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A New Mindset for Prison Operator

The South Florida State Hospital contract in 1998 provided a huge springboard for GEO Group to expand beyond prison management.

Through art, mentally ill patients can express themselves and hope for recovery.
Follow Trend’s Amy Keller as she visits South Florida State Hospital and documents some lifesaving artwork.

In the late 1950s, the state opened the South Florida State Hospital in Pembroke Pines as a treatment facility for people suffering from severe and persistent mental illnesses such as schizophrenia and major depression. But by the late 1980s, the hospital had become little more than a human warehouse where the mentally ill wandered about naked and shared toothbrushes from a communal bucket. When passers-by complained of seeing nude patients from the street, state workers responded by painting the hospital’s windows black. Patients sat idle; therapy was almost non-existent.

A class-action lawsuit in 1988 produced some improvements, but a decade later the hospital was still dysfunctional. Patients often wandered off the grounds, and the hospital lacked good treatment programs. Ineffective treatment meant few patients could be discharged. With few beds opening up, incoming patients faced a yearlong wait to be admitted.

Fed up, the state Legislature and then-Gov. Lawton Chiles decided in 1997 to privatize the facility. At the time, Wackenhut Corrections, a south Florida-based company that operated 21 correctional facilities, including two prisons in the state, was looking for new opportunities from privatization of government services. After learning of the state’s desire to privatize the south Florida hospital, Wackenhut purchased an 87-bed, private psychiatric hospital in Fort Lauderdale for $6 million and spun off a company, Atlantic Shores Healthcare, to provide mental health services.

Before GEO Care took over South Florida State Hospital, the average stay for the facility’s mentally ill patients was 8 1/2 years. Today the average stay is less than a year.

In November 1998, Atlantic Shores was awarded the contract to take over the state hospital, which became the first state mental hospital in the nation to be turned over completely to a private company.

The results? While the state isn’t achieving big savings [“Cost of Care,” below], privatization has improved services to some of its sickest, most vulnerable citizens at a facility once considered unmanageable. The company, meanwhile, now doing business as GEO Care, has been able to leverage its success at the south Florida hospital into additional contracts in Florida and New Mexico — and possible contracts in other states like Nevada, Georgia and Utah that are considering privatizing the operation of mental health facilities.

Cost of Care

An analysis by the Department of Children and Families revealed little difference between the cost of private and state-run forensic facilities, which are for the treatment of people in the criminal justice system who are mentally ill. Most have been adjudicated incompetent to proceed or found not guilty by reason of insanity. The costs ranged from about $330 to $360 per bed day ($120,000 to $130,000 per bed year). The cost breakdown: 85% salaries and benefits, 5% prescribed medicines and 10% other costs, such as food and other expenses.

Bed Costs in Florida
(fiscal year 2006-07)

Annual Cost
Daily Cost
Florida State Hospital
North Florida Evaluation & Treatment Center
South Florida Evaluation & Treatment Center (GEO Care)

Those who look to South Florida State Hospital for a model in how privatized mental health services can work, however, should pay close attention to a key factor: Both the company and the state credit the improvement in the hospital’s operations in some part to an accountability plan that spelled out goals and desired outcomes clearly and established ways to monitor performance carefully as the contract proceeded.

At the south Florida hospital, the transition from state control wasn’t smooth. The hospital’s unionized staff reacted angrily to the takeover, and Atlantic Shores encountered picket lines, protests, thefts and vandalism as it replaced state workers with its own. Even some newly hired employees had their doubts: “I went into it being fairly skeptical, as I had been a state employee for seven years and believed the general myth that privatization meant generally ‘take the money and run,’ ” recalls Kevin Huckshorn, whom Atlantic Shores hired as the assistant administrator of the hospital’s clinical programs.

But as Atlantic Shores whacked away at inefficiencies, the hospital’s operations began to improve. The state employed four people to procure supplies and equipment. Atlantic found it could get by with one. Also on the payroll were more than a dozen psychologists who spent most of their time conducting psychiatric assessments of patients — a somewhat pointless task since the hospital never established programs to address the disorders it documented.

In all, the company cut about 200 jobs from the hospital’s 700-employee staff, including many of the psychologists. Some of the savings went for higher salaries to hire top talent in the mental health field and to create treatment plans oriented toward preparing patients for lives outside the hospital. Atlantic Shores implemented programs to engage patients in art, music and other therapies and skill-building courses. Instead of sitting in their hospital units, some 90% of the hospital’s patients today participate in programs in the Town Center, a building in the center of the hospital campus.

While the average stay at South Florida State Hospital was 8½ years when Atlantic Shores took over, today the average stay is less than a year. Readmissions to the hospital have dropped to around 2% annually. The company bases its approach to treatment on the concepts of William A. Anthony, a Boston University professor and one of the founders of the modern movement in psychiatric rehabilitation.

