STATE OF FLORIDA
DEPARTMENT OF CORRECTIONS
OFFICE OF THE INSPECTOR GENERAL
BUREAU OF INTERNAL AUDIT

MEMO TO:

Maureen Olson
Deputy Director of Health Services

FROM:

Donald L. Miller
Chief Internal Auditor

DATE:

December 15, 2006

SUBJECT:

MANAGEMENT LETTER - LABORATORY CORPORATION OF AMERICA
(LABCORP) – CONTRACT # C2311

On August 14, 2006 the Bureau of Internal Audit issued an engagement letter to the Office of
Health Services to begin an audit of the contract with Laboratory Corporation of America
(LABCORP). After completion of the fieldwork, it is my decision not to issue an audit report, but
rather issue a Management Letter to discuss weaknesses identified. Although identified for
current business processes and transactions, I feel the current contract manager has not been
afforded ample opportunity to address and correct the weaknesses.
We will conduct a follow-up on these weaknesses as well as LABCORP’s and the Contract
Managers responsibilities in the future to determine compliance with terms of the contract.

BACKGROUND
On June 1, 2006, the Department of Corrections (DC) entered into a three year contract
estimated at $13,500,000 with Laboratory Corporation of America (LabCorp). This contract
provides for inmate clinical laboratory services for Regions I, II and III in 51 institutions.
The contract provides for specimen pick-up and delivery service to institutions on a daily basis,
Monday through Friday. Weekend and holiday pick-ups are offered where there is sufficient
demand or need determined by DC.
The Contract requires LabCorp to provide the following to each institution:
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Overview of services offered;
Procedures and equipment for collection of specimen for each test;
Instructions and any special precautions for handling, preserving and packaging
specimens for submission to LabCorp's lab;
Test methodology and;
Normal values or expected therapeutic ranges.

The contract defines DC’s Contract Manager or designee with the following responsibilities:
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Serve as liaison between the Department and LabCorp;
Direct the Institutional Health Services Administrator (IHSA) to verify receipt of
deliverables from LabCorp;
Monitor LabCorp’s progress;
Evaluate LabCorp’s performance;
Direct the Contract Administrator to process all amendments, renewals and
terminations of this contract;
Direct the Institutional Health Services Administrator to review, verify, and approve
invoices from LabCorp; and
Evaluate LabCorp’s performance upon completion of the overall contract. This
evaluation will be placed on file and will be used as a reference for future
procurements.

OBJECTIVES
Our fieldwork objectives were to evaluate whether LabCorp is meeting the terms and conditions
of the contract; whether the contract payments are in accordance with the terms of the contract;
and to confirm that the delivery of services is effectively verified and properly monitored by
Health Services Management.

SCOPE AND METHODOLOGY
The scope of our fieldwork was for transactions and business practices for the current contract
in place. In order to accomplish our objectives, we reviewed operations at three (3) institutions:
Regional Medical Center (RMC), Central Florida Reception Center (CFRC), and Washington CI.
Utilizing a prepared questionnaire, information was obtained from Institutional Health Service
Administrators (IHSA’s) and LabCorp’s representative. Judgmental samples of data (i.e.
contractor invoices, LabCorp Manifest Logs, and clinical lab results) were collected for review
and analysis.

RESULTS OF FIELDWORK
Overall, LABCORP is meeting the requirements of the contract, however DC’s monitoring effort
could be enhanced. During our fieldwork, the following weaknesses in the internal control
structure were identified and warrant management’s attention. If addressed we feel it should
further enhance the effectiveness and efficiency of the LABCORP contract.
Issue # 1: Monitoring and Evaluation of LabCorp’s progress and performance.
Section IV(A) (3), (4) and (7) require the contract manager to monitor the contractor’s progress,
evaluate the contractor’s performance and evaluate contractor performance upon completion of
the overall contract. The current Contract Manager was able to find an eight question monitoring
tool that should have been used for the previous contract # C1877. This monitoring tool does
not appear to have been used annually because there were no corrective action plans, written
documentation or telephone calls placed in the contract file. Any monitoring or evaluation of the
previous contract would have been useful during the procurement process for the current
contract # C2311.

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The current Contract Manager has redesigned and developed a more thorough and extensive
monitoring tool. After reviewing this monitoring tool, it was determined that it was directed
toward the entire contract and not LABCORP’s deliverables. It was determined that the
monitoring tool should address LABCORP’s responsibilities rather than the whole contract since
both the Department of Corrections (DC) and LABCORP have agreed to the terms of the
contract. The current Contract Manager has scheduled a tentative review for December 2006.
Our attached proposed revision to the monitoring tool is an attempt to focus on the Contractor’s
responsibilities and assist the Contract Manager with future monitoring tool revisions.
We recommend that the contract be monitored as required by the contract.
Issue # 2: Inadequate Reports and Lack of Contract Monitoring.
LABCORP has not provided complete reports to the Office of Health Services nor has the
contract manager requested or accurately monitored the following reports required by Section IID (21):
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Monthly summary report of clinical laboratory services by institution and by region.

The July 2006 monthly report provided to the auditor by the Contract Manager was by
institution and region; however it did not contain any cost information for the current month
or year-to-date. No monthly reports for institutions from Region II were part of the monthly
reports provided except for the Regional Medical Center (RMC). On the other hand, there
were monthly invoices for lab services provided to Region II facilities for July 2006.
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Monthly summary report of clinical laboratory services within the department.

No monthly summary report of clinical laboratory services within the Department was
provided by the Contract Manager LABCORP confirmed that this report had not been sent
out for distribution. There was some confusion regarding the information required in the
report. Clarification on the reports content was provided to LABCORP and this report will be
forthcoming.
Failure to receive accurate and complete reports will distort cost information and the ability to
track laboratory testing services reported by the Health Services Department.
We recommend the Office of Health Services ensure institutions are receiving the required
monthly report by spot checking different institutions or by developing a tracking system that
keeps the Contract Manager informed of whether LABCORP is providing reports as required by
the contract.

Issue # 3: Contract Management.

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Section IV(A), (2) and (6) of the contract requires the Contract Manager to:
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Direct the Institutional Health Services Administrator to verify receipt of deliverables, and

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Direct the Institutional Health Services Administrator to review, verify, and approve
invoices.

We determined that the IHSA’s in the field were receiving all the goods and services per the
contract and were very satisfied. It was stated by all IHSA’s that LABCORP continues to
improve upon past identified weaknesses, thereby providing a better service.

Directions to the IHSA to verify receipt of deliverables and to review, verify, and approve
invoices is understood. However, there is no tracking system or procedure to inform the
Contract Manager that these tasks have been completed by the IHSA’s.
We recommend the Office of Health Services devise a reporting procedure that informs the
contract manager that all deliverables have been received as well as all monthly invoices have
been reviewed, verified, approved and forwarded for payment by the IHSA’s.

Issue # 4: Accessible/Institutional coordinator.
Section II-D (12) requires the contractor to provide DC with an accessible coordinator
responsible for all aspects of the contract. Additionally, a coordinator shall be designated
specifically for each correctional institution to refer any questions regarding laboratory test
results for immediate resolution. These coordinators are one in the same.
Not all institutions are familiar with the name of their institutional coordinator responsible for
solving problems or providing assistance because LABCORP did not provide such list to DC.
We obtained a copy of this list which is attached for your use.
We recommend the Office of Health Services monitor this area to ensure an accurate list is
maintained by the institutions.
Issue # 5: Training.
Section II(D), (6) and (14) requires the contractor to:
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Provide centrifuges to all facilities and appropriate in-service training on use and
maintenance of equipment. Refresher in-service training shall be provided annually by
the contractor.

We determined that there was no need for annual refresher training on centrifuges by
LABCORP. The nursing staff employed at the institutions is trained on its use and operation
and can provide this annual training.

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Provide in-service training to all institutional health services staff at institutions. The
contractor shall coordinate the date and time of the training with each institutional HSA.

There is no specification as to the frequency of training and LABCORP admits that they have
never contacted the HSA to set up training. However, they have volunteered training and
informational updates for distribution at Regional Health Service meetings and will provide any
additional training regarding LABCORP computer software.
We recommend the Office of Health Services discuss with LABCORP’s representative what
type of training is available, then canvas the institutions that require training and have them
coordinate with their institutional coordinator for the training.

Issue # 6: Licensing Documentation.
Section II-D (9) states that LabCorp shall provide pathologists who are licensed in the State of
Florida. A copy of LabCorp’s pathologist’s certification, licensure and DEA registration shall be
provided to the Contract Manager within thirty days of execution of the contract.
The contract Manager possessed only three certifications. During our meeting with LABCORP,
a copy of all pathologist certifications was requested and received. They are attached for your
use.
We recommend the Office of Health Services verify that all licensures, certifications, insurance
coverage and permits held by LABCORP have been received and are on file with the contract.

Issue # 7: Contract Deletions.
Section II-C, Medical Records and Documentation, delete in its entirety. LABCORP
personnel are never allowed to document healthcare encounters in the inmate’s health record
nor enter anything into DC’s medical computer system (OBIS).
Section II-D (4), Data transmission equipment is no longer installed at the institutions. A laser
jet printer provided by LABCORP has taken its place for receiving reports and performing print
functions.
Section II-F (1) Staff Conduct should be reviewed because LABCORP personnel basically
provide a pick up and delivery service with an occasional maintenance call on the equipment.
Their staff never has contact with any inmate, so there is no chance for preferential treatment;
any type of business relations; contact with the inmate’s family; or the possibility of engaging in
criminal conduct with an inmate.

Section II-F (3), Contractor’s Staff Training and Education. Since LABCORP provides a pick
up and delivery service with minimal to no contact with Institutional personnel, the need for
training and education is nonessential for LABCORP employees.

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Chief Internal Auditor
cc: Attachments

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