As state psychiatric hospital struggles, health department turns to private consultants

Montana has awarded a contract to a private consulting firm to oversee operations of seven public health facilities, a move that follows a substantial reorganization of the state health department and a compounding crisis that drove federal health authorities to cut off funding for the state’s adult psychiatric hospital in Warm Springs this month.

Department of Public Health and Human Services spokesperson Jon Ebelt said Monday the department finalized its contract with New York-based Alvarez & Marsal Public Sector Services LLC last week.

Ebelt directed Montana Free Press Tuesday to file a formal records request for the consultant’s final contract with the state. A request for proposals, posted on the state’s website for vendors last winter, said there was $2.2 million available for the contract through June 2023.

The decision to hire an outside company for management of state facilities comes after DPHHS Director Adam Meier reorganized the department last fall to bring all the state’s public health facilities under one division. It’s also a significant step in the Gianforte administration’s handling of the emergency conditions in Warm Springs, where employees and patients are feeling the strain of high staff turnover and the pandemic. The state was notified on Friday that the hospital would lose an average of $7 million annually in reimbursements for hospital services from the federal Medicaid and Medicare program after inspectors identified multiple patient deaths and injuries linked to inadequate safety protocols.

Even before the loss of federal funds, the state hospital has faced a series of difficulties. The hospital in Warm Springs serves some of the highest-need patients in the state and is not legally allowed to turn away admissions. The hospital has been operating with a roughly 40% employee vacancy rate for several months and is running approximately $7 million over budget for the current fiscal year, in part because staff turnover has made it more reliant on temporary staff paid higher rates.

Meier, in previous comments to lawmakers, has said he hopes the third-party contract can help the state navigate the pile-up of challenges and forecast how to manage the state’s facilities going forward.

“I’m not just looking to make some sort of a visible, high-profile move based on emotion,” Meier said in March. “[We] really want to make well-reasoned, strategic and data-driven decisions that recognize the true complexity of the issues and the broadness of those issues.”

Blake Emidy, who teaches in the University of Montana’s Department of Public Administration and Policy, said working with a third party can help state government bring experts with specific skill sets to the table. Appointing one state employee to manage seven different facilities might not be something that DPHHS can do now, he said. But asking a contractor to help steer significant parts of state government includes a level of risk.

“You’re essentially outsourcing your strategic planning process to a company that hopefully serves the state’s interests,” Emidy said. “But it does make me nervous whenever I hear that.”

SCOPE OF SERVICES

In a “scope of services” document posted on the state’s vendor portal as part of the department’s bidding process for the contract, DPHHS said it was seeking a private contractor “to provide temporary management in areas of high concern as it relates to recruitment, retention, and operational bandwidth.” Listed responsibilities of the contractor included “daily operations of its healthcare facilities, stabilizing the facility workforce, and providing comprehensive consulting services to establish long-term sustainable operation plans for the facilities.”

In addition to the Montana State Hospital and group homes in Warm Springs, the contract covers management of the Montana Chemical Dependency Center in Butte, the Montana Mental Health Nursing Care Center in Lewistown, the Intensive Behavior Center in Boulder, the Montana Veterans Home in Columbia Falls, the Eastern Montana Veterans’ Home in Glendive and the Southwest Montana Veterans’ Home in Butte.

DPHHS specified that the successful contractor would identify and retain an Executive Facilities Director to have direct oversight over all the listed facilities. That person is anticipated to be in the role for “a minimum” of 18 months, the document said, and “may be transitioned into an executive support role at the time the state … decides it is appropriate to hire a State-employed facilities director.”

Ebelt, the spokesperson for DPHHS, did not respond to an email before publication asking if Alvarez & Marsal had hired an executive facilities director for the role.

The state said the facilities director shall, among other qualifications, “have experience in management services for behavioral, long-term care, or skilled nursing facilities.” The state also said it “highly desired” a director with experience leading “turnaround efforts” at health facilities “to improve operations, efficiency, cost-effectiveness, and patient outcomes.”

THE HOSPITAL’S CHALLENGES

In its scope of services document, DPHHS outlined specific “challenges” for each of the state’s facilities. For the Montana State Hospital (MSH), which contains 270 beds between two campuses and additional group homes, the state listed specific hurdles it says have complicated operations.

“Workforce is a major challenge in the area, with MSH competing for clinical and direct care workers with the State Prison and three community hospitals,” the state said. The state also pointed to the facility’s “[h]ighly unionized workforce with most employees covered by five different union locals.”

Additional points of difficulty included the hospital’s inability to refuse admissions, and its obligation to serve both forensically and civilly committed patients — i.e., those who have been charged with criminal conduct and those who have not. The last named challenge focused on the hospital’s practice of serving “a small geropsychiatric population that has been denied entrance to other providers.”

The department’s assessment of challenges was largely echoed in a letter sent this week to Meier and Gov. Greg Gianforte’s staff by unions representing MSH employees. The labor groups listed wages, working conditions, reliance on contracted staffers and poor management as key issues fueling the hospital’s problems.

“These conditions have culminated in the worst staffing shortages, lowest morale, and most dangerous conditions in the history of MSH,” wrote representatives from the Montana Federation of Public Employees, the Montana Nurses Association, Teamsters Local #2 and IBEW Local #233. “Immediate steps must be taken to ensure patient and staff safety and we implore leadership to take action quickly to remedy the situation.”

Low staffing numbers affect other facilities covered by the new contract with Alvarez & Marsal. DPHHS said in its scope of services document that 30% of the positions at the Mental Health Nursing Care Center in Lewistown were unstaffed. The Veterans Home in Columbia Falls also had a 20% vacancy rate, putting a squeeze on how many people the facility can serve — the state said that home was “operating at 70% with 100+ individuals on the waiting list.”

In addition to leading staff recruitment efforts and analyzing pay rates, the state said, the contractor would be responsible for delivering monthly reports to the state on each facility and creating strategic plans “with recommendations, considerations, and options” for how state leadership can improve the use of facilities and patient outcomes.

While the state presented an extensive list of responsibilities for the successful contractor, it’s unclear how those were translated into concrete tasks for Alvarez & Marsal in the final contract. UM’s Emidy said the state’s ability to hold the consulting group accountable for delivering specific outcomes such as staff retention and patient safety depends on the precise language of the contract. Those provisions, including for the facilities director, can help ensure that the state’s money is well spent.

“If the idea was for this person to sort of act as sort of a superhero, to come in and allow there to be better conditions or more favorable conditions” going forward, Emidy said, “then there need to be accountability measures in that contract that can ensure that that’s actually what’s going to happen.”