HB 86-MENTAL HEALTH HOSPITAL: CONTRACTS/BIDS  3:49:00 PM CHAIR ZULKOSKY announced that the next order of business would be HOUSE BILL NO. 86, "An Act relating to a state-owned inpatient mental health treatment hospital; and providing for an effective date." [Before the committee, adopted as a work draft on 3/28/19, was the proposed committee substitute (CS) for HB 86, Version 31-LS0623\U, Marx, 3/26/19.] 3:49:08 PM REPRESENTATIVE SPOHNHOLZ, in response to Chair Zulkosky, [renewed] the motion to adopt the proposed committee substitute (CS) for HB 86, Version 31-LS0623\U, Marx, 3/26/19, as the working draft. 3:49:21 PM CHAIR ZULKOSKY objected for the purpose of discussion. 3:49:43 PM REPRESENTATIVE ZACK FIELDS, Alaska State Legislature, as prime sponsor of HB 86, using a PowerPoint presentation, shared some history and facts about API on slides 2-3. He said API had far fewer beds than were needed to meet present needs, which created a myriad of problems ranging from people with psychiatric illnesses not receiving treatment, which put Alaskans at risk and necessitated hospitals' holding of psychiatric patients in the ER, guarded one-on-one, effectively driving up the cost of health care. Representative Fields noted the controversy surrounding attempted privatization of API since the introduction of HB 86; some headlines from news stories could be seen on slide 4 of the PowerPoint. The state was not permanently privatizing API, he said; Wellpath (WP) continued to have shorter-duration contracts to provide some management services. What HB 86 would do was prevent overall privatization of the entire facility, he related, while not prohibiting privatization of certain functions within API. 3:51:45 PM REPRESENTATIVE FIELDS related there were many troubling examples of negligent care at WP facilities across the U.S., and Correct Care Solutions, which was the former name of WP, had been sued about 1,400 times since 2003, including substantiated claims of wrongful death and inadequate care. 3:52:58 PM REPRESENTATIVE FIELDS, referencing slides 5-6, shared with the committee a timeline of API's relationship with WP and the latter's corporate history. Referencing slides 7-8, Representative Fields noted there had been a high turnover of numerous positions under WP. Staff were concerned with WP management, he related, and there has been criticism, including in the media, of WP's failure to bring conditions at API where they needed to be. Referencing slide 9, Representative Fields noted that the legislature had looked at API management in a recent comprehensive study in 2017, examining a wide range of options for managing the facility ranging from wholesale privatization to partial privatization to modified state management. In the study, full privatization entailed decreased quality of service and higher costs, and recommended state management with outsourcing what they considered non-core services. Consistent with the 2017 study, HB 86 would ensure public management with opportunities to outsource certain functions, but not management of the whole facility. 3:55:24 PM REPRESENTATIVE FIELDS noted public support for continued public management of API, as exemplified on slide 10. Pacific Consulting Group (PCG) had looked at private management of facilities such as API, and when those facilities were privately managed for profit, it cost a significant amount of extra money in terms of profit margin on top of basic operations of the facility. In conclusion, Representative Fields stated that the for-profit model was incompatible with the basic mission of API because it created an ongoing incentive for the private owner to provide inadequate staffing to meet patients' and employees' needs. 3:56:19 PM REPRESENTATIVE FIELDS said HB 86 had some adjusted terminology and did allow for privatization of certain functions, a good balance to ensure the entity that ran API had a public mission but there was flexibility to run the facility and adjust to current needs. 3:57:01 PM REPRESENTATIVE PRUITT confirmed API had been managed by the state prior to the last election. He then asked, when looking at the Ombudsman's report and some things that occurred under state management including the sexual assaults in 2018 and 2019, why state management would be better than a private entity. He also mentioned HB 86 seemed to group all private entities in with WP, when the important consideration was that the most vulnerable of the population were properly cared for, no matter who managed the facility. 3:58:44 PM REPRESENTATIVE FIELDS expressed that the issue was complex and said he was aware of three bills all addressing different aspects of problems with API. He admitted that passing HB 86 would not, in and of itself, solve the problems. Representative Fields said he appreciated the committee's hearing another bill he introduced addressing API staffing and capacity issues. He said the sexual assault and other safety-related incidences were related to inadequate staffing. He said he has a problem with "a profit motive." He said he would not have the same problem with a non-profit running the facility because the same problems did not exist in terms of incentives. He said the legislature must appropriate sufficient money "to run the facility" while recognizing that not having sufficient funds "creates the public safety and cost ripple effect." He said he thinks HB 86 would be one part of a broader solution. In the last year, WP has had a chance to fix problems with API and they have not done so, he added. 