State cancels long-term phase of no-bid contract to privatize API, extends short-term phase through 2019

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

Amid an ongoing lawsuit brought by the public employees’ union, the Department of Health and Social Services announced today it’s cancelling the long-term portion of its controversial no-bid contract to privatize the Alaska Psychiatric Institute.

The state entered a no-bid, sole-source contract with for-profit Wellpath Recovery Solutions, a company with a long and messy legal past in private prisons, is broken into two phases. The contract includes a short-term phase to pull the state’s psychiatric hospital from the brink of federal decertification as well as a long-term phase covering the management of the facility for the next five years.

Department of Health and Social Services Commissioner Adam Crum said at an Anchorage press conference Monday that the state had canceled the long-term portion of the contract. If the state pushes ahead with privatization, he said the long-term management would be put to a competitive bid.

“We want to make sure everyone knows where we’re going with this,” he said.

Crum said the short-term phase of the contract, which would have expired on July 1 with the start of the long-term phase, has been extended to the end of 2019. He said the changes were agreed upon by both the state and Wellpath, which did not have representatives at the meeting.

Why now

The details of today’s change were weeks in the making, Crum said, but driven by a disclosure that took place in court today about the reworked contract.

He said the long-term portion of the contract has been cancelled while the state waits for the results of a feasibility study on privatizing the facility. Such an update is required by the public employees’ union contract, which was a key component of the lawsuit. The existing contract allows the union to come up with alternatives to privatization proposals.

The state is pushing ahead with updating its feasibility study, which Crum said he expects to have back a month.

The most recent feasibility study found that privatizing the facility wouldn’t save money or improve the facility, but backers of privatization argue that things have changed since that report was published in February 2017. Though much of the press conference focused on the logistics of future privatization efforts, Crum said that they’d have to wait to see the feasibility study first.

The update of the study has been met with skepticism of its own by the Alaska State Employees Association’s executive director Jake Metcalfe, who told KTUU that he was concerned the state was essentially rigging the study.

“ASEA has pursued remedies provided in the contract, but the Dunleavy Administration has delayed its response so the handpicked contractor can move closer to permanently managing and operating API,” Metcalfe said.

Why it matters

While many agreed with the dire situation at the facility likely necessitated emergency action outside the normal competitive bid process, there was alarm raised because Wellpath would also have an opportunity to take over long-term management of the facility outside the competitive bid system.

Legislators have raised concerns about Wellpath’s messy legal history as well as concerns that health care providers that already have experience in Alaska were unfairly locked out of an opportunity to bid. Providence Health and Services, whose Anchorage campus is next door to API, recently revealed that it would have liked an opportunity to bid on the long-term management of the facility.

The entire bidding process has also been called into question, with House legislators going as far as to bring the state’s independent chief procurement officer, Jason Soza, in front of the committee. The hearing with Soza was particularly illustrative of legislators’ concerns with the contract, finding that DHSS officials didn’t disclose Wellpath’s legal history to him.

Legislators requested Soza cancel the contract.

“This is an important first step to restoring public trust. This is now being done the way it should have been done in the first place,” wrote Rep. Ivy Spohnholz, the Anchorage Democrat who’s been one of the most vocal critics of the privatization. “There is no replacement for a careful and methodical decision making process in determining who should provide care for the vulnerable patients at API.”

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1 Comment on "State cancels long-term phase of no-bid contract to privatize API, extends short-term phase through 2019"

  1. James H Sinnett | April 23, 2019 at 9:04 pm | Reply

    NOTE OF THOUGHT: As the bright light was focused, has DHSS only taken action to cancel the extended no-bid, and move to a bidding, SO AS TO AVOID further legal and court lawsuit scrutiny in to how and who was involved in the no-bid contract let in the 1st place. This still begs for a criminal investigation of how the no-bid came about.

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