Don't rush deal to privatize hospital


Process matters. That's why Texas Health and Human Services Commissioner Dr. Kyle Janek should heed state Sen. Robert Nichols' call to put a halt to the privatization of Terrell State Hospital (see our article on Page A1 of this edition).

There's no cause to doubt Dr. Janek's commitment to providing the best care possible for our state's severely mentally ill residents. But as he proceeds with a contract with the GEO Care group to take over the Terrell facility, there's cause to question how the process worked. There's also room to explore whether privatization is really the answer for our budget-strapped state psychiatric hospitals.

First, process. Dr. Janek contends that the 2013 budget ("General Appropriations Act") requires him to "create a 10-year plan for the state hospital system and the delivery of inpatient mental health care."

And he should do so — but when that 10-year plan contemplates something as major as privatizing one (and perhaps eventually more) of the state's 10 psychiatric hospitals, such a decision should be made by the Texas Legislature, not by an unelected appointee. It's a question of accountability; voters prefer that big decisions be made by legislators, who can be held directly accountable.

The second issue is privatization. In many cases, privatization can work well — because in theory, it's sound. Free market forces usually cause private sector companies to operate more efficiently.

But often, when contracts with private companies are drawn up, those very free market forces are stifled — on purpose.

For example, competition drives the free market toward more efficiency and higher quality. But many privatization deals include non-compete clauses; in other words, the private firm is giving exclusive rights, for a specified length of time.

The exclusive nature of a privatization scheme can also work against cost savings. One example is the arrangement Texas had with the data analytics company 21CT.

That firm had a $110 million no-bid contract with the state to ferret out Medicaid fraud. Even as a criminal investigation was launched into the company's dealings, the firm was asking for more money from the state.

And then there's accountability. When state agencies are doing the work — whether it's building a road or providing a service, they're on the hook for the results. When agencies contract with a private firm to do the work, there's another layer added, which reduces accountability.

Of course, good contracts can mitigate many of the drawbacks, and privatization has worked in many specific instances in the state of Texas.

But the bottom line at Texas psychiatric hospitals isn't the bottom line — it's the care of patients. Some corners shouldn't be cut. The last time GEO Care made a bid to take over a psychiatric hospital, it pledged to save the state 10 percent over the prior year's budget at Kerrville State Hospital.

But Dr. David Lakey, head of the Department of State Health Services (a division of HHS), rejected the bid, because savings would be "achieved primarily through reductions in staffing and benefits to a degree that would put both our patients and the state of Texas at risk," he said.

With too many unanswered questions, and the Legislature about to convene, we agree with Sen. Nichols' assessment, that the process should be halted so the Legislature can have the appropriate time to review the matter.


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