State shouldn’t outsource Alaska Psychiatric Institute management to global private equity firm

Gov. Mike Dunleavy’s decision to privatize the Alaska Psychiatric Institute came almost 10 years to the day after an eerily similar deal was made in Chicago — one that continues to haunt the Windy City.

In February of 2009, Chicago inked a contract with private investors, including JPMorgan Chase and from as far away as Abu Dhabi, not for managing a psychiatric hospital but for operating parking meters. The deal was championed by then-Mayor Richard M. Daley, who announced it publicly before City Council members knew the details.

Once the dust settled, Chicagoans quickly learned the bad news. Parking rates quadrupled within the first year of the contract, which lasts until 2083. The city’s inspector general eventually found that taxpayers lost at least $1 billion in the deal.

The Dunleavy administration’s rushed attempt to privatize Alaska’s only psychiatric hospital looks just as misguided and has the same air of deception.

There’s no denying that services at Alaska Psychiatric Institute need to be improved. But is privatization the right tool for the job?

The answer is: No. In fact, outsourcing would likely lead to worse patient outcomes, less transparency into an already struggling operation and a higher cost for taxpayers.

Providing psychiatric care is a far cry from collecting parking fees, but the similarities between the two deals are uncanny.

There’s the lack of public input. Chicago’s City Council had two days to read and evaluate the complex contract’s details before voting on it. The Dunleavy administration declared an emergency to ram through a no-bid contract with few specifics. Before July 1, a decision will be made whether to extend the contract for five years based on criteria that haven’t been made public.

There’s the wheeling and dealing with global financiers. In the midst of the 2008 recession, Chicago signed a deal with some of the very banks that had just crashed the economy. Dunleavy’s contractor, Wellpath, is the product of a recent merger between two correctional health care companies, one of them—Correct Care Solutions—a former subsidiary of the private prison corporation GEO Group.

Correct Care Solutions has a disturbing track record littered with medical malpractice and wrongful death lawsuits. According to a Department of Homeland Security watchdog report, it was sued a staggering 1,395 times in federal courts in the decade prior to merging.

Wellpath itself is owned by a global private equity firm based in Miami that also owns companies producing everything from dog food to gin. Doing business with contractors is one thing, but private equity ramps up the pressure to put profits over service quality.

Like when water and sewer rates went up 28 percent after a New Jersey town leased its municipal utility authority to a private equity firm. Or when an ambulance company owned by private equity investors sent a bill for hundreds of dollars to an infant girl born in one of its ambulances, threatening her with the possibility of a bad credit report.

There’s the faulty math. Last year, Chicago even had to pay investors an extra $20 million to make up for lost revenue. Privatizing the Alaska Psychiatric Institute will likely not save the state money and may end up actually taxpayers costing more.

That’s what a third-party consultant found in 2017. “Cost-benefit analysis revealed that (privatization would fail) to produce cost savings, making it infeasible on fiscal grounds,” the consultant reported. “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.”

But most significantly, there’s the shunning of responsibility. Instead of doing the dirty work of leading Chicago through a tough time, the Daley administration signed a Band-Aid contract that ended up being a horrendous deal. Gov. Dunleavy appears to be doing the same.

Yes, the government should lean on the private sector for certain tasks. It probably doesn’t make sense for Alaska’s Office of Information Technology to manufacture its own computers.

But when it comes to caring for human beings, particularly the most vulnerable, privatization is not mere negligence — it’s cruelty.

The Alaska Psychiatric Institute has already suffered through years of underfunding and understaffing. It needs care and public investment, not more cruelty at the hands of someone else thousands of miles away.

Jeremy Mohler is communications director of In the Public Interest, a national nonprofit that studies public goods and services, and his writing has appeared in the Washington Post, USA Today, and other publications.

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