Legislature(2017 - 2018)CAPITOL 106
02/16/2017 03:00 PM House HEALTH & SOCIAL SERVICES
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Study Overview for Privatization of Alaska Psychiatric Institute | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE HEALTH AND SOCIAL SERVICES STANDING COMMITTEE
February 16, 2017
3:04 p.m.
MEMBERS PRESENT
Representative Ivy Spohnholz, Chair
Representative Sam Kito
Representative Geran Tarr
Representative Jennifer Johnston
MEMBERS ABSENT
Representative Bryce Edgmon, Vice Chair
Representative David Eastman
Representative Colleen Sullivan-Leonard
Representative Matt Claman (alternate)
Representative Dan Saddler (alternate)
COMMITTEE CALENDAR
PRESENTATION: STUDY OVERVIEW FOR PRIVATIZATION OF ALASKA
PSYCHIATRIC INSTITUTE
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
COY JONES, Consultant
Project Leader
Public Consulting Group (PCG)
Austin, Texas
POSITION STATEMENT: Presented the PCG findings and
recommendations for privatization of API.
RANDALL BURNS, Director
Central Office
Division of Behavioral Health
Department of Health and Social Services
Juneau, Alaska
POSITION STATEMENT: Answered questions during the discussion
for privatization of Alaska Psychiatric Institute.
ACTION NARRATIVE
3:04:56 PM
CHAIR IVY SPOHNHOLZ called the House Health and Social Services
Standing Committee meeting to order at 3:04 p.m.
Representatives Spohnholz, Kito, Tarr, and Johnston were present
at the call to order.
^Presentation: Study Overview for Privatization of Alaska
Psychiatric Institute
Presentation: Study Overview for Privatization of Alaska
Psychiatric Institute
3:05:28 PM
CHAIR SPOHNHOLZ announced that the only order of business would
be the conclusion of the presentation by the Public Consulting
Group regarding the privatization of Alaska Psychiatric
Institute to the House Health and Social Services Standing
Committee meeting of February 7.
3:06:17 PM
COY JONES, Consultant, Project Leader, Public Consulting Group
(PCG), returned attention to the PowerPoint titled "Feasibility
Study for Privatization of Alaska Psychiatric Institute" and
directed attention to slide 10, "Staffing Requirements." He
spoke about the reduction of full time employees at the
administrative level, and reported that PCG assumed there would
be built-in efficiencies for a private entity, as a larger
enterprise could better absorb quality assurance, IT, and other
functions. He reported that the minimum levels for nursing
staff had been determined by staff levels at comparable small
peer hospitals, as well as industry recommendations. He
reported that the benchmark in the industry was a ratio of 1
registered nurse (RN) for 6 patients, and that this was close to
the API ratio. He pointed out that the PCG recommended cuts
were not to RNs but to psychiatric nursing aides. He discussed
the minimum staffing requirements for the hospital, sharing that
API required 18.1 nursing staff at any time in the hospital, and
that PCG recommended 21.2 nursing staff at any given time.
MR. JONES moved on to slide 12, "Benefits and Drawbacks: Full
Privatization," and recounted the options to include full
privatization, joint operating agreement between the state and
the private entity, current state management with new
efficiencies, and component outsourcing. He discussed Option 1,
Full Privatization, and shared a high level cost-benefit
analysis. The benefits for full privatization included: a
private contractor would provide more flexible compensation to
improve recruitment and retention of qualified employees; the
Division of Behavioral Health would act as a contract
administrator and no longer provide acute inpatient care and day
to day management duties; and, a private contractor would have
the autonomy to implement necessary changes, improvements, and
efficiencies at API.
MR. JONES detailed the drawbacks to full privatization to
include: it would be cost prohibitive, even under the
recommended staffing scenario, and would not save money for the
State of Alaska; there would be termination liability costs to
the retirement fund; it would be necessary to minimize some of
the contract monitoring costs, or not build in the strong
safeguards to ensure safe levels of staffing; and, it would be
necessary to cut corners that were not safe to cut.
3:16:07 PM
MR. JONES directed attention to slide 13, which depicted a
thumbs down for Option 1, declaring that this option would not
produce the necessary savings.
3:16:28 PM
MR. JONES addressed slide 14, "Benefits and Drawbacks: State
Management," and discussed "Option 3: State Management with New
Efficiencies." He stated that most of the efficiencies were not
dependent on a private operator. He spoke about the benefits,
which included: an opportunity for the state to maintain full
control and accountability of this service; no additional costs
related to contract administration; the greatest amount of value
and cost savings to the state if the service delivery
recommendations were implemented; and minimal termination
liability costs.
