[citation needed] In 1904, Morningside was awarded a contract from the U.S. Department of the Interior to care for people who were mentally ill and/or had developmental disabilities from the territory of Alaska, who would constitute the bulk of the hospital's patients throughout its tenure.

From other patient data, the Lost Alaskans Project found that initially miners and other white adults were sent to Morningside, but later on, it was more likely to be Alaska Natives and children who were sent.

[4] In 1955, Morningside came under attack after a bill was introduced by U.S. Rep. Edith Green (D) of Oregon, to transfer care of Alaskan patients to Alaska.

The Coes were accused of using hospital funds for personal expenses, including trips to South Africa and Mexico, a beach property in Gearhart and a ranch in Stanfield, Oregon.

The Coes were also accused of "outrageous abuse of privilege" including the use of patient labor for home and hospital building and maintenance, under the guise of occupational therapy.

The Alaska Mental Health Enabling Act was passed in 1956 and Alaskan patients began being moved from Morningside to new facilities in their home state.

Morningside was never able to recover from the loss of Alaskan patients, however, and attempts by Henry Coe to find a buyer who would continue to use the facilities for medical purposes were unsuccessful.