Legislature(2017 - 2018)BUTROVICH 205

02/06/2017 01:30 PM HEALTH & SOCIAL SERVICES

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01:31:09 PM Start
01:31:41 PM Presentation: Alaska Psychiatric Institute Privatization Feasibility Report
02:20:56 PM Presentation: Alaska Pioneer Homes' Pharmacy Services Privatization Feasibility Study Report
02:31:50 PM Presentation: Juvenile Justice Facilities Privatization Feasibility Report
03:04:34 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Department Overview TELECONFERENCED
- Alaska Psychiatric Institute Privatization
Feasibility Report
- Juvenile Justice Facilities Privatization
Report
- Alaska Pioneers Homes' Pharmacy Services
Privatization Feasibility Report
-- Testimony <Invitation Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
      SENATE HEALTH AND SOCIAL SERVICES STANDING COMMITTEE                                                                    
                        February 6, 2017                                                                                        
                           1:31 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator David Wilson, Chair                                                                                                     
Senator Natasha von Imhof, Vice Chair                                                                                           
Senator Cathy Giessel                                                                                                           
Senator Peter Micciche                                                                                                          
Senator Tom Begich                                                                                                              
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATIONS:                                                                                                                  
                                                                                                                                
   · ALASKA PSYCHIATRIC INSTITUTE PRIVATIZATION FEASIBILITY                                                                     
     REPORT;                                                                                                                    
   · ALASKA PIONEER HOMES' PHARMACY SERVICES PRIVATIZATION                                                                      
     FEASIBILITY STUDY REPORT;                                                                                                  
   · JUVENILE JUSTICE FACILITIES PRIVATIZATION FEASIBILITY                                                                      
     REPORT                                                                                                                     
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
COY JONES, Senior Consultant                                                                                                    
Public Consulting Group, Inc.                                                                                                   
Austin, Texas                                                                                                                   
POSITION STATEMENT: Presented the Alaska Psychiatric Institute                                                                
Feasibility Study.                                                                                                              
                                                                                                                                
RANDALL BURNS, Director                                                                                                         
Alaska Department of Health and Social Services                                                                                 
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Provided an overview the Alaska Psychiatric                                                               
Institute Feasibility Study.                                                                                                    
                                                                                                                                
VICKIE WILSON, Director                                                                                                         
Division of Alaska Pioneer Homes                                                                                                
Alaska Department of Health and Services                                                                                        
Juneau, Alaska                                                                                                                  
POSITION   STATEMENT:   Addressed   the    intent   for   a   new                                                             
privatization-feasibility  study  that   was  requested  for  the                                                               
Alaska Pioneer Homes' pharmacy.                                                                                                 
                                                                                                                                
JOHN SHERWOOD, Deputy Commissioner                                                                                              
Medicaid and Health Care Policy                                                                                                 
Alaska Department of Health and Social Services                                                                                 
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:  Addressed a  new  privatization-feasibility                                                             
study for the Division of Alaska Pioneer Homes' pharmacy.                                                                       
                                                                                                                                
BARBARA MURRAY, Acting Director                                                                                                 
Alaska Division of Juvenile Justice                                                                                             
Alaska Department of Health and Social Services                                                                                 
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:  Addressed  the Feasibility  Study  for  the                                                             
Privatization of Juvenile Justice Facilities.                                                                                   
                                                                                                                                
KARL BECKER, Senior Vice President                                                                                              
CGL Consulting Group                                                                                                            
Sacramento, California                                                                                                          
POSITION  STATEMENT:  Presented  the Feasibility  Study  for  the                                                             
Privatization of Juvenile Justice Facilities.                                                                                   
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:31:09 PM                                                                                                                    
CHAIR DAVID WILSON  called the Senate Health  and Social Services                                                             
Standing Committee meeting  to order at 1:31 p.m.  Present at the                                                               
call  to order  were  Senators Giessel,  von  Imhof, Begich,  and                                                               
Chair Wilson.                                                                                                                   
                                                                                                                                
                                                                                                                                
^PRESENTATION:   Alaska   Psychiatric   Institute   Privatization                                                               
Feasibility Report                                                                                                              
    PRESENTATION: Alaska Psychiatric Institute Privatization                                                                
                       Feasibility Report                                                                                   
                                                                                                                              
1:31:41 PM                                                                                                                    
CHAIR  WILSON announced  that the  committee will  hear from  the                                                               
Department  of   Health  and  Social  Services   (DHSS)  and  its                                                               
consultants   on  three   recently  released   privatization  and                                                               
feasibility  studies.  He  said  the first  presentation  is  the                                                               
Alaska Psychiatric Institute Privatization Feasibility Report.                                                                  
                                                                                                                              
1:32:37 PM                                                                                                                    
RANDALL  BURNS,   Director,  Department  of  Health   and  Social                                                               
Services, Juneau,  Alaska, detailed  that the  Alaska Psychiatric                                                               
Institute Feasibility Study was  competitively bid and awarded to                                                               
the  Public Consulting  Group (PCG).  He noted  that PCG  is well                                                               
known in  the state and  has done  numerous studies on  behalf of                                                               
DHSS,  the state,  and the  Legislature.  He added  that PCG  was                                                               
involved  in the  study that  led to  the determination  of API's                                                               
current size.                                                                                                                   
                                                                                                                                
1:33:32 PM                                                                                                                    
COY  JONES, Senior  Consultant,  Public  Consulting Group,  Inc.,                                                               
Austin, Texas,  said he would  go over the basic  methodology and                                                               
overview  of the  study, its  scope  and how  PCG approached  the                                                               
questions  around  privatization.  He  added  that  he  would  go                                                               
through  PCG's report  analysis at  a  very high  level with  its                                                               
findings and recommendations.                                                                                                   
                                                                                                                                
He addressed page  4 of PCG's report,  "Stakeholder Feedback." He                                                               
detailed that  the sources of  information PCG relied on  were as                                                               
follows:                                                                                                                        
                                                                                                                                
   · API;                                                                                                                       
   · Stakeholders and those being impacted across the state;                                                                    
   · Privatization efforts in the last 10 years from psychiatric                                                                
     hospitals as well as privatization across the country on:                                                                  
     ƒGeneral hospitals,                                                                                                       
     ƒPrivate prisons;                                                                                                         
   · Branches of state government:                                                                                              
     ƒDHSS,                                                                                                                    
     ƒAlaska Court System - potentially heavily effected,                                                                      
     ƒAlaska Department of Administration - related to the                                                                     
        effects from retirement plan and workers' compensation,                                                                 
     ƒAlaska Department of Law,                                                                                                
     ƒCommunity health providers,                                                                                              
     ƒTribal and non-tribal providers,                                                                                         
     ƒAdvocacy groups,                                                                                                         
     ƒFormer API patients,                                                                                                     
     ƒLabor unions and trade associations that are potentially                                                                 
        affected.                                                                                                               
                                                                                                                                
1:36:40 PM                                                                                                                    
He addressed page 5, "Privatization Options" and identified as                                                                  
follows:                                                                                                                        
                                                                                                                                
   1. Full privation where  everything but  the facility  will be                                                               
     privatized.  API itself  would not  be sold,  but a  private                                                               
     operator would come in as a property manager.                                                                              
   2. Variant of  option-1 where  a  new  legal entity  would  be                                                               
     created as  a partnership  between the  state and  a private                                                               
     entity  through a  joint-operating  agreement,  either as  a                                                               
     public  corporation along  the  lines of  the Mental  Health                                                               
     Trust or a 501(c) non-profit.                                                                                              
   3. Public alternative to privatization where  new efficiencies                                                               
     could be implemented under  the current management structure                                                               
     in  a  competitive way  to  find  cost savings  or  improved                                                               
     service delivery.                                                                                                          
   4. Outsourcing operational components for privatization:                                                                     
        a) Communication Center:                                                                                                
             1) Security functions: front desk reception and                                                                    
               staff that controls who enters and exits through                                                                 
               API.                                                                                                             
        b) Facility and Material Management.                                                                                    
        c) Psychiatric and Medical Services.                                                                                    
        d) Nursing Services:                                                                                                    
             1) 58 percent of care that happens at API.                                                                         
        e) Comprehensive Outsourcing:                                                                                           
             1) Outsourcing everything but the administration and                                                               
               management.                                                                                                      
                                                                                                                                
