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Second Health Contract Questioned; Probe Requested

A state senator wants the Texas auditor to review how a private firm was selected to operate a state psychiatric hospital in Terrell.

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A state senator wants the Texas auditor to review how a private firm was selected to operate a state psychiatric hospital in Terrell.

The request from state Sen. Robert Nichols, R-Jacksonville, is the second recent call for an audit of the way the Texas Health and Human Services Commission strikes a deal with a private contractor. 

In a Jan. 7 letter, Nichols asked State Auditor John Keel to examine the commission's award of a tentative contract to GEO Care LLC to operate the Terrell State Hospital (GEO Care's name recently changed to Correct Care Solutions.) The hospital, one of 10 the state owns, was the subject of a federal investigation two years ago over the 2012 death of a patient. 

Nichols' letter follows the suspension of a separate, $110 million contract for Medicaid software. The commission has come under fire for awarding that deal to a relatively unknown company called 21 Century Technologies Inc., or 21CT.

"Recent events surrounding HHSC's procurement processes have resulted in several contracts being terminated, staff resigning and other disciplinary actions," Nichols wrote. "While the Legislature has previously authorized HHSC to consider privatization is the most cost effective way to deliver services in state hospitals, the agency has, until now, rejected all previous bids for privatization, because those bids have failed to guarantee the outcomes required by law." 

Last month, the commission's chief counsel, Jack Stick, resigned over the 21CT ordeal. A week later, Gov. Rick Perry asked for and received the resignation of Doug Wilson, the commission's inspector general. That same week, state Sen. John Whitmire, D-Houston, asked the state's public integrity unit to investigate the contract, and Health and Human Services Executive Commissioner Kyle Janek asked the state auditor's office to review the inspector general office's contracting procedures, including how 21CT received the first piece of that contract — $20 million — without going through a competitive bidding process.

Federal investigators targeted Terrell State Hospital, a psychiatric hospital in East Texas, after the Austin American-Statesman reported on the death of a patient there in 2012. In 2013, the investigators found she had died because she was held in restraints for too long and didn't get adequate nursing care. 

Over the protests of mental health advocates, the state last year asked for private bids to run the hospital and chose Correct Care Solutions in October, the Statesman reported.

A tentative contract was awarded to the company, which was then called GEO Care, and the state has not paid the company any money, commission spokeswoman Stephanie Goodman said Thursday. She said GEO Care was the only contractor considered because it was the only one that presented a viable bid.

"We’ll cooperate fully with any review," Goodman said. 

The commission will thoroughly vet the company before a final contract is awarded, she said. A value for the contract has not yet been determined. It costs the state about $56 million a year to run the hospital.

"We will only sign a contract if we believe the private sector can improve patient care," Goodman said. 

State officials have long discussed privatizing all of the state's 10 psychiatric hospitals. Goodman said Janek "believes it's important to look at alternative ways to improve services at Terrell." 

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