36-214. Arizona state hospital; private operation

A. Notwithstanding any law to the contrary, pursuant to requests for proposals, the department of health services may enter into a five year contract with a private entity to administer the Arizona state hospital and deliver client services. The contract shall allow the department to renew the contract for two subsequent renewal periods of not more than five years each and shall prescribe the circumstances under which the department may terminate the contract before the end of a five year period. The department may issue separate requests for proposals for criminal, civil, juvenile and adult population categories in the state hospital.

B. The contract shall include the following requirements:

1. The contractor must successfully attain performance goals prescribed by the department and the joint legislative budget committee relating to improvement of the state hospital's administration and delivery of client services.

2. The contractor shall not use subcontractors or subsidiaries to deliver services prescribed in the contract.

C. To be considered for an award of a contract, the contractor must demonstrate that it has:

1. The qualifications, operations and management experience and experienced personnel necessary to carry out the terms of the contract.

2. The ability to comply with applicable standards and any specific court order, if required.

3. A demonstrated history of successful operation and management of secure behavioral health facilities.

4. A demonstrated history of successful delivery of behavioral health services.

D. The contractor must agree:

1. That this state may cancel the contract at any time after the first year of operation, without penalty to this state, on ninety days' written notice.

2. To be in compliance at all times with all corrective action plans that are in effect at the time the contract is entered into or that are subsequently entered into by this state and the center for medicare and medicaid services.

3. To comply with all medicare certification requirements.

E. A contract may provide for annual contract price or cost adjustments, except that any adjustments may be made only once each year effective on the anniversary of the effective date of the contract. If any adjustment is made pursuant to the terms of the contract, it must be applied to the total payments made to the contractor for the previous contract year and shall not exceed the per cent of change in the average consumer price index as published by the United States department of labor, bureau of labor statistics between that figure for the latest calendar year and the next previous calendar year. Any price or cost adjustments different than those authorized in this subsection may be made only if the legislature specifically authorizes the adjustments and appropriates monies for that purpose, if required.

F. The department shall not award a contract unless:

1. It receives an acceptable proposal pursuant to any request for proposals. For the purposes of this paragraph, " acceptable proposal" means a proposal that substantially meets all of the requirements or conditions prescribed in this section and that meets all of the requirements in the request for proposals.

2. The proposal offers cost savings to this state based on the standard cost comparison model approved by the joint legislative budget committee.

3. The proposal offers a level and quality of services that equal or exceed those that would be provided by this state.

4. The contractor provides audited financial statements for the previous five years, or for each of the years the contractor has been in operation, if fewer than five years, and provides other financial information as requested.

5. The contractor provides an adequate plan of insurance, specifically including coverage or insurance for civil rights claims and liabilities as approved by the risk management division of the department of administration.

6. The contractor agrees to be liable for the costs of any emergency, public safety or security services provided to the contractor by this state or any political subdivision of this state and to reimburse this state or any political subdivision of this state for the cost of those services.

G. The sovereign immunity of this state does not apply to the contractor. Neither the contractor nor the insurer of the contractor may plead the defense of sovereign immunity in any action arising out of the performance of the contract.

H. The contract terms are subject to prior review by the joint legislative budget committee before placement of any advertisement that solicits a response to a request for proposals. Any proposed modification or amendment to the contract is subject to prior review by the joint legislative budget committee.

I. During its first year of operation, the contracting entity shall submit monthly reports to the department and the joint legislative budget committee as prescribed by the department. Thereafter, the contracting entity shall submit quarterly reports to the department and the joint legislative budget committee as prescribed by the department.

J. At the end of the fourth year of the contract, an independent evaluator selected by the department shall conduct and complete a performance review to determine if the contracting entity has met the goals specified in the contract. The independent evaluator shall submit a report of its findings to the governor, the president of the senate, the speaker of the house of representatives and the joint legislative budget committee on or before May 1, 2010 and shall provide a copy of its report to the secretary of state and the director of the Arizona state library, archives and public records.

K. The department shall make a good faith attempt to place all state hospital personnel who are under the state personnel system on the effective date of the contract entered into pursuant to this section and who are not offered continued employment by the contracting entity.

L. All appropriated monies that remain unexpended and unencumbered on the effective date of the contract entered into pursuant to this section revert to the state general fund.

M. The department of health services shall report to the joint legislative budget committee by July 1, 2006 on whether the department intends to privatize the state hospital. If the department intends to privatize the state hospital, the report shall contain a time frame for issuing a request for proposals. If the department decides against privatizing the state hospital, the report shall include the department's rationale for not doing so.