Agency Cancels Terrell Hospital Privatization Plan After Audit Reveals Major Flaws

March 25, 2015

Advocacy Organizations Call for Legislative Authority and Oversight Before any Future Privatization

March 25, 2015 (Austin, TX) - Mental health advocacy organizations, civil rights and civil liberties groups, and state employees today reacted to a damning audit of state hospital privatization plans.  The State Auditor’s Office reviewed a tentative award for operation of the Terrell State Hospital to for-profit prison corporation GEO Care (now known as Correct Care Recovery Solutions).

While the audit acknowledges that some procurement processes were indeed followed, other significant breaches to protocol occurred. The opening paragraph to members of the Legislative Audit Committee boldly states that “the Health and Human Services Commission (Commission) did not ensure that its decision to tentatively award a contract to GEO Care, LLC to manage selected operations at Terrell State Hospital provided the best value to the State. The Commission and the Department of State Health Services (Department) did not fully comply with the Commission’s contract planning and procurement processes.”

“The audit makes clear that the state’s contracting woes extend to privatization of state hospitals,” said “Eshe Cole, mental health and criminal justice coordinator for Grassroots Leadership.  “Lawmakers should increase scrutiny of privatization of state hospitals and make sure that patient safety and taxpayer dollars don’t come at the expense of profits for prison companies looking for new markets.”

Some of the specific fumbles found in the audit include failure to conduct a preliminary needs assessment and a cost-benefit-analysis, tardy purchase requisitions, and failure to adequately verify the background, qualifications, and experiences of vendors. In addition, there were a number of discrepancies in the bid evaluation process including inconsistencies in scoring, lack of a minimum qualifying score, and failure to receive non-disclosure agreements prior to negotiations.

“Mental Health America of Texas advocates for open and accountable government,” said Lynn Lasky Clark, President & CEO of Mental Health America of Texas.
“We are glad that the State Auditor's Office shined a light on a seriously flawed process related to privatizing Terrell State Hospital.”

In 2012, Texas Department of State Health Services Commissioner Dr. David Lakey rejected GEO Care’s bid to privatize the Kerrville State Hospital after a coalition of organizations warned that privatization would have negative impacts on patients and the community.  Lakey concluded that savings in the proposal were achieved “primarily through reductions in staffing and benefits to a degree that would put both our patients and the State of Texas at risk.” Even with this conclusion, HHSC chose to move forward with solicitation to privatize Terrell State Hospital in 2014.

However, the agency has responded to the audit by acknowledging that it will no longer pursue privatization of the Terrell State Hospital.  “We must continue to make sure that those who operate our state health facilities provide high standards of care and do not put the state at risk of litigation” said Terri Burke, Executive Director of the ACLU of Texas.

While the audit has rendered current attempts to privatize Terrell State Hospital momentarily dead, concerned advocates and stakeholders are calling for legislative authority and increased transparency and oversight prior to future attempts to privatize state hospitals in Texas.

“We’re glad that the Auditor’s Report has brought to light the many flaws with HHSC’s rush to privatize the hospital in Terrell.“ says Seth Hutchinson, Vice President of the Texas State Employees Union. “Now, the state needs to stop trying to turn over care for the mentally ill to profit-hungry corporations, and should instead start investing in patient care and the state employees who are hard at work in these hospitals.”

Read a copy of the full report here.




Eshe Cole, Grassroots Leadership, (512) 499-8111,


Ron Day, Texas State Employees Union, (512) 448-4225,