Editor's note: This story has been updated to include a comment from a spokeswoman for the Health and Human Services Commission.

State Sen. Kirk Watson, D-Austin, on Thursday proposed creating an "MD Anderson of the brain" on the site of the troubled Austin State Hospital, a psychiatric facility that has been plagued with staff shortages, crumbling facilities and a failure to meet federal health standards.

“The state must do something about the Austin State Hospital,” Watson told a crowd of higher education leaders and health care advocates at a downtown Austin hotel. "I call being worst an opportunity."

A 2015 study from the Texas Department of State Health Services, which oversees state hospitals, identified the Austin campus as one of five facilities that were beyond repair and should be replaced. Last year, Medicare and Medicaid inspectors cited the Austin State Hospital twice in one month for nursing shortages and restraint violations, according to the Austin American-Stateman.

The proposal comes at a time of uncertainty the state's 10 psychiatric hospitals. Many advocates for people with mental illness have called on the state to build new facilities, but such a proposal would be costly.

“ The state must do something about the Austin State Hospital. ” — State Sen. Kirk Watson, D-Austin

As an alternative, Watson and other state leaders are signaling a preference for Texas to partner with public universities and medical schools as a way to modernize and remodel the aging mental hospitals. That charge has been led in part by David Lakey, the state health department's former commissioner and now senior vice president for population health at UT Health Northeast in Tyler. Lakey has touted the example of the University of Texas Health Science Center at Tyler, which converted an empty ward in a university building into a mental health hospital.

Advocates of that approach hope similar partnerships could be a cheaper and effective solution to completely rebuilding state hospitals, including the Austin campus, in a way that the fiscally conservative Legislature could find palatable.

Watson looked to The University of Texas' MD Anderson Cancer Center, based in Houston, which is considered one of the leading cancer research centers in the country. He hopes to model the success of the center by rebuilding the Austin State Hospital at its current site north of the University of Texas. His vision includes working with the University of Texas' new Dell Medical School to bring treatment for patients, training and research.

However, it's likely there won't be funding for the Austin hospital until 2019. The Legislature would have to approve funding, and Watson said that in the 2017 legislative session it's likely Rusk State Hospital in East Texas will receive funding to rebuild first. According to a state funding request from the Health and Human Services Commission, the hospital has been hiring staff to sit in patient bedrooms 24 hours a day because it lacks the funds to fix building problems that could put patients at risk of suicide attempts.

Watson's plan is part of his "10 Goals in 10 Years" initiative to improve the health of Austin and the state. The goals include building a medical school, establishing modern Austin health clinics and providing psychiatric care and facilities. The Dell Medical School's inaugural class started this summer.

"We’ve set ourselves on a path to become a model healthy community," Watson said Thursday.

In a report released this month to the Legislature by the Health and Human Services Commission, state officials outlined six options for the Austin hospital, including rebuilding the aging property or moving to a different location.

A spokeswoman for the commission said patients should have appropriate psychiatric care "in the right setting."

"Our state hospital system is deteriorating and needs to be fixed or replaced," said the spokeswoman, Carrie Williams. "We need to have a broad vision and be open to taking the system and mental health services to the next level. We are open to new ideas and will take direction and work closely with state leadership on this as we head into next session."

The commission estimated the cost of building a freestanding state mental health hospital ranges from $300 million to $400 million, but Watson said he hopes state and local governments can work together to shoulder the costs and, in the long run, “make Austin the place where we model mental health care.”

“We have such an opportunity with the Dell Medical School and with the local community to engage in a planning process where my hope would be we save money either on the building or the operations of a new state hospital,” Watson said.

Despite an influx of funding by state lawmakers, Texans still faced long waits to receive emergency mental health care, The Texas Tribune reported in May. Mental health advocates hope to persuade lawmakers to finance more psychiatric hospital beds during the upcoming legislative session.

Stephen Strakowski, founding chair of the Department of Psychiatry at the Dell Medical School, said the state falls short when it comes to providing mental health care to Texans, but the failing hospital “gives us a chance to think differently about how we’ve done this compared to the past.”

Strakowski said he foresees the Dell Medical School contributing to the state hospital by bringing forward partners, new innovation and updated technology to improve the health care of Central Texans.

“It’s not easy, but I think it’s doable,” Strakowski said. “Texas is a big enough, wealthy enough state that I think we can pull it off.”

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Edgar Walters contributed to this report.

Disclosure: The University of Texas System, the University of Texas at Austin and MD Anderson Cancer Center have been financial supporters of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.