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Lakeshore CMH system under fire from state

By Jake Allen/The Holland Sentinel • Mar 30, 2018 at 1:30 PM

The state of Michigan is less than 30 days away from canceling a contract and pulling funding from the Lakeshore Regional Entity, which distributes Medicaid dollars to five community mental health organizations across West Michigan.

Between those organizations, the counties of Ottawa, Allegan, Kent, Lake, Mason, Muskegon and Oceana are served. For the month of February, the Lakeshore Regional Entity (LRE) received Medicaid funding to provide services to 262,592 people through its community mental health organizations.

In a letter dated March 22, the Michigan Department of Health and Human Services provided a 30-day written notice of intent to cancel the contract with LRE for “material default.”

If the LRE does not come up with a plan to correct a number of concerns outlined in the letter by April 22, its contract with the state will be terminated, effective Sept. 30.

The letter includes five main points of concern from the state agency: a lack of an approved risk management strategy; the need for structural change within the governance of the LRE; inconsistencies of managed care functions within the region; data reporting inaccuracies; and the need to continue ongoing communication between the region and the state.

Lynn Sutfin, a public information officer for the MDHHS, said if the contract is canceled, Medicaid funding would continue to be provided to the community mental health organizations within the region, but not through the LRE. At some point, a new entity would take over responsibilities of the LRE if the contract is canceled, she said. 

This action would not put consumer services immediately at risk, according to Sutfin.

“Consumer services will continue through the same (community mental health organizations) and providers that are providing the services now,” she said.

Allen Jansen, a former LRE board member representing Kent County, this week was named transition manager of the entity by the board.

“It was expected,” Jansen said of the 30-day written notice from the state. “We have been in conversations with them for a while about concerns outlined in the letter.”

According to the letter, the state contracted with Beacon Health Services in 2015 to conduct a special evaluation of the LRE due to concerns with managed care functions and contractual responsibilities.

The LRE’s risk management strategy is a top concern of the state. The region lacks sufficient internal funds to cover its share of financial risk for fiscal year 2018.

When formed in 2014, the LRE had reserves of $11.3 million in an internal service fund and $8.2 million of Medicaid savings. Since then, reserves have dwindled and the LRE had to use the remainder of its reserve fund to make up for budget deficits from fiscal year 2017.

Jeffrey Brown, CEO-in-transition of the LRE, previously told The Sentinel that his organization had to dip into reserves to cover budget deficits because of reductions in Medicaid funding from the state. Medicaid funding is provided to the LRE by the MDHHS.

In 2017, revenue coming from Medicaid dollars significantly decreased for many community mental health programs as certain consumers were enrolling into different funding groups, Brown said. These consumers were enrolling in the Healthy Michigan Plan, he said, because it takes less time and paperwork to receive benefits compared to the Disabled, Aged and Blind category, which receives more funding per month per consumer.

Consumers received the same benefits and services, while community mental health organizations received less funding, Brown explained.

Adding to the issue, there has not been any decrease in expenditures for the LRE, and community mental health organizations across the region are servicing the same amount of people or more since the Healthy Michigan Plan was implemented in 2013, Brown said.

Lynda Zeller, who serves as deputy director for Behavioral Health and Developmental Disabilities at the MDHHS, previously told The Sentinel that her staff was aware of decreasing Medicaid revenues, but did not attribute the issue to consumers opting to enroll in lower-funded Medicaid categories. She said an improving state economy was the reason fewer consumers overall were enrolling in Medicaid.

The LRE did submit a risk-management plan for fiscal year 2018, which included pulling necessary financial resources from the individual community health organizations within the group.

When asked by the MDHHS, these organizations said they were either “unwilling or unable” to commit to covering the region’s financial risk from its own resources.

Mark Witte, executive director of Allegan County Community Mental Health, said it’s not fair for individual community mental health organizations to cover financial risk for the LRE.

“It doesn’t make sense to expect that those responsibilities to be covered by the local government,” he said. “It’s a federal and state benefit, not a local benefit.”

According to the state’s letter, the LRE will have to submit a revised risk management strategy by April 6. A final risk management plan will have to be approved by the MDHHS by April 22. If the LRE fails to meet either of these deadlines, its contract with the MDHHS will be canceled.

Lynne Doyle, executive director of Ottawa County Community Mental Health, said she is working with the LRE to draft an adequate plan to address all of the state agency’s concerns and keep the contract intact. In the meantime, Doyle said the goal is to ensure the situation has minimal impact on consumers of mental health services in the region.

“Certainly, managing the dollars is something everyone should be concerned about,” she said. “I really think we will be able to develop a response that will satisfy the needs of the department.”

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