Put the Patients’ Welfare First in Hospital Privatization Dispute

Legislature sacrificed psychiatric patients' well-being to retain legacy jobs on state payroll

Opponents of privatizing the Northeast Florida State Hospital (NEFSH) in Macclenny killed an important opportunity in the legislature, claiming that privatization would have caused the state to lose jobs and the local economy to suffer. Not only was this fear misguided, but it also ignored an important reality: State psychiatric hospitals exist to provide quality care to individuals suffering from severe mental illness, not to be a government jobs program.

Area legislators and their union allies apparently felt otherwise, deciding that the preservation of government largesse was more important than care for the mentally ill. One government union lobbyist went so far as to call the privatization defeat “a victory for the community.” But what about the patients?

The reality is that privatization could have saved the state money while also ensuring higher quality care for patients at NEFSH. Opponents will falsely claim that cost-cutting reduces the quality of care. Yet, 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.

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 reached some significant operational milestones, such as dramatically reducing waiting lists for patient admissions, reducing the average patient stay from eight years to less than one year, and nearly eliminating 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-at its own expense. The system increases the accuracy of treatment at the hospital and has created a benchmark for every other hospital in the state to aspire to.

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.

The Florida Statewide Advocacy Council-a human rights advocacy group that initially opposed the SFSH privatization-noted the 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 told a legislative committee in 2007 that the average cost per bed in privately operated psychiatric facilities was as much as 15 percent lower than at the state-run hospitals.

Missing in opponents’ anti-privatization rhetoric is the important fact that the privately-operated hospitals actually receive more monitoring and oversight than those run by the state. 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.

By contrast, no state-run facility-including NEFSH-has received this respected seal of approval. Are taxpayers just supposed to take it on faith that the state is providing quality care in-house?

Florida just missed a tremendous opportunity to modernize service delivery at NEFSH by engaging the private sector. Privately-run psychiatric facilities have a proven track record of providing higher quality care in the Sunshine State, no matter the complexity and severity of the patients’ illnesses they treat. And they are doing it at a lower cost, innovating through more efficient business practices that offer better care for less money.

While some in Tallahassee clamor to preserve government jobs, it’s the individuals in Florida’s mental health care facilities who deserved the legislature’s full attention. Instead they sacrificed patients’ well-being to retain legacy jobs on the state’s payroll.

Leonard C. Gilroy is an adjunct scholar at the Tallahassee-based James Madison Institute and director of government reform at Reason Foundation. Anthony Randazzo is a policy analyst at Reason Foundation. This column was originally published by the Tallahassee-based James Madison Institute.

Leonard Gilroy is Senior Managing Director of the Pension Integrity Project at Reason Foundation, a nonprofit think tank advancing free minds and free markets. The Pension Integrity Project assists policymakers and other stakeholders in designing, analyzing and implementing public sector pension reforms.

The project aims to promote solvent, sustainable retirement systems that provide retirement security for government workers while reducing taxpayer and pension system exposure to financial risk and reducing long-term costs for employers/taxpayers and employees. The project team provides education, reform policy options, and actuarial analysis for policymakers and stakeholders to help them design reform proposals that are practical and viable.

In 2016 and 2017, Reason's Pension Integrity Project helped design, negotiate and draft pension reforms for the state of Arizona's Public Safety Personnel Retirement System and Corrections Officer Retirement Plan, which both passed with overwhelming bipartisan support in the state legislature and were signed into law by Gov. Doug Ducey.

Gilroy is also the Director of Government Reform at Reason Foundation, researching privatization, public-private partnerships, infrastructure and urban policy issues.

Gilroy has a diversified background in policy research and implementation, with particular emphases on competition, government efficiency, transparency, accountability, and government performance. Gilroy has worked closely with legislators and elected officials in Texas, Arizona, Louisiana, New Jersey, Utah, Virginia, California and several other states and local governments in efforts to design and implement market-based policy approaches, improve government performance, enhance accountability in government programs, and reduce government spending.

In 2010 and 2011, Gilroy served as a gubernatorial appointee to the Arizona Commission on Privatization and Efficiency, and in 2010 he served as an advisor to the New Jersey Privatization Task Force, created by Gov. Chris Christie.

Gilroy is the editor of the widely-read Annual Privatization Report, which examines trends and chronicles the experiences of local, state, and federal governments in bringing competition to public services. Gilroy also edits Reason's Innovators in Action interview series, which profiles public sector innovators in their own words, including former U.S. Transportation Secretary Mary Peters, former Florida Gov. Jeb Bush, former Indiana Gov. Mitch Daniels, former New York City Mayor Rudy Guiliani and more.

Gilroy's articles have been featured in such leading publications as The Wall Street Journal, Los Angeles Times, New York Post, The Weekly Standard, Washington Times, Houston Chronicle, Atlanta Journal-Constitution, Arizona Republic, San Francisco Examiner, San Diego Union-Tribune, Philadelphia Inquirer, Sacramento Bee and The Salt Lake Tribune. He has also appeared on CNN, Fox News Channel, Fox Business, CNBC, National Public Radio and other media outlets.

Prior to joining Reason, Gilroy was a senior planner at a Louisiana-based urban planning consulting firm. He also worked as a research assistant at the Virginia Center for Coal and Energy Research at Virginia Tech. Gilroy earned a B.A. and M.A. in Urban and Regional Planning from Virginia Tech.

Anthony Randazzo

Anthony Randazzo is director of economic research for Reason Foundation, a nonprofit think tank advancing free minds and free markets. His research portfolio is regularly evolving, and he maintains a wide interest in economic policy at both a domestic and international level.

Randazzo is also managing director of the Pension Integrity Project, which provides technical assistance to public sector retirement system stakeholders who are seeking to prevent pension plan insolvency. His research focus on the national public sector pension crisis has a dual focus of identifying the systemic factors that cause public officials to underfund pension obligations as well as studying the processes by which meaningful pension reform can be accomplished. Within the Project he leads the analytics team that develops independent, third party actuarial analysis to stakeholders considering changes to public sector retirement systems.

In addition, Randazzo writes about the moral foundations of economic theory, and is currently developing research on the ways that the moral intuitions of economists influence their substantive findings on topics like income inequality, immigration, or labor policy.

Randazzo's work has been featured in The Wall Street Journal, Forbes, Barron's, Bloomberg View, The Washington Times, The Detroit News, Chicago Sun-Times, Orange-County Register, RealClearMarkets, Reason magazine and various other online and print publications.

During his tenure at Reason he has published substantive research on housing finance, financial services regulation, and various other aspects of economic policy at the federal level. And he has written regularly on labor economics, tax policy, privatization, and Turkish-U.S. political and economic issues.

Randazzo has also testified before numerous state and local legislative bodies on pension policy matters, as well as before the House Financial Services Committee on topics related to housing policy and government-sponsored enterprises.

He holds a multidisciplinary M.A. in behavioral political economy from New York University.

Follow Anthony Randazzo on Twitter @anthonyrandazzo