4:00:48 PM JAKE METCALFE, Executive Director, Alaska State Employees Association, testified in support of HB 86 and said he agreed with Representative Fields' statements. Mr. Metcalfe shared the Alaska State Employees Association (ASEA) experience with its staff at the facility. Understaffing and underfunding had been problems for a long time, he related, including with WP. One of the more concerning aspects, he shared, were the discussions of outsourcing having created a high amount of instability in the workplace: according to ASEA calculations, 75 people have left in the last year for the reason of uncertainty regarding what will happen at the facility. Employees do not want to work for a private contractor; they want leadership, he shared. Some of those who have left had been at API their entire careers, he added. MR. METCALFE blamed the privatization for the employees' departure. They had been told a feasibility study would be done, he related, at the end of February when it had been announced that WP would come in as the contractor. It had not been done, which resulted in litigation. There had been a feasibility study scheduled for April [2019], and then June, and then September, and then December, before the February date was missed, and [at the time of Mr. Metcalfe's testimony] one more had been scheduled for March 9. The inability to get a study done, or to provide the results, has created moral issue in the workplace. Mr. Metcalfe referenced the 2017 study Representative Fields had brought up, which showed privatization would only be successful by a major cut in staff. This created safety problems for staff and patients alike, he reiterated. MR. METCALFE noted there had been problems not only with staff but with leadership, as there had been between five and seven chief executive officers (CEOs) during the current administration, in addition to another six prior to the privatization effort. Leadership had changed every couple of months, both under state management and with WP in the facility. From ASEA's standpoint, Mr. Metcalfe stated, the situation was "privatization by attrition," both within leadership and among staff who took care of people in need. Among neither group was the instability welcome, he said, and the way to fix the problem was to have the state run it and to staff it properly. 4:07:28 PM REPRESENTATIVE PRUITT said that sexual assaults were due not to a lack of funding but to failure by staff, and since WP has been at the helm there has been additional training of staff. 4:09:23 PM MR. METCALFE replied he had been with ASEA since 2018 and knew from experience dealing with API what the record was like prior to that time. He said he also knew from his experience dealing with WP and the privatization issue he would stand by API as a state-run facility as opposed to one run by WP. He admitted this stance did not account for perfection of all staff, and it was possible additional training may in certain cases be required. Mr. Metcalfe shared some background prior to the transition to WP. He said that in his experience the problem was with the transition to WP, but API had been underfunded and understaffed for many years. He said stable leadership and adequate staff were needed on all levels, and if that were able to happen, issues such as sexual assault would be able to be prevented. He reiterated understaffing would not work at a hospital that is at full capacity. State-run programs implement decisions by policy makers that the funding and staffing will be adequate because of the constitutional obligation to provide the service to people, he added. 4:13:30 PM REPRESENTATIVE PRUITT said that funding and bed levels had been increased in 2017, and one of the sexual assaults was in spring of 2018. Even when additional funding was given, assaults happened, he stated. 4:15:38 PM MR. METCALFE said funding had been increased but it had not been enough, as API had been underfunded for years prior to 2017, and the 2017 funding had in fact been a "Band-Aid funding approach." As far as WP was concerned, Mr. Metcalfe stated 70 staff had left since the WP takeover, including six to seven new CEOs. Mr. Metcalfe repeated that WP lacked leadership and admitted the cause may be other bills which addressed wage issues and other changes. He stated that privatization had not been successful in psychiatric facilities; the state had made the decision to care properly and responsibly for its vulnerable people and not "ship them out." 4:18:52 PM REPRESENTATIVE PRUITT clarified that the state still did manage the facility with WP as a consultant. 4:19:33 PM REPRESENTATIVE SPOHNHOLZ pointed out API was still a public institution. There had been a contract last year for the takeover of the hospital which had not been awarded. A look at the records, she continued, showed Centers for Medicare & Medicaid Services (CMS) citations at API had started to rise in 2015 and coincided with many years of tough fiscal situations. Costs had to be cut in many areas and the budget had to be managed, she imparted, and API had been under-resourced, especially when taking into consideration the high level of training needed to support patients. Representative Spohnholz asked whether there was any language in HB 86 that would prevent API from contracting with experts to help improve outcomes. 