            (acting)                         Jan.   1969   Sept.    1969
        Joseph T. English, M.D.              Mar.   1968   Jan.     1969
        Julius B. Richmond, M.D.             July   1966   Mar.     1968
ASSISTANT DIRECTORFOR COMMUNITY
  ACTION PROGRAMS(note a>:
    Theodore M. Berry                        Apr.   1965    Sept.   1969

PROJECTMANAGER,HEALTH SERVICES,
  COMMUNITYACTION PROGRAM
  (note a>:
    Gary D. London, M.D.                     Apr.   1968    Aug.    1969
    John Frankel,  D.D.S.                    July   1966    Apr.    1968

aIn a September 1969 major reorganization      of OEO, these of-
 fices were terminated  as organizational     entities.       At that
 time, the various health activities      of OEO, including      the
 Comprehensive Health Services Program, were combined in a
 new Office of Health Affairs     and the majority      of other Com-
 munity Action Program activities     were shifted      to a newly
 created Office of Operations.




u.s   GAO. Wash.. D.C.

                                       89
WV-   .            .       c




                            DEPARTMENT                      0F   HEALTH.             EC&CATION,              AND        WELFARE
                                                             OFFICE      OF    THE     SECRETARY

                                                                 WASHINGTON.           D.C.   20201




          Honorable Elmer B. Staats
          Comfitroller General of the United                                    States
          General Accounting   Office
          Washington,  D.C.   20548

          Dear Mr.      Staats:

          The Secretary                  has asked that               I reply          to the report                    of the General

          Accounting      Office                 entitled        “Opportunities                       for    Improving            the Southern

          Monterey      County             Rural       Health         Project,            King City,                California.”         As

          requested,      we are enclosing                        the Department’s                          comments on the findings

          and recommendations                       in your       report.


          IE you would           like            any additional                information                  or if       we can help      in

          any way, please                  let     us know.

                                                                       Sincerely              yours,                ’

                                                                                                               !




                                                                       Assistant              Secretary,                Comptroller
                                                                                                       c
          Eric losure
                                                                                                                    h       c

        5’           .                             .

.   .        -
                                                   CdbDIENTS G,4 11lE GF3ERAL ACCOUNTING OFFICE
                                                        REPORT TO THE CONGP~SS, ENTITLED       .
                                           OPPORTUNITIES FOR IXI’ROVING TiiE SOUTHERN MNTEREY COUNTY ’
                                                  RURAL HEALTH PROJECT, KING CITY, CALIFOWIA

        N-... l * /
                 I*
                           i

                                     GAO Recommendation : HEW should require      and assist   the project    to
                                        make a concerted   and systematic  effort   to expand, improve,      and
                                  *’    more adequately   document the preventive     care services   p rovi d-&
                                        to iTs enrollees.   -.
                                         HEIJ’Comment : We concur.      Arrangements    have been made for staff    at
                                         the HEW Regional Office     in San Francisco,      California   to provide the
                                         necessary   consultive  services    to Project    officials   to carry out this
                                         recommendation.


                                         ‘GAO Recommendation : HEW should monitor                  the project’s    outreach    program
                                 4           periodically    and continue to assist              the project     in its efforts     to
                                             strengthen   the program.

                                    ‘HEW Comment : We concur.     The Medical Project     Officer   at the regional
                                     office   has established a schedule    for reviewing    the effectiveness       of
                                     the outreach   program and its relationship     to medical   services     being
                         .
                                  . rendered’,

                     . -
                                   ” GAO Recommendation : HEW should encourage and assist                                   project     officials
                 I
                                            ‘to undertake         systematic     evaluations           designed for measurin
                                         “extent         to which the project          is meeting its objectives                  an
                                          “develop         procedures     for reporting          ‘-he results        to management        at all
                     /                    * levels       for planning       purposes      and for dissemination               to other federally
                                            ‘assisted       projects.
                                                                                           .                             .a
                                    ’ ‘HEW Comment : V/e concur.                As pointed          out in the GAO report,             funds were
                                       provided        by OEO +s of July 1, 1970, to increase                        the capability         of Project
                                       officials         to review     and evaluate          the adequacy of their              operations.        A
                                       computer system has been designed for this purpose by an outside - contractor.
                                    -,-This sys tern, rchen fully            de-bugged,         will be the basis for a complete
                               .p:
                                       management evaluation              and reporting          system     of the project’s           operaticns.
                                       Ue plan to have HE:‘/ regional               staff       participate        iti this work during its
                                       later      stages.                                                      n
                                                      r*                                                        ..- ,
                                 ;,
                                     l




                                                                                                                        .
                                                         .

