AUDIT REPORT Riga March 28 2007 5.1-2-65R/2005 Legality audit Expenditure compliance of funds from the State budget shifted into ambulatory health care services with the requirements of normative documentation and provision of availability of the service Legal justification of Audit 1. On the basis of Articles 46 and 48 of the law on the State Audit Office (SAO) and the audit assignment No.5.1-2-65R/2005 of 31.10.2005. of the Third Audit Department of the SAO, a legality audit Expenditure compliance of funds from the State budget shifted into ambulatory health care services with the requirements of normative documentation and provision of availability of the service has been performed. 2. The audit was performed by the state auditors Sandijs Miķelsons, Agnese Bedrīte, Ivars Greitāns (terminated from the job in the SAO on 12.01.2007.), Sarmīte Zīle (terminated from the job in the SAO on 30.06.2006.) and the state auditor assistant Baiba Liberte (terminated from the job in the SAO on 17.05.2006.). Audit Objective 3. To inspect and evaluate within the legality audit Expenditure compliance of funds from the State budget shifted into ambulatory health care services with the requirements of normative documentation and provision of availability of the service confirmed in the audit plan 2005 of the SAO, if the State Agency for Compulsory Health Insurance (hereinafter in the text SACHI) under the supervision of the Ministry of Health (hereinafter in the text MH): 3.1. administers the funds from the State budget allocated for the payment for the ambulatory health care services in compliance with the requirements of the regulatory enactments; 3.2. ensures the availability of the ambulatory health care services in the state; 3.3. supervises, if the funds from the State budget shifted into ambulatory health care are spent in accordance with the concluded contracts; 3.4. ensures data security and completeness of the Management information system (hereinafter in the text MIS) used in the administration of the ambulatory health care services. Accountability of the SAO auditors 4. The SAO auditors are responsible for the audit report, which is based on the audit evidence obtained during the audit.
Accountability of the Ministry of Health and State Agency for Compulsory Health Insurance 2 5. The MH and SACHI under the supervision of the MH are responsible for the compliance with the regulatory enactments and the truthfulness of the information provided to the auditors. Scope of the Audit 6. The audit is accomplished in accordance with the international auditing standards recognized in the Republic of Latvia. The audit is planned and performed, so that to acquire sufficient certainty, if SACHI observes the requirements of the regulatory enactments, when administering the funds from the State budget shifted into ambulatory health care and ensuring the availability of the ambulatory health care services. 7. The inspections are performed on the activities of SACHI within the audit, when administering the funds from the State budget for the payment for the ambulatory health care services and provision availability of the ambulatory health care services in April December, 2005. Within the course of the audit, random inspections are performed in the central authority of SACHI and the territorial structural units of SACHI Riga and Vidzeme Territorial Departments. 8. The audit included: 8.1. a random inspection of the planning of the funds from the State budget allocated for the payment for the ambulatory health care services; 8.2. a random inspection of the compliance of the conclusion of contracts with the ambulatory health care service providers with the requirements of the regulatory enactments; 8.3. a random inspection of the provision of availability of the ambulatory health care services; 8.4. a random inspection of the payments for the rendering of ambulatory health care services; 8.5. a random inspection of the supervision of expenditure of the funds allocated for the ambulatory health care; 8.6. evaluation of the supervision of MIS data security and data flow. 9. Sufficient and appropriate audit evidence is obtained during the audit, on the basis of which the audit report is prepared. SUMMARY I 10. The MH, as the managing authority of the sector, which is responsible for the development, organization and coordination of the health policy, had not ensured, that the legislative act the regulations of CM No. 1036 of 21.12.2004. stipulating the procedures for the organisation and financing of the ambulatory health care services within the audit period, would stipulate explicit and transparent procedures for the organisation and financing of the ambulatory health care services, because the regulatory enactment did not stipulate several substantially mportant points of the organisation and financing of the ambulatory health care. It is disclosed within the audit, that the inaccurate regulations of the regulatory enactment have caused the basis for initiation of legal proceedings,
