Dunleavy continues drive to privatize Alaska Psychiatric Institute

The Dunleavy regime has not given up on the effort to get the Alaska Psychiatric Institute in private hands.

For the second time in three years the state wants a consultant to study the feasibility of privatization of the state mental hospital. The state plans to spend up to $185,000 for a report due by the end of the year.

The Dunleavy administration hopes that this time a consultant will come to a different conclusion than that reached in 2017.

“Our findings demonstrate that continued state management is not only the most advantageous route for generating overall cost savings, but that it also avoids many of the risks involved in contracting out the management of critical public infrastructure,” the Public Consulting Group said in 2017.

About privatization, the report said:

“Cost-benefit analysis revealed that, even after significant staff reduction, when all transition costs, contract monitoring costs, and provider margins are considered, this option proves to be more expensive to the state over a likely 5-year contract period. The additional staff reductions needed for budget neutrality would likely diminish the quality of service delivery.”

The 2016 Legislature ordered the study that concluded public ownership is in Alaska’s best interest.

But Dunleavy and his staff believe that private ownership and operation of anything is always superior, so they have made several steps and misteps this year trying to transfer API to a company called Wellpath.

The no-bid deal with Wellpath, announced in February, called for full privatization by the beginning of July and a long-term operations contract.

On April 22, health commissioner Adam Crum announced—as the state was about to lose a case in court—that the state had halted the no-bid contract for full privatization with Wellpath, but continued to keep the company in place for the time being. Wellpath receives $1 million a month.

In April, Crum said the state hoped that the Public Consulting Group would update the 2017 report in a month. Clearly he hoped the company would change its mind and recommend privatization.

In fact, the state signed a $50,000 contract with PCG on April 19 to update its report, with the finished product due on June 30.

About a month before the report was due, the state said it has “withdrawn from its current contract with PCG for an updated feasibility study at API.” It’s not clear if the $50,000 was paid.

In its report two years ago, PCG made a strong case that API, “at the center of a fragile network of behavioral health services,” should stay in public hands.

The 2017 study assumed an 8 percent profit margin for a private company and that employees would get paid about 14 percent more under the private option, but take a substantial cut in benefits. Full privatization would cost about 13 percent more over a five-year period. The state would have to pay anywhere from $16 million to $24 million more over five years if a private company takes over.

“The overall conclusion of this baseline analysis is that some reduction in staffed hours will need to occur if the state is to realize a savings while allowing a private provider to retain margins,” the study said.

The study said full privatization was cost prohibitive, and “without strong safeguards, further reductions of staff to unsafe levels” would be needed to make API financially viable.

After the April announcement by Crum, PCG did not update the study, perhaps because it was unwilling to contradict its own research.

The state claims that API operations have improved under Wellpath. “The introduction and recent efforts of “consultants” from a contractor to help bring API into compliance have proven fruitful, as indicated above,” the RFP says.

“API has experienced recent success in filling some key leadership and staff positions; however the Director of Nursing, Safety Officer and select other positions remain empty, albeit under active recruit action. The CEO, the COO, the Quality Assurance Performance Improvement (QAPI) Director are recent examples of the wins in recent recruitment efforts over the past 3 months (since May 2019)”

The hospital has 80 beds, but only 41 are in use because the problem of hiring enough professional staff has continued under Wellpath.

“API continues to struggle with staffing challenges (nursing (RN), social worker, MD and APP psychiatry shortages, and other key leadership roles), which threaten the ability to sustain certifications required by regulatory agencies,” the state says.

The Dunleavy administration says it hopes the Trump administration will allow it to get around some federal Medicaid rules, through what is known as a Section 1115 waiver.

In time, this waiver, the state says, “will reduce admission pressure on API. This in turn, may reduce the length of stay of patients at API, as well enable better access to care for those with behavioral health challenges. This reduction in length of stay may open other opportunities for different care models at API.”

The 2017 study includes a detailed review of experiences elsewhere and the pros and cons of turning public facilities into private operations.

The Associated Press reports that Albert Wall, a deputy commissioner of health and social services, “said a lot has changed since that report was written and it was determined that a fresh look was needed.”

What has changed is that the Dunleavy administration is determined to privatize API and needs a report to back up its ideology.

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