Amid a flurry of media coverage Wednesday as Gov. Mike Dunleavy unveiled his proposed budget, the state revealed its sole-source contract to privatize Alaska's only state-run mental health hospital. 

Last week, Department of Health and Social Services (DHSS) Commissioner Adam Crum announced that he's taking control of the Alaska Psychiatric Institute (API) and the state is now contracting with Wellpath Recovery Solutions for administrative leadership.

On Wednesday, the department unveiled a website containing documents related to the sudden privatization. 

Materials posted there include the contract, which reveals the state is paying Wellpath an immediate $1 million per month to take over. If the first phase of the contract goes well, the state and the company will move into the second phase on July 1, in which the state plans to pay the private contractor roughly $43 million annually to run API. 

"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," DHSS officials said in a Friday statement. 

The administration is using that provision to bypass regulations that require a competitive bidding process, which would held publicly, before awarding Wellpath the contract.

A Feb. 5 declaration letter from Crum describes the long-brewing trouble at API that the state cites as a need to take immediate action.

API, according to the letter, is currently under four letters of correction by four different regulatory authorities: The Centers for Medicaid and Medicare Services (CMS), the Joint Commission, the federal Occupational Safety and Health Administration, and the Health Facilities Licensing and Certification Section within DHSS. 

The actions were taken over patient safety issues, including: suicide risk, misuse of seclusion and restraint, lack of complete and appropriate de-escalation of violence training for staff and security contractors, and the physical injury and sexual assault of patients. 

Crum characterizes the CMS letter of correction as being the most concerning: 

"Of those four Letters of Correction, the one from the CMS (Federal government) is the most concerning. This finding was originally issued in July of 2018 with a 90-day deadline, which was not met. In November, CMS issued a follow-up letter with intent to revoke CMS certification of API. Immediately thereafter, resignations were submitted by the then-Deputy Commissioner, Director of the Division of Behavioral Health, and CEO of API. The deadline for correction was November 26th, which was again not met and should have resulted in the loss of certification at that time. However, due to the earthquake, which put Alaska in a State of Emergency, CMS granted an extension until February 1, 2019, for API to submit its Plan of Correction. The Plan of Correction has been submitted, and the Plan itself has been approved, but upon information and belief, CMS lacks confidence in the State of Alaska to actually implement the Plan of Correction because of its repeated failure to do so in the past, and because of its current management structure and lack of personnel." 

In his letter, Crum says without the declaration of authority, Alaska stands to see a forced closure of its only state-operated inpatient mental health hospital.

"This would have catastrophic consequences up to and including further patient trauma, the need to transfer patients out of the state to other hospitals for care (all at the expense of General Funds), and potential safety issues," Crum wrote.  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 Friday statement. "When choosing between the two, what will a Wellpath corporate office in Nashville decide?" 

During an interview over the weekend, the governor said those concerns can be addressed through the contract, which his administration had not yet released. 

"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."

The DLC, which is already suing the state over the placement of un-charged mental health patients in Department of Corrections facilities, demanded Friday that the state release the contract immediately, and called for additional oversight. 

"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. 

Wellpath Recovery Solutions was formed by a merger of two correctional medicine companies, including Correct Care Solutions. CCS, based in Nashville, Tenn., "has been named as a defendant in 1,351 federal lawsuits in the past 10 years," according to a report published Monday by The Augusta Chronicle

According to the report, "The lawsuits accuse the private, for-profit company of malpractice, wrongful death and injury of people housed at facilities where Correct Care Solutions is contracted to provide health care." 

Dunleavy has hinted he will pursue privatization beyond API.

During Wednesday's rollout of the budget, Dunleavy budget director Donna Arduin said the state Department of Corrections would send 500 inmates under Outside prisons, under a plan that would save the state around $12 million. Additionally, the administration wants the Alaska Marine Highway System to migrate toward privatization, and will work with a marine consultant to pursue options.

No further, concrete plans for privatization have been confirmed.

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