.     .             *                          GAO ReconunendaLLon:      HLI‘r shouiuli)     r~ein$~asizc    to Llic p-ro~ccl.       IL.,
                        .                         responsibility     to seek out and obtain reimbursements              from     third
                                                  parties     where appropriate     and (ii)   monitor    the project’s        p erformance
                                                  in this regard.
          ,
                                 .
                                               HEW Comment : We concur.           Third party reimbursement         guidelines    are
              YC.                              presently     being developed nationally           \;hich state:    “Except under
                                      .        extenuating      circumstances     with justifications         documented and approved
                                               by DHEW, 314(e] grants may not be charged for covered services                     rendered
                                               to individuals       eligible   under third      party insurance     or prepayment
                                               financing     arrangements     except for the. cost to the grantee which is in
                               ,I              excess pf the reimbursable          amount.!’
&\                      , ;’ ‘. !         ,,
              I’
                                               We plan to monitor     the extent     that projects    such as this one go against
.,y                         i
                                               thibrd parties   for reimbursement       of medical expenses by reviewing      and
                                               analyzing    a monthly closing     statement   to be submitted      to the HEN regional
                                               office . The requirement       for this type of report      is now being cieveioped
                                               as a condition     of award for all projects        of this nature.


                                               GAO Recommendation:       HEW should take action to determine        and recover
                                               the      full  amount of the project’s     overpayments    to the medical group
                                                   for services   rendered to project     enrollees    aznd make periodic   reviews
                                                   of project   expenditures    to ensure that billings      are correct   and that
                                                   overpayments    are avoided.                            .

                                               HEW Comment : Ne concur.         The Regional     Office will,    within   the next
                                               sixty  days, determine    and recover       appropriate  project     overpayments     to
                                               the ‘medical group.     Periodic     reviews of project      expenditures     are being
                                               made by the Regional Office        to ensure that billings        are correct     and
                                               that overpayments    are avoided.


                                               GAO Recommendation : HEP: should require       the medical  group to L--I_
                                                                                                                        reimburse
                                  /               the project     for p ayclcnts made on other than a fee-for-service
                                                                                                                    ---      bas.is
                                                  that were not anproved by OEO and30 adequately          suoport -- any ciaims
                                                  for reirribursement    of overhead costs charged to the grant during the’
                                                  third  program year.

                                          HEN Comment : We concur.      After  detailed    and lengthy negotiations,
                                          including   an audit by the Southern Jiontergy       County Nedical     Sociccy,
                                          a fee schedule b:as accepted by the Medical Group for future             reimburse-
                   f;                               Collection of prior    payments   made  on  other   than a  fee-for-
      ,I.
         ,I G                   : ’ 6 -‘-merits .
                                        ’ service   basis and pot app’roved by OEO will      be. discussed   with the medical
                                        . group in the near future.                               ..* ,

                                             An audit by an independent      accounting    firm supported      the center’s    ciaim
                                           ;5or reinbursemeni     of overSead costs charged to        the   grant  during   the
                                             third  program year.    An evaluation      of this report    is now in process.
                                                                                                                                  5       x


                                                         .       .



SC                   -

                         .
                                                        GAO Recommendation : I-W,’ should require                and assist    the project-.-       to
                                                           strengthen     i;.ts policies      and procedures        for determining       cli;ibility
                                                           for projec:       services,      to maintain      records    adequate to cnsurc that
                                     ..                    the State is billed           for medical care for rihich it has the rcsponsi-
                                              I            bility    to pzxy,' and to continue          efforts     to assist    enrollees        in
     .
             -a*..
                                         j,
                                                           applying    for programs for which they are eligible.

                                                       HEW Comment : Xe concur.            Project   personnel      are revising        the guidelines
                                                       concerning    eligibility       for project     services.       obese  guidelines      will     .
                                                       bear a direct      nlationship        to Medicaid standards         on eligibility.         In
                                                       additidn,   they will       incorporate     a sliding     scale of payment for border-
                                                       line ar “near Poor” as well a.5 for other types of prospective                        patients.

