How Privatization Could Improve Accountability at Scandal-Plagued Texas Hospital

Commentary

How Privatization Could Improve Accountability at Scandal-Plagued Texas Hospital

Private sector has solid track record operating similar facilities

Change is never easy, as recently demonstrated by the state’s move to privatize Terrell State Hospital and the ensuing calls by state Sen. Robert Nichols and the Tyler Morning Telegraph editorial page to put a stop to it. Accountability is a recurring theme among skeptics of the hospital privatization plans, so it’s useful to delve deeper on that issue.

Government has operated Terrell State Hospital and concerns that a private operator might be less accountable for patient care are understandable – but wrong. The pursuit of privatization was prompted by the 2012 death of a 62-year old patient at Terrell State Hospital, who was held in restraints for 55 straight hours. After an Austin American-Statesman investigation brought the story to light, a federal investigation found that being strapped down for that long led to her death and the widespread quality of care problems at Terrell were causing “immediate jeopardy to patient health and safety.” In fact, the Centers for Medicare and Medicaid Services threatened to pull nearly $5 million in federal funding from the hospital to force immediate action to improve patient care, and the state even considered closing Terrell’s medical unit for patient safety.

Accountability has thus been lacking under state control, and while privatization is no guaranteed panacea, the private sector does have a solid track record operating similar hospitals.

South Florida State Hospital – the first psychiatric hospital privatized in that state – offers a good example. Within the first year of privatization, the private operator was able to get the existing facility accredited for the first time in its history. Improvements resulted in the dismissal of a major class action lawsuit concerning patient abuse and poor facility conditions that had been filed while still under state operation. The private operator was also able to significantly reduce waiting lists for patient admissions and shorten the average length of patient stays.

The Florida Legislature’s Office of Program Policy Analysis and Government Accountability issued a 2010 report finding that the quality of care at the hospital was similar to two state-run facilities but had per-bed costs 6 to 14 percent lower. In fact, differences in cost and quality had previously been more pronounced, but Florida’s state-run hospitals have improved considerably since privatizing that one facility. Introducing competition had a positive influence on costs and quality of care throughout the state hospital system.

State Sen. Robert Nichols, R-Jacksonville, is seeking to prevent the Health and Human Services Commission from finalizing a contract with Correct Care Recovery Solutions to take over hospital operations at Terrell, instead preferring to see the legislature take up the issue. And the Morning Telegraph recently editorialized that voters should want legislators to approve such privatization decisions since they “can be held directly accountable.”

It’s neither realistic nor desirable to have state legislators add procurement and contract management to their job duties. Privatization is not an obstacle to accountability. In fact, privatization brings more accountability through implementing financial penalties for not meeting health care standards, and ultimately, through the ability to fire under-performers. In government-run hospitals the state is almost always in a position of overseeing itself, a major conflict of interest, and civil service rules can make it difficult to penalize poor job performance.

If the Health and Human Services Commission is able to finalize a contract that will ensure high quality of care at Terrell State Hospital at a reasonable cost, it should be afforded the discretion to do so.

Giving the legislature a platform to politicize the proposed contract would serve as an obstacle, not a boost, to improved patient care.

Leonard Gilroy is director of government reform at Reason Foundation. This article originally appeared in the Tyler Morning Telegraph.

Leonard Gilroy is vice president of government reform at Reason Foundation, a nonprofit think tank advancing free minds and free markets. He also serves as senior managing director of the Pension Integrity Project at Reason Foundation, which assists policymakers and other stakeholders in designing, analyzing and implementing public sector pension reforms.