In 2000, Atlantic Shores issued tax-exempt bonds to replace the old hospital facility with a new building that helped it streamline operations further and improve security. Instances of patients walking away from the facility fell from 30 or 40 per year to two or three. Atlantic Shores also assigned employees to track patients after their release and coordinate further care with local community mental health centers.

“The project worked better than any of us could have ever dreamed,” says Huckshorn. Other observers, including Gayle Bluebird, a registered nurse and independent consultant on patient rights issues who served as a resident advocate at the state hospital during the transition, validate Huckshorn’s view: “I think the privatization has allowed for more creativity, a more focused approach to treatment.”


The company, of course, wasn’t in business out of the goodness of its heart. Even as it negotiated the South Florida State Hospital contract, it was looking ahead to future business. “We kind of recognized this new business line as very similar in many respects to the corrections business line, in that they were all large state-run facilities, many of which were not running all that well,” says Dale Frick, who oversaw the project’s development. Frick is vice president of project development and client relations for GEO Care, the company descendant of Atlantic Shores. “Of course, we saw a large national market availability of these types of facilities and projects.”

"We kind of recognized this new business line as very similar in many respects to the corrections business line, in that they were all large state-run facilities, many of which were not running all that well,” says Dale Frick, vice president of project development and client relations for GEO Care."

And in fact, the south Florida project has provided a huge springboard for Atlantic’s parent company, which changed its name to GEO Group in 2003 and renamed Atlantic Shores Healthcare as GEO Care in 2005. The original South Florida State Hospital contract of $30.8 million has grown to $35.7 million. And GEO now has several other contracts to run new mental care facilities in Florida, including a $2.7-million-a-year contract to provide mental health services at Palm Beach County jails.

Earlier this year, GEO opened two facilities to help the state deal with a 300-person backlog of mentally incompetent inmates awaiting placement to treatment facilities from county jails. Together, the contracts to operate the two facilities — the 100-bed South Florida Evaluation and Treatment Center Annex in Miami and the 175-bed Treasure Coast Forensic Treatment Center in Indiantown — are worth $34 million.

GEO’s track record in Florida has other states taking notice. At the south Florida hospital, the company regularly hosts visitors from other states curious about the privatization model. Many of the several hundred state mental health facilities around the country don’t reach minimum constitutional standards for care, Frick says. “If the states can’t do it and can’t bring it up to the necessary levels, they might look to a company like ours to come in and do it for them or help them do it. It’s just a nice market.”

But if GEO’s performance at South Florida State Hospital was motivated in part by a desire to create a showcase to attract future business, the results also reflect the provisions of a tough contract insisted on by state negotiators, most particularly Ed Feaver, secretary of the Department of Children and Families when the state negotiated the contract with Atlantic Shores in 1998.

GEO Care has a $18.9-million contract to take over the Florida Civil Commitment Center, a former prison in Arcadia now used as a treatment facility for sexually violent offenders. With 17 states operating similar programs, GEO stands to capitalize if it can turn around the facility. [Photo: Jeffrey Camp]

“I’ll have to give Feaver a lot of credit. Those negotiations were fairly drawn out,” says Bill Marvin, former executive director of the Florida Statewide Advocacy Council, an independent group that protects the constitutional and human rights of people receiving services from state agencies. The state agreed to evaluate Atlantic Shores’ performance based on outcomes and effectiveness rather than on how many workers it employed per patient, but it insisted on a strict set of measurements, standards and goals that Marvin says made a big difference.

Built into the contract, for example, was a provision that Atlantic Shores would be fined if the hospital did not receive accreditation from the Joint Commission on Accreditation of Healthcare Organizations, which the hospital had never been able to attain, within one year. Under Atlantic Shores, the hospital earned its accreditation within 10 months. Another part of the contract involved assigning a member of Marvin’s group, Phil Ketchum, to monitor the facility. Ketchum made sure patients were discharged properly. If patients were discharged prematurely, he’d intervene.

“For the next two or more years, he monitored weekly, if not multiple times a week and became an integral part of making the administration aware of everything that was wrong and making sure they corrected the problems,” recalls Marvin. The council also established a local advocacy committee in the county assigned strictly to South Florida State Hospital. The committee reviewed abuse reports and patient complaints and established a “very strong working relationship” with Atlantic Shores.

The oversight, says Huckshorn, was “kind of uncomfortable for us, but in retrospect, smart.” The state also froze the hospital’s budget for the first four years before it began granting 3% cost-of-living increases. And it mandated clearly defined guidelines and expectations for admissions and discharges of patients.

GEO Growth

GEO Care is providing an increasing share of the GEO Group’s annual revenue. In 2005, GEO Care made $32.6 million, or 5.3% of the company’s revenue. In 2006, revenue increased 115% to $70.4 million and accounted for 8.2% of GEO Group’s total revenue. Revenue from GEO’s corrections division increased 29.5% between 2005 and 2006 to $485 million.

