Citing a "crisis" at the Alaska Psychiatric Institute, Alaska Department of Health and Social Services Commissioner Adam Crum announced Friday he was taking over its management and contracting with a private, for-profit company to run the facility.

According to Crum, state law allows the DHSS commissioner to bypass regulations requiring a competitive bidding process before awarding a sole-source contract, such as the one negotiated with Wellpath Recovery Solutions.

A cost estimate for the contract with Wellpath wasn't immediately available from DHSS officials Friday.

Crum said problems with the state's only public psychiatric facility are well-documented and ongoing. He took the emergency action after a recent visit from a team representing the Centers for Medicare and Medicaid Services which suggested patients and staff could be in immediate danger.

The hospital is working to maintain its federal certification so it can continue to bill Medicaid and Medicare for patient services. Crum said losing that certification would cost the state millions of dollars every year.

"It was with the exit interviews of that CMS survey team that led us to understand the immediate jeopardy of the patients there and the staff there, which is why we are taking this move," Crum said. "We are taking care of the patients and we are showing CMS that we are willing to do substantial improvements and change to make sure that we provide the best environment possible."

The state had considered whether to privatize API in 2016, under then-Gov. Bill Walker’s administration, but found a lack of interest from the private sector.

In September, the institute’s CEO resigned following a study which deemed the facility to have an “unsafe work environment” amid issues ranging from poor staffing to low morale.

API’s roughly halved patient housing capacity during the crisis was a factor in a Disability Law Center suit against the state in October, challenging the placement of patients under civil court orders in correctional facilities instead.

In a statement Friday afternoon, the center said it was "concerned" about Crum's choice. It noted "documented problems" linked to the privatization of state psychiatric hospitals like API, as well as immigrant detention facilities and medical and mental care in federal prisons.

“Privatization creates tension between patient care and profit. When choosing between the two, what will a Wellpath corporate office in Nashville decide?” Fleurant asked.

Asked why the state chose Wellpath, Crum said the company – a merger of Correct Care Solutions and Correctional Medical Group Companies, both of which provide medical care in correctional institutions – came highly recommended.

"We asked experts in the behavioral health field who might be able to assist us with this crisis, Wellpath was the name that was strongly recommended,” Crum said. “They were able to swiftly bring in a cohesive leadership team and they have a proven track record of success working to improve crisis situations in similar facilities."

Both of Wellpath’s component companies have played roles in Outside investigations. In 2017 Texas state Sen. Carlos Uresti was accused of being a middleman for bribes, according to the San Antonio Current, allegedly paid by a company that became part of Correct Care Solutions. The Texas Tribune reported that Uresti was sentenced to a 12-year prison term in 2018, on separate charges stemming from his work for an oilfield services company that perpetrated a Ponzi scheme.

One Alaskan who questions Crum’s selection of Wellpath is Jake Metcalfe. He’s the executive director of the Alaska State Employees Association Local 52, which represents about 200 employees at API.

Metcalfe said he's been trying to get information about the take-over for weeks but only heard official word from the state Friday morning. He's concerned about whether Wellpath will honor union contracts and said staff there has many questions that have yet to be answered.

State Sen. Bill Wielechowski, D-Anchorage, said he also had concerns about contracting with the company.

"There is no doubt that significant improvements need to happen at API. For years they have been understaffed and underfunded," Wielechowski said in a statement. "But just last week the Department of Health and Social Services acknowledged they were 'already seeing a turnaround' at API. This makes the decision to issue an apparent sole source, non-competitive contract to Wellpath all the more questionable."

But another Anchorage Democrat in the Legislature, Rep. Ivy Spohnholz, said an Outside firm taking over management duties may be a good first step.

“Given that API cares for our friends, families and community members, it’s really important that we bring every resource to bear to help API,” said Spohnholz, who chaired the House Health and Social Services Committee last legislative session. “Bringing in outside expertise that has done work in turnarounds is just the kind of solution we need to be approaching."

Crum said Wellpath will have three goals it needs to tackle immediately. The first is implementing new policies, procedures and training to keep patients and staff safe. The second is making sure that API is in compliance will all state and federal regulations. The third is bringing on staff so that the whole facility can be utilized.

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