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GEO Group Expands into Mental Health Facilities for Business Growth
Since 1984, the GEO Group (formerly Wackenhut Corrections) has focused on operating private prisons as its business model. It is now finding a more lucrative niche in privatizing mental health facilities and civil commitment centers for sexual predators. The company has been able to procure multiple contracts in Florida to develop and refine its expanded, and lucrative, business model.
This evolution in the type of services provided by GEO is a major transformation from the private investigation firm founded in 1954 by former FBI agent George R. Wackenhut. By 1958, Wackenhut was providing security guard services. With a nationwide need for more prison beds in the 1980s due to tough on crime rhetoric and harsh sentencing laws, the company saw an opportunity for increased profits when it entered into prison and jail operations in 1984.
That expansion resulted in Wackenhut Corrections – renamed as the GEO Group, Inc. in 2003 – becoming the self-proclaimed “world leader” in providing prison design, construction, financing and operations to state and national governments. The company does business in the United States, Australia, South Africa and the U.K. It manages or owns 67 prisons or residential treatment facilities with a total design capacity of more than 56,000 beds, and claims 27% of the global private corrections market.
Critics have charged that GEO shirks on staffing and services to pad its profit margin. At a recent congressional hearing, the company was faulted for failing to offer substance abuse treatment and vocational training programs to prisoners housed at the Bureau of Prisons’ Rivers Correctional Institution in Winton, North Carolina.
Abuse and neglect by GEO’s private prison guards have caused bad publicity for the company too, resulting in the loss of contracts in some cases. In October 2007, the Texas Youth Commission swiftly cancelled its $8 million annual contract with GEO after inspectors found fetid conditions at the Lake County Juvenile Justice Center, including feces-smeared cells and insect infestations. [See: PLN, July 2008, p.18]. Amid allegations of neglect and abuse, Louisiana and Michigan officials closed GEO-operated juvenile facilities in 2000 and 2005, respectively.
Adult prisons have also been an Achilles heel when it comes to bad press for GEO. Regular readers of PLN are familiar with articles that describe riots, escapes, physical and sexual assaults by guards, and abysmal medical care at GEO-operated facilities. [See, e.g.: PLN, April 2008, p.39; Dec. 2007, p.23; Nov. 2007, p.16; Feb. 2007, p.34]. Rather than improve conditions, the company’s response has included settling the few prisoner lawsuits that make it beyond the courts’ preliminary screening process for unknown sums, through confidential settlements that do not admit wrongdoing.
With states curtailing mental health institutions and embracing prisons as the preferred choice for “treating” the mentally ill [see this issue’s cover story], it seems inevitable that for-profit companies like GEO would eye the expanding market for institutional mental health services. In 1997, Florida created the perfect opportunity for GEO to capitalize on that market.
The South Florida State Hospital opened in the 1950s as a treatment facility for people with mental illnesses such as schizophrenia and major depression. By 1988 it had devolved into a human warehouse where the mentally ill wandered around naked and shared toothbrushes from a communal bucket. A class action lawsuit resulted in some much-needed improvements.
Regardless, by 1997 the facility was still dysfunctional. Seeking to further privatize government services, and noting the state’s desire to privatize the South Florida Hospital, GEO contracted to design, build and operate a replacement facility. The mental health hospital now houses patients who have been found incompetent to stand trial or not guilty by reason of insanity.
Admittedly there have been vast improvements since GEO took over. When the state ran the facility, the average stay for patients was 8½ years. Now the average stay is less than one year. The hospital’s treatment approach follows the concepts of Boston University Professor William A. Anthony, a founder of the modern movement in psychiatric rehabilitation.
Rather than sit in their rooms, some 90% of the patients are involved in programs to engage them in art, music and other therapies that stress skill building. Re-admissions have dropped to 2% annually. GEO’s goal, however, was not so much to assure that patients receive adequate care, but to create more contracts and revenue.
“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,” said Dale Frick, vice president of project development and client relations for GEO Care, the mental health arm of GEO Group. “Of course, we saw a large national market availability of these types of facilities and projects.”