GEO Care's Bottm Line
(in millions of dollars)

Source: GEO Group annual reports filed with the Securities and Exchange Commission

Prison problems

By contrast, GEO Group’s prison operations haven’t been models of good performance — particularly in states where government monitoring has been poor. In October, the Texas Youth Commission abruptly canceled its $8-million annual contract with the GEO Group after Texas Youth Commission inspectors found fetid conditions, including feces-smeared cells and insect infestations throughout the Coke County Juvenile Justice Center. The commission subsequently fired four state-paid monitors, whom a newspaper investigation revealed had previously worked for GEO.

Similar problems have been reported at other GEO-run correctional facilities in Texas, including the Dickens County facility in Spur. And youth prisons that GEO Group ran in Louisiana and Michigan were closed in 2000 and 2005, respectively, amid allegations of abuse and neglect. And at a recent congressional hearing, the GEO Group came under fire for not offering substantive drug treatment and vocational training programs for the federal prisoners it houses at the Rivers Correctional Institution in Winton, N.C.

While GEO’s operation of three Florida prisons hasn’t been an issue, a state inspector general’s report concluded in 2005 that GEO Group and another private prison operator had received $6.7 million in alleged overpayments from the state for vacant jobs and other questionable expenses. The audit report attributed the overpayments to the failure of the now-defunct Correctional Private Commission to properly enforce contract provisions. GEO, which was absolved of criminal wrongdoing, eventually reached a $290,952 settlement with the state and the Department of Management Services, which now oversees the state’s private correctional facilities.

Treating sexual predators

GEO Care’s sternest test in the mental health services market lies ahead: Along with the contracts in south Florida, the company has a $18.9-million contract to take over operation of the Florida Civil Commitment Center, a former prison in Arcadia now used as a treatment facility for offenders designated “sexually violent predators” under the state’s Jimmy Ryce Act. That 1998 law allows the state to hold those who have been convicted of a sexually violent offense and who are considered likely to re-offend at a secure facility for long-term control, care and treatment.

The state DCF, which had hired Pennsylvania-based Liberty Behavioral Healthcare Corp., to run the facility, didn’t renew that company’s contract after the Miami Herald published a report last year depicting chaos and mismanagement inside the 14-acre compound, including violence, drug abuse and alleged sex among both inmates and staff.

Aside from cleaning up operations at the center, GEO faces the task of determining what kind of programs can be used to treat sexual predators — it’s unclear whether such offenders can in fact be rehabilitated. The company has assembled a consulting team that includes several board members of the Association for the Treatment of Sexual Abusers. GEO has broken ground on a facility that will increase the center’s capacity from 600 to 720 and should be finished by spring 2009.

With 17 states now operating post-incarceration civil commitment programs for sex offenders, there’s market potential for GEO if it can turn around the Florida Civil Commitment Center. “We want to become a national model because it is evolving, and other states don’t know exactly what they’re doing with this population either,” says Frick.

Promising potential

Frick says the company is targeting about two to three new contracts a year in the mental health services area. To expand any faster would be “dangerous,” he says.

But the arithmetic of mental health services means mental health will likely remain a focus for GEO. “The typical correctional bed generates only $20,000 to $25,000 per year as compared to the GEO Care bed, which generates in excess of $100,000 per year per bed,” GEO Group Chairman and CEO George Zoley recently told investors.

Because mental health facilities are more expensive to run, Frick says the margins for correctional services and mental health services are about the same. When asked whether the company had turned a profit at the south Florida hospital from the outset, Frick demurred, saying only that “none of the projects have ever been a loss leader.”

Meanwhile, GEO Care revenue has risen from $33 million in 2005 to $127 million in 2007 and is expected to hit $180 million next year. “It’s just a different market. It’s not that it’s more lucrative,” says Frick. “It’s just that it’s new, it’s available and it’s large.”

GEO's Evolution

Richard Wackenhut (seated) took over from his father, company founder George Wackenhut, in 1997.

1954 — Former FBI agent George R. Wackenhut starts a private investigation firm called Wackenhnut Corp.

1958 — Wackenhut expands into providing security guard services

1967 — Wackenhut goes public

1984 — Wackenhut Corrections Corp. (WCC) is formed as a division of Wackenhut Corp. to expand into corrections sector

1986 — WCC receives a contract — its first — from the U.S. Immigration and Naturalization Service to design and operate a 150-bed detention facility

1997 — WCC buys a psychiatric hospital and forms Atlantic Shores Healthcare division as a vehicle to compete for privatized state mental health service contracts

2002 — Group 4 Falck, a Danish security company, acquires Wackenhut Corp. for $570 million and divests WCC

2003 — WCC moves its headquarters from Palm Beach Gardens to Boca Raton and changes name to GEO Group

2005 — Atlantic Shores Healthcare changes name to GEO Care