Echoes of Fights Past in Health Consolidation

Twelve years after a major mash-up of state health agencies, the Sunset Commission and several lawmakers say it's time to finish the job and merge the remaining five systems into one. Some veteran Capitol observers say they're feeling déjà vu.

Sen. Jane Nelson, R-Flower Mound, wraps up the Sunset Advisory Commission hearing on Jan. 14, 2015.
Sen. Jane Nelson, R-Flower Mound, wraps up the Sunset Advisory Commission hearing on Jan. 14, 2015.  Bob Daemmrich

Here we go again.

The state’s beleaguered health and human services agencies, led by Executive Commissioner Kyle Janek, are under investigation over a contract awarded to a private vendor outside of the competitive bidding process. A group of state lawmakers, led by Sen. Jane Nelson, R-Flower Mound, is decrying the health agency's “dysfunction,” and calling for sweeping reforms that would consolidate five agencies into a single massive one.

And some veteran Capitol observers say they’re feeling déjà vu.

“I don’t know if the climate is that much different from what it was in 2003,” said Talmadge Heflin, a former state representative who now directs the Center for Fiscal Policy at the Texas Public Policy Foundation, a conservative nonprofit.

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That year, Heflin and then-state Rep. Arlene Wohlgemuth co-authored House Bill 2292, which consolidated 12 health agencies into five. It was a tough year for state budget writers, who faced a $10 billion shortfall. Critics set their eyes on the array of health agencies, which they said were fractured and failing their constituents. In the previous year, 44 foster children had died under the state’s care.

“What I found was the agencies couldn’t get along with each other,” said Wohlgemuth, now TPPF's executive director. “There was so much turf warfare that things were not happening.”

Now, state lawmakers are considering another massive reorganization recommended by the Sunset Advisory Commission, which periodically evaluates facets of state government. Supporters and critics of HB 2292 say what thatsweeping legislation wrought 12 years ago offers lessons for the next round of consolidation talk. What exactly those lessons are depends on whom you ask. 

For Democrats and others who opposed it, the state’s last experiment with health agency consolidation serves as a cautionary tale.

“I was absolutely opposed to it back then,” said state Rep. Harold Dutton, D-Houston, a member of the Sunset Commission. “Essentially what we did was create an agency that didn’t have anyone who was ultimately responsible for what happens over at the agency.”

State Rep. Garnet Coleman, D-Houston, agreed. “I do not think the best way to run that agency is to make it more centralized, because it assumes that one person in charge makes it better,” he said of the current Sunset recommendations.

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But for Republicans, further consolidation offers a chance to address “inefficiencies” identified by the Sunset Commission, and address how the health agencies award contracts. Nelson, who chairs the commission and was the Senate sponsor of HB 2292, said another round of consolidation is crucial.

"These recent troubles clearly demonstrate that the agency has to change,” she said in a written statement. “The current structure of the enterprise is contributing to its dysfunction, and the absolute worst thing that could happen is to leave it the way it is today.” 

That structure is composed of four "system" agencies serving specific populations: the Department of Aging and Disability Services, the Department of Family and Protective Services, the Department of State Health Services and the Department of Assistive and Rehabilitative Services.

All fall under a single umbrella, the Health and Human Services Commission. In 2013, the agencies together spent a combined $34.5 billion, with HHSC accounting for nearly 70 percent. The agencies employ more than 54,000 people, about 12,000 working for HHSC.

But because the four lower agencies operate separately from one another, it creates "gray lines of accountability, policy disconnects, and lost efficiency," according to the Sunset report.

One of the challenges facing lawmakers is what to do about the HHSC Office of Inspector General, which investigates fraud. That office, created by Wohlgemuth’s bill, is at the center of controversy over how the agency awarded a contract to the firm 21CT for Medicaid fraud detection software.

Wohlgemuth said HB 2292 was a success in streamlining s far as it went, and supports a further round of consolidation. But she also said new measures are necessary to create “accountability of having somebody oversee the work of the OIG’s office.”

Unique among state agencies, the HHSC inspector general is appointed by the governor rather than the agency head, Dutton said. But because the inspector general resides within the agency he is supposed to manage, that can cause conflict, he said.

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“It’s kind of like in Houston, when we used to have the crime lab within the police department,” Dutton said. “That worked out real well, didn’t it?”

“I think there’s several questions that would need to be investigated,” Heflin said. “How do you structure [the OIG] as a stand-alone entity? What’s the cost look like for that? But I do think striving to have more independence would be probably a good thing for the next round.” 

This year, consolidation is more about agency functionality and contract reform than fiscal benefit. The Sunset Commission’s recommendations claim it would yield only about $1.7 million in savings.

But experts say the quest for efficiency comes with trade-offs.

“The joke about management consultants is if they walk into your organization and they discover you’re centralized, they tell you decentralize, and if you’re decentralized they tell you to centralize,” said Bob Behn, a lecturer at Harvard University's Kennedy School of Government. “There’s a little bit of wisdom here in the sense that, if you have to change your structure, it forces you to think about why it ought to be that way. The other side of it, of course, is that there’s no perfect way.”

Disclosure: The Texas Public Policy Foundation is a corporate sponsor of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.  

This story was produced in partnership with Kaiser Health News, an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.