That market is also more profitable than prisons. “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 bed per year,” stated GEO Chairman and CEO George Zoley.
GEO Care, created as a GEO Group subsidiary in 1997 and previously known as Atlantic Shores Healthcare, expanded its revenue from $32.6 million in 2005 to $70.5 million in 2006 – a 115% increase. In contrast, GEO’s corrections division saw revenue rise 29.5% during the same time period. The increase for GEO Care included a $2.7 million-a-year contract to provide mental health services at Florida’s Palm Beach County jails. The company further obtained contracts worth $34 million to operate the 100-bed South Florida Evaluation and Treatment Center Annex and the 175-bed Treasure Coast Forensic Treatment Center. Both are located in South Florida, with the latter being a former civil commitment center.
GEO Care also operates the 230-bed Fort Bayard Medical Center in New Mexico, and in 2006 proposed taking over two state mental hospitals in West Virginia. “It’s just a niche market,” said Frick. And a highly profitable one, too. GEO Care’s 2007 revenue was $113.8 million. GEO has stated that its mental health subsidiary is part of the company’s “strategy to diversify into services that are complementary to its core business.”
Other states have taken notice of GEO Care’s track record in Florida. GEO regularly brings in visitors to view its South Florida Hospital operations, hoping those states will be encouraged to privatize their mental health facilities, which it sees as a potential $7.2 billion market.
Florida has also provided GEO Care a platform to build a business model that involves operating civil commitment centers for sexual predators who have completed their prison sentences.
As previously reported in PLN, the Florida Civil Commitment Center (FCCC) was a mismanaged, chaotic facility when it was operated by the state’s Department of Children and Family Services, and even after it was turned over to Liberty Behavioral Healthcare Corp. Investigators found that sex among staff and prisoners was a regular occurrence; cell phones, alcohol and drugs were brought in by employees; violence was rampant; and at least one murder occurred plus an attempted escape by helicopter. [See: PLN, Nov. 2006, p.13; Sept. 2007, p.20].
GEO Care obtained an $18.9 million annual contract to operate FCCC in July 2006. The company plans to be in the business of treating sexual predators for the long haul, as it has broken ground on a new facility to increase FCCC’s capacity from 660 to 720 beds, with a completion date in Spring 2009. Meanwhile GEO is developing a program to treat sexual predators, though some experts say it’s unclear if such offenders can be rehabilitated. Even if they can, there is little political inclination to ever release them from confinement.
GEO sees FCCC as a clear business opportunity. “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,” said GEO Care vice president Dale Frick. The company expects to bring in $180 million this year. “It’s just a different market. It’s not that it’s more lucrative,” stated Frick. “It’s just that it’s new, it’s available, and it’s large.”
If that business model was not lucrative, however, it is doubtful GEO would be involved. Rather, it’s more likely the company will make more money and face fewer lawsuits from mentally ill patients held in treatment centers than it does from litigation-savvy prisoners in GEO’s privately-run correctional facilities.
To ensure it has friends in high places to help procure new contracts, GEO Group uses several tactics typical of the private prison industry. One is political contributions, to the tune of $880,621 in 19 states during the 2002 and 2004 election cycles. Another tactic is to hire former government officials. For example, Gary Johnson, a 28-year veteran of the Texas Department of Criminal Justice, who retired as that agency’s Executive Director, became GEO’s Central Region Vice President effective January 2, 2008. GEO’s Board of Directors includes former Bureau of Prisons director Norman A. Carlson and current Pennsylvania State Representative John M. Perzel.
With a continued insistence by government policy makers to incarcerate the mentally ill and civilly commit sex offenders after they have completed their prison sentences, other companies will undoubtedly follow the trail blazed by GEO’s expanded business model. The only question is when stories of abuse, misconduct and neglect, such as those that plague the private prison industry, will begin to emerge.
Sources: Florida Trend, GEO Group Press Release and Annual Report, “Policy Lockdown: Prison Interests Court Political Players” (April 2006), New Mexican, www.thegeogroupinc.com
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