1:40:34 PM                                                                                                                    
MR. JONES addressed page 6, "Financial Assumptions" and detailed                                                                
as follows:                                                                                                                     
                                                                                                                                
   · Capital cost  essentially remains  the same  for a  state or                                                               
     private entity.                                                                                                            
   · Margins in  models were set  at 4  percent or 8  percent for                                                               
     either  for-profit  or  non-profit  entities.  8-percent  is                                                               
     often   set   for   for-profit   providers   that   bid   on                                                               
     privatization.                                                                                                             
   · PCG's salary and  benefits modeling is based  on a paramount                                                               
     case where South Florida State  Hospital was privatized on a                                                               
     full-scale  level; "sister"  hospitals remained  under state                                                               
     management  and  PCG  extensively  analyzed  differences  in                                                               
     salaries and benefits.                                                                                                     
   · Salaries generally  go up and  total compensation  goes down                                                               
     for   private  employees   because   benefits  are   reduced                                                               
     extensively  due  to  differences in  state  retirement  and                                                               
     health-care plans.                                                                                                         
   · Benefits account  for 36 percent  of API's  compensation, 22                                                               
     percent under a private provider.                                                                                          
   · Added legal costs  for privatization because API  is part of                                                               
     the state system and a private provider would have to                                                                      
     internalize an added 0.3 percent.                                                                                          
   · Overtime cost  adjustment because fulltime for  the state is                                                               
     37.5 hours and 40 hours for a private provider.                                                                            
                                                                                                                                
1:40:49 PM                                                                                                                    
SENATOR MICCICHE joined the committee meeting.                                                                                  
                                                                                                                                
1:44:08 PM                                                                                                                    
MR.  JONES addressed  page 7,  "Financial Assumptions"  regarding                                                               
costs for:  transition, information technology  (IT), retirement,                                                               
and contract monitoring as follows:                                                                                             
                                                                                                                                
   · Transition costs incurred regardless of operations.                                                                        
   · $2.1  million IT  upgrade cost  avoided  by the  state if  a                                                               
     private provider uses their own IT system.                                                                                 
   · $2 million  retirement cost  incurred when  public employees                                                               
     are removed from the system.                                                                                               
   · Costs for options  that are less than  full privatization is                                                               
     scaled down proportionally.                                                                                                
   · 15  percent of  total  contract cost  would  go towards  the                                                               
    state's new role in procurement and contract monitoring.                                                                    
   · API's  revenue would  stay exactly  the same  from Medicaid,                                                               
     Medicare, and insurance.                                                                                                   
                                                                                                                                
1:47:35 PM                                                                                                                    
He  addressed   page  8,  "Service  Delivery   Assumptions,"  and                                                               
detailed sources to figure out staffing needs as follows:                                                                       
                                                                                                                                
   · Recent  reviews  at  API  on  nursing  staff  and  potential                                                               
     inefficiencies.                                                                                                            
   · Stakeholder comments.                                                                                                      
   · Peer-state hospitals.                                                                                                      
   · Clinical guidelines on nursing-staff ratios.                                                                               
                                                                                                                                
He  detailed that  the stakeholder  interviews  and the  clinical                                                               
reviews were very helpful in  pointing out places where there may                                                               
be   too  much   administrative  overhead,   particularly  around                                                               
overtime,  scheduling,  and  shift  overlap.  He  specified  that                                                               
whenever PCG  proposed reductions,  the reductions were  based on                                                               
an actual situation that was understand  and could be made on the                                                               
ground at  the hospital. He  said after targeted  reductions, PCG                                                               
compared the  full-time equivalent  (FTE) levels with  other peer                                                               
hospitals to  see whether the  cuts were plausible  in comparison                                                               
to how other hospitals run.                                                                                                     
                                                                                                                                
1:49:54 PM                                                                                                                    
MR.  JONES   addressed  page  9,  "Staffing   Requirements,"  and                                                               
detailed PCG's findings as follows:                                                                                             
                                                                                                                                
   · API's baseline compares closely with the "small peer                                                                       
     group."                                                                                                                    
   · API staffing runs a little high in relation to other state                                                                 
     hospitals.                                                                                                                 
   · API will always have higher administrative overhead than                                                                   
     many other state hospitals because API is not a large                                                                      
     hospital.                                                                                                                  
                                                                                                                                
He  said  PCG  ended  up   making  its  recommendation  based  on                                                               
comparing API  to small-peer-hospital staffing. He  asserted that                                                               
significant  cuts  can  be  made  both  in  different  levels  of                                                               
administration and nursing.                                                                                                     
                                                                                                                                
He remarked that  the main staffing difference  between a revised                                                               
state  structure  and a  private  provider  is in  administrative                                                               
services.  He asserted  that  PCG  thinks that  the  nature of  a                                                               
private provider  as part of a  larger practice is going  to have                                                               
lower administrative  costs whereas API  is the only  hospital in                                                               
the entire system to bear all of the administrative costs.                                                                      
                                                                                                                                
He  summarized  that  PCG  shows   differences  in  state  versus                                                               
privatized administrative costs, but  direct-care staffing is the                                                               
same between both models.                                                                                                       
                                                                                                                                
1:52:12 PM                                                                                                                    
He  addressed page  10, "Staffing  Requirements" and  detailed as                                                               
follows:                                                                                                                        
                                                                                                                                
   · Administrative:                                                                                                            
        ƒAssumes built-in efficiencies for a private entity                                                                    
          where IT and administrate functions are absorbed into                                                                 
          a larger corporate structure.                                                                                         
        ƒAssumes API can operate with administrative levels                                                                    
          comparable to small-peer hospitals and significantly                                                                  
         greater efficiencies under a private operator.                                                                         
                                                                                                                                
   · Nursing:                                                                                                                   
        ƒAssumes API  would operate  with nurse  staffing levels                                                               
          comparable to small-peer hospitals.                                                                                   
        ƒA review of staffing-ratio  guidelines found that there                                                               
          are few established  industry standards for psychiatric                                                               
          staffing,   except   for   registered   nurses   (RNs).                                                               
          California requires a 1:6 RNs  to patient ratio, API is                                                               
          close.                                                                                                                
        ƒAPI  requires 18.1-nursing  staff on  the floor  at all                                                               
          times,   21.2-nursing   staff  provided   under   PCG's                                                               
          "recommended staffing scenario."                                                                                      
                                                                                                                                
MR. JONES addressed page 12, "Recommendations for Benefits and                                                                  
Drawbacks: Full Privatization" and detailed as follows:                                                                         
                                                                                                                                
   · Benefits:                                                                                                                  
        ƒMore  flexible compensation  could improve  recruitment                                                               
          and retention of qualified employees.                                                                                 
        ƒDivision of Behavioral Health  (DBH) no longer provides                                                               
          acute   inpatient  care,   but  acts   as  a   contract                                                               
          administrator.                                                                                                        
        ƒRelieves  DBH staff  of resource  intensive, day-to-day                                                               
          management duties.                                                                                                    
        ƒAutonomy   of  a   private   contractor  to   implement                                                               
          efficiencies at API.                                                                                                  
        ƒOnly way to implement service delivery improvements.                                                                  
                                                                                                                                
   · Drawbacks:                                                                                                                 
        ƒCost prohibitive, even  under the "recommended staffing                                                               
          scenario." PCG did not see  ultimately that there would                                                               
          be any additional savings in full privatization.                                                                      
        ƒWithout strong safeguards,  further reductions of staff                                                               
          to unsafe levels needed to  be financially viable; that                                                               
          is  true both  for full  privatization as  well as  the                                                               
          joint-operating agreement.                                                                                            
        ƒ$2 million in termination liability costs.                                                                            
        ƒNecessary   contractual    requirements   could   deter                                                               
          potential contractors.                                                                                                
                                                                                                                                
1:54:55 PM                                                                                                                    
He addressed page 14, "Benefits and Drawbacks: State Management                                                                 
with New Efficiencies" and detailed as follows:                                                                                 
                                                                                                                                
