Kansas Issues Request For Proposals To Privatize Osawatomie State Hospital

Nov 17, 2016

This story was updated at 6:04 p.m. 

Kansas is seeking a private partner to operate Osawatomie State Hospital under a proposal that would allow the contractor to shift more than half the hospital’s beds to other parts of eastern Kansas.

A request for proposals to operate Osawatomie State Hospital was posted Monday on the Kansas Department of Administration website. It would require a contractor to maintain 206 beds for inpatient mental health treatment but said only 94 would have to be at Osawatomie State Hospital. Any remaining beds would have to be in the hospital’s catchment area, which covers eastern Kansas.

Osawatomie State Hospital is one of two hospitals the state operates for people deemed a danger to themselves or others because of mental illness. During the legislative session, Tim Keck, interim secretary of the Kansas Department for Aging and Disability Services, said he was committed to keeping the hospital in Osawatomie but didn’t specify if all beds would remain there.

The contract would last five years, with the option to extend it for three additional years. The state also would have the right to terminate the contract early.

Angela de Rocha, a spokeswoman for KDADS, said the request for proposals doesn’t run afoul of Senate Bill 449, which Gov. Sam Brownback signed in May. The bill forbade KDADS from spending money to privatize Osawatomie or Larned state hospitals without legislative approval.

During the session, some legislators said they hadn’t been consulted about plans to build a new power plant for the statehouse complex and wanted to avoid a similar situation

Rep. Kevin Jones, a Wellsville Republican, said Thursday that Keck told him any proposals would have to go through the Legislature but that KDADS wanted to explore its options.

Jones, whose district includes the hospital grounds, said he disagrees with any plan that would move beds out of Osawatomie.

“It is so very important that any move for privatization will have to go through the Legislature,” he said.

Rep. Dan Hawkins, a Wichita Republican and chair of the House Health and Human Services Committee, said the Legislature will have a major role in determining whether the state actually privatizes Osawatomie State Hospital.

“They can’t do anything without legislative approval,” he said. “We’re going to decide if we even like what they’ve got.”

De Rocha said she couldn’t answer additional questions about the RFP at this time.

The Centers for Medicare and Medicaid Services decertified Osawatomie State Hospital last year because of safety concerns. That has cost the state about $1 million a month in Medicare reimbursements.

The state’s requirements for the proposals include:

  • Staffing: The contractor would have to send the state monthly staffing reports for the first year and quarterly staffing reports after that. It also would have to notify KDADS of staffing shortages and could face penalties of $500 per day if a shortage lasts more than 45 days. “Key positions,” which include the superintendent and heads of various medical and administrative departments, can’t be vacant for more than 60 days. The contractor is required to give preference in hiring to existing hospital employees who are qualified to do the work.
  • Physical location: The state required unspecified “hospital improvements” and said contractors could be fined $2,500 per day for delays.
  • Federal certification and quality: The contractor could be fined $1,000 per day if the hospital fails to maintain federal certification or if inspectors find problems that could harm patients.
  • Services: The contractor is required to offer evidence-based treatment, including peer support services, in a “planned, consistent approach that recognizes the individual strengths of each patient.” The beds also would be open to patients seeking voluntary commitment, which hasn’t been the case for more than a year.
  • Payment: The state won’t pay the full cost of operating the hospital. Instead, the contractor would use a “mix of state general funds, third party payments and other sources.” The contractor could add beds but couldn’t use state funds to pay for them.
  • Incentives: The contractor could receive additional money for reducing the number of preventable readmissions and the number of patients living at the hospital long-term.

The state plans an informational conference for interested bidders Nov. 29 at Osawatomie State Hospital. Bidding closes at 2 p.m. Dec. 29. After bidding ends, the state will release the names of the bidders but not the amount they proposed.

In practice, there may be little competition. The state will only accept bids from bidders who have at least three years of experience operating an inpatient psychiatric facility.