DHSS officials didn’t disclose Wellpath’s legal history when pushing for a no-bid contract to privatize API

The Alaska Psychiatric Institute as seen in a Department of Health and Social Services Recruitment video.

The state’s independent Chief Procurement Officer Jason Soza said state officials didn’t alert him to Wellpath’s lengthy legal history when they asked him to approve their sole-source, no-bid contract to privatize the Alaska Psychiatric Institute.

The disclosure came today during a joint hearing held by the House Health and Social Services and State Affairs committees. Legislators are continuing to investigate why the private for-profit company, which has ties to the state budget director, was awarded the contract without giving state-based hospitals and others an opportunity to take over the long-troubled psychiatric hospital.

Wellpath Recovery Solutions—formerly Correct Care Recovery Solutions—was awarded a no-bid contract to take over management of the facility earlier this year for $5 million. The contract also has a second phase that would see the for-profit company take over total operations of the facility at the cost of $44 million per year for up to five years. The contract’s total value is $225 million.

Tuesday’s meeting seemed to focus largely on the process for awarding the contract, bringing Soza and Department of Health and Social Services Deputy Commissioner Al Wall in front of the committee. According to multiple public emails, Wall was key in developing the case for the contract.

The hearing also established that the size, scope and speed of the Wellpath contract exceeded every other sole-source contract he had reviewed except for one, a $50 million contract for leasing fire-fighting equipment.

Throughout the meeting Soza was questioned about his knowledge of the Wellpath’s lengthy legal history—the target of more than 1,400 lawsuits and multiple wrongful death claims—prior to approving the contract.

“Did anybody from the agency tell you about any of these judgments, litigation, et cetera against this particular vendor?” asked Rep. Gabrielle LeDoux, R-Anchorage.

“No,” Soza replied.

Later, Rep. Adam Wool, D-Fairbanks, asked whether knowing about it would have affected the approval process.

“Do you think you should have been informed about lawsuits, litigation and deaths at other facilities that this contractor was perhaps involved with?” he asked.

“That would have been helpful information to have considered as well,” Soza said.

Legislators frequently pressed Soza about the procurement office’s responsibility to vet such contracts. Soza said, essentially, that he gave the administration some of the benefit of the doubt in determining whether Wellpath was really the sole source of the services needed to address the problems at API.

He noted that the decision was made with involvement from senior leadership at the Department of Health and Social Services as well as involvement from the Attorney General’s office.

“The level of scrutiny that this was getting prior to it coming to my office felt sufficient,” he said. “It felt like a lot of care was being put into ensuring that the evidence being provided was going to meet our statutory requirement.”

“In yes no terms, you felt you could have said no, that you would have had the political independence to say no if you had felt that was warranted,” asked Rep. Jonathan Kreiss-Tomkins, D-Sitka.

“Mr. Chair, Yes, I could have said no,” Soza said after a lengthy pause. “It would have required, obviously, a different set of talks. If I hadn’t felt this evidence had met our statutory requirements, I could have and would have gone back for more information or said no at that point.”

Two contracts in one

Another element of the discussion revolved around the fact that the contract is really two contracts in one: The first $5 million phase is for management of the facility and the second phase is a five-year contract to privatize the entire facility at $44 million per year. Legislators asked if API was really on the brink of failure, then why couldn’t the two contracts be separated out: one under an emergency contract and another under a normal competitive bid process taking between 90 and 120 days.

Soza explained that an emergency contract would have essentially only covered the first phase of the Wellpath contract and that the second phase, a long-term privatization of the facility, would have had to go out to a competitive bid. Instead, the contract was made under a sole-source bid. As Soza explained it’s because “The evidence presented to me described the awarded vendor as the only vendor capable of providing these services.”

That claim has come under fire this week, as legislators disclosed communications with Providence Health and Services that showed the health care giant whose Anchorage campus neighbors API had been interested in taking over the facility.

Soza and Wall defended the current arrangement in the name of stability for patients and the facility, but Rep. Matt Claman, D-Anchorage, pointed out that the second, five-year phase of the contract is contingent on Wellpath meeting certain goals during the first phase.

“Wow, we really don’t have a plan now. If they don’t produce on these deliverables, we don’t have another alternative. We’re not even bidding out for the alternative and we’re kind of stuck with these guys,” he said. “If they’re a poor job, what’s the plan then?”

Claman argued that the state should be at least looking into alternatives. The state was originally expected to make a decision on extending the Wellpath contract on April 15, but Wall said that had been pushed to June 15.

“Where’s the point at which you have the authority to step in and say you’ve got to put this out for competitive bid, and could you do that today?” Claman asked Soza.

“Under procurement law, yes, we could do that today” Soza said.

“What is the point at which, if not today, you could consider stepping in and saying, ‘Let’s put this out to bid and we can’t really wait on it any longer,'” Claman asked.

“That could be any point if it’s found the vendor is not capable of doing the work. If they’re not a responsible party, then we can’t have a contract with them and we would have to terminate it. That’s one end of the spectrum,” he said. “Based on information that’s come to light, I don’t know where that line in the sand is right now.”

Why it matters

Under Alaska state law, the chief procurement officer is appointed to a six-year term in order to serve independently from the state’s political pressures. According to LinkedIn, Soza was appointed to the position in May of 2013 so his term would be up sometime in the next two months.

It was a point that was oddly brought up by Rep. Lance Pruitt, the Anchorage Republican whose wife has a communications contract with the Dunleavy administration. Pruitt seemed to dismiss the seriousness of Wellpath’s litigation.

“Now Wellpath, there’s been a lot of discussion about 1,400 lawsuits, but they don’t do just mental health, don’t they also do corrections facilities?” he said.

Wall agreed, noting that “most of the lawsuits associated with their parent company are on their corrections side. … API also has lawsuits against it. It’s a litigious field of work.”

More from TMS

1 Comment on "DHSS officials didn’t disclose Wellpath’s legal history when pushing for a no-bid contract to privatize API"

  1. Elstun Lauesen | April 2, 2019 at 8:46 pm | Reply

    Great reporting, Matt…thank you! In combination w disclosures in Congress vis-a-vis the Stephen Moore nomination to the Fed. Can we get copies of that background material?

Leave a comment

Your email address will not be published.