Privatizing mental care

Georgia is preparing to let for-profit companies take over much of its troubled mental health system, even though little evidence suggests privatization would save much money or improve care.

The state plans to privatize one of its seven psychiatric hospitals, possibly the Atlanta facility, by next year, according to public records obtained by The Atlanta Journal-Constitution. It also could soon place sections of other hospitals in private hands. By 2012, Georgia may close four hospitals altogether and privatize most of what remains of its mental health services.

These dramatic steps come at a desperate moment for a system that historically has been overcrowded, understaffed and poorly funded.

Falling tax revenue is forcing deep budget cuts —- perhaps $77.5 million, or 10 percent —- just as Georgia tries to negotiate an end to a federal investigation of its state hospitals. The U.S. Justice Department says poor care endangers patients’ health and safety. If the state does not make substantial improvements, the federal government may file a lawsuit that could force expensive remedies.

Privatizing could help the state “begin another way of looking at things,” said B.J. Walker, commissioner of the Georgia Department of Human Resources. The agency oversees the state hospitals and other mental health programs.

“This is the most exciting thing I have seen, conceptually, that helps us get to a real, positive change in mental health,” Walker said last week.

But she added: “Privatization is no panacea. You have to manage the privatization. You have to know what you’re going to buy.”

Still, turning over state hospitals to private firms would not necessarily satisfy federal authorities. Only four states have ceded management of public psychiatric hospitals or even parts of such facilities to the private sector, according to the National Association of State Mental Health Program Directors. And the states that Georgia is looking to emulate have compiled a record of success that is spotty, at best.

One of those states, North Carolina, wasted as much as $400 million after allowing unqualified firms to run much of its mental health system, according to state audits and news reports. Another, Pennsylvania, dropped a hospital privatization proposal earlier this year.

In Florida, the pioneer in privatizing state mental institutions, the move generated “no significant differences” in costs or care, auditors found. Still, the privately run facilities operate at a slightly less expensive rate than its state institutions, and many long-warehoused patients were finally discharged.

Georgia began considering privatization in earnest last year after the Journal-Constitution revealed a pattern of suspicious deaths of state hospital patients. From 2002 through late 2007, the newspaper found, at least 136 patients died from neglect, abuse or substandard medical care. The articles prompted the Justice Department investigation.

State officials were reluctant last week to disclose details of their plan to forestall federal intervention. No decisions have been made, the DHR’s Walker said, so premature discussion of major hospital changes could cause workers to abandon their jobs.

In public records, however, as well as in briefings for mental health advocates, Walker has outlined comprehensive ideas for largely getting the state out of the psychiatric care business.

A shift to programs

The state wants to “close hospitals and expand community services,” Walker wrote in an e-mail to a consultant last month. “I find myself with a strategic opportunity, given budget cuts, to do what was unthinkable here.”

Besides privatizing one hospital next year, the plan calls for moving all forensic patients —- criminal defendants who are mentally ill —- to a newly privatized facility in Milledgeville, beginning in March, documents show. Both of the state’s children’s psychiatric units would be closed; adolescent patients would be sent to private hospitals or treated in community-based programs. And community services, including short-term units to stabilize critical patients, would greatly expand in two communities, probably Columbus and Savannah —- a prelude to closing the state hospitals in those cities next year.

Over the next four years, if current plans do not change, state hospitals in Thomasville and Rome also may close. Only the psychiatric hospitals in Atlanta and Milledgeville, along with an institution housing developmentally disabled patients in Augusta, would remain.

By creating community programs designed as alternatives to state hospitals, officials said, the new system could accommodate 18 percent more adult mental health patients. At first, cost savings would be negligible: less than two-tenths of 1 percent.

Several potential hurdles exist: a lack of acceptable bidders, resistance in cities where hospitals would be closed and possible objections from the Justice Department.

Provider concerns

Privatization of public services has become more commonplace in recent years, based on the theory that the private sector can perform many government functions at less cost and with greater efficiency. States have contracted for tollbooth operators, housekeeping, payroll, and even prisons and juvenile detention centers.

Privatizing state psychiatric hospitals and related programs, however, has been slow to catch on.

Georgia was unsuccessful in an effort to privatize some mental health services last year. The state asked private firms to take over adolescent mental health programs, including inpatient hospital care. But potential bidders balked.

“Because Georgia’s system is underfunded, discussions with potential providers have suggested that the service could not be provided for the funds that are presently in the system for this purpose,” Gwen Skinner, head of the state’s mental health division, wrote in a memo in December.

Georgia officials, Skinner wrote, had studied Florida’s privatization efforts. But “there was no great cost savings,” she wrote, “and the quality of service was essentially the same.”

