Yes, it's common practice to the extent that correctional services may have what are classified as multi-level security units or institutions.
If I'm correctly interpreting what's being proposed here, inmates who didn't have a medium- or maximum-security classification couldn't be placed in a medium- or maximum-security institution. That would limit correctional services' ability to manage emergencies. Units may be assigned multi-level security classifications in certain cases to facilitate the management of inmates with various security classifications, while guaranteeing the highest security level for the general inmate population.