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State will turn over administration of troubled Alaska Psychiatric Institute to a for-profit company

The Alaska Psychiatric Institute, photographed Wednesday, Jan. 30, 2019. (Loren Holmes / ADN)

Alaska will hand over administrative oversight of its troubled state-run psychiatric hospital to a company with ties to private prison operators, the state announced Friday.

The company, Wellpath Recovery Solutions, will “provide administrative leadership” over the Alaska Psychiatric Institute in Anchorage, the Alaska Department of Health and Social Services announced Friday. API is Alaska’s only state-run psychiatric hospital.

The contract is being awarded without a competitive bidding process or public review under a state rule that allows contracting on an emergency basis, officials said. Details of the contract were not immediately available, nor was documentation showing the justification for the emergency action. Officials could not immediately say exactly how much the contract would cost.

Over the past year, API has been the target of multiple investigations by federal regulators that found serious and widespread problems ranging from slow responses to sexual assaults to excessive use of restraints and seclusion rooms for patients. A separate investigation also found that it is a dangerous workplace for nurses with high rates of worker injuries.

The problems were putting the hospital at risk of losing a certification that allows it to receive Medicare and Medicaid funding.

After recent conversations with federal regulators, state officials decided progress was not being made quickly enough, Adam Crum, the state health commissioner, told reporters on Friday. He said regulators had not yet issued a formal ruling but the state decided to take action anyway.

“The exit interviews ... led us to understand immediate jeopardy of the patients and staff there,” Crum said.

Crum said Wellpath, a Nashville, Tennessee-based company with roots in the private prison industry, was recommended to state officials by a national group, the National Association of State Mental Health Program Directors. He said the company had a reputation for working quickly.

The company describes itself as providing health care in “correctional facilities, state psychiatric hospitals, forensic treatment facilities and civil commitment centers." It employs 14,000 people in 550 facilities in 37 states in the U.S. and Australia.

In the near term, a Wellpath management team will come in to fill key leadership positions at API, Crum said. Current employees will remain state employees. The company will be charged with resolving problems with patient and staff safety and patient rights, bringing the hospital into compliance with regulators and restoring it to its 80-bed capacity by the end of June, according to Crum and deputy health director Albert Wall.

Only about 45 beds are in use at this time because of staffing problems, Wall said.

After July 1, Wellpath could assume full responsibility of API, officials said. It was not immediately clear how that would happen. Crum could not say Friday whether the state planned to accept bids from other companies.

He said a contract with Wellpath would “not be a substantial reinvestment.”

Rumors of an impending move to privatize had been circulating at API for weeks, according to current and former employees.

Alaska Psychiatric Institute, photographed on Friday. (Marc Lester / ADN)

The idea of privatizing operation of API has been debated for years. A 2017 study commissioned by the state warned against privatization, saying it would cost more and diminish the quality of service.

But since the study, the problems at API have accelerated, said Wall, the deputy director at the state health department. Patients have been sitting in jail cells and emergency rooms waiting for a bed, Wall said.

“Since the feasibility study came out, (the hospital) has gone downhill,” Wall said.

State officials were joined at the news conference by representatives from several organizations, including the Alaska Mental Health Trust, the Alaska Behavioral Health Association, North Star Behavioral Health, Alaska Regional Hospital and Fairbanks Memorial Hospital.

Mike Abbott, the executive director of the Alaska Mental Health Trust Authority, said his agency appreciated the urgency. An external management team could be helpful in the short term, he said.

Beyond that, trust officials have not decided if API should make a permanent transition to a private operator, Abbott said.

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Alaska Senate President Cathy Giessel, R-Anchorage and a registered nurse, said she supported steps toward privatization.

"It certainly can’t be worse than we’ve done, can it? I am very pleased the effort is going forward,” Giessel said.

State Reps. Ivy Spohnholz and Matt Claman, both Anchorage Democrats, also said they see the move as a positive sign for API.

“Given the crisis that we have at API, and the fact that people at API are our friends and family and loved ones, we need to bring every resource to bear,” Spohnholz said.

Other lawmakers were more skeptical. Sen. Bill Wielechowski, D-Anchorage, said he was concerned about introducing a profit motive into the state’s psychiatric health care system. He also questioned the administration’s decision to award a no-bid contract.

The Disability Law Center, a nonprofit law firm that advocates for people with disabilities, released a statement questioning whether the state had the legal authority to sign a contract with Wellpath through its emergency procurement law. State officials said Friday that they weren’t yet ready to release documentation that described safety concerns for API patients and staff.

“Was this a patient-care emergency or a funding emergency?” said David Fleurant, the executive director of the Disability Law Center. The organization has sued the state over its recent practice of holding court-ordered psychiatric patients in jail when API is full.

The law firm also called for independent oversight over Wellpath’s performance the next five months, through a legislative or outside entity.

Wellpath was the product of a 2018 merger between two of the biggest players in the incarceration health care business: Correct Care Solutions and Correctional Medical Group Companies. H.I.G. Capital, a Miami-based private equity firm, was behind the merger, records show.

Correct Care Solutions was a medical-care spinoff of the private prison giant GEO Group. GEO Group is already a player in Alaska’s incarceration world. The company manages almost all of Alaska’s halfway houses. Critics, including the former head of the Department of Corrections, say GEO’s management has allowed drugs and contraband to infiltrate the halfway houses and the number of inmates escaping to rise dramatically.

The state budget director, Donna Arduin, has come under scrutiny by some lawmakers and a consumer-interest group, the Alaska Public Interest Group, for past connections to GEO.

That history includes serving in the mid-2000s as a paid trustee on the board of Correctional Properties Trust, a spinoff of GEO Group that owns prisons, the Los Angeles Times reported. Prior to that, Arduin worked as the budget director for California Gov. Arnold Schwarzenegger.

Crum said Arduin had “no input” in the decision to contract with Wellpath. He also said the state Department of Law had concluded there were no ethics violations. A Department of Law official declined to provide a copy of the ethics opinion, saying it was confidential.

Crum said he was not aware of other state health officials with past employment connections to GEO or its subsidiaries.

Union representatives, meanwhile, criticized the Dunleavy administration for poor communication. Employees were first briefed on the change at a 7 a.m. meeting Friday, said Jake Metcalfe, the executive director of the Alaska State Employees Association, which has about 200 members at API. He said the union was left out of discussions leading up to the decision and that he was concerned about future contract disputes.

At Friday’s news conference, representatives of Wellpath said the company had a track record of turning around failing psychiatric hospitals. Kevin Ann Huckshorn, a consultant with Wellpath, said the company will retrain managers and staff to emphasize a goal of working with patients, not necessarily enforcing rules.

“We have a long history in doing this over 20 years at Wellpath, in many multiple hospital situations,” Huckshorn said.

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