Legislature(2017 - 2018)BUTROVICH 205
02/06/2017 01:30 PM Senate HEALTH & SOCIAL SERVICES
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Alaska Psychiatric Institute Privatization Feasibility Report | |
| Presentation: Alaska Pioneer Homes' Pharmacy Services Privatization Feasibility Study Report | |
| Presentation: Juvenile Justice Facilities Privatization Feasibility Report | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
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.
| Document Name | Date/Time | Subjects |
|---|---|---|
| AKPH Privatization Feasibility Report_Jan 26 2017.pdf |
SHSS 2/6/2017 1:30:00 PM |
|
| API Privatization Feasibility Report_Jan 26 2017.pdf |
SHSS 2/6/2017 1:30:00 PM |
|
| API Privatization Presentation_02_03_2017_FINAL.pptx |
SHSS 2/6/2017 1:30:00 PM |
|
| DJJ Privatization Feasibility Report_Jan 26 2017.pdf |
SHSS 2/6/2017 1:30:00 PM |
|
| Alaska SHSS DJJ Presentation 2.6.17 FINAL.pptx |
SHSS 2/6/2017 1:30:00 PM |