State to privatize mental-health hospital

State officials are advancing plans to privatize a state-run hospital for the mentally ill and now are looking for a not-for-profit
to build and manage a new facility in Indianapolis.

They may not have to look far.

Although a request for proposals just went out, Family and Social Services Administration Secretary Mitch Roob said he's
already hashed out preliminary plans with Indianapolis-based Clarian Health Partners.

Roob's vision is to create a facility that's part of a research-intensive neuroscience center next to Methodist Hospital–a
focus shift that could force patients who need to be hospitalized for more than six months to be moved to other state hospitals.

"There may be better ideas than the ones we have created," Roob said. "But I believe the [hospital] will end
up being at 16th and Capitol Avenue and Clarian would develop a research facility around it as well."

If he's right, Larue D. Carter Memorial Hospital would be the second such facility to be privatized, behind Richmond
State Hospital. And moving the hospital to Clarian-owned land would free up prime property developers have been eyeing.

Talks about moving Larue Carter have dragged on for years, as officials looked for an alternative to the current leased facility
in a former VA Hospital at 2601 Cold Spring Road.

In 2004, the state bought a 19-acre undeveloped site along Indiana Avenue–at the north end of what has become a booming
biotech corridor–and planned to move the 159-bed hospital there.

But Roob wants more than a new home for the facility that houses Medicaid patients with severe mental illnesses. He wants
a new mission. Under his vision, Larue Carter would be part of a center widely known for its diagnostic skill and research
prowess–enough so that privately insured patients, experts and students from across the nation would flock to it.

"We want it to be an integral part of the expansion of medical research opportunities and teaching opportunities at
the IU School of Medicine," Roob said.

Indiana University's med school psychiatrists and psychologists already treat patients and conduct research at Larue
Carter, but integrating the hospital into a broader center would increase its focus on research.

Medicaid patients would stay at the facility 30-180 days for intensive diagnosis and work to balance medications, down from
the current average 270-day stay. Under the new setup, patients who need to be hospitalized for more than six months likely
would be transferred to state hospitals in Richmond, Logansport or Evansville.

To make the transition, the state wants a not-for-profit to build and manage a new facility. And since the idea is to strengthen
the hospital's relationship with the IU School of Medicine, a new location would need to be either on the IUPUI campus
or a quick PeopleMover-hop away, next to Methodist Hospital.

The state put out a call for bids Jan. 9, asking for proposals for a 207,000-square-foot hospital, a 90,000-square-foot research
facility, a 206,500-square-foot medical office building, and a 1,500- to 2,000-spot parking garage.

Roob said he's open-minded about proposals, but already has talked with the IU School of Medicine and Clarian about the
project. He said he wants construction to begin by the end of 2007 and have the hospital move in within three years.

Clarian spokesman Jon Mills was noncommittal about the hospital's role, confirming that the health care system has talked
with the state but declining to say whether Clarian will submit a bid. Proposals are due Jan. 29.

But the head of IU's Department of Psychiatry supports the plan. A new center would let the school capitalize on investments
it has made recently in its neuro-imaging programs, including luring a new faculty expert from Dartmouth College, said psychiatry
Chairman Christopher J. McDougle.

"No matter who would run the new Larue Carter, it would be imperative for the [School of Medicine] to stay very involved,"
he said.

The hospital, which has a 45-person waiting list, gets its medical staff from IU. About 400 state employees attend to daily
nursing and needs.

Privatization with no push back?

While other attempts to privatize state hospitals have met with resistance from employee groups and patient advocates, that
doesn't seem to be the case yet locally.

Gov. Mitch Daniels canceled the collective bargaining rights of the AFSCME government employees union shortly after taking
office in 2005, and the beleaguered local branch–Council 62–has had little success fighting privatization efforts ever since.

"This is just more of the same from [the Daniels] administration to privatize all services provided to the neediest
Hoosiers," Council President David Warrick said of the Larue Carter plans.

But some patient advocates appear to be on board.

Stephen McCaffrey, CEO of Mental Health America of Indiana, heard of the plans in his role as the chairman of an FSSA advisory
committee. He said specialization is of enough value to patients to offset other trade-offs, such as making longer-term patients
move to other facilities.

Only a small subset of Medicaid patients with mental health issues–about 1,100 statewide-end up in state hospital care,
he said. And they require a great amount of expertise to diagnose and stabilize.

"It's very difficult in my opinion to get that level of expertise at every state hospital," he said. "My
fear is that, in trying to do that, you end up with a bunch of general hospitals without the expertise needed in any of them."

Having a "top notch" facility capable of dealing with the new research on medication and other treatments makes
sense, he said, and it requires different skills from long-term care.

Musical sites

If the move happens, it would leave Larue Carter's current site–a 30-acre, 12-building former VA Hospital complex–vacant.
The state leased the property from the U.S. Department of Veterans Affairs in 1995 under a $10 million, 35-year contract.

State officials started to make plans for a new Larue Carter building in part because the VA building's 30-plus exits
and sprawling layout weren't a good fit for a mental health facility, Roob said.

The irked landlord hasn't decided what it might do with the space if Larue Carter leaves because it's been in the
dark on the state's plans, according to VA Public Affairs Officer Linda Jeffrey.

VA officials sent a letter to FSSA about a year ago requesting to be kept in the loop after IBJ last wrote about
the state's plans to move Larue Carter, Jeffrey said. "We've never heard back."

But the bigger buzz surrounding the hospital relocation is centered around the 19-acre tract the state acquired in 2004–which
Roob said isn't close enough to IUPUI. The property stretches east from Indiana Avenue to an Indy Parks parcel along Fall
Creek and reaches north almost to 16th Street.

Roob said if the Larue Carter move goes through as expected, he'll turn the land over to the Indiana Office of Management
and Budget to decide if the state still needs the parcel or if it can be sold through the state's surplus property program.

Its location–near downtown, at the north end of the life-sciences corridor and within one of the city's two certified
tech parks–would make it a hot commodity on the open market.

Experts said it would be a good fit for high-tech offices or lab space. A residential component tapping into the IUPUI population
also is likely. But they said it's difficult to guess its value, since such sites don't come along every day.

"It would fetch a great price," said Nick Arterburn, with the local office of Los-Angeles-based CB Richard Ellis.

Prime downtown parcels can sometimes sell for $25 to $35 per square foot, but with such a large tract, it's hard to imagine
those prices would be attainable, according to Abbe Hohmann, at the local office of St. Louis-based Colliers Turley Martin
Tucker.

"It's so unique, it's a hard parcel to judge," she said.