Louisiana Legislature Considering Anti-Privatization Bills, Part 2: Psychiatric Hospital Edition

My post last Friday was the first in a review of several anti-privatization bills currently in discussion in the Louisiana state legislature, and today’s installment brings us to House Bill 1443. This bill is actually a variation on the same theme as the last one, but this time allowing multiple legislative subcommittees to veto privatization contracts related to mental health facilities and services. And for many of the same reasons I outlined in that post—which I won’t restate here for brevity—this would be terrible procurement policy.

For context, see this recent article on the bill in The Advocate. Reading the proposed statutory language, it seems apparent to me that this is a state jobs preservation bill first and foremost, and one that comes in the midst of an enormous fiscal crisis, to boot. Unfortunately, state legislators don’t tend to respond well to pending state employee layoffs in their district, so you might say this is a NIMBY reaction along the “we should cut state spending, so long as it’s not in my district” line of thinking. However, it’s important to remember that state psychiatric hospitals exist to provide quality care to individuals suffering from severe mental illness, not to be a government jobs program.

There’s an unfortunate déjà vu with a similar situation that played out in Florida last year, in which a few state legislators convinced their colleagues to squash a proposal to privatize a north Florida psychiatric hospital in their district, with the outright aim of protecting state jobs. This was a huge missed opportunity, as my colleague Anthony Randazzo and I discussed at length here.

The reality is that privatization can save the state money while also ensuring higher quality care for patients. For over a decade, Florida has successfully privatized a number of state psychiatric hospitals and correctional mental health services, dramatically improving patient care and outcomes while innovating to drive costs down. Louisiana’s current Health and Human Services Secretary Alan Levine, a key privatization proponent, knows Florida’s successes firsthand-in fact, he actually led them for several years while serving in the administration of former Governor Jeb Bush.

South Florida State Hospital (SFSH)-the first state psychiatric hospital privatized in Florida in the late 1990s offers an excellent example. The aging Pembroke Pines facility had never been accredited in its 50-year history and was facing a major class action lawsuit concerning patient abuse and abysmal conditions when it was privatized. Within 10 months of receiving the contract, the private operator was able to get the existing facility accredited and the lawsuit dismissed, while at the same time financing and building a new, modern facility to replace it. No state capital dollars were involved, and the state will own the new facility when the debt is retired.

The results speak for themselves. Since privatization, the hospital has dramatically reduced waiting lists for patient admissions, reduced the average patient stay from eight years to less than one year, and nearly eliminated the use of seclusion and restraint to manage patient behavior. SFSH also recently rolled out the first electronic health records system in a Florida psychiatric hospital. Significantly, the contractor paid to develop this cutting-edge system itself-recognizing the operational improvements it would facilitate-even though such improvements immediately become property of the state.

Those rightfully concerned with the quality of patient care in privatized psychiatric facilities should understand that privately-operated hospitals typically receive more monitoring and oversight than those run by governments. For example, after privatization, SFSH and all of Florida’s other privately-operated state psychiatric facilities have become accredited by the Joint Commission, a national, nonprofit health care accreditation organization that reviews the quality of public and private hospitals. By contrast, no state-run facility in Florida has received this respected seal of approval.

The Florida Statewide Advocacy Council-a human rights advocacy group that initially opposed the SFSH privatization-noted its turnaround, unanimously passing a resolution in 2003 supporting further privatization of Florida’s psychiatric facilities. Policymakers paid attention as well and subsequently privatized several additional forensic psychiatric hospitals, as well as several prison mental health programs.

Cost savings through privatization have also been impressive.

  • The Florida Department of Children and Families reported in 2007 that the average cost per bed in privately operated state psychiatric facilities was as much as 15% lower than at the state-run facilities.
  • These results were confirmed more recently in February 2010, when the Florida Legislature’s Office of Program Policy Analysis and Government Accountability (OPPAGA) issued a report finding that the private civil hospital’s quality of care was similar to the two state employee run facilities, however the cost of the private hospital was 6 to 14% less per bed. The disparities in cost and quality had been larger but Florida’s state employee run hospitals have improved considerably since competition was introduced and the partnership began in 1998.

Indeed, introducing privatization into one facility seems to have had a positive effect on the performance of its peers-a predictable result of competition.

Louisiana could expect similar results if they were to engage in well-structured, competitive procurement processes. That would become a lot more difficult if the legislature were to add several more layers of hurdles at the end of a procurement, driving up risks and costs for the private sector and reducing competition at the margin. Why bother trying to compete on a procurement in Louisiana if the legislature can render your time and money expended in the process entirely moot at the very end-and on a political whim, even! Why not compete for projects in other states instead, where there’s less political risk?

Privately-run psychiatric facilities have a proven track record of providing high quality patient care, and they can often do it at a lower cost, innovating through more efficient business practices that offer better care for less money. Louisiana legislators should not sacrifice patients’ well-being and fiscal responsibility to retain politically favored jobs on the state’s payroll.