The state wants to end an agreement with the local public entity responsible for administering mental health services in West Michigan and instead go directly through a private health provider, sparking concern of the “privatization overnight” of mental health care.

The Michigan Department of Health and Human Services announced June 28 it plans to end its contract with Lakeshore Regional Entity, the pre-paid inpatient plan (PIHP) covering the region containing Allegan, Ottawa, Kent, Muskegon, Oceana, Mason and Lake counties.

In mental health service delivery, the state contracts with regional, locally controlled public entities known as PIHPs to administer behavioral health care services. The PIHPs in turn contract with the local community mental health agencies to deliver those services.

In this instance, DHHS wants to contract directly with Beacon Health Options—a private provider LRE already works with—and essentially make it the PIHP for the western Michigan region until the state can establish a new PIHP.

But this would mark the first time DHHS would depart from the usual mental health service delivery model and go directly through a private provider. DHHS spokesperson Lynn Sutfin said the state intends to strike a deal in such a way to make Beacon like a PIHP for the region under federal regulations.

But Robert Sheehan, CEO of the Community Mental Health Association of Michigan, said the state’s intentions would essentially “move toward privatization overnight.”

Sutfin said the DHHS’ proposed deal with Beacon would “preserve public oversight” via a board set up by the state to oversee the contract and “ensure compliance and service delivery” and would include representation from the region’s CMHs, counties, advocates and consumers.

However, Sheehan said the proposed board would be more advisory in nature. Greg Hofman, CEO of the LRE, said a board chosen by the state and not by the locals is a pretty big difference from how things have been run.

The prospective end-around of an existing PIHP and through a private provider is roughly similar to the same issue CMHs and other mental health advocates had a few years ago with the initial proposal to blend physical and mental health services, also called the Section 298 initiative.

In the budget-crafting process for Fiscal Year 2017, language was inserted into boilerplate to send mental health Medicaid funding through the same private health plans in charge of providing physical health care, essentially taking the PIHPs out of the process.

There was enough uproar from CMHs and other mental health advocates to get the offending boilerplate removed from the budget, with the issue getting sent to a workgroup led by then-Lt. Gov. Brian Calley to work out a deal.

In the end, everyone agreed the funding streams for physical and mental health should remain separate, but there was not a consensus on the funding model.

In recent years, the Legislature had directed DHHS to implement pilot programs testing the integration of physical and mental health. Earlier this month, the DHHS announced the state and the pilot participants would hold off on implementing anything until Oct. 1, 2020 as further work is still needed in a number of areas.

The DHHS said it wants to cancel the contract with LRE for “many factors,” one being financial: The state said LRE has run five years of deficits and there has been a failure to address such deficits. And, the DHHS said there doesn’t appear to be a plan to cover the locals’ portion of a projected $16 million shortfall.

However, Sheehan said the funding problem is not isolated to just LRE, but that there’s a problem with underfunding across the entire mental health system. That was echoed by Hofman, who said it felt like the state is blaming the “funding issues and deficit issues . . . pretty squarely placed on our region.”

According to a press release issued today by Muskegon County—one of the counties covered in LRE’s region — out of the 10 PIHPs across the state, nine are projecting a funding deficit for FY 2019 and four PIHPs have no reserve funds to cover the anticipated shortfalls, including Lakeshore.

“Delays in payments from the state and inadequate funding of the PIHPs have forced county governments across the state, including Muskegon County, to loan millions of dollars” to their CMHs to cover expenses for programs that CMHs are required to provide, according to the Muskegon County press release, adding the county has had to loan $9 million to cover payments owed to HealthWest, the county’s CMH.

“It is unfair that Muskegon County taxpayers are asked to foot the bill for services the State of Michigan is legally required to pay for,” said HealthWest Executive Director Julia Rupp, in a statement.

Yet Sutfin said the “ongoing significant overspending and risk structure issue” in LRE and its member CMHs are “an outlier compared to the rest of the state.”

Sutfin said this is the “fourth year in a row” that LRE has been over budget, and LRE has been in “deficit years before other PIHPs were having issues and shows poor outcomes on metrics like inpatient utilization that are also indicators of not just financial but also operational mismanagement.”

The state cited LRE’s “performance issues despite multiple years of corrective action plans and weaker member outcomes relative to other regions on key metrics like inpatient hospitalization” as another reason for the move.

Sutfin said DHHS has asked for additional funding for the PIHPs for 2019, yet that and other steps being taken “are not sufficient to address Lakeshore’s longstanding problems.”

“Following many years of poor performance and financial mismanagement that stands out among PIHPs, we believe it is clear that LRE is not the right entity to deliver services for West Michigan residents in need,” said Robert Gordon, director of DHHS, in a statement today. “The success of our public system depends on effective management. With a new approach, building on Lakeshore’s recent work with Beacon, the region can achieve better outcomes for people while operating on a sustainable basis.”

While Hofman said there have been “things that we have to improve on and work on,” that is one of the reasons why Lakeshore is contracting with Beacon.

“I can’t tell you we’ve never had performance issues, but I can also tell you we’ve taken pretty assertive action to try and enhance our managed care oversight,” Hofman said.

Sheehan said the state told him they want three things out of this change: Greater involvement in management of LRE’s region, to change the make-up of the LRE board and to re-examine the LRE staff’s role.

But Sheehan said that could all be done without ending the contract and “destroying local governance.” He suggested a three-way deal with the state, LRE and Beacon.

The state gave LRE notice to end the contract by Oct. 1, and Sheehan said the state may not be able to legally exit the contract with LRE based on the specific cancellation clauses outlined in the agreement.

Asked if those claims would show up in court at some point, Sheehan said he is hoping it won’t have to go that far.

This story courtesy of MIRS, a Lansing-based news and information service.