influenced the finance division for the payment for the health care services, the disbursement with the health care service providers, etc. 3 On 01.01.2007. the regulations of CM No.1036 of 21.12.2004. have lost validity, instead of them the regulations of CM No.1046 of 19.12.2006. Procedures for the Organisation and Financing of Health Care (hereinafter in the text regulations of CM No.1046 of 19.12.2006.) have come into force, however, in these regulations substantial issues stipulating the organisation and financing of the ambulatory health care services are still not brought to a close either, as, for example: the contradictory regulation on the inclusion of family doctor controllable funds for the payment for the secondary ambulatory health care services in the content of the funds, planned for the payment for the primary health care or secondary ambulatory health care, which maintain a risk, that the issue of the organisation and financing of the health care services still allows the possibility of different interpretations. II 11. SACHI, which is responsible for the administration of the financial resources of the state health compulsary insurance, provision of availability of health care services, development of the methodological instructions on the organization of the health care services, had not observed the substantive requirement of the internal control system establishment within the audit period on the determination of the procedures of the fulfilment of the functions or assignments by the institution and its structural units, because it had not stipulated in any level of administration the fulfilment procedures of the functions or assignments delegated to it, regarding the planning and expenditure supervision of the division of funds allocated for the payment for the ambulatory health care services, which caused a risk, that the funds from the State budget allocated for the provision of the ambulatory health care services may not be administered in the most efficient and useful way. III 12. SACHI, which is accountable for the implementation of the provision of the health care services of the state policy, has allowed several violations of the norms of the regulatory enactments within the audit period, as a result of which the State budget expenses are increased for the payment for the primary health care services not corresponding with the requirements of the legislative act in the amount of about Ls 800 thousand, a single approach is not ensured in the planning of the rendered services within the state, both, in case of distribution of the service providers, and the division of the state territories, the planning and disbursement of the financing necessary for the payment for the services has not taken place, by observing the parameters stipulated in the regulatory enactment (a parameter not mentioned in the regulatory enactment is used the differentiated rate), which has influenced the amount of the financing received by the medical treatment service providers, both, in terms of increase and decrease, etc.. IV 13. Substantial problems are disclosed in the provision of availability of health care services and disbursement, including: patient queues to particular health care service providers within several months, a risk of financial problems for the health care providers regarding the delay in payments for the rendered health care services, etc.. V
4 14. shortcomings were disclosed within the audit period in the operation of SACHI Management information system, which is established for the planning, accounting, payment, supervision, as well as analysis of the health care services (regular performance of system security audits, nor systematic control of audit trails were insured, the procedures for the performance of user rights registration were not determined, etc.), which caused a risk for the system life in case of security incident. In 2005 about 10 million registration documents of the ambulatory health care were input in the system. I SHORTCOMINGS IN THE REGULATORY ENACTMENT 15. Regulations of CM No.1036 of 21.12.2004. (valid from 01.04.2005. to 01.01.2007.) did not stipulate explicit and transparent procedures for the organisation and financing of the ambulatory health care services within the audit period in several points of the ambulatory health care, as, for instance: the procedures of planning the funds necessary for the work organization and work renumeration of the primary health care service providers (midwife, doctor on duty, vaccine coordinator). The inaccurate regulations of the regulatory enactment have created such consequence, as, for instance: 15.1. the regulations did not fix the date, until which SACHI has to disburse with the family doctors for the annual variable payment, as a result of which SACHI had made a prepayment to the family dotors for the annual variable payment within the audit period in the amount of Ls 486,2 thousand, but it had reserved Ls 215,8 thousand for a complete disbursement. SACHI has made a complete disbursement with the family doctors for the variable payment of 2005 only after 25.10.2006., when a corresponding internal regulatory enactment had come into force. 15.2. the regulations stipulated, that not more than 75% of the balance from the funds allocated to the family doctors for the payment for health care services rendered by specialists are monthly disbursed to the family doctors, but did not stipulate the criteria for calculation the amount of the funds to be disbursed. SACHI issued the order No.331 on 24.10.2005., by violating the coordination procedure with the MH and the Ministry of Justice stipulated in the State Administration Structure Law, in which the procedure was stipulated, according to which the amount to be disbursed to the family doctors is to be calculated. On the basis of the procedure, stipulated in the order mentioned above, in the 2 nd and 3 rd quarter of 2005 SACHI disbursed Ls 1,044 million or 30 per cent to the family doctors from the funds unused by the family doctors for the payment for the rendered health care services by specialists. The minister of Health has cancelled the procedure mentioned above on 03.03.2006., separately the resolutions of family doctors, which have been adopted on the basis of the procedure mentioned are litigated in the administrative court of the region, which may create additional necessity of the funds from the State budget for the implementation of the court order; 15.3. without economically justified calculation, the fixed payment was stipulated in the regulations for maintenance of family doctor practice of Ls 160,00 a month and the fixed payment for every child registered at the family doctor up to18 years of 0,12 Ls/a month, as a result of which a risk existed, that the amounts of the payments mentioned have been determined without sufficient consideration; 15.4. the regulations without sufficient economic justification stipulated the limit of the maximal amount of the funds for the payment for the secondary ambulatory health care services not more than 12% of the funds allocated for the payment for health care services. Although the central authority of SACHI exceeded the maximal limit of the funds stipulated in the regulatory enactment, when planning the funds for the payment for the secondary ambulatory health care services within the period from 01.04.2005. to