   · Benefits:                                                                                                                  
        ƒOpportunity  for  DBH  to implement  efficiencies  that                                                               
          will improve service delivery while containing costs.                                                                 
        ƒThe greatest  possibility for cost savings  comes under                                                               
          new efficiencies implemented under state management.                                                                  
        ƒStaffing   expenditures   are    higher   under   state                                                               
          management, but  the state will reap  the benefits from                                                               
          efficiencies from  staff reductions and not  having the                                                               
          margins that would  go to a provider  or the additional                                                               
          overhead related to contract monitoring.                                                                              
        ƒThe state would  retain full control of  its only acute                                                               
          inpatient-psychiatric hospital.                                                                                       
        ƒNo  new   additional  costs  related   to  procurement,                                                               
          contract administration, legal and margin.                                                                            
        ƒCost-effective   under    the   "recommended   staffing                                                               
          scenarios."                                                                                                           
        ƒLow termination liability  costs, only applicable under                                                               
          the "recommended staffing scenario."                                                                                  
                                                                                                                                
   · Drawbacks:                                                                                                                 
        ƒHigher   staffing   expenditures  related   to   public                                                               
          employees.                                                                                                            
        ƒMore    administrative     burden    associated    with                                                               
          implementing changes.                                                                                                 
        ƒContingent  on  DBH  and  API  management  successfully                                                               
          implementing changes.                                                                                                 
        ƒPotential pushback from  labor unions when implementing                                                               
          changes.                                                                                                              
                                                                                                                                
1:56:18 PM                                                                                                                    
MR.   JONES  addressed   page   16,   "Benefits  and   Drawbacks:                                                               
Communication  Center  Outsourcing."   He  summarized  that  even                                                               
though  the Communication  Center  is  not a  big  area for  cost                                                               
savings   it's   the   most   clearly   beneficial   option   for                                                               
privatization.  Hiring   a  private-security  company   would  be                                                               
straight forward to man the front  desk 24-hours a day with fewer                                                               
people involved  and significant cost savings,  almost 60 percent                                                               
of  what current  costs  are.  [The following  was  noted in  the                                                               
presentation:]                                                                                                                  
                                                                                                                                
   · Benefits:                                                                                                                  
        ƒLower  staffing  expenditures due  to  the  shift to  a                                                               
          private workforce.                                                                                                    
        ƒA  private  contractor  would  require  fewer  FTEs  to                                                               
          provide around-the-clock coverage.                                                                                    
        ƒNo negative  impact to service  delivery or  quality of                                                               
          care.                                                                                                                 
        ƒNo additional  contract administration costs,  could be                                                               
          provided in-house.                                                                                                    
       ƒAvailability of qualified contractors in Alaska.                                                                       
                                                                                                                                
   · Drawback:                                                                                                                  
        ƒSome additional costs related to contracting.                                                                         
                                                                                                                                
MR. JONES  addressed page 18,  "Benefits and  Drawbacks: Facility                                                               
and  Material  Management  Outsourcing,"  and  noted  that  PCG's                                                               
results were  similar to  the Communication  Center. He  said PCG                                                               
did not  see as many savings,  but the state could  privatize the                                                               
indirect  costs   associated  with  environmental   services  and                                                               
maintenance costs without effecting  services with patients. [The                                                               
following was noted in the presentation:]                                                                                       
                                                                                                                                
   · Benefits:                                                                                                                  
        ƒLower staffing expenditures due to the shift to a                                                                     
          private workforce.                                                                                                    
        ƒNo negative impact to service delivery or quality of                                                                  
          care.                                                                                                                 
        ƒNo additional contract administration costs, could be                                                                 
          provided in-house.                                                                                                    
       ƒAvailability of qualified contractors in Alaska.                                                                       
                                                                                                                                
   · Drawback:                                                                                                                  
        ƒSome additional casts related to contracting.                                                                         
                                                                                                                                
1:57:37 PM                                                                                                                    
He  addressed page  20, "Benefits  and Drawbacks:  Psychiatry and                                                               
Medical Services  Outsourcing." He  explained that PCG  looked at                                                               
privatizing physician  staff and  admitted that physicians  are a                                                               
high-cost-level practitioner.  He said  PCG finds  that physician                                                               
costs generally  do not go  down with privatization  and actually                                                               
go  up because  physicians are  paid better  because the  private                                                               
provider  has  the flexibility  to  do  so  in order  to  support                                                               
retention.  He  revealed that  psychiatrist  retention  is a  big                                                               
issue due  to a basic  supply problem nationwide. He  pointed out                                                               
that  private providers  pay more  than state  operators and  the                                                               
cost for  privatizing psychiatrists  and physicians to  the state                                                               
would be enormous and not  financially viable for the state. [The                                                               
following was noted in the presentation:]                                                                                       
                                                                                                                                
   · Benefits:                                                                                                                  
        ƒNo reduction in hospital staff for psychiatrists,                                                                     
          physicians and mid-level providers.                                                                                   
        ƒCompensation could potentially increase under a                                                                       
          private    contractor,   improving    recruitment   and                                                               
          retention.                                                                                                            
        ƒAutonomy   of  a   private   contractor  to   implement                                                               
          efficiencies at API.                                                                                                  
                                                                                                                                
   · Drawbacks:                                                                                                                 
       ƒHigh contract related costs counteract savings.                                                                        
        ƒCost-prohibitive under  PCG's "current  and recommended                                                               
          staffing scenarios."                                                                                                  
        ƒReduction  of  staff  to unsafe  levels  needed  to  be                                                               
          financially viable.                                                                                                   
        ƒLack  of  clear  providers,  aside  from  locum  tenens                                                               
          agencies.                                                                                                             
                                                                                                                                
1:58:38 PM                                                                                                                    
MR.  JONES addressed  page 22,  "Benefits and  Drawbacks: Nursing                                                               
Staff Outsourcing."  He said  there are  cost savings  because of                                                               
the changes in  compensation and the fact that  the nursing staff                                                               
deals  with  58  percent  of   the  hospital's  total  employees;                                                               
however, PCG came  short of making a  full recommendation because                                                               
nurses are  the core  group of  practitioners involved  in direct                                                               
services  and there  was no  good way  of understanding  what the                                                               
effects from a  compensation package change would  have on hiring                                                               
and retention.                                                                                                                  
                                                                                                                                
He  pointed  out  that  API  currently  has  a  hard  time  being                                                               
competitive with  other employers  for a  very highly  valued and                                                               
scarce  labor force  for nursing.  He admitted  that PCG  did not                                                               
know exactly how the noted  changes would affect API's ability to                                                               
retain its  nursing staff.  He added that  PCG questioned  if the                                                               
market existed  for a vendor  in the  Anchorage area to  access a                                                               
nursing-staff resource.  He noted that the  nursing privatization                                                               
in  other  states  usually have  significant  resources  both  at                                                               
universities and  private providers  where there  are significant                                                               
nurse-training  programs  that  allow  vendors  to  come  into  a                                                               
hospital and take it over. He  set forth that even though PCG did                                                               
find  nurse  staff  outsourcing feasible,  PCG  cautions  whether                                                               
outsourcing   is  truly   viable  when   market  conditions   are                                                               
considered. [The following was noted in the presentation:]                                                                      
                                                                                                                                
   · Benefits:                                                                                                                  
        ƒLower  staffing  expenditures due  to  the  shift to  a                                                               
          private workforce.                                                                                                    
        ƒNo negative  impact to service  delivery or  quality of                                                               
          care.                                                                                                                 
        ƒModest  cost savings  can be  found through  safe staff                                                               
          reductions.                                                                                                           
        ƒAutonomy of a private contractor to implement                                                                         
          efficiencies at API.                                                                                                  
                                                                                                                                
   · Drawbacks:                                                                                                                 
        ƒWith current FTEs, high contract related costs                                                                        
          counteract savings.                                                                                                   
        ƒ$1.4 million in termination liability costs.                                                                          
        ƒPossible difficulties finding a qualified contractor.                                                                 
                                                                                                                                