The state recently hired a consultant to put together requests for bids to start privatization in Georgia, instructing her to use Florida, Pennsylvania and North Carolina as “templates.”

Florida began privatizing state hospitals in 1998, hoping to reverse decades of poor care.

It hired a company now known as GEO Care, a subsidiary of the private prison operator GEO Group Inc., based in Boca Raton, Fla. GEO Care, which Georgia has identified as one of three potential bidders, did not respond to requests for an interview. The company’s Web site says it has been lauded for “high-quality care and effective treatment programs.”

Florida’s first hospital to be privatized, near Fort Lauderdale, had never been certified by a national accrediting organization. Patients stayed an average of eight years, routinely restrained and held in seclusion.

GEO Care reduced the average stay to less than one year, virtually eliminated the use of restraints and seclusion and got the hospital accredited, according to the Florida Statewide Advocacy Council, a watchdog group. The council endorsed additional privatization.

Other reviews have been less enthusiastic. A state auditing agency found that privatization had produced “no significant differences in total operating costs or in client outcomes.”

No studies have tracked the patients that GEO Care deinstitutionalized. Florida does not measure patient outcomes by hospital, so evaluating the relative quality of care in privately run or state-operated facilities is all but impossible.

Even financial comparisons are tricky. A decade into privatization, GEO Care operates three of Florida’s mental health facilities, while the government runs three others. GEO Care institutions operate for 7 percent to 11 percent less per bed than the state facilities, according to the Florida Department of Children and Families. However, the GEO Care facilities have several advantages: They are smaller and more modern, require less overhead and were built with state dollars before being turned over to GEO Care.

Florida officials review GEO Care’s facilities at least once a year and hold them to the same standards of care as state-operated institutions, said Sarrah Troncoso, a spokeswoman for the Department of Children and Families.

Unsuccessful models

Pennsylvania intended to follow Florida’s lead last year. Three companies submitted bids to operate a forensic unit at a state hospital in western Pennsylvania. But the proposal was shelved after unions representing hospital employees protested possible job cuts and a financial analysis called the estimated cost savings into doubt, said Stacey Witalec, a spokeswoman for the state Department of Public Welfare.

In 2006, North Carolina tried a different approach: It began delivering all community mental health treatment through private companies, replacing programs operated by local governments.

After a year, a state audit found that 89 percent of community treatment under the new system was either unnecessary or excessive. The News & Observer of Raleigh reported that the state had wasted as much as $400 million. The federal government is auditing the services and withholding $138 million in Medicaid funding while investigating.

North Carolina officials did not respond to requests for comment.

Gov. Mike Easley has acknowledged his state’s “privatization with no accountability.” At his urging, legislators approved greater state oversight and new controls over private providers.

North Carolina mental health advocates were stunned to hear that Georgia might follow their state’s lead.

“Oh, man —- have they not been looking at what problems we’ve had?” said Debra Dihoff, executive director of North Carolina’s chapter of the National Alliance on Mental Illness. “I can’t believe they would use us as a model.”

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A MAP FOR PRIVATIZATION

Georgia may turn over some state mental health services to private companies, a tack that has produced mixed results in a handful of other states.

FLORIDA

Privatization plan: Beginning in 1998, Florida contracted with what is now known as GEO Care, a subsidiary of private prison operator GEO Group. It now operates three of the state’s psychiatric facilities; a state agency continues to run three others.

Results: The privately run facilities reduced patients’ average stay and the use of restraints and seclusion. State auditors say cost savings and improvements in care are negligible.

NORTH CAROLINA

Privatization plan: North Carolina launched a new system of privately run, community-based mental health services in 2006, replacing programs run by local governments.

Results: According to a state audit and news reports, the new privatized system provided treatment that wasn’t needed or was more than medically necessary in 89 percent of cases. Estimates of wasted tax dollars run as high as $400 million over two years.

PENNSYLVANIA

Privatization plan: Last year, state officials proposed hiring a private firm to operate a facility for mentally ill criminal defendants. Three companies, including GEO Care, submitted bids.

Results: State officials shelved the plan after questioning whether it would reduce costs and an employees’ union objected to possible job cuts.

INDIANA

Privatization plan: A 2005 plan called for privatizing three state psychiatric hospitals. Hospital employees feared massive job losses; the state said it would require private operators to keep workers for no more than one year.

Results: Only one non-profit group offered to take over the first of the three hospitals —- and it wanted the state to provide $3 million to $5 million in startup money. Officials dropped the privatization plan early this year but said they may reconsider it in 2009.

Sources: State mental health agencies, AJC research