MR. JONES shared that the drawbacks included: higher staffing
expenditures with public employees; more administrative burden
with implementing the recommended changes; and a question for
successful improvements under the public entity.
MR. JONES shared slide 15 which depicted a thumbs up for Option
3 as the most recommended.
3:19:46 PM
MR. JONES reported on slide 16, "Benefits and Drawbacks: Center
Outsourcing," and stated that four options had been identified,
which included: privatize security and reception, the
communication centers; and, privatize the maintenance and
environmental services. He reported that there was potential
for significant savings to both of these cost centers, and that
there were not any strong drawbacks to either of these.
MR. JONES presented slide 20, "Benefits and Drawbacks:
Psychiatry and Medical Services Outsourcing," which described
the option to privatize the physician component of the hospital.
He declared that this option was not feasible, as it would not
reduce costs, slide 21. He suggested that costs could even
increase, as salaries and benefits could increase in an effort
to improve retention.
3:22:13 PM
MR. JONES shared slide 22, "Benefits and Drawbacks: Nursing
Staff Outsourcing." He stated that PCG did not recommend yes or
no, as this could only be feasible under a non-profit operator,
and it was not clear who the vendor for nursing staffing would
be in Alaska. He stated that PCG recommended strong caution,
slide 23.
3:23:13 PM
MR. JONES directed attention to slide 24, "Benefits and
Drawbacks: Comprehensive Outsourcing," which discussed the
option for privatizing all the direct services, and leaving the
state as the administrator of the hospital. He reported that
this was found not to be feasible, mainly due to the increased
cost of the physician staff. There would not be any cost
savings to the state, slide 25. He said that this concluded
PCGs findings and recommendations.
3:23:52 PM
REPRESENTATIVE JOHNSTON asked if API was currently fully staffed
for medical providers.
MR. JONES offered his belief that it was fully staffed. He
reported that in recent years there had been a heavy reliance on
locum tenens for substitute positions, and that API was only one
or two positions away from going back to locum tenens.
3:24:51 PM
RANDALL BURNS, Director, Central Office, Division of Behavioral
Health, Department of Health and Social Services, expressed his
agreement that it was a fragile system and that, as one
psychiatrist had just given notice, API was "now down a
psychiatrist."
REPRESENTATIVE JOHNSTON asked if API moved back and forth from
being fully staffed to the use of "more transient providers."
MR. BURNS replied that this was correct. In response to
Representative Johnston, he expressed agreement that the
staffing was "a hybrid."
3:25:52 PM
REPRESENTATIVE JOHNSTON asked about termination costs and
studies.
MR. JONES replied that this cost estimate was a rough
approximation, and it came from the Department of
Administration. He acknowledged that, as PCG had not done a
termination study, the closest way to approximate was to look at
past cases and similar studies. He reported that PCG had used a
public hospital of similar size, and its termination liability
had been $2 million. They used this assumption although costs
might have increased, as the benefit package was now
significantly different.
REPRESENTATIVE JOHNSTON asked if, as termination costs were an
issue, it should be dropped.
MR. JONES replied that PCG had wanted to represent the scale for
the likelihood of the liability "without trying to make it look
more concrete than it is."
3:27:56 PM
REPRESENTATIVE TARR asked how to deal with sensitive health
information when an outsourced call center was used.
MR. JONES replied that PCG was really describing the front desk
at API, which included the reception and security functions. He
shared that these functions were often privatized, although
within API, these were employees of the hospital. He reported
that these functions could be done significantly cheaper than
the current costs.
3:29:36 PM
MR. BURNS added that API had other contracts, including for
transportation of patients, and that confidentiality was managed
as long as there were business agreements under the Health
Insurance Portability and Accountability Act.
3:30:07 PM
CHAIR SPOHNHOLZ asked about the amount determined to be
significant savings under private management of the
communications center.
MR. JONES replied that this was significant relative to the
total cost of the communication center, a savings of about
$233,000 annually, or a 62 percent savings to the current cost.
He acknowledged that this was a small part of the total hospital
costs.
3:31:26 PM
ADJOURNMENT
There being no further business before the committee, the House
Health and Social Services Standing Committee meeting was
adjourned at 3:31 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| API Privatization Presentation_02_07_2017_FINAL.pdf |
HHSS 2/16/2017 3:00:00 PM |
API Privatization |