Don’t rush to privatize mental health services

State health officials seem intent on privatizing Georgia’s mental health services, even though there is scant evidence that having for-profit companies take over troubled state hospitals will either save taxpayers money or improve the quality of care to patients.

Still, the Georgia Department of Human Resources is pressing forward with a proposal to turn over one of the state’s seven mental hospitals to a private company as early as next year. DHR’s longer-range plan is to close four of the institutions and privatize most of what remains of the state’s mental health services by 2012, according to a report by The Atlanta Journal-Constitution’s Alan Judd and Andy Miller.

But members of Gov. Sonny Perdue’s mental health commission and a growing number of state legislators have doubts about the proposal. They are correctly demanding more public participation in DHR’s privatization plans, which have been largely hashed out behind the scenes within the giant department’s bureaucracy. Even if there were a case for privatization, DHR’s plans are being pushed at the worst possible time. For months, the state’s mental hospitals have been under investigation by the U.S. Justice Department for endangering the lives of patients. If Georgia doesn’t present a viable action plan to correct obvious problems at the facilities, a federal judge could order the state to cede control of the hospitals.

The Justice investigation was prompted by the AJC’s reporting over the last two years on the state’s failure to adequately staff the hospitals. To make matters worse, Perdue has ordered DHR to cut its budget by 6 percent for the remainder of the fiscal year because of a shortfall in state revenue. Against this backdrop, DHR proposes now to turn the hospitals over to a private operator? Justice officials are unlikely to see the move as a legitimate effort on the state’s part to improve the quality of care for patients. Taxpayers should also be skeptical of it.

State mental hospitals can hardly be seen as potential profit centers for private companies —- one of the reasons there has been so little private or public investment in that market over the last two decades. Patients who are sent to state institutions have usually exhausted all private insurance coverage.

And unlike regular hospitals, there is no way to cost-shift the burden of caring for indigent patients by treating insured patients. Private practice psychiatrists rarely admit insured patients to state institutions. Given this, corporations don’t have many ways to make a profit from running state hospitals. They’ll probably resort to reducing staff and services —- the very things that have gotten Georgia in trouble in the first place.

It’s hard to tell whether DHR officials believe privatizing mental health services will really work or whether they have become ideological slaves to the notion that the private sector always delivers higher-quality and lower-cost services than the government can.

“This is the most exciting thing I have seen, conceptually, that helps us get to real, positive change in mental health,” DHR Commissioner B.J. Walker breathlessly announced last month. In an e-mail obtained by the AJC through the Georgia Open Records Act, Walker told a consultant: “I find myself with a strategic opportunity, given budget cuts, to do what is unthinkable here.”

Perhaps Walker is just trying to shake up the inertia that has plagued her department. Still, using the state’s budget crisis as a reason to privatize could be a major mistake. The experience in other states shows it rarely results in budget savings.

Florida’s 10-year record shows that some of the worst hospitals in the state have indeed improved in quality of care. But even with shorter stays it’s not clear whether the state has been able to reduce a high rate of re-hospitalization among patients. It is also difficult to determine from the evidence so far whether there has been any substantial cost savings to taxpayers because of privatization. There may be lower per-patient costs, but the state had already paid the capital costs underlying many of the services —- buildings, infrastructure, etc.

In North Carolina, auditors found that the system of privately run, community mental health centers wasted as much as $400 million over two years by providing unnecessary services. Pennsylvania scrapped its plans for a private firm to operate a facility for mentally ill criminal defendants when questions about costs arose and employee unions objected.

Still, there may be a targeted role for privatizing some mental health services in Georgia, particularly in the area of mental health care for criminal defendants and state prisoners. County jails are often called upon to pay for medical services and perform forensic examinations for the chronically mentally ill who wind up behind bars —- services many medical providers under contract with the jails aren’t equipped to perform. There are programs run by companies, including the one in Florida, that are geared exclusively toward these defendants. The state may also want to consider privately run units in existing mental hospitals, or creating smaller stand-alone institutions for mentally ill Georgians convicted of crimes.

Perdue has already indicated he wants to break mental health services away from the giant DHR bureaucracy and create a separate agency focusing on behavioral health. That’s a good idea. But before privatizing a single service, the governor ought to enlist the help of the state mental health commission and the Legislature to guide the work of the new Department of Behavioral Health. DHR’s track record in running the state’s mental health facilities has proven too unreliable for such an important decision to be made by Walker and her deputies.

—- Mike King, for the editorial board (mking@ajc.com)

 McClatchy News Service