By K.D. Norris
As local health officials statewide seek to work with state officials to deal with funding shortfalls linked to state reimbursement for low income patients, Kent County’s community mental health provider, Network180, has begun belt tightening.
Having already made internal staffing reductions in reaction to a funding shortfall, Network180 executive director Scott Gilman said official notification began this week to its local partners that will have their funding reduced or eliminated — but that may be only the beginning of the local belt-tightening, he said.
“Even with the cuts, and we are currently looking at about $778K, we still have a $7 million deficit,” Gilman said to WKTV, adding that despite the funding deficit Network180 will be doing what it can to secure cash to make payments to providers. “We have to be really careful … We are the public safety net.”
(For more information on the issue, see previous WKTV stories on the announcement of the problem and more details of the problem.)
Meanwhile, the Michigan Department of Health and Human Services (MDHHS) maintains its existing funding contract with the local Lakeshore Regional Entity, through which state funds flow to the local Network180, is sound and needs no adjustment.
“Rates paid in Kent County have been certified as actuarially sound for the state by an independent actuary, Milliman (USA Inc.),” Bob Wheaton, MDHHS public information officer, said to WKTV. “MDHHS pays Lakeshore Regional Entity a monthly payment for each Medicaid and Healthy Michigan Plan eligible individual in their geographic region; those payments vary according to the number of people eligible in a given month. … As stated above, rates have been certified as actuarially sound, so there are no current plans to adjust the rates.”
The Lakeshore Regional Entity manages a contract with MDHHS to provide services to Kent, Allegan, Lake, Mason, Muskegon, Oceana, and Ottawa counties.
Combined, Network180 and a spectrum of independent groups provide support to persons with developmental disabilities, mental and behavioral health problems including addiction and substance use, and the family members who access services for those needing mental health assistance.
While the Lakeshore Regional Entity and other state mental health networks have been under financial strain for several reasons in recent years, the basic cause of the current funding shortfall, according to Gilman, is the difference in state funding between two Medicaid programs: the older, established Disabled, Aged and Blind (DAB) program and Michigan’s newer Healthy Michigan. Healthy Michigan provides $24 per person versus the $270 received from DAB, according to Gilman. That has lead to a $9.7 million shortfall for Network180.
“The issue is that thousands and thousands of people have transitioned, that makes the rate we are paid not longer valid,” Gilman said to WKTV.
Wheaton, with MDHHS, has slightly different numbers as to the funding differential — $271.13 and $39.05 — and also says the number of people who have transitioned between DAB and Healthy Michigan is not the source of the local provider problems.
“It is not correct that Healthy Michigan Plan beneficiaries are mostly people who used to receive DAB benefits,” Wheaton said. “Former DAB beneficiaries make up a small percentage of the 669,000 Healthy Michigan Plan enrollees.”
Wheaton was unable to give the specific number of people who transitioned from DAB. He did go into more detail on the state’s contract with the Lakeshore Regional Entity and other similar entities across the state.
“Lakeshore Regional Entity is responsible for providing all medically necessary specialty behavioral health services to Medicaid and Healthy Michigan Plan eligible individuals in their geographic region,” Wheaton said. “The contract between MDHHS is a shared risk contract between the Department and Lakeshore Regional Entity. An increase or decrease in the number of individuals eligible for Medicaid or Healthy Michigan is part of the risk component of the contract; additional numbers of eligible results in higher payments and reducing numbers of eligible results in reduced payments.
“The contract between MDHHS and Lakeshore Regional Entity is a shared risk contract. Lakeshore is solely responsible for the first five percent of costs above their revenue. The next five percent of costs above revenue are split equally with MDHHS and Lakeshore Regional Entity both responsible for 2.5%. Any costs exceeding 10 percent of revenue would be borne solely by MDHHS.”
But, Gilman points out, a big part of the current funding problem is that the Lakeshore Regional Entity has exhausted its reserves not only due to the DAB-Healthy Michigan issue but to a separate but recent state funding shortfall for autism-related services.
“The Department (MDHHS) and the legislature recognized the problem and fixed it for fiscal year 2018, but it resulted in a loss of savings last year fiscal (2017) of approximately $6 million,” Gilman said. “So the savings was depleted and then with the DAB issue on top of that the savings for the Lakeshore Regional Entity is depleted completely. The projection for the LRE is (that DAB-Healthy Michigan issue will cost) $10 million.”
The appropriateness of the current contract, and differences in opinions on the revenue shortfall, may well be the crux of the matter as discussions continue between local healthcare providers and state officials.
An independent study — funded by Lakeshore Regional Entity and eight of the state’s other nine Prepaid Inpatient Health Plans (PIHPs) — by the Grand Rapids based Rehmann Group estimated a $97 million state-wide revenue shortfall, and a $7.8 million loss for the Lakeshore Regional Entity.
