Blog Archives

The Merger of the MCOs!

Breaking News: From DHHS

Raleigh, NC

State health officials announced today that the state- and Medicaid-funded Local Management Entities/Managed Care Organizations providing mental health, intellectual and developmental disability and substance use services to North Carolina citizens will be consolidating into four service regions across the state.

Further consolidation will improve quality of services, accessibility, accountability and long-term sustainability.

“I’m a strong believer in LME/MCOs,” said Rick Brajer, Secretary of the Department of Health and Human Services. “These populations deserve dedicated management.”

The newly consolidated service areas are:

  • North Central Region: CenterPoint Human Services and Cardinal Innovations Healthcare Solutions will be merging
  • South Central Region: Sandhills Center and Alliance Behavioral Healthcare will be merging
  • Eastern Region: Eastpointe and Trillium Health Resources will be merging
  • Western Region: Partners Behavioral Health Management and Smoky Mountain LME/MCO will be merging

newmco

A Brave New World With Mergers and Acquisitions of Behavioral Health Care Providers: Not Always Happily Ever After!

Unintentionally, I misrepresented the Benchmark panel discussion on which I appeared last Thursday. See blog.  I thought that I would be sitting on the panel along with MCO representatives. I honestly cannot tell you from where I got this idea. Maybe it was a subconscious desire. Regardless, the panel discussion was about merges and acquisitions among behavioral health care providers. While the subject of managed care organizations (MCOs) did come up, managed care was not the primary subject.  And the only MCO representative that I saw was Smokey Mountain’s attorney.

panelpic2

Nevertheless, the panel discussion went fantastic and was informative for those who attended.  I will summarize the panel discussion here for those who could not attend.  First, if you are a behavioral health care provider in NC, joining an association, such as Benchmarks, is an asset.  Not only do you get the benefit of attending educational programs, but you also have the opportunity to meet other behavioral health care providers across the state at the events.  You never know the potential relationships that could be created by attending a Benchmark event.

Going back to the panel…

There were 5 people sitting on the panel.  Besides myself, the panel consisted of Robert Shaw, Senior Counsel with me at Gordon & Rees, Frank Williams, a broker who facilitates mergers and acquisitions for health care providers, and two CEOs of health care providers who have undergone successful mergers and/or acquisitions.

The general consensus of the panel was that the future of behavioral health care will be larger companies which offer multiple services, instead of mom and pop shops that provide few types of services.  The panel was intended to bring potential mergers/acquisitions together in one venue and to educate the providers on “Do’s and Don’ts of Merging/Acquiring,” which is summarized below.

This consensus is generally derived from the MCO atmosphere here in NC.  Right or wrong, the MCOs are operating in closed networks and have the financial incentives to save money by contracting with fewer providers and decreasing authorizations for Medicaid services requested by Medicaid recipients.  See blog. And blog. And blog.

The MCOs seem to be terminating or refusing to contract with smaller health care providers, which, in turn, incentivize small health care providers to join other providers in order to grow its footprint.

Merging or acquiring a company is similar to partnering with another person in marriage.  Both parties have to familiarize themselves with the other’s habits, expectations, learn the other’s faults/liabilities, and, ultimately, have to work together on projects, issues and other matters.  And as we can discern from today’s high divorce rate, not everyone lives happily ever after.

Some marriages, as well as mergers, simply do not work.  Others live happily ever after.

The two provider panelists shared successful merger/acquisition stories.  Both shared experiences in creating new and larger entities effectively.  Both panelists were happy with the mergers/acquisitions and hopeful as to what the future will bring both new entities.

But all mergers and acquisitions do not have happy endings.  The two entities do not always live happily ever after.

Robert and I shared a story of an acquisition from Hades. There is no other way to describe the outcome of the acquisition.

The story of these two companies begins with the fact that the companies leased space in the same building.  One company was on floor 2 and the other was on floor 1.  The staff knew each other in passing.

The problem with the merger of these companies stemmed from a difference in culture.

