State Auditor Criticizes California Agencies’ Handling of Health IT

The California state auditor last week released a report criticizing California’s two state health agencies for the way they manage information technology.  Although the report stems from complaints from unions about how the health agencies hired and contracted workers involved in health IT, it also illustrates larger issues involving paper-based bureaucracies moving slowly and somewhat clumsily into the digital era.

Both agencies — the Department of Health Care Services and the Department of Public Health — generally agreed with the auditor’s recommendations to change personnel and contracting practices and procedures, but legal counsel for the state Personnel Board concluded the state would be unable to implement those recommendations without a statutory amendment.

Representatives from both agencies declined to comment and both referred questions to the state Chief Information Officer Teri Takai, who issued a written statement, which said, in part:

“We have created a number of open, continuous online exams, which range in level, so that we can hire state staff more rapidly and with greater expertise. We are committed to developing the state IT work force, not only to face the issue of state contracting, but to deal with the great number of state employees that are reaching retirement age.

“There are times when using contractors is appropriate, such as when we lack expertise in a certain area, or if we need to temporarily ramp up staff before launching a project. We must also continue requiring a knowledge transfer to state staff so that we can maintain and run the projects in the long term.”

Health IT Brings New Challenges

The relatively new field of health IT raises new and difficult situations for state agencies and the unions representing state workers. Traditionally, state agencies are prohibited from contracting with private entities to perform work the state has historically and customarily performed. But because much of the work involved in health IT is new, there’s little history to fall back on.

State regulations allow — under certain circumstances — state agencies to enter personal services contracts with private vendors when state agencies and their employees don’t have the necessary skills and expertise.

“In many ways, the state health departments are caught between a rock and a hard place when it comes to health IT,” said Tessie Guillermo, president of Zerodivide, an organization whose work in technology integration brings it close to both agencies.

“I think there is a sincere intent in both departments to comply with civil service mandates but when you’re caught up in the bureaucracy of a state agency and you need work done in a timely manner, you’re sometimes forced to looking for help elsewhere and that sometimes means going to the marketplace,” Guillermo said.

Auditor’s Key Findings

Responding in part to complaints from the Service Employees International Union, the California state auditor noted the following:

  • Although DHCS saved more than an estimated $1.7 million between October 2006 and July 2009 by replacing IT consultants with state employees, it did not have budget approval to create any new, permanent IT positions and inappropriately funded the new positions with funds intended for temporary positions.
  • A state employees’ union challenged 23 health IT contracts made by both agencies over the past five years. Two of those contracts have since expired. The state Personnel Board disapproved 17 of the 21 remaining IT contracts.
  • For nine of the 17 disapproved contracts, the departments entered into subsequent contracts for substantially the same services as those in the disapproved contracts.
  • The board’s executive officer took between 64 and 152 days to review the 21 contracts, much longer than the 45 days prescribed in regulations.
  • The departments terminated only three of the six disapproved IT contracts still active at the time of the decisions.
  • The departments experienced no repercussions for not terminating the contracts because the state has no mechanism for determining whether or not state agencies carry out board decisions.

State Proceeding Slowly, Carefully

The unfamiliar terrain of health IT and some of the same issues raised in the auditor’s report are playing a part in the state’s slow, careful navigation through federal legislation that will direct considerable money toward health IT endeavors over the next decade.

The American Recovery and Reinvestment Act identifies $19 billion in direct money and another $17 billion in savings for a total of about $36 billion to be used for health IT over the next several years nationwide. California is expected to get about 10% of that — or $3.6 billion.

Some of the first installments — as much as $30 million — could be spent relatively quickly, once California determines how to spend it.

One of the first orders of business is determining whether the state itself should oversee the framework that will allow physicians, hospitals, insurers, pharmacies and patients to share information electronically.

Although some small states might elect to take on health information exchange in house, many large states — including California — are expected to contract the job to industry experts. But precisely how that gets done is still under discussion.

Moving From 19th Century to Digital Age

Kathy Ko, program director for Community Clinics Initiative, said her experience with health IT efforts in both state agencies has been largely positive, despite the inherent problems of bureaucracies dealing with new technology.

“For three years, Funders Fostering Technology for Quality has been working with state health departments to help safety net providers make good use of health IT,” Ko said.

Funders Fostering Technology for Quality is a collection of 20 public and private organizations making health IT grants to health care organizations, mostly in California.

“In all that time, we’ve really seen the best efforts of these state agencies to move health IT forward, but despite their best intentions they are hindered by a 19th-century system trying to move into the 21st century,” Ko said.

“In that context, I’d have to say most of our dealings with the state have gone remarkably well,” Ko added.

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