2:00:43 PM                                                                                                                    
MR.   JONES   addressed    page   24   regarding   "Comprehensive                                                               
Outsourcing." He  specified that comprehensive  outsourcing takes                                                               
all of  the outsourcing options  and puts them together.  He said                                                               
PCG did  not find outsourcing  all of the direct  services viable                                                               
because  privatizing  the  physicians   would  make  the  overall                                                               
outsourcing  more  expensive. [The  following  was  noted in  the                                                               
presentation:]                                                                                                                  
                                                                                                                                
   · Benefits:                                                                                                                  
        ƒLower staffing expenditures due to the shift to a                                                                     
          private workforce.                                                                                                    
        ƒAutonomy of a private contractor to implement                                                                         
          efficiencies at API.                                                                                                  
        ƒDBH maintains administrative presence in API.                                                                         
                                                                                                                                
   · Drawbacks:                                                                                                                 
       ƒHigh contract related costs counteract savings.                                                                        
        ƒCost-prohibitive     under    "recommended     staffing                                                               
          scenario."                                                                                                            
        ƒReduction of staff to unsafe levels needed to be                                                                      
          financially viable.                                                                                                   
        ƒ$1.74 million in termination liability costs.                                                                         
        ƒPossible difficulties finding a qualified contractor.                                                                 
                                                                                                                                
SENATOR BEGICH mentioned  that he did not hear  Mr. Jones address                                                               
Option 2.                                                                                                                       
                                                                                                                                
MR. JONES explained  that Option 2 had  no significant difference                                                               
from a financial  or service delivery perspective  from Option 1.                                                               
He noted that  he talked about Option 1 and  Option 2 together in                                                               
his presentation.                                                                                                               
                                                                                                                                
SENATOR BEGICH  asked if the  API nurses  are paid more  than the                                                               
private sector.                                                                                                                 
                                                                                                                                
MR. JONES  answered that  salaries for API  nurses are  less, but                                                               
their total compensation is more due to retirement benefits.                                                                    
                                                                                                                                
2:02:49 PM                                                                                                                    
CHAIR  WILSON  asked   how  API's  staffing-to-client  population                                                               
ratios compared with peer hospitals across the country.                                                                         
                                                                                                                                
MR. JONES replied that PCG found  that API staffs higher than all                                                               
of  the  small-peer  hospitals,  but  not  by  huge  margins.  He                                                               
specified that  API was clearly  overstaffed in relation  to even                                                               
small hospitals that treat the same kind of patients.                                                                           
                                                                                                                                
2:04:01 PM                                                                                                                    
SENATOR  VON IMHOF  thanked Mr.  Jones for  his presentation  and                                                               
noted that  the presentation was  clear and well  researched. She                                                               
asked what would happen now and what would happen next.                                                                         
                                                                                                                                
MR. JONES replied that PCG  did look at certain efficiencies that                                                               
can  be implemented  at  API.  He cautioned  that  PCG relied  on                                                               
FY2015 data and recommended reductions  may not be viable now. He                                                               
detailed  that  PCG  definitely  made  some  recommendations  for                                                               
limited privatization that are easy  to do and will generate some                                                               
cost savings,  but the core  reductions that could happen  at API                                                               
need close review to figure out what a safe reduction is.                                                                       
                                                                                                                                
CHAIR WILSON  asked Mr. Burns  to address  PCG's recommendations.                                                               
He  inquired if  the department's  goal is  to implement  some of                                                               
PCG's  recommendations or  come up  with a  plan after  receiving                                                               
legislative intent on how to proceed forward.                                                                                   
                                                                                                                                
2:06:54 PM                                                                                                                    
MR. BURNS answered that the  recommendation on the Communications                                                               
Center will  be pursued with a  forth coming request-for-proposal                                                               
(RFP) for privatization.                                                                                                        
                                                                                                                                
He said  the rest of  the recommendations, particularly  with the                                                               
management  of  API's core  business  in  terms of  its  clinical                                                               
services,  requires  additional  thought.   He  stated  that  the                                                               
department  needs   to  take  into  consideration   about  waiver                                                               
applications  to the  Centers  for  Medicare regarding  seriously                                                               
bringing on administrative-service  organizations (ASO) to manage                                                               
the behavioral-health system. He  revealed that three states have                                                               
an ASO managing at least one of their public hospitals.                                                                         
                                                                                                                                
He summarized that  the department is sensitive  to the pressures                                                               
on  API  and  its  needs.  He  added  that  the  department  also                                                               
recognizes API's  administrative difficulties. He set  forth that                                                               
the  department will  think about  the difficulties  and plan  as                                                               
part  of the  department going  forward  with the  reform of  the                                                               
behavioral-health system as a whole.                                                                                            
                                                                                                                                
SENATOR BEGICH noted that PCG's  numbers were based on FY2015. He                                                               
added  that  overstaffing  was  mentioned by  PCG  and  asked  if                                                               
staffing cuts were made in FY2016 and FY2017.                                                                                   
                                                                                                                                
2:09:56 PM                                                                                                                    
MR. BURNS replied that staffing is essentially the same.                                                                        
                                                                                                                                
SENATOR BEGICH  asked what  the average  number of  patients were                                                               
during the same time period.                                                                                                    
                                                                                                                                
MR.  BURNS replied  that Senator  Begich's  question addresses  a                                                               
significant issue  regarding admission  pressures on API  and its                                                               
impact  on  staff.  He  detailed  that  API  averaged  92-percent                                                               
occupancy during  FY2016 and  FY2017. He  said averaging  over 85                                                               
percent  has significant  impacts  on staffing  ratios, an  issue                                                               
that needs further  examination. He specified that  API went over                                                               
25,000-patient  days  in  FY2016  which  was  considerably  above                                                               
FY2015.                                                                                                                         
                                                                                                                                
CHAIR WILSON inquired  if asking for a timeline  was feasible for                                                               
implementing  cost-savings   measures  that  will   impact  API's                                                               
quality of services.                                                                                                            
                                                                                                                                
2:12:26 PM                                                                                                                    
MR. BURNS answered yes. He  set forth that the question regarding                                                               
API's capacities  should be addressed prior  to restructuring. He                                                               
revealed that some hospitals are  considering bringing on mental-                                                               
health units, which  would have a significant impact  on what the                                                               
department  will  do. He  noted  that  hospitals possibly  adding                                                               
mental-health units will be considered  as part of moving forward                                                               
in  the   1115-waiver.  He  stated   that  the   department  will                                                               
definitely  be looking  at API  as  sort of  a separate  function                                                               
within the system  because API is a key part  of the changes that                                                               
will have to be made, admittedly an expensive one.                                                                              
                                                                                                                                
SENATOR  GIESSEL  asked  if  the  department  was  interested  in                                                               
entering into  conversation with  other facilities that  could be                                                               
opening  up some  beds. She  opined that  community collaboration                                                               
seems to  her to be a  critical part. She remarked  that when she                                                               
hears  the department  talking  about  applying for  1115-waivers                                                               
while  a report  talks about  inefficiencies, her  translation is                                                               
"Let's get more federal money  to continue to fund an inefficient                                                               
system," something that does not feel acceptable to her.                                                                        
                                                                                                                                
2:14:47 PM                                                                                                                    
MR. BURNS  agreed with Senator  Giessel and opined that  the real                                                               
issue  is what  can  be  done with  the  current  system and  the                                                               
resources that the communities have to change API.                                                                              
                                                                                                                                
MR. BURNS revealed  that he was the CEO at  API and asserted that                                                               
he is  very conscious of what  it takes to run  the API facility.                                                               
He  stated  that  everyone  has  to  be  very  conscious  of  the                                                               
pressures on API.                                                                                                               
                                                                                                                                
He  concurred that  the state  has talked  to other  hospitals as                                                               
well as being aware of  hospitals that are thinking about opening                                                               
up beds.  He revealed  that one hospital  is in  Anchorage, which                                                               
would be  really useful, as  well as  one that is  thinking about                                                               
developing a  psych-emergency room  like Providence  Health; both                                                               
would be  a welcome  change and  would substantially  improve the                                                               
pressures on API. He opined that  the department has to know more                                                               
than  a  hospital  having  an  interest  and  a  confirmation  on                                                               
proceeding is needed.                                                                                                           
                                                                                                                                