5 15.11.2005., the funds shifted into the payment for the secondary ambulatory health care services were insufficient within the audit period, because the ambulatory health care services were not paid in the amount of Ls 978,3 thousand within the audit period, which could cause a risk of financial problems for the health care providers; 15.5. a contradictory regulation was included in the regulations on the inclusion of family doctor controllable funds for the payment for the secondary ambulatory health care services in the amount of the funds, planned for the payment for the primary health care or secondary ambulatory health care. The central authority of SACHI, when planning the amount of the funds from the State budget for the payment for the primary health care services, included the family doctor controllable funds for the payment for the secondary ambulatory health care services and the funds for the payment for the medical treatment manipulations performed by the family doctors in this section, as well, but in the section of the secondary ambulatory health care services planned the funds only for the payment for the secondary ambulatory health care services controlled by SACHI. II IGNORING THE BASIC REQUIREMENTS OF THE INTERNAL CONTROL ON THE ESTABLISHMENT OF THE PROCEDURE OF FULFILMENT OF THE FUNCTIONS OR ASSIGNMENTS 16. SACHI had not insured the development of the methodological instructions on the organization of the provision of health care services within the audit period for such relevant issues, as: the procedures for the planning of the funds for the payment for the primary health care and dentistry service; the procedures for the planning of the funds for performing the payments of the capitation money to the family doctors, the payment for the manipulations performed by the family doctors; the procedures for the planning of the funds for the payment for the secondary ambulatory health care services; the procedures for the planning of the funds for the estimate financing payments of the direct accessibility specialists and the consulting-rooms (the diabetic foot care consulting-rooms, palliative care consulting-rooms, stoma consulting-rooms, doctor on duty consulting-rooms); the procedures for calculation the amount of work of the specialists (physicians, nurses, assistants), for the work renumeration of whom, the estimate financing is applied; the procedures for the calculation of the funds for the payment for the prophylactic examinations, etc., which caused a risk, that the funds from the State budget allocated for the provision of the ambulatory health care services may not be administered in the most efficient and useful way. III IGNORING THE REQUIREMENTS OF THE REGULATORY ENACTMENTS 17. The central authority of SACHI did not use the amount of the capitation money of Ls 0,345 for one patient a month stipulated by the order No.47 of the MH of 23.03.2005.in the payment calculation of the capitation money of the 2 nd quarter of 2005, but used the amount of the capitation money of Ls 0,48 for one patient a month stipulated by a verbal order of the MH without a documentary justification and economically justified calculations, thus increasing the State budget expenses for the payments of the capitation money (the basic payment and the variable payment) in the amount of about Ls 800 thousand. 18. SACHI departments, when calculating and disbursing the amount of the capitation money to the family doctors, did not observe the requirements stipulated in the normative document. A parameter not stipulated in the regulatory enactment was used in the calculations of the amount of the capitation money for the family doctors: the differentiated rate, as a result of the use of which the amount of the capitation money to
6 be disbursed to the family doctors changed (for a part of the family doctors in terms of increase, for another part of the family doctors in terms of decrease). 19. The central authority of SACHI, when planning the funds for the 2 nd quarter of 2005 for the payment for the family doctor controllable secondary ambulatory health care services, did not observe the amount of the capitation money of Ls 0,345 stipulated in the legislative act for one patient a month, but used the parameter determined as a result of additional calculations base capitation money in the amount of Ls 0,38 for one patient, as a result of which, the amount of the allocated funds for the payment for the family doctor controllable secondary ambulatory health care services did not comply with the amount of the funds, which would be obtained, if the amount of the capitation money of Ls 0,345 stipulated in the legislative act was used for one patient a month, nor the amount of the funds, which would be obtained, if the amount of the capitation money of Ls 0,48 for one patient a month stipulated by a verbal order of the MH was used in the calculation of the financing. 