University of Texas

An Audit Report on Selected Management Controls at Certified Non-Profit Health Corporations

December 1998

Report Number 99-017

Overall Conclusion

Both the UT Southwestern Health Systems and the UTMB HealthCare Systems, Certified Non-Profit Health Corporations, are at risk of not collecting all the money earned on their capitated managed health care contracts or not receiving the agreed upon services associated with these contracts. This is significant because these non-profit corporations negotiate and administer capitation contracts (estimated at $60 million for fiscal year 1998) for The University of Texas Southwestern Medical Center at Dallas and The University of Texas Medical Branch at Galveston.

Key Facts and Findings

UT Southwestern Health Systems (Southwestern Corporation)

• A well-defined capitated (risk-based) managed health care contract (capitation contract) could have saved the Southwestern Corporation approximately $160,000.

• Southwestern Corporation's business systems over the billing and collections for The University of Texas Southwestern Medical Center's $125 million Medical Services, Research and Development Plan are generally effective. The $125 million includes revenue from capitation contracts and other medical services the institution provides.

UTMB HealthCare Systems (Galveston Corporation)

• Some payors (usually insurance companies) do not provide Galveston Corporation with information it needs to manage approximately $54 million in capitation contracts. Information, such as the number of health plan members enrolled per month and the members' utilization of medical services, is needed by Galveston Corporation to effectively manage its business. Without it, Galveston Corporation does not know if it is paid according to the contract or if members are using more medical services than estimated.

• Galveston Corporation knew, as of May 31, 1998, that it had a $5 million aggregated operating loss from its capitation contracts. Because the Galveston Corporation does not have an accounting system that can track costs by individual contract, it cannot tell which contracts are losing money.

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