He  addressed the  quote, "over  staffing at  API" and  concurred                                                               
with  the statement.  He noted  that the  department has  a study                                                               
that suggests that  changes need to occur with  the API's nursing                                                               
administration.  He said  API's staff  in nursing  administration                                                               
needs  to be  deployed to  the floors  where nurses  are actually                                                               
needed, an adjustment  that the department can  make; however, he                                                               
said, "We  live in a  bargaining-unit system and changes  of that                                                               
nature  need  to be  negotiated  and  you  need to  move  forward                                                               
cautiously, so those things take time."                                                                                         
                                                                                                                                
He said under option-3, which  addresses efficiencies rather than                                                               
privatization,  the department  estimates  that 12  to 18  months                                                               
will be required to bring the efficiencies into practice.                                                                       
                                                                                                                                
2:17:49 PM                                                                                                                    
SENATOR GIESSEL  stated that she  understood the  challenges with                                                               
the union system  that the state operates under.  She pointed out                                                               
that one of  the pieces that is not often  talked about regarding                                                               
state government is  "systems" and in the case  regarding API she                                                               
stressed  that   she  is  interested  in   outcomes  for  people,                                                               
specifically  the   patients  being   treated.  She   asked  that                                                               
information be provided on patients being treated as well.                                                                      
                                                                                                                                
MR. BURNS  noted that developing  the measures  regarding patient                                                               
outcomes is part of the  1115-waiver process, but emphasized that                                                               
the department agrees with Senator  Giessel's previous point that                                                               
she made.                                                                                                                       
                                                                                                                                
2:19:13 PM                                                                                                                    
At ease.                                                                                                                        
                                                                                                                                
^PRESENTATION:   Alaska   Pioneer    Homes'   Pharmacy   Services                                                               
Privatization Feasibility Study Report                                                                                          
     PRESENTATION: Alaska Pioneer Homes' Pharmacy Services                                                                  
             Privatization Feasibility Study Report                                                                         
                                                                                                                              
2:20:56 PM                                                                                                                    
CHAIR WILSON  called the  committee back  to order.  He announced                                                               
that the  committee will hear a  privatization-feasibility report                                                               
on the Alaska Pioneer Homes' pharmacy services.                                                                                 
                                                                                                                                
2:21:38 PM                                                                                                                    
VICKIE  WILSON,  Director,  Division  of  Alaska  Pioneer  Homes,                                                               
Alaska  Department  of  Health   and  Services,  Juneau,  Alaska,                                                               
detailed that  the Division of  Alaska Pioneer Homes put  out two                                                               
RFPs on a privatization feasibility  study. On both occasions, no                                                               
one met the minimum requirements.                                                                                               
                                                                                                                                
She explained that  the Division of Alaska Pioneer  Homes has its                                                               
own pharmacy data  that can be shared with the  committee that is                                                               
not  from a  consultant. She  detailed that  the division  made a                                                               
switch in 1996  from multiple private carriers to  its own single                                                               
pharmacy  to  more economically  meet  its  residents' needs  and                                                               
reduce costs.                                                                                                                   
                                                                                                                                
CHAIR WILSON  asked if  a new timeline  has been  established for                                                               
putting out a new RFP to meet the conditions in SB 74.                                                                          
                                                                                                                                
2:24:56 PM                                                                                                                    
JOHN  SHERWOOD, Deputy  Commissioner,  Medicaid  and Health  Care                                                               
Policy, Alaska Department of Health  and Social Services, Juneau,                                                               
Alaska,  remarked that  rather than  simply  putting out  another                                                               
RFP, the division has been  in discussions with the Department of                                                               
Administration to see whether they have some resources.                                                                         
                                                                                                                                
SENATOR  GIESSEL  noted  that a  previous  audit  by  Legislative                                                               
Budget and  Audit indicated  that Medicaid-eligible  residents at                                                               
the  Division  of  Alaska  Pioneer  Homes  were  not  necessarily                                                               
applying for  Medicaid and that was  part of the budget  gap. She                                                               
pointed out  that the audit  report shows the Division  of Alaska                                                               
Pioneer Homes'  pharmacy cost was  short $250,000 on the  cost of                                                               
medications. She  asked if the  report has helped  in encouraging                                                               
qualified residents to apply for Medicaid.                                                                                      
                                                                                                                                
2:27:16 PM                                                                                                                    
MS.  WILSON  replied  that  Medicare   [Part-D]  is  what  really                                                               
effected a  lot of the  Division of Alaska Pioneer  Homes' costs.                                                               
She revealed  that all residents  must have from  either Medicare                                                               
[Part-D]  or another  resource. She  noted that  the Division  of                                                               
Alaska  Pioneer Homes'  pharmacy made  money before  the Medicare                                                               
[Part-D]  process. She  opined that  the pharmacy  cost would  be                                                               
less with another broad-overview analysis.                                                                                      
                                                                                                                                
SENATOR GIESSEL  noted that another  subject that came up  in the                                                               
Division  of  Alaska   Pioneer  Homes'  audit  had   to  do  with                                                               
controlled  substances and  one of  the facilities  not having  a                                                               
secure process. She asked if  Ms. Wilson can offer assurance that                                                               
the controlled-substance process has been remedied.                                                                             
                                                                                                                                
MS. WILSON  replied yes and  pointed out that the  secure process                                                               
noted in the audit was handled  in an "old school" manner and the                                                               
process was brought  into compliance before the  actual study was                                                               
finished.                                                                                                                       
                                                                                                                                
2:29:39 PM                                                                                                                    
At ease.                                                                                                                        
                                                                                                                                
                                                                                                                                
^PRESENTATION:   Juvenile    Justice   Facilities   Privatization                                                               
Feasibility Report                                                                                                              
    PRESENTATION: Juvenile Justice Facilities Privatization                                                                 
                       Feasibility Report                                                                                   
                                                                                                                              
2:31:50 PM                                                                                                                    
CHAIR WILSON  called the  committee back  to order  and announced                                                               
the next feasibility report.                                                                                                    
                                                                                                                                
2:32:11 PM                                                                                                                    
BARBARA  MURRAY, Acting  Director,  Alaska  Division of  Juvenile                                                               
Justice (DJJ),  Alaska Department of Health  and Social Services,                                                               
Juneau, Alaska,  read the following statement  on the feasibility                                                               
report:                                                                                                                         
                                                                                                                                
     As authorized by SB 74,  the department contracted with                                                                    
     Carter  Goble  Lee (CGL)  to  conduct  a study  of  the                                                                    
     feasibility  of  privatizing  services  at  select  DJJ                                                                    
     facilities. The department identified four standalone-                                                                     
       detention facilities: Mat-Su Youth Facility, Kenai                                                                       
     Peninsula  Youth  Facility,  Ketchikan  Regional  Youth                                                                    
     Facility, and  the Nome  Youth Facility.  The Ketchikan                                                                    
     Facility was closed in September  of 2106, but remained                                                                    
     as  part of  the study  to evaluate  the impact  of the                                                                    
     closure;  these facilities  provide detention  services                                                                    
     for  youth needing  secure confinement  who are  facing                                                                    
     criminal   charges  and   awaiting  outcome   of  court                                                                    
     processes and  placement. The division  appreciates the                                                                    
     tremendous  efforts  of  Mr. Becker  and  his  team  to                                                                    
     complete this thorough study.                                                                                              
                                                                                                                                
2:33:07 PM                                                                                                                    
KARL  BECKER,  Senior  Vice   President,  CGL  Consulting  Group,                                                               
Sacramento,  California, addressed  page 2  in his  presentation,                                                               
"CGL Overview" as follows:                                                                                                      
                                                                                                                                
   · CGL has provided justice system analyses since 1976;                                                                       
   · CGL has over 200 staff with backgrounds in justice system                                                                  
    planning, operational analysis, and performance reviews;                                                                    
   · CGL has conducted reviews of state adult and juvenile                                                                      
     correctional systems for Florida, Texas, Louisiana,                                                                        
     Mississippi,   Oklahoma,    Massachusetts,   North   Dakota,                                                               
     Virginia, and Colorado;                                                                                                    
  · CGL's project team was multi-disciplinary and experienced.                                                                  
                                                                                                                                