                                                       A n'ew accounttag     system has been installed          at the project.    One of its
                                                       features   is tizt    it assists    in identifying      project   patients  whose
                                                       medical: bills     say be paid partially       - or in full     - by third  parties,
                                                       such as the St&e        or co,mmerical insurance      firms.     The public  accounting
                                                       firm that installed       this system plans to review i-t: in the near future
                                                       for adequacy md effectiveness.

                                                       As recommended,      Project  Officials    will    continue   the systematic                      efforts
                                                       be-gun in Janrr;;rry 1970 to assist     project     enrollees    in applying                    for
         .
                                                       assistance   unkr     the State Medicaid        or other public    assistance                     programs
                                                       for whi’ch they- appear to meet the criteria.                    ’

                             .           .        .
                                                      * ‘GAO ,Recommendation : HEN should require            the project    to (i) dcvc’ioy)
                                                           ‘procedures    Co ensure that the county,           rather  than the project,       is
                                                           ‘billed   whenever   annrooriate
                                                                                      L    *
                                                                                                   for care rendered     at the cll%< -- a;ld
                                                            Nee Hospital     and (ii)    assure that the county hospital          is u:i.lized
                                 1                          for nonemeri:ency    hos;)italizations        and those which are not of a
                                                           ‘highly   unusual nature.

                                     /            ’ ‘HE17 Cotnnent : Xe concur.                 HEIR regional     office      officials        have stressed
                                                     to proj.ect        off-% cials     that in most instances            the county and not the
                                                     project       is responsible           for paying the cost of medical services                      provided
                                                     project       partic5~2ti>ts       at the c?-inic or at the (local)                  81~~ hospital.         IT
                                                     was pointed          out,    that    as   mentioned    by   G,40, in   tlleir     report,     program
                                                    *funds are the kzst-dollar                  source for payment of such expenses,                     and are
                                 .
                                                     not to be used I”or this purpose except in highly                              unusual circlLmStCances.
                                              ‘g-.En      addition,        project      ofZ.cials      were notified        that the amount of the
                                                      current     year’s       grant    a!:lard which may be used fo? such payments of
                                                     hospitalitatior-:           expenses has been reduced - and that next year’s                           award
                                                     will     have no f&ds           for payment of such expenses,
                                                                    L.
                                                   *
                                                  *“I&e Regional            CIealth Director        has notified       project       officials       that the
                                                     county kospi t aI ;:i.ll           have to be used for all nonemergency                     hospitalization
                                                     required        for those people not eligible                for care under any other
                                                     hospitalization            plan such as Medicare,            Ncdicaid         or private      health
                                                     insurance.
                                                                                                                                                      b                        I
         ,- ,                           l                       .



                                  brW                l\C.COnsileilcl,lilc:l       j        TIN            I.                                                             L1'       . I
                                                                                  ----~_         --~__-            -   -----_.---       _...   __~.       --I----.
=a         -
                                   proup for the cases -_
                                                               cited    aboLe
                                                                        -_I_       (i) the amount of - the di:'iGrciiCC';-
                                   between the Dart of salaries               p aid ant! the Dart     of the salari cs tliat
                    .
                                   should have been paid on the basis                  of the amount of time actually
     .   -.
                                   spent on project       activities,         (2) the reinburscments         due LLFICTroject
                           ,       for services     rendered to non-project              patients   by persons r~&sc
                                   salaries   were pa.~., in \vhole or in part,                with program funds ; (3)
                                   the amounts     paid the medical group on a fee-for-service                    basis    --- for
                                 ’ services   rendered     to p reject        patients    by persons lchose salaries
                                   were paid, in rshole or in part,               with program funds.
                              ,          0
                             . HEW should also provide           for more adequate monitoring             of project
                                   operations    to preclude        such situations         from occuring     in the
                                   future.

                                  HEI’/ Comment : In regards to' the OEO overpayments,               these amounts were
                                  in negotiation        between the medical group administrator            and OEO. HEW
                                  will,    within   the next sixty      days, continue      these negotiations    and make
                                   qpropriate      collections.       However,  additional      overpayments   to the
                                  Medical     Group should be prevented        under HEW because of accounting
                                  systems installed         by a national    CPA firm,     and an agreed rate between
                                   the center and the medical group.
                                                                                                                                                      .


                                                          9         .
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