Anoka-Metro Regional Treatment Center, the state’s second-largest psychiatric hospital, could lose millions of dollars in critical federal funding if it fails to correct long-standing threats to patient safety, according to a federal report.

State officials, already struggling to contain a surge in violence at the hospital, now must take extraordinary measures to satisfy federal rules and retain reimbursement by the federal agency that oversees public health insurance programs in Minnesota. The loss of such funding, about $3.5 million a year, could cripple a facility that has long treated some of the most psychiatrically complex people in the state.

After conducting onsite reviews of Anoka-Metro this summer, the Centers for Medicare and Medicaid Services (CMS) put Minnesota on notice that it was in “immediate jeopardy” of losing its ability to bill the federal government for services, according to a state memo issued last week. The state has been given until March 5 to complete the plan, according to a Dec. 11 letter from CMS.

Underscoring the urgency of the safety crisis, the state’s new Commissioner of Human Services, Emily Johnson Piper, has visited Anoka-Metro twice since her appointment in early December — even meeting with frustrated workers at the hospital on Christmas Day.

“Changes need to start now, and the solutions will require both short and long term actions,” Piper wrote in a Dec. 30 memo to employees.

Though patient safety has long been a concern at Anoka-Metro, hospital staff say conditions have deteriorated since the Legislature passed a law two years ago known as the “48-hour rule.” In an effort to keep people with mental illnesses out of county jails after being arrested, the law required state psychiatric facilities to admit jail inmates within 48 hours after being committed as mentally ill by a judge.

The law forced Anoka-Metro to admit certain jail inmates ahead of patients in private hospitals, regardless of need. Many inmates were sent directly from jails to Anoka-Metro without undergoing psychiatric assessments or having their medications reviewed, resulting in a surge of violence and unruly behavior, hospital staff said.

Last year, the state recorded 48 aggression-related injuries involving 28 patients at Anoka-Metro. That’s up from 38 such injuries involving 24 patients in 2013, when the 48-hour rule took effect.

In an incident early this year, a male patient grabbed a housekeeper by her arms, threw her against the wall and started kissing and licking her face. When police arrived, the attacker was still pacing the hallway. Another male patient was allowed to masturbate in front of female patients and nurses, staff said.

The situation has become so dire that the union representing workers at the facility has suggested bringing in armed security guards.

“The patients run the facility now, because they get away with practically anything,” said Jackie Spanjers, a nurse at Anoka-Metro and president of AFSCME Local 1307, which represents about 300 workers at the hospital. “People who work [at the hospital] have had enough.”

Not all of Anoka-Metro’s problems stem from the 48-hour rule. Like the larger state mental hospital in St. Peter, Anoka-Metro has been forced to keep patients longer because of bottlenecks throughout the state’s mental health system. Of the 103 patients currently housed at Anoka-Metro, 45 percent no longer meet the hospital-level criteria for care, but they are stuck at the hospital because they have nowhere else to go.

“These are systemic issues that need systemic solutions,” Piper said.

Even so, the assaults at Anoka-Metro cause cascading problems for state officials. When they recruit more staff to improve hospital conditions, the new employees leave once they witness the violence and unruly conditions firsthand. Anoka-Metro has hired 42 staff since September, yet because of high turnover, the hospital still has 43 vacant positions.

“Our hiring cannot keep up with the vacancy rate,” Piper said.

With so many vacancies, employees on the payroll are often forced to work back-to-back shifts, logging huge amounts of overtime. In December alone, staff at the hospital worked more than 4,500 hours of overtime, the union estimates. Some hospital employees are working 70 hours or more a week, sleeping in their cars in the hospital’s parking lot between shifts, union officials said.

“We are in a really challenging situation … we are being forced to mandate overtime for our staff, and staff are leaving because they are being mandated to work so much overtime,” Piper said. “Our employees are tired and frustrated.”

Piper said her agency is working with federal regulators on details of their plan to improve conditions at the hospital. The first steps are likely to include hiring outside experts to address concerns about nursing services, patient rights and other quality assurance concerns raised by CMS.

Though a cutoff in federal funding is unlikely, Piper said she is taking the warning from CMS seriously. Last year, Medicaid and Medicare payments accounted for about 10 percent of the hospital’s operating budget of $35.3 million. “I am very concerned about it, and that’s why I am trying to do everything we can to stop [defunding] from happening,” Piper said.