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On January 1, 2017, the KHI News Service became part of KCUR public radio’s new initiative, the Kansas News Service. The Kansas News Service will continue to cover health policy news and broaden its scope to include education and politics. All stories produced by the former KHI News Service are archived here. Stories and photos may be republished at no cost with proper attribution and a link back to KHI.org.

KDADS extends deadline for Osawatomie State Hospital bids

By Meg Wingerter | December 19, 2016

KDADS extends deadline for Osawatomie State Hospital bids
Photo by KHI News Service File State officials will give potential contractors two extra weeks to submit bids to operate Osawatomie State Hospital but cautioned they might not receive any proposals they like.

State officials will give potential contractors two extra weeks to submit bids to operate Osawatomie State Hospital but cautioned they might not receive any proposals they like.

Tim Keck, interim secretary of the Kansas Department for Aging and Disability Services, on Monday told the Legislature’s Special Committee on Larned and Osawatomie State Hospitals that the department will extend the deadline to submit bids from Dec. 29 to Jan. 10, to give private contractors time to ask more questions.

The request for proposals would require a contractor to have at least 206 psychiatric beds available, but only 94 would need to be in the city of Osawatomie. It also suggests KDADS would look favorably on proposals that include new facilities, because most of the buildings are more than 40 years old, Keck said.

Federal officials cut Medicare payments to the hospital in December 2015 after an attack on an employee exposed security concerns. The hospital, one of two state-run facilities for Kansans with severe mental health issues, has to pass two inspections before payments would resume.

Keck said he thought privatization was the only way forward for the hospital when he took the secretary’s job. The hospital staff’s efforts to improve changed his mind, he said, adding that KDADS will examine any bids carefully before deciding whether to bring a proposal to the Legislature.

“If we get a proposal that we want to consider, we'll spend a lot of time with all of you in a room,” he said. “The Legislature sent a very loud message last year.”

Legislators passed a bill last session requiring any proposal to privatize the state hospitals to come before them for approval. Some members of the special committee already looked at a potential bid with a critical eye Monday.

Sen. Caryn Tyson, a Parker Republican, and Sen. Laura Kelly, a Topeka Democrat, both wanted more information about how much the state spends to operate the hospital.

Tyson, whose district includes part of the city of Osawatomie, also pressed Keck on how KDADS decided to require that only 94 of the beds would remain in the city.

The department wanted to show a commitment to the city while offering flexibility for bidders, Keck said.

Sen. Jim Denning, an Overland Park Republican, expressed skepticism that KDADS would be able to find a bidder who could build new facilities while still caring for patients for a lower rate than the state currently pays to run the hospital.

“It’s a head scratcher,” he said.

$1 million per month

Regardless of whether bidders make offers to run the hospital, the state will need to come up with more money to run it in the short term.

Federal decertification has cost the hospital about $20 million so far, said Amy Penrod, KDADS director of finance and budget. The state supplied enough to take the hospital through January, she said, but it will need to spend $900,000 to $1.1 million per month to keep the hospital running at its current level, with 146 beds.

The hospital also has lost some revenue from private insurance coverage, said John Worley, the hospital’s superintendent.

“Some of the insurers are balking because we’re not certified,” he said.

Keck said the unit the hospital would like to recertify is ready for inspectors, but the Centers for Medicare and Medicaid Services haven’t indicated when they will visit.

The state eventually could seek to recertify all the hospital’s beds, Keck said, but completing the renovations inspectors want would have upfront costs of about $23,000 per bed. KDADS staff estimated the state currently is losing about $95,000 per decertified bed.

Kelly said the federal payments would outweigh the upfront costs of recertifying the beds.

“I wonder if we’re not being penny-wise, pound-foolish,” he said.

Hospital still below capacity

Even if federal officials allow Medicare payments to resume, the hospital still will be down about 60 beds from its total capacity.

While the renovated unit is open, another 60-bed unit currently is shuttered, mostly due to staffing issues, Keck said. The department might seek to reopen a smaller number of beds, perhaps 15 at a time, but Keck declined to give specifics before seeing what the bidders might propose. The beds wouldn’t be recertified, so the state wouldn’t receive federal payments for patients treated there.

“We want to be very confident that we have enough staff to protect our patients,” he said.

The reduced number of beds has contributed to patients waiting in Kansas emergency rooms or jails for a spot at the hospital. Keck estimated the current average wait time was about 30 hours, down from four or five days earlier this year. 

Amy Campbell, executive director of the Kansas Mental Health Coalition, praised efforts to improve care at the hospital but said the limitation on the number of beds available had led to tragic results. In one case, Topeka police picked up a person walking along a highway but released the individual after determining the person wasn’t likely to get treatment. Within hours, the pedestrian died on the highway, she said. 

Campbell said the coalition isn’t opposed to privatization in general, but efforts to reduce the state’s contribution would backfire. She said cuts over the past 12 years contributed to the decertification

“Right now we have to rebuild, and I don't mean bricks and mortar,” she said. “We have been doing this on the cheap for a long time.”