4:21:15 PM REPRESENTATIVE FIELDS replied there was not. 4:21:19 PM CHAIR ZULKOSKY asked about the status of the new feasibility study being conducted by API on privatization and state management. 4:21:50 PM CLINTON LASLEY, Deputy Commissioner, Office of the Commissioner, Department of Health and Social Services, replied the feasibility study was due to DHSS March 9. He said it had four focal points: maintaining a state-run facility with enhancements to try to get back to the 80-bed capacity; looking at privatization, whether through a for-profit or non-profit organization; providing an option for public corporation while remaining a state-owned facility; and contracting out some services, as was currently done. 4:23:24 PM CHAIR ZULKOSKY asked when DHSS began the feasibility study Mr. Lasley referenced. MR. LASLEY replied the contract had been awarded in October [2019] and had been due to be finalized at the end of February, but the contractor did ask for some additional information, and an extension had been granted until March 9. 4:23:48 PM REPRESENTATIVE SPOHNHOLZ asked what DHSS was seeking to understand or learn after a privatization study which consisted of 98 pages had just been done in 2017. 4:24:22 PM MR. LASLEY replied there were now four options, which was a different approach. Instead of "just a typical privatization study," the feasibility study at hand looked at the best mechanism to run the hospital, he stated. REPRESENTATIVE SPOHNHOLZ asked how many state psychiatric hospitals in the U.S. were privately run. MR. LASLEY replied he did not know. REPRESENTATIVE SPOHNHOLZ asked whether there was a model in other places DHSS was trying to follow or if it was on a general fact-finding mission. 4:25:52 PM ALBERT WALL, Deputy Commissioner, Office of the Commissioner, Department of Health and Social Services, regarding why another privatization study would be done in such quick succession, stated that the older study, began in 2016 and published in 2017, showed that beginning in 2013 there had been a series of state-run hospitals having the same problems as API. There were laws which required states to care for inpatient psychiatric patients in a timely fashion, and many states had been failing in that regard. Because of these failures, many states were experiencing lawsuits. Mr. Wall related that in a presentation to the Senate Health and Social Services Standing Committee in February 2019, new findings, court orders, and rulings across different states had been revealed. Other states, through U.S. Department of Justice injunctions, had been appointed court monitors for their state-run hospitals, and DHSS had wanted to take this into account in a privatization study to bring it up to date. 4:28:03 PM REPRESENTATIVE FIELDS noted that in the 2017 feasibility study PCG did look at eight privatization options, and PCG's letter to the committee did address privatization in different states and proclaimed it a "disaster." 4:28:56 PM BESSE ODOM, Staff, Representative Zack Fields, Alaska State Legislature, on behalf of Representative Fields, prime sponsor, presented the Sectional Analysis for the proposed committee substitute (CS) for HB 86, labeled 31-LS0623\U, Marx, 3/26/19, [included in members' packets], which read as follows [original punctuation provided]: Section 1. This section amends AS 36.30.300, the statute on Single Source Procurements, to add a new subsection, (f) that prohibits creation of contracts relating to the ownership or management of an inpatient mental health treatment hospital established under AS 47.30.660 (c) (see Section 4) Section 2. This section amends AS 36.30.310, the statute on Emergency Procurement, to add a new subsection, (b) that prohibits the use of these statutes to create contracts relating to the ownership or management of an inpatient mental health treatment hospital established under AS 47.30.660 (c) (See Section 4) Section 3. This section amends AS 47.30.660 (b) to correspond with a new subsection in AS 47.30.660 (c), that is established in Section 4. Section 4. This section amends AS 47.30.660 to add a new subsection, (c), that requires the Department of Health and Social Services manage an "inpatient mental health treatment hospital" in the State. It prohibits the state from delegating or contracting for the ownership or management of such a facility. It also defines "inpatient mental health treatment hospital" for the purposes of this section. Section 5. This section amends the uncodified law of the State of Alaska to define the applicability of new subsections established in Section 1, Section 2, Section 3 and Section 4, to contracts entered into, amended, extended or renewed after the effective date of this Act. Section 6. This section amends the uncodified law of the State of Alaska to state if this Act takes effect after February 1st 2019, it is retroactive to February 1st 2019. Section 7. This section provides for an effective date; it would take effect immediately on passage under AS 01.10.070 (c). 4:31:52 PM CHAIR ZULKOSKY removed her objection to the [renewed] motion to adopt the proposed committee substitute (CS) for HB 86, Version 31-LS0623\U, Marx, 3/26/19, as the working draft. There being no further objection, Version U was [once again] before the committee. CHAIR ZULKOSKY announced that HB 86 would be held over.