As he prepares to release his proposed budget on Wednesday, Republican Gov. Mike Dunleavy is responding to criticism over his sudden move to turn over administration of the Alaska Psychiatric Institute (API) to a private, for-profit company. 

Following recent federal and state investigations into API, Alaska's Department of Health and Social Services (DHSS) Commissioner Adam Crum announced Friday that he's taking control of API and the state is now contracting with Wellpath Recovery Solutions to provide administrative leadership for the only state-run mental health hospital in Alaska.  

"API was not managed well, everyone agrees with that, everyone agrees it wasn't managed well," said Dunleavy, "And so what we want to do is put something in place that's going to be managed well and be a benefit to the patients, the clients seeking that service, as well as the people that work there." 

The results of an independent investigation of API last September highlighted unsafe working conditions, insufficient staffing, a cultural divide over the issue of staff versus patient safety, a practice of favoritism by API's nursing administration, and overall low employee morale. 

API has had known safety issues for years. The Alaska Department of Labor and Workforce Development, Occupational Safety and Health (AKOSH) cited API for being unsafe in 2014, and again in November of 2017.

API has also had issues staying in compliance with the Centers for Medicare and Medicaid Services' (CMS) standards. A recent visit from the agency left state officials worried the hospital could lose its CMS certification, which would mean the loss of millions of dollars in federal funding every year. 

"Alaska state law (AS 47.32.140) allows for the commissioner to assume either temporary or permanent management of a licensed health care entity when there is reasonable cause to believe there is a danger to the health, safety or welfare of individuals receiving care from that entity," a news release from DHSS stated on Friday. 

The administration is using that provision to bypass the regulations that require a competitive bidding process in view of the public before awarding a sole source contract. 

Voices raising criticism of the move, including the Disability Law Center of Alaska, question whether turning to a company that stands to profit off of one of Alaska's most vulnerable populations is in the best interest of Alaskans. 

"Privatization creates tension between patient care and profit," said David Fleurant, DLC's executive director, in a news release Friday. "When choosing between the two, what will a Wellpath corporate office in Nashville decide?"

The governor said those concerns can be addressed through the contract, which his administration has still not released to the public. 

"Certainly private enterprise is driven by a profit, there’s no doubt about it," Dunleavy said, "But when you partner with a private enterprise, you just have to make sure that the state’s concerns are first and foremost, and that they’re written into any contracts and any expectations, and that we have the oversight over the implementation of those contracts, just like we should have the oversight over the management of state programs state projects." 

When asked when the public will get to see that contract, Dunleavy responded, "Eventually it's all gonna be public knowledge. [...] You'll see, we're gonna roll everything out related to all, any and all business that we do that we can we can provide by law." 

Officials have said that under the contract, Wellpath will bring in a team that will work to correct problems relating to staff safety, patient safety and rights, regulatory compliance and the therapeutic environment. The goal is for API to return to full capacity by the end of June. If Wellpath is successful, it will take over full responsibility of API on July 1, 2019.  

All API staff will keep their positions as state employees.

The DLC filed a lawsuit against the state in October after learning multiple mental health patients — who are not charged with crimes — have been held in Department of Corrections facilities for days. The advocacy group said placing people who are under civil court orders to receive psychiatric evaluations or treatment in jail, instead of a health facility, is unconstitutional. 

Friday, DLC raised additional questions about privatizing API: 

  • Is this an appropriate use of the emergency authority cited by the Commissioner?
  • How does the State reconcile today's decision with the conclusion of a 2017 report, commissioned by the legislature, that privatization of API would cost the State more money?
  • Does the State see this primarily as a funding crisis or a patient care crisis?

DLC is also asking to see the contract, among other documentation.  

"If the exercise of this authority is to protect patients, a responsibility the State has been incapable of meeting, then another independent entity needs to be created to assess whether Wellpath is successful in the first phase of this contract," a release from DLC stated Friday. 

Dunleavy, who has promised Alaskan's an honest budget, said, "We want to be as open and honest as possible, and I know that every administration says that, but I have no special pet projects. I have no special trick up my sleeve that I want to protect, guard or otherwise hide. My purpose in running for Governor and being Governor today is to manage Alaska better for the people of Alaska." 

The Dunleavy administration has not cited a legal statute preventing the release of the contract, but a second request for the materials sent to DHSS Monday did not receive an immediate response. 

"All of the information is still being gathered and the Alaska Department of Law still needs to give all of the documents a legal review," a DHSS spokesperson wrote in an email on Friday. 

The governor pushed forward to Wednesday's reveal of his proposed budget when asked if other departments would become privatized.

“You’re going to see a whole slew of different approaches to not just budgeting but in services and what can we do as [the] state of Alaska in terms of enlisting the private sector,” Dunleavy said. "So you’ll see, again, on February 13 you’ll get a better idea."

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