The Schwarzenegger administration wants to put the University of California in charge of state prison inmates' medical needs in an overhaul of the troubled corrections healthcare system that could save $12 billion over a decade, officials say.

The arrangement, similar to a centralized system of managed care, would dramatically expand the use of telemedicine, a technique by which patients are seen by doctors in remote locations over a screen with an Internet connection. It would institute electronic record-keeping so providers could access medical information from anywhere.

The California Institution for Men at Chino. California pays more than $40 a day for inmate care; Texas pays $9.67. (Allen J. Schaben, Los Angeles Times / August 10, 2009)

And the plan, still being refined, could include the purchase or construction of a central hospital near several prison infirmaries for housing and treatment of the chronically sick. That would reduce the state's current -- and expensive -- practice of paying correctional officers overtime to transport and guard inmates at community hospitals around the state.

Eventually, the program would mean a sharp reduction in the number of employees providing care.

The proposal would require approval from lawmakers and from federal judges presiding over inmate lawsuits on inadequate healthcare. It could meet with opposition from unions for state workers whose jobs might change or be eliminated.

The program, recommended by a Texas company that the state hired as a consultant, would be an effort to reduce, and ultimately end, oversight of California's prison medical care by federal courts.

After a receiver took control of the system in 2006, medical costs skyrocketed. They reached $2.5 billion a year, including mental health care, which the receiver does not control, and have since declined to $2.2 billion. But they remain far higher than in other states, according a report by NuPhysicia, the state's consultant.

"This is definitely a wholesale reform of the prison healthcare system," said Susan Kennedy, Gov. Arnold Schwarzenegger's chief of staff. "The system is a mess right now. California needs to . . . rein in its costs, provide quality care and get out from oversight of multiple federal courts."

John Stobo, UC senior vice president for health sciences and services, said the university, which has not yet agreed to the plan, would be paid for the care it provided. But he noted, as in its decision to help reopen Martin Luther King Jr. Hospital in Willowbrook, the university is a public trust that exists to work with medically underserved populations such as prisoners.

"This is part of our mission and our responsibility," Stobo said.

The project would start at 11 Northern California prisons before being expanded to all 33.

Some of the recommended approaches, including telemedicine, records modernization and cheaper bulk purchasing of drugs, are already being undertaken by the court-appointed receiver, J. Clark Kelso, who is working with Schwarzenegger to cut the receiver's budget by $800 million in the coming year.

In proposing to pair state prisons with UC's academic medical system, the state is suggesting faster, broader changes similar to those in place in Texas and New Jersey, which also had federal court oversight of inmate care, and in Georgia.

California pays more than $40 a day for inmate care, according to NuPhysicia; it has added resources inefficiently under court scrutiny, state officials say. Texas pays $9.67 a day, New Jersey $15.84 and Georgia $10.25. With about 12,000 medical staff members serving inmates, California has about twice as many per prisoner as those states.

Savings from the plan in California are estimated to be at least $300 million in 2010 and would reach $1.2 billion a year by 2014, according to NuPhysicia.

The company grew out of the University of Texas Medical Branch's entrance into prisoner healthcare in the mid-1990s. Stobo headed the Texas medical center at that time.

He briefed Schwarzenegger on the plan Wednesday. The governor's aides said they planned to work with lawmakers, Kelso and the federal judges overseeing lawsuits on inmate medical care, dental care, mental health and disabilities.

The state also would need cooperation from unions for state prison employees, some of whom would be transferred to the university system.

Kelso's spokesman, Luis Patino, said the receiver had just received the report and had not yet reviewed it but would be pleased to discuss "any plan that will improve prison healthcare cost-effectively." He noted that the medical spending was already decreasing.

Under the new system, lawmakers would create a state agency that included corrections administrators, federal court representatives and appointees of the governor. It would give a contract to UC and monitor spending and quality of care.

The UC system would establish another agency to absorb state prison doctors, dentists and psychiatrists and to centralize purchasing of drugs and equipment.