House lawmakers ask state to throw out Alaska Psychiatric Institute contract

JUNEAU — Citing information revealed in a legislative hearing, five Democratic members of the Alaska House of Representatives have asked state officials in a letter to throw out a no-bid contract for privatization of the Alaska Psychiatric Institute and to open the contract to other bids.

“In light of new information brought forth at that hearing, we are writing to request that you halt Phase 2 of the contract,” the letter states in part. The letter was addressed to Jason Soza, the state’s chief procurement officer.

It was signed by Rep. Ivy Spohnholz, D-Anchorage; Rep. Matt Claman, D-Anchorage; Rep. Tiffany Zulkosky, D-Bethel; Rep. Zack Fields, D-Anchorage; and Rep. Jonathan Kreiss-Tomkins, D-Sitka.

Speaking to reporters Friday, Spohnholz said the administration appears to have failed to disclose relevant information to Soza.

“The department did not properly educate or inform our state’s chief procurement officer about the scope of this contract, the other alternatives that were available, and about the potential risks that were associated with awarding this contract to a non-Alaskan company that has a demonstrated track record of health and safety violations across the country,” she said.

She referred to an April 2 joint hearing of the House Health and Social Services and State Affairs committees, in which Soza said he was previously unaware that Providence Health and Services had offered to operate API. The state had contended that a sole-source contract with Wellpath, a national firm, was warranted because no other organization could provide the services on short notice.

Problems at the Alaska Psychiatric Institute have been known for years. The facility has been chronically underfunded by the state, and as the only public inpatient psychiatric institution in Alaska, demand for its services is high.

Furthermore, the hospital is legally unable to turn away some cases. That fact, coupled with an unwillingness to fund the institution, has occasionally created safety issues for staff and patients.

The hospital remains in danger of losing its certification from the federal Centers for Medicare and Medicaid Services, Soza said in a legislative hearing earlier this week.

Wellpath was hired under a no-bid contract to fix the hospital’s issues. The House lawmakers don’t have a problem with that.

Their issue is with a subsequent Phase 2 contract that allows Wellpath to continue operating the hospital for years. Phase 2, according to information provided by Spohnholz, is scheduled to begin Sept. 1. It will cost $40.4 million per year for five years, plus an additional $3.3 million in pass-through expenses annually.

“This is really important because they used a short-term emergency to justify a $225 million contract," Spohnholz said. "It’s almost a quarter of a billion dollars. This is unprecedented. This has never been done in the state of Alaska.”

Rep. Matt Claman, D-Anchorage, compared the situation to road reconstruction after the Nov. 30 Southcentral earthquake. No lawmaker has disputed the need for no-bid contracts for temporary repairs after the earthquake, but if the same contractor received a no-bid award for permanent repairs in the summer, there would be a problem.

“We would actually insist that be bid out. We would want to see the competitive prices, we would want to see who is best able to do the work,” he said.

Soza did not respond to emails and phone calls seeking comment. A spokesman for the Department of Health and Social Services provided a comment late Friday by email: “The Alaska Department of Health and Social Services (DHSS) believes that the process that took place in late January and early February was fully compliant with the procurement code and allowed us to contract with Wellpath to come in and help DHSS turn around a failing Alaska Psychiatric Institute (API).”

The comment continued: “DHSS followed the law during this process and we will follow the law should the Chief Procurement Officer, Mr. Soza, decide that this matter should be re-bid. We do not think that this is necessary but the decision rests with Mr. Soza. DHSS will be compliant with whatever decision he makes. Until we are told otherwise, we will continue to work with Wellpath to improve the operations of API for both its staff and its patients.”

Spohnholz said Wellpath could very well win a competitive bid process to operate the mental hospital, but “we need to have more options on the table.”

She said that need is particularly acute because the state may face a lawsuit over its handling of the no-bid contract.

Jake Metcalfe, executive director of the Alaska State Employees Association, represents about 220 workers at the hospital and said his organization is still considering its options.

“We’re pretty damn confident that what they’ve done is wrong on a number of points,” he said.

Critically, the state failed to perform a feasibility study before beginning the privatization move, something Metcalfe said is required under the union’s contract.

“They’ve ignored that, and what they’ve never answered is why they have to contract the whole place out,” he said. “They made a mistake. They didn’t provide the procurement officer with all the information, and the best thing would be for the state to start all over."