20. SACHI, when calculating the amount of the family doctor controllable funds for the payment for the secondary ambulatory health care services, did not observe the requirements of the regulatory enactment and calculated the financing in various departments of SACHI differently, as a result of which, a single approach was not observed in the planning of the provision of availability of health care services: 20.1. SACHI Riga Territorial Department used the amount of the family doctor controllable funds for the payment for the secondary ambulatory health care services in the calculations for the 2 nd quarter of 2005, by comparing with the regulatory enactment reduced rates (for example: the regulatory enactment stipulated, that in case, if the proportion of the children, registered at the family doctor does not exceed 70%, the rate 1,8 is to be applied in the calculation of financing, in fact SACHI Riga Territorial Department used the rate 1,29375 in the calculation of financing) and the average payment of the capitation money of 0,48 Ls/a month for one patient stipulated by a verbal order of the MH, but in the calculation of financing of the 3 rd 4 th quarters of 2005, applied different payments for every registered patient for various family doctors, determined not compliant with the regulatory enactment within the limits from Ls 0,500 Ls 1,010 (the rates of 0,698 are stipulated in the legislative act, if the proportion of the children registered at the family doctor does not exceed 70%, and 0,543, if the proportion of the children registered at the family doctor exceeds 70%), as a result of which the financing shifted to the family doctors did not comply with the stipulated in the regulatory enactment; 20.2. SACHI Vidzeme Territorial Department used the rates 1,8 and 1,4 stipulated in the regulatory enactment and the average payment of the capitation money of 0,345 Ls/a month for one patient stipulated in the legislative act, as well as the additional parameter differentiated rate for the family doctor controllable funds for the payment for the secondary ambulatory health care services for the 2 nd quarter of 2005. In the 3 rd and 4 th quarter of 2005, in addition to the stipulated in the normative document, used the additional parameter differentiated rate. 21. The central authority of SACHI, when planning the financing for the payment for the services rendered by the direct accessibility specialists (psychiatrist, narkologist, oncologist, etc.), consulting-rooms (diabetic foot consulting-room, doctor on duty consulting-room, etc.), did not use the parameters of estimate financing calculation stipulated in the regulatory enactment (salary of doctors and nurses, mandatory payments of social insurance, the funds, necessary for the provision of activity), but based on the data of the actually allocated funds in the previous period, which created a risk, that the planned financing will not ensure the defrayment of expenses necessary for the provision
7 of medical treatment institutions activity. By paying, SACHI Riga and Vidzeme Territorial Departments did not observe the requirement stipulated in the regulatory enactment to for every medical treatment institution separately to calculate the funds necessary for the provision of its activity. In SACHI Riga Territorial Department an equal payment of Ls 290,00 a month was determined and disbursed for all medical treatment institutions, buti n SACHI Vidzeme Territorial Department - a payment to Ls 200,00 a month. The amount of work of the medical practitioners of SACHI Riga and Vidzeme Territorial Departments was defined, by applying different criteria, as a result of which the payment of different amount was determined and disbursed for the work of equal amount. 22. Regulations of CM No.1036 of 21.12.2004., which became valid on 01.04.2005., did not stipulate a transition period of time for the performance of the selection of the secondary ambulatory health care service providers and SACHI concluded the contracts with the secondary ambulatory health care service providers on the rendering of services in the 2 nd quarter of 2005 without the performance of the selection procedure, although the mentioned requirement of the regulatory enactment became valid with 01.04.2005. 23. The central authority of SACHI did not observe the limits of the financing to be allocated stipulated in the regulatory enactment in the planning process of the funds from the State budget: 23.1. for the payment for the secondary ambulatory health care services it is stipulated in the regulatory enactment (in the wording, which was valid until 15.11.2005.), that not more than 12% of the funds from the State budget planned for the payment for health care services are shifted into the secondary ambulatory health care, which would be Ls 16,43 million. The central authority of SACHI planned Ls 18,92 or 13,8% for SACHI controllable funds for the payment for the secondary ambulatory health care services; 23.2. into the payment for the manipulations performed by the family doctors within the period from 01.04.2005. to 15.11.2005. the amount of the funds of Ls 0,574 less than it was stipulated in the regulatory enactment was shifted: it is stipulated in the regulatory enactment (in the wording, which was valid until 15.11.2005.), that the funds in the amount of 4-7% of the funds planned for the payment for the primary health care are shifted into the payment for the medical treatment manipulations performed by the family doctor. SACHI planned to shift Ls 16,26 million into the primary health care, 4% of it would be Ls 0, 650 million. SACHI planned for this purpose Ls 0,076 million or 0,5% of the primary health care funds. IV PROBLEMS IN DISBURSEMENT AND PROVISION OF AVAILABILITY OF HEALTH CARE SERVICES 24. The central authority of SACHI performed complete disbursement with the health care service providers with the delay of several months (the calculations on April, 2005 were prepared in August, 2005), not ensuring for the health care providers well timed receipt of all the financing for the rendered health care services. Advance payments were made until complete disbursement. 25. Within the audit period 133 ambulatory health care service providers exceeded the amount of finance stipulated in the Contract in total for Ls 1 284,7 thousand or 5,0% of the amount of finance determined for these services. In compliance with the requirements of the regulations of CM No.1036 of 21.12.2004. SACHI paid for the health care services in the amount of Ls 306,4 thousand, but did not pay for the rendered health care services in the amount of Ls 978,3, which could cause a risk of financial problems to the ambulatory service providers. SACHI:
