Texas cancels privatization of state hospital contract

The Texas Health and Human Services Commission (HHSC) announced on March 25 that it was cancelling a deal to privatize a state psychiatric hospital in Terrell, Texas.

Six months ago HHSC announced it had awarded a contract to operate the Terrell State Hospital to Correct Care Solutions. When hospital workers objected, they were told that it was a done deal and there was nothing they could do to stop it.

But some workers didn’t listen and fought back.

As workers filed into a November 3 town hall meeting to hear about the privatization of their hospital, members of the Texas State Employees Union (TSEU) Organizing Committee at the hospital passed out flyers. The title of the flyers read, “THIS IS NOT A DONE DEAL.”

Inside, workers heard from the CEO of Correct Care, a company that primarily provides medical services in jails and prisons.

He tried to assure workers that the transition to private management would be painless.

But the workers weren’t so sure. They questioned whether a for-profit company could provide decent care and still make a profit. They also wanted to know if there was anything that could be done to stop or at least delay the takeover of their hospital.

Representative Lance Gooden, who had lost a Republican primary election but at the time was still Terrell’s representative in the Texas House, told them no; the privatization of the Terrell State Hospital, which is located 32 miles east of Dallas and serves 19 North Texas counties, was a done deal.

After the meeting, members of the TSEU organizing committee, began to mobilize other union members, co-workers not in the union, and others against the deal.

Some thought it was a lost cause, but the committee succeeded in generating hundreds of calls to lawmakers.

Callers, which included TSEU members not working at the Terrell State Hospital, raised questions about the transparency of the deal and asked lawmakers to hold public hearings to investigate how the hospital’s privatization would affect patient care.

Union members helped organize a coalition of opponents to the privatization plan. The coalition included patient advocacy groups and community leaders as well as the union.

In January, Texas State Senator Robert Nichols, a Republican who represents an East Texas district that includes another state hospital located in Rusk, asked the State Auditor to review the procurement process that resulted in the deal.

“I believe that if we are considering privatization of one of our state hospitals, we need to be able to show that it will not only save money for the state, but that better services will be provided,” said Sen. Nichols. “I hope that through this review some of our questions will be answered, and we will be able to determine the best next step forward in this process.”

The State Auditor conducted a review and reported that “the Health and Human Services Commission did not ensure (that its contract with Correct Care) provided the best value for the state.”

Among other things, the State Auditor found that the bidding process appeared to be flawed.

The agency gave different answers to similar questions asked by different potential vendors.

The agency received only two bids for the contract. The one that did not come from Correct Care was disqualified on a technicality.

The agency formed an evaluation team to score Correct Care’s proposal, but before the evaluation team finished its work, HHSC Executive Commissioner Kyle Janek awarded the contract to Correct Care.

HHSC kept the estimated cost of the contract artificially low. As a result of the low cost estimate, the contract did not have to be reviewed by the state’s Attorney General.

Shortly after the audit report was issued, Commissioner Janek announced that he was cancelling the contract with Correct Care.

Janek has also come under fire for another contract whose bidding process appeared to be suspect. The Austin American Statesman has reported extensively on an HHSC contract with 21CT, an Austin software company, for Medicaid fraud investigation services.

That contract was recently cancelled after the Statesman reported that HHSC’s former general counsel had worked for 21CT before coming to work for HHSC and had maintained a relationship with the company while serving as general counsel.

The FBI and a governor’s task force is currently investigating the 21CT contract.

Janek said that he wanted to privatize the Terrell State Hospital because a report by US Center for Medicare and Medicaid on the 2012 death of a patient at the hospital had found a number of serious problems.

However, after the report, the Terrell hospital staff began correcting the problems, and by 2013, the Center for Medicare and Medicaid reported that the hospital had instituted the reforms that it recommended and had corrected the problems.

TSEU said that even though the cancellation of the Terrell State Hospital privatization contract was a victory, much more needs to be done to address the mental health needs of Texans.

According to the Kaiser Family Foundation, Texas spends about $39 a year per Texas resident on state mental health funding. That’s the second lowest amount for all 50 states, and it’s 200 percent below the national average of $120 per resident.

TSEU is urging lawmakers to fully fund the state’s public psychiatric hospitals and state supported living centers for Texans with developmental disabilities. It also wants lawmakers to fund other mental health services so that people who need these services have a range of alternatives that fits their needs.

TSEU is urging workers at the state supported living centers and state hospitals to join other TSEU members in attending the union’s 2015 Lobby Day in Austin on April 8

“TSEU is calling for a massive show of strength (on April 8) to tell the legislature that we will fight to restore funding for public services, protect state employee benefits, and win a real across-the-board raise,” said the union in message to members.


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