Gov. Mike Dunleavy’s administration has temporarily limited the scope of private management for the troubled Alaska Psychiatric Institute, amid a deal that has itself drawn fire from lawmakers and union members.

Department of Health and Social Services Commissioner Adam Crum, who signed a $1-million-a-month contract for management of API with Tennessee-based Wellpath Recovery Solutions, announced the new terms Monday afternoon at an Anchorage news conference.

Under the modified agreement, changed after a lawsuit from the Alaska State Employees Association, Wellpath will no longer receive a no-bid assessment to fully take over API on July 1. Its contract under the management phase of the contract has been extended to Dec. 31.

“By mutual agreement, DHSS and Wellpath have agreed to modify the original Feb. 8, 2019 contract,” DHSS officials wrote in a statement just before Crum's announcement. “Wellpath will continue to provide services through phase 1. The vendor for phase 2 services will be determined by conducting a request for proposals (RFP) process.”

In a separate statement, Crum also announced Matt Dammeyer takes over as the institute’s new CEO effective Monday. Dammeyer formerly held executive positions at Central Peninsula Hospital in Soldotna. Gavin Carmichael, who had been serving as CEO on an interim basis, will once again become API’s chief operating officer.

“I am confident Matt Dammeyer will provide the leadership that API needs at this time,” Crum said. “His history of focusing on positive patient outcomes will serve API well. Because substance use disorder often goes hand-in-hand with mental health issues, his broad background in that area and his health care experience in Alaska will strengthen API’s ability to help some of Alaska’s most vulnerable citizens.”

Crum said a pending feasibility study on psychiatric hospital services — being conducted under a maximum $50,000 contract by the Public Consulting Group — was the main cause of Wellpath contract’s change. Crum said the study would not be done in time for them to make a final decision based on the original time frame in the contract.

Asked about potential bidders to run the currently 33-patient facility beyond Wellpath, Crum emphasized that the process has yet to unfold. Wellpath will continue to collect $1 million a month under its initial contract.

“They haven’t directly told us that they’d want to run API, but Providence [Health & Services Alaska] has been mentioned a lot,” Crum said.

API has drawn a series of allegations dating back to last year, from claims that its work environment was unsafe to claims of a patient-on-patient rape being ignored by API staff being found justified by the state ombudsman’s office.

Dunleavy administration officials have deemed the deal with Wellpath necessary to prevent API from losing key operating certifications, but state lawmakers have questioned whether the state’s chief procurement officer was fully informed regarding Wellpath before making his recommendations.

The Alaska State Employees Association has also protested the contract’s effect on more than 200 members who work at the institute, delivering a letter to Dunleavy’s office last week laying out its concerns.

State Rep. Zack Fields, D-Anchorage, quickly hailed the news Monday, saying the ruling leads to a more transparent procurement process for API management. DHSS officials addressed such concerns in their announcement.

“DHSS is taking this step not due to any violations of the procurement process but rather so Alaskans have trust in their government and know that decisions are being made in the best interest of the safety of our patients and staff,” the statement reads.

Department officials initially declined to answer a question from a private citizen about whether any prior feasibility study had found in favor of the state privatizing API, but said none had to their knowledge when a reporter asked the same question.

Cassie Schirm contributed information to this story.

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