LANSING, Mich. — The Michigan Department of Health and Human Services is planning to cancel its contract with the Lakeshore Regional Entity, an organization that manages Medicaid funding for mental health services in seven West Michigan counties.
LRE had a contract with MDHHS and worked with about 30,000 people annually who have mental illnesses, development disabilities and substance abuse disorders in Allegan, Kent, Lake, Mason, Muskegon, Oceana and Ottawa counties.
There are 10 prepaid inpatient health plan organizations in Michigan, including LRE, that are responsible for overseeing Medicaid funding to community mental health providers.
In 2017, LRE received just under $254 million in Medicaid funding.
The state announced on Friday that it issued LRE a contract cancellation notice and will establish a new health plan in the region. MDHHS said it notified LRE of its intent to cancel the contract on April 25.
Primarily, MDHHS said the reason to terminate the contact was financial issues.
"Five years of financial deficits, failure to address the deficits the lack of a current risk management strategy and the lack of a plan to cover their portion of a projected $16 million deficit," a news release said.
The state also said LRE has overspent its budget since 2015, and they would have to provide additional financial assistance for the third year in a row.
Eight of the 10 regional PIHPs ran deficits in fiscal year 2018, according to a May report by the Community Mental Health Association of Michigan. Officials at LRE say systemic state underfunding, not management weakness has led to the deficit.
"Over the course of time where there are flat or declining revenues, that will eventually impact what services are being provided, said Interim CEO Greg Hofman.
LRE is an outlier compared to the rest of the state's PIHPs, said Lynn Sutfin, spokesperson for MDHHS.
"There is no other PIHP that is experiencing these types of issues on a consistent basis," Sutfin said. "We have not been contacted by any other PIHPs about this."
The Grand Rapids Business Journal reported Robert Sheehan the CEO of Community Mental Health Association of Michigan said the pre-paid inpatient health plan (PIHP) program was overfunded the first two years, which is why the LRE has seen deficits in recent years.
“The state, in our view, has reneged on that contract. They haven't adequately funded it and then they blame Lakeshore for not fulfilling their obligations,” Sheehan told the Business Journal in May.
LRE has been in danger of losing the state's contract in the past. In 2018, they were given 30 days to fix a long list of issues. In the state health department's statement about the contract cancellation, they alluded to this, saying "The termination also reflects performance issues despite multiple years of corrective action plans and weaker member outcomes relative to other regions on key metrics like inpatient hospitalization."
MDHHS said they intend to keep the region's behavioral healthcare management intact once the contact with LRE expires on Sept. 30. They said a new temporary contract will be put in place until a new PIHP is developed.
On Monday, Network180, a community mental health organization in Kent County, issued a statement in response to the state's announcement.
"This decision by the State is ill-advised and effectively eliminates local control of an organization which has been jointly led by representatives from across Western Michigan," the statement said.
Network180 said the terminated contract could set the region back years as "the system reels from the substantial shift in direction triggered by this change."
Network180 serves over 17,000 people in Kent County. They said during this transitional period, they will continue to provide services to people in the area.
"Our commitment to this mission is absolute. The consumer should see no change in their services as we work with the state on this issue,” said Bill Riley, Network180’s Interim Executive Director.
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