He  said CGL  is  one  of the  oldest,  largest criminal  justice                                                               
consulting firms  in the country  and the company's  specialty is                                                               
performance evaluations,  operational reviews,  program analysis,                                                               
program evaluations for  the justice systems, both  for adult and                                                               
juvenile.  He  added  that  CGL  has  done  projects  in  Alaska,                                                               
including  the  2014  legislative  audit  of  the  Department  of                                                               
Corrections  and   the  recent   analysis  of  staffing   in  the                                                               
Department of Corrections.                                                                                                      
                                                                                                                                
He addressed page 3 in  his presentation, "Project Objectives" as                                                               
follows:                                                                                                                        
                                                                                                                                
   · Determine the feasibility of privatizing the operation of                                                                  
     the state's standalone juvenile-detention facilities;                                                                      
   · Assess the value provided to the State of Alaska by these                                                                  
     facilities in terms of their current operations and                                                                        
     programs;                                                                                                                  
   · Identify potential alternative uses for these facilities by                                                                
     way of establishing their highest and best use.                                                                            
                                                                                                                                
MR. BECKER addressed page 4, "Project Approach" as follows:                                                                     
                                                                                                                                
   · Data Analysis,                                                                                                             
   · Staff Interviews,                                                                                                          
   · Site Visits,                                                                                                               
   · Facility Operational Reviews,                                                                                              
   · Community Meetings,                                                                                                        
   · Cost Analysis.                                                                                                             
                                                                                                                                
He said CGL's approach was  multifaceted. Data was collected from                                                               
the  department in  terms by:  youths served  by the  system, the                                                               
facilities themselves, how the system  is organized and operated,                                                               
and the  programs provided  in the facilities.  CGL spent  a good                                                               
deal of  time talking to  staff to  get their perspective  on the                                                               
system in the facilities, not  just facility staff, but probation                                                               
staff and administrative  staff as well. CGL spent  a good amount                                                               
of  time  to  familiarize  the   analysts  with  the  facilities'                                                               
operations and  conditions. CGL met with  stakeholders associated                                                               
with the facilities' local communities  to get their sense of the                                                               
potential for  privatization, performance, and value  provided to                                                               
the local communities. CGL did a  cost analysis by looking at the                                                               
actual-operational costs and efficiencies.                                                                                      
                                                                                                                                
2:35:15 PM                                                                                                                    
He addressed  page 5,  "System Overview."  He explained  that DJJ                                                               
operates two types of programs for detained youthful offenders:                                                                 
                                                                                                                                
   · Secure Detention: stabilize justice-involved youth with an                                                                 
     objective to facilitate their return to the community and                                                                  
     the processing of their cases through the justice system as                                                                
     they await court decision and/or placement.                                                                                
   · Treatment: provide long-term rehabilitative programming for                                                                
     youth who have been adjudicated through the juvenile-                                                                      
     justice system.                                                                                                            
                                                                                                                                
He  specified  that the  review's  focus  was on  the  short-term                                                               
detention facilities.                                                                                                           
                                                                                                                                
He  addressed  page  6, "Alaska's  Juvenile  Justice  Trends"  as                                                               
follows:                                                                                                                        
                                                                                                                                
   · Criminal charges against juveniles have dropped by 52                                                                      
     percent over the last 10 years.                                                                                            
   · Admissions of juveniles to secure detention in Alaska have                                                                 
     fallen 48 percent since 2006.                                                                                              
   · The average daily population of youth in secure detention                                                                  
     declined by 29 percent over this same period.                                                                              
                                                                                                                                
MR. BECKER added that juvenile  crime has gone down nationwide by                                                               
60  percent over  the  last  10 years  with  the  same trends  in                                                               
Alaska.                                                                                                                         
                                                                                                                                
He addressed  page 7, "DJJ  Standalone Detention  Facilities." He                                                               
noted that  the facilities were all  built in the early  2000s in                                                               
response  to  a surge  in  juvenile-justice  population that  was                                                               
occurring in  the 1990s;  that surge crested  in the  early 2000s                                                               
and has declined since then.                                                                                                    
                                                                                                                                
2:36:47 PM                                                                                                                    
He addressed pages 8-10 regarding  population trends for juvenile                                                               
justice, statewide detention, and  youth detention. He noted that                                                               
juvenile  justice "charges,"  "referrals" and  "unique juveniles"                                                               
in the system has trended down  by nearly 50 percent [from FY2006                                                               
to FY2016.] He  added that admissions to  detentions had declined                                                               
constantly  [FY2006 to  FY2014], but  stabilized from  [FY2014 to                                                               
FY2016].                                                                                                                        
                                                                                                                                
He addressed page  11, "Current Facility Status."  He said Alaska                                                               
has  larger  facilities  that  house   both  detention  beds  and                                                               
treatment beds:  McLaughlin in  Anchorage, Bethel,  Johnson Youth                                                               
Center in  Juneau, and the  Fairbanks facilities.  The standalone                                                               
secure-detention facilities  total 39  beds and  include: Mat-Su,                                                               
Kenai, and Nome.                                                                                                                
                                                                                                                                
He   addressed  page   12,  "Juvenile   Detention  Privatization"                                                               
nationwide. He  specified that CGL  sees a substantial  number of                                                               
facilities  are  contracted  by  units  of  government  to  house                                                               
juveniles and detailed as follows:                                                                                              
                                                                                                                                
   · 29 percent of the total juvenile-justice population is                                                                     
     privately operated facilities, such as group homes and                                                                     
     residential care.                                                                                                          
   · Juvenile-detention facilities are typically non-secure,                                                                    
     treatment oriented, and operated by non-profit or social-                                                                  
     service agencies.                                                                                                          
                                                                                                                                
He  specified  that the  use  of  private facilities  for  secure                                                               
detention is  limited. Nationally, eight percent  of juveniles in                                                               
secure detention are housed in  private facilities; these tend to                                                               
be larger institutions with a treatment focus.                                                                                  
                                                                                                                                
2:39:08 PM                                                                                                                    
MR.  BECKER addressed  page 13,  "Privatization Feasibility."  He                                                               
set  forth   that  CGL's  approach  to   assessing  privatization                                                               
feasibility was  to look at organizations  within communities due                                                               
to the  facilities' locations and  small sizes. He  detailed that                                                               
CGL interviewed the following:                                                                                                  
                                                                                                                                
   · Tribal organizations,                                                                                                      
   · Local public-health agencies,                                                                                              
   · Behavioral-health agencies,                                                                                                
   · Non-secure residential care/group home providers,                                                                          
   · Education system providers,                                                                                                
   · Local social service non-profit agencies.                                                                                  
                                                                                                                                
He   revealed  that   CGL  found   no  private   or  governmental                                                               
organizations  that had  the interest  or  capability to  operate                                                               
standalone-detention  facilities.  He  stated  that  due  to  the                                                               
absence of interest,  CGL felt that the  privatization concept is                                                               
not feasible at the current time.                                                                                               
                                                                                                                                
He  addressed  page  15,  "Privatization  Feasibility"  regarding                                                               
factors cited for lack of interest in privatization as follows:                                                                 
                                                                                                                                
   · Lack of expertise/experience in juvenile detention,                                                                        
   · Legal liability/insurance costs,                                                                                           
   · Financial burden/exposure,                                                                                                 
   · Relationship with DJJ,                                                                                                     
   · Current facility operational performance.                                                                                  
                                                                                                                                
2:42:19 PM                                                                                                                    
He addressed  page 16, "Potential for  Repurposing." He specified                                                               
that CGL  looked at the operational  advantages and disadvantages                                                               
for each of the facilities.                                                                                                     
                                                                                                                                
He addressed page 17, "Kenai  Current Use Analysis-Advantages" as                                                               
follows:                                                                                                                        
                                                                                                                                