Theoretically, the two companies did everything right.  The owner of the company getting acquired agreed to stay and work for the company buying it in order to ensure consistency. The buying company agreed to hire all the seller’s employees at their current salaries.  The acquisition was to be seamless.

The problems arose when news of the acquisition passed to the employees.  There was genuine discontentment with the arrangement.  The employees from the seller reacted with hostility and resentment.  Prior to the acquisition, the seller was fairly lax in regulatory compliance.  For example, if a service note was not drafted and filed the date of services….eh?…not that big of a deal.  Well, the buyer had strict document compliance rules for daily service notes.  Anytime more stringent policies are enacted on employees, there is sure to be a negative reaction.  The buyer also expected the seller’s employees to provide more services for the same salary received before the acquisition.

There was no legal or logical step omitted in the acquisition of the one company to the other.  On paper, the acquisition should have been successful.  But, then, personalities got in the way of happily ever after.

The other panelists offered great advice as to mergers and acquisitions, both from the providers’ view and a broker’s view.  I have compiled the advice that I recall below.  I have taken the liberty to provide analogous dating advice, as well, since marriages and mergers/acquisitions are so similar.  Hope it helps!!

Do’s and Don’ts of Mergers/Acquisitions

  • Do not let the secret out.

One provider panelist explained that if your employees learn of a possible merger/acquisition, they will kill the deal. Confide only in the CEO of the firm of which you are looking to merge, acquire, or sell.  Those dating: Never tell other that you want to marry (until the appropriate time).

  • Look outside your catchment area.

The reason companies merge/acquire is to grow.  Think of potential companies outside your own catchment area to grow even more.  For example, if you are in Alliance’s catchment area, think of merging with a company in ECBH/Eastpointe’s area.  Those dating: Have you exhausted your resources? Think of others, such as church, Match.com, etc.

  • Do your due diligence

This is a task as important as the oxygen you breath.  The last thing that you want is to acquire or merge with a company that owes $500,000 in employment taxes or an alleged overpayment.  Part of due diligence will be to check the credentials of every single staff member.  If someone is acting in the role of a LCAS, ensure the person is appropriately licensed.  Those dating: Is he/she employed? Have significant debt?

  • Review the other company’s documentation policies

This could be lumped into the due diligence section, but I think its importance is worth emphasizing.  Whatever service(s) the other company provides, what are its policies as to documentation? Does the provider have a computer program to maintain electronic health records (EHR)? Does it employ paper copies? Does the other company require the providers to submit daily service notes? Look at your own documentation policies.  Contemplate whether your own documentation policies would mesh well with the other company’s policies.  Those dating: How does your potential partner document spending, taxes, and calendared events?

  • Analyze both company’s corporate culture

Merging or acquiring a company is difficult in many ways, but it’s also hard on staff.  Imagine walking into work one day and you notice that the staff had doubled…or tripled.  And you and your colleagues are being told what to do by someone you never met.  This is not an uncommon occurrence with mergers and acquisitions.  Sometimes accepting change of supervision or team members can be a bitter pill to swallow.  How will you work through employee issues?  Personality clashes?  Ego fights?  Those dating: Analyze both person’s personalities, dispute resolutions, religion and beliefs.  Do you like his/her friends?

In addition to the potential conflicts with employees that stay with the merged entity, you also need to contemplate which employees, if any, may, potentially leave the new entity.  Disgruntled employees are a liability.  Those dating: How does he/she treat ex-partners?

  • Research the company’s relationship with its MCO

In our current MCO atmosphere, it is imperative to know, before merging or acquiring, whether the company has a good relationship with its MCO.  What if you acquire the company and its MCO refuses to continue to contract with the new entity.  Knowing the company’s relationship with the MCO is not an absolute.  As in, the company may believe it to have a good relationship with the MCO, while, in truth, it does not.  Ask to review some correspondence between the company and the MCO to discern the tone of the communications.  Those dating: How does he/she treat his/her mother/father?

  • Surround yourself with knowledge

Have a broker and an attorney with expertