The Alaska State Capitol. (Michael Penn | Juneau Empire File)

The Alaska State Capitol. (Michael Penn | Juneau Empire File)

No-bid contract for psychiatric institute raises questions

Past history of companies concerns at least one lawmaker

Wellpath Recovery Solutions, a private contractor, is taking over administration at the beleaguered Alaska Psychiatric Institute. The Alaska Department of Health and Social Services made the announcement in a press release Friday.

Alaska’s state-run psychiatric facility, where patients receive emergency and court-ordered treatment, has been proven to be a dangerous place for employees and patients in recent years, according to a DHSS report released last year.

State law allowed DHSS Commissioner-designee Adam Crum to assume management of API because there is, as the press release states, “reasonable cause to believe there is a danger to the health, safety or welfare of individuals receiving care from that entity.” Crum was then able to award the no-bid contract (meaning there was no competitive bidding process) to Wellpath.

Wellpath had a recent success in bringing a Massachusetts hospital back into federal compliance, according to the release.

“During the course of recent investigations at API, we determined immediate steps were needed to protect patients and staff and ensure complete compliance with federal regulations, which also allows the facility to continue to receive federal funds,” Crum said in the release.

Wellpath will bring in a team of specialists to fill key leadership roles while Gavin Carmichael will continue as acting chief of staff at API, the release says. All state employees will remain in their positions too. If Wellpath “is successful” it will completely take over the operation of API on July 1, according to the release.

“It certainly can’t be worse than we’ve done, can it?” Alaska Senate President Cathy Giessel, an Anchorage Republican, said on Friday. “I am very pleased that the effort is going forward.”

“If we need to spend more money to help them, it needs to be done,” Giessel added.

Would privatizing API save money?

With the state of Alaska in a fiscal crunch some may wonder if this move is worth the money. In 2017, DHSS hired consulting group PCG Health to conduct a feasibility study to see if privatizing API would save the state money.

“Based on these analyses, PCG’s assessment is that a blended approach to privatization is in the best interest of API and the state,” according to the study’s executive summary. “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 report advised against a comprehensive outsourcing of API.

“Cost-benefit analysis revealed that this option failed to produce cost savings, making it infeasible on fiscal grounds. The higher cost was due largely to expense of privatizing psychiatric services,” the report says.

A troubled past

Sen. Bill Wielechowski, D-Anchorage, spoke out against the contract during an interview with the Empire on Friday.

According to the DHSS news release, Wellpath Recovery Solutions is “a nationally recognized health care company with a proven record of success,” but Wielechowski said that description of Wellpath is not very accurate.

“Well, Wellpath by that name has been in existence four months,” Wielechowski said. “It’s a combination of two other companies that have an extremely disturbing track record.”

The companies Wielechowski referred to are Correct Care Solutions and Correctional Medical Group, which merged in October 2018.

Wielechowski pointed to a Daily Beast article published in November 2017, which reported a lawsuit against the Arkansas Department of Corrections. Inmate Winfred Lawrence’s family sued the department after Lawrence died in prison.

“A treatable case of pneumonia turned deadly after medical staff at the Varner state prison refused to treat Lawrence, according to a lawsuit filed last week against the Arkansas Department of Corrections,” the Daily Beast article reads. The prison’s medical care provider was Correct Care.

In the same article it was reported that a county in Georgia “ended their contract with Correct Care Solutions following the deaths of five inmates in 75 days.”

Budget director’s history of cutting with ‘hatchet, not a scalpel’ sparks concern

According to a HIG Capital (a global private equity firm) news release regarding the merger that created Wellpath, “the combined company will generate approximately $1.5 billion in annual revenues and be headquartered in Nashville, Tennessee.”

“The idea that we’re going to profitize people, who have mental illness, and desperately need help and are being forced into an institution where a company is going to be making profits, and incentivized to be making profits off treating these individuals — I don’t think the that’s the direction we want to go in this state,” Wielechowski said.

Wielechowski said he also wants to closely examine how this no-bid contract came about.

“There’s a reason you have procurement laws on your books in this state and many others,” Wielechowski said. “It’s to prevent cronyism, it’s to prevent shady deals, sweetheart deals. I think we need to take a good hard look at how it came about.”


• Contact reporter Kevin Baird at 523-5528 or kbaird@soundpublishing.com.


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