   · Public Safety:                                                                                                             
        ƒAllows law enforcement to maintain community presence                                                                 
          by avoiding time-consuming transports of youth.                                                                       
   · Community/Family Access:                                                                                                   
        ƒDetained youth contact with family and local agencies                                                                 
          is a key to their rehabilitation.                                                                                     
   · Backup to McLaughlin Youth Center (MYC):                                                                                   
        ƒProvides backup detention capacity for MYC which                                                                      
          prevents overcrowding and avoids the need to open                                                                     
          currently closed units.                                                                                               
   · Facility Design:                                                                                                           
        ƒProvides   an   outstanding   environment   for   youth                                                               
          detention.                                                                                                            
   · Community Support:                                                                                                         
        ƒStrong community support for the facility in its                                                                      
          current use.                                                                                                          
                                                                                                                                
2:44:23 PM                                                                                                                    
MR.  BECKER  addressed  page 18,  "Kenai  Current  Use  Analysis-                                                               
Disadvantages."                                                                                                                 
                                                                                                                                
   · Utilization:                                                                                                               
        ƒ60 percent utilization in 2016.                                                                                       
   · Cost:                                                                                                                      
        ƒ$2.1 million in 2016.                                                                                                 
        ƒAnnual average cost of $974 per youth per day.                                                                        
                                                                                                                                
He noted  that the average-daily  population in 2017  has trended                                                               
up  to  close to  10-youths  per  day,  which is  the  facility's                                                               
capacity.                                                                                                                       
                                                                                                                                
He  summarized that  the  Kenai community  did  not identify  any                                                               
potential use  for the  facility and the  strong feeling  was for                                                               
the facility to continue in its current fashion.                                                                                
                                                                                                                                
SENATOR MICCICHE  asked to confirm  that the total  spending cost                                                               
is fairly  consistent whether the  Kenai facility has  an average                                                               
daily population of 6 or 10.                                                                                                    
                                                                                                                                
MR.  BECKER answered  that the  cost is  consistent. He  revealed                                                               
that 85  percent of  the cost  is staffing,  and the  staffing is                                                               
basically  fixed regardless  of the  number of  juveniles in  the                                                               
facility.  He said  the only  variable  cost is  food, all  other                                                               
costs are fixed.                                                                                                                
                                                                                                                                
SENATOR MICCICHE asked if  facility-utilization levels outside of                                                               
privatization were  considered regarding the need  for facilities                                                               
that were not operating at full capacity.                                                                                       
                                                                                                                                
2:46:29 PM                                                                                                                    
MR. BECKER replied that the  continued operation of facilities is                                                               
really  outside of  CGL's scope  of study.  He detailed  that CGL                                                               
attempted to  look at what specific  advantages and disadvantages                                                               
the  facilities offer  in  their current  use.  He admitted  that                                                               
under-utilized facilities  is a  major disadvantage and  needs to                                                               
be considered.  CGL did  take a  look at what  would happen  if a                                                               
facility was  closed and juveniles  were moved to  another center                                                               
or a  facility that  added on.  He remarked that  adding on  to a                                                               
current facility would  require the same amount of  staffing as a                                                               
facility that is being closed.                                                                                                  
                                                                                                                                
CHAIR  WILSON  pointed  out  that Mr.  Becker  touched  upon  not                                                               
finding  any entities  currently in  the facilities'  surrounding                                                               
areas  to  take  on  privatization.  He asked  if  CGL  ran  cost                                                               
modeling on how much the  department would pay for privatization.                                                               
He  emphasized  that  DJJ  does wonders  in  communities  with  a                                                               
positive impact, but admitted that  DJJ's impact was a reason for                                                               
there  being  no  privatization  interest. He  pointed  out  that                                                               
national   statistics  showed   that  30   percent  of   juvenile                                                               
facilities  are privately  operated and  opined that  the private                                                               
entities saw a use to expand their services.                                                                                    
                                                                                                                                
2:48:37 PM                                                                                                                    
MR. BECKER pointed out the  juvenile populations Senator Micciche                                                               
noted are different.  He specified that the  juveniles' stays are                                                               
very short in order to  stabilize prior to processing through the                                                               
justice  system   for  treatment  or  further   adjudication.  He                                                               
remarked that any privatization  operation would essentially have                                                               
to staff  facilities the way DJJ  does. He said DJJ  is currently                                                               
staffing facilities at bare-bones  levels. He summarized that CGL                                                               
believes that there is no ability  for a private provider to come                                                               
in and  substantially cut costs  by reducing staff. He  set forth                                                               
that   the  state   could  have   some  savings   through  salary                                                               
reductions. He said CGL did not  do modeling on salary levels for                                                               
privatization.                                                                                                                  
                                                                                                                                
He addressed  page 20,  "Mat-Su Current  Use Analysis-Advantages"                                                               
as follows:                                                                                                                     
                                                                                                                                
   · Public Safety:                                                                                                             
        ƒAllows law enforcement to maintain community presence                                                                 
          by avoiding time-consuming youth transports.                                                                          
   · Utilization:                                                                                                               
        ƒOperates at capacity with a growing service-area                                                                      
          population.                                                                                                           
        ƒPotential for increased demand for services.                                                                          
   · Facility Design:                                                                                                           
        ƒProvides   an   outstanding   environment   for   youth                                                               
          detention.                                                                                                            
   · Community Support:                                                                                                         
        ƒStrong community support for the facility in its                                                                      
          current use.                                                                                                          
                                                                                                                                
2:51:06 PM                                                                                                                    
MR. BECKER addressed page 20, "Mat-Su Current Use Analysis-                                                                     
Disadvantages" as follows:                                                                                                      
                                                                                                                                
   · Proximity to McLaughlin Youth Center which already serves                                                                  
     the Anchorage-metro area, but adding another unit at                                                                       
     McLaughlin would involve substantial costs.                                                                                
                                                                                                                                
He revealed that the annual cost for the Mat-Su facility is                                                                     
approximately $2.6 million. He added that the facility runs at a                                                                
high-utilization rate which equates to substantially lower cost-                                                                
per-day-per-youth than other facilities.                                                                                        
                                                                                                                                
He addressed page 22, "Mat-Su Current Use Analysis-Potential                                                                    
Alternative Uses" as follows:                                                                                                   
                                                                                                                                
   · Detoxification Center, identified as a strong community                                                                    
     need.                                                                                                                      
   · Transitional   step-down   facility    for   youth   leaving                                                               
     McLaughlin Center after treatment.                                                                                         
                                                                                                                                
He summarized that the identified alternatives would be                                                                         
contingent on additional state resources for operation and                                                                      
facility remodeling.                                                                                                            
                                                                                                                                
He addressed page 22, "Nome Current Use Analysis-Advantages" as                                                                 
follows:                                                                                                                        
                                                                                                                                
   · Public Safety:                                                                                                             
        ƒAccess to local detention provides a valuable resource                                                                
          to law enforcement for youth who need to be detained.                                                                 
        ƒAbsence of the facility could limit law enforcement's                                                                 
          response to delinquent-youth behavior.                                                                                
   · Location:                                                                                                                  
        ƒOnly juvenile detention facility within 600 miles and                                                                 
          serves the immense geographic area of Northwest                                                                       
          Alaska.                                                                                                               
   · Community/Family Access:                                                                                                   
        ƒDetained youth contact with family and local agencies                                                                 
          is a key to their rehabilitation.                                                                                     
   · Youth Programming:                                                                                                         
        ƒProvides culturally appropriate programming and a                                                                     
          supportive-living environment.                                                                                        
   · Community Support:                                                                                                         
        ƒStrong community support for the facility in its                                                                      
          current use.                                                                                                          
                                                                                                                                
2:53:32 PM                                                                                                                    
MR. BECKER addressed page 23, "Nome Current Use Analysis-                                                                       
Disadvantages" as follows:                                                                                                      
                                                                                                                                
   · Low utilization:                                                                                                           
        ƒLowest in the department.                                                                                             
   · Physical plant maintenance costs:                                                                                          
        ƒLocation requires more resources to continue its                                                                      
          operation.                                                                                                            
   · Operating cost:                                                                                                            
        ƒ$2.8 million in FY2016.                                                                                               
                                                                                                                                
He noted that the Nome facility's year-to-date average-daily-                                                                   
population in FY2017 has rebounded to 8.1 youth-per-day versus                                                                  
5.0 youth-per-day in FY2016.                                                                                                    
                                                                                                                                