25.1. paid Ls 95 066 for the non-rendered services to 37 health care service providers (for whom the fulfilment of contract was from within 95% to 99,9%); 8 25.2. did not pay Ls 52 925 for the rendered health care services to 40 health care service providers (for whom the fulfilment of contract was from within 100,1% to 105% of the amount of the contract); 25.3. paid Ls 306 387 of the exceeded amount of the contracts Ls 1 231 737 to 91 health care service providers (for whom the fulfilment of contract exceeded 105% of the amount of the contract). SACHI declined to pay the excess of the health care services to two health care service providers. 26. In the 2 nd and 3 rd quarters of 2005 the funds for the payment for the health care services rendered by specialists were allocated to the family doctors in the amount of Ls 8,39 million, the family doctors had spent only 58,6 % of the financing mentioned. The unused balance for the family doctor controllable funds for the payment for the secondary ambulatory health care services increases the income of the family doctors. By randomly analysing the expenditure level of the family doctor controllable funds for the payment for the secondary ambulatory health care services for particular doctors, substantial expenditure diferences of the funds for various doctors are disclosed, which simultaneously indicate both, the risk, that the patients do not receive all the health care services necessary for them (in cases, when there is large economy of the funds mentioned above), and the risk, that the family doctors (in cases, when they significantly exceed the amount of the funds mentioned) do not sufficiently fulfil their assignment stipulated in the regulations of CM No.1036 of 21.12.2004. to render health care services to patients and to write out a referral to a specialist by evaluating the health status of the patient. 27. The length of the queue to the specialists was from 7 to 30 days in the territory of SACHI Vidzeme Territorial Department during the audit. The length of the queue to the specialists in the territory of SACHI Riga Territorial Department was from 5 days to 14 months during the audit. The longest queue was in the day hospital to an ophthalmologist: VAS P.Stradins Clinical Hospital 14 months, SIA Rīga 1st Hospital 8 months, which testifies about the problems in the availability of the health care services. V SHORTCOMINGS IN THE OPERATION OF MANAGEMENT INFORMATION SYSTEM 28. The internal system security documents developed by SACHI stipulated a single approach to the issues of security, as well as coordinated the functions performed by the employees involved in the operation of the information systems, however several aspects relevant for the security of information systems were not introduced in the documents (a management plan of security risk, a restoration plan, the procedure for the identification, investigation and accounting of security incidents, the procedure for security training), which caused a risk, that in case of security incident the action of the system users will not be agreed and coordinated. 29. There was not a documentary justification for the resolution of SACHI to activate only 7 of 16 logical inspections in the system, nor the influence of every activated inspection on the data transmission rate was evaluated, and the decrease of the amount of work to be performed by expertise doctors with every activated logical inspection, which would not have to be performed manually for every ticket. Within the periods, when the system controls are activated and deactivated, decisions and activities were not documented,
9 which created a risk, that low confidence will be obtained on the operation and efficiency of the controls. 30. Within the audit period from September 5, 2005 regular performance of the system security audits and systematic inspection of the audit trails was not ensured, which reduced the possibility, that substantial problems and security risks would be identified. 31. The procedure for the storage of the data reserve copies nor the control procedures were defined in this process, besides the deficiency of the controls of the data copying process created a risk, that the copies prepared in the system automatically may not be applicable for the data restoration. 32. The incompletely described system and technical resources restoration measures to be performed, the procedure of their performance, the register of the executives and the control plan of their training, classes and qualification could create a situation, that the institution is unable to react to a security incident in due time, as a result of which the performance of the co-contractor functions could be hampered and it could significantly influence the system operation and successful and timely performance of the restoration process in case of the security incident or a technical or mechanical problem of the system or servers. 33. The procedures of the performance of the user rights registration was not defined, which caused a risk, that the acess rights of the system are not annuled for the persons, who have terminated the employment relations with the service provider, but about whom the service provider had not informed in due time the holder of the resources and by the identification access of such user the operations might be performed in the system.