He addressed page 24, "Nome Current Use Analysis-Potential                                                                      
Alternative Uses" as follows:                                                                                                   
                                                                                                                                
   · Modify facility mission to dedicate four beds to long-term,                                                                
     post-adjudication treatment for a dual-mission facility                                                                    
     like the McLaughlin Youth Center.                                                                                          
   · Target population would be youth that are difficult to                                                                     
     place  due to  complex-clinical needs,  age (close  to aging                                                               
     out  of  the  juvenile  justice   system),  or  in  need  of                                                               
     transitional    services   appropriate    to   Alaska-native                                                               
     communities.                                                                                                               
   · Nome already has required mental-health services and                                                                       
     culturally-appropriate programming for long-term treatment.                                                                
   · Program could be supported within the existing-facility                                                                    
     budget with potential cost savings if youth were diverted                                                                  
     from expensive private placements to Nome.                                                                                 
   · Establishing    a    secure    juvenile-justice    treatment                                                               
     alternative in the region would provide superior program                                                                   
     outcomes for local youth.                                                                                                  
                                                                                                                                
He addressed pages 26, "Ketchikan Current Use Analysis-Current                                                                  
Status" as follows:                                                                                                             
                                                                                                                                
   · Facility closed in September 2016.                                                                                         
   · Youth transferred to the Johnson Youth Center in Juneau.                                                                   
   · Facility is owned by the City of Ketchikan.                                                                                
   · No immediate plans for alternative use of the facility.                                                                    
                                                                                                                                
MR. BECKER addressed pages 27, "Ketchikan Current Use Analysis-                                                                 
Impact" as follows:                                                                                                             
                                                                                                                                
   · Detained  youth  could have  reduced  access  to courts  and                                                               
     legal counsel due to distance between home community and                                                                   
     Juneau.                                                                                                                    
   · Potential  for  longer stays  in  detention  due to  reduced                                                               
     access to courts.                                                                                                          
   · Case management more difficult.                                                                                            
   · Relocation   away   from    community   and   family   makes                                                               
     reintegration of youth more difficult.                                                                                     
                                                                                                                                
2:56:32 PM                                                                                                                    
He addressed page 28, "Potential for Repurposing" and specified                                                                 
CGL conclusions as follows:                                                                                                     
                                                                                                                                
   · The State  of Alaska should  continue to operate  the Kenai,                                                               
     Mat-Su, and Nome Youth facilities in their current                                                                         
     function.                                                                                                                  
   · The  facilities  provide  substantial  value  to  the  state                                                               
     juvenile justice system and their local communities.                                                                       
   · The  facilities'  highest  and  best  use  is  in  continued                                                               
     detention operations.                                                                                                      
                                                                                                                                
He summarized that CGL found no alternative purposes for any of                                                                 
the juvenile facilities that would result in cost savings to the                                                                
state.                                                                                                                          
                                                                                                                                
He addressed page 29, "Facility Operations Were Outstanding" as                                                                 
follows:                                                                                                                        
                                                                                                                                
   · Security systems provide effective control.                                                                                
   · Facility   staff  appear   to  be   well-trained,  dedicated                                                               
     professionals that manage in-custody youth in an effective                                                                 
     manner.                                                                                                                    
   · Staffing patterns  at all  facilities are  appropriate given                                                               
     facility layouts and operational practices.                                                                                
   · All facilities  maintain an  exceptional array  of programs,                                                               
     given their size, and are supported by active community                                                                    
     participation.                                                                                                             
   · The  Nome Youth  Facility  stood out  for  its cultural  and                                                               
     other community-based programming.                                                                                         
                                                                                                                                
MR. BECKER addressed  page 30, "Mental Health  Services." He said                                                               
providing  effective  mental-health  services  is  a  change  and                                                               
detailed as follows:                                                                                                            
                                                                                                                                
   · 56   percent  of   detained  youth   have  a   mental-health                                                               
     diagnosis.                                                                                                                 
   · Available mental-health resources are strained.                                                                            
   · Current policies for recognizing  and managing youth at risk                                                               
    for suicide are consistent with national best practices.                                                                    
   · The  system  lacks  a  comprehensive  plan  for  effectively                                                               
     delivering mental-health services in facilities.                                                                           
                                                                                                                                
2:59:26 PM                                                                                                                    
He addressed page 31, "Recommendations" and detailed as follows:                                                                
                                                                                                                                
   1. Do not pursue  privatization  of  detention facilities  for                                                               
     juveniles.                                                                                                                 
   2. Continue to  operate  the Kenai,  Mat-Su,  and  Nome  Youth                                                               
     facilities  in their  current  function;  their highest  and                                                               
     best use is in continued operation as detention facilities.                                                                
   3. Develop a housing  and  treatment  program for  adjudicated                                                               
     delinquents  with  long-term  treatment needs  at  the  Nome                                                               
     Youth  Facility. The  program would  provide an  alternative                                                               
     placement for youth  at little or no additional  cost to the                                                               
     state.                                                                                                                     
   4. Develop a  comprehensive  plan  for  mental-health  service                                                               
     delivery  in  detention   facilities  that  defines  service                                                               
     objectives,   establishes   specific  strategies   for   the                                                               
     achievement  of   these  objectives,  and   measures  system                                                               
     performance.                                                                                                               
                                                                                                                                
CHAIR WILSON addressed  Ms. Murray and noted that  the state also                                                               
came out and  agreed with the recommendations of  the CGL report;                                                               
however, the  department's supplemental budget continued  to show                                                               
zero funding  for the Nome  facility. He asked if  the department                                                               
plans  to request  funding for  the Nome  facility this  year and                                                               
continued years.                                                                                                                
                                                                                                                                
MS.  MURRAY replied  that the  department  is awaiting  direction                                                               
from the  Legislature. She  said the closure  of any  facility is                                                               
going to be impactful. She  asserted that the department wants to                                                               
keep the services  going because the facilities  are important in                                                               
the communities.                                                                                                                
                                                                                                                                
CHAIR  WILSON asked  if the  department had  a recommendation  on                                                               
keeping the Nome facility opened or closed.                                                                                     
                                                                                                                                
MS.  MURRAY  answered  that  department  supports  the  continued                                                               
operation of detention services in the communities.                                                                             
                                                                                                                                
3:01:21 PM                                                                                                                    
SENATOR BEGICH  asked if  the department would  be in  support of                                                               
funding the Nome facility.                                                                                                      
                                                                                                                                
MS. MURRAY answered yes.                                                                                                        
                                                                                                                                
SENATOR BEGICH  asked if the  Ketchikan facility has  been turned                                                               
back to the City of Ketchikan.                                                                                                  
                                                                                                                                
MS. MURRAY answered yes.                                                                                                        
                                                                                                                                
SENATOR MICCICHE  stated that  he is  worried about  the average-                                                               
daily population.  He noted  that based on  the 3-year  data that                                                               
CGL provided, the facilities on  average have 15.5-empty beds, an                                                               
inefficiency that cannot be cost effective  in a time with a $3.2                                                               
billion  budget deficit,  something that  the Legislature  has to                                                               
look at.  He asserted  that there are  no services  available for                                                               
private  operators in  the  state because  the  state has  always                                                               
risen  to the  challenge of  providing  those funds.  He said  he                                                               
would  like   to  investigate  the  private   services  that  are                                                               
available  in  other  states.   He  opined  that  private-service                                                               
entities could be drawn to the  state. He announced that he would                                                               
provide Chair  Wilson with a  series of questions to  get answers                                                               
on for the committee.                                                                                                           
                                                                                                                                
CHAIR  WILSON suggested  that the  department  should be  invited                                                               
back for additional discussions.                                                                                                
                                                                                                                                
SENATOR  BEGICH commented  that ample  experience has  shown that                                                               
privatization of the juvenile-justice  systems in many states has                                                               
not been a pretty picture.                                                                                                      
                                                                                                                                
CHAIR WILSON thanked the presenters.                                                                                            
                                                                                                                                
3:04:34 PM                                                                                                                    
There being  no further  business to  come before  the committee,                                                               
Chair  Wilson adjourned  the Senate  Health  and Social  Services                                                               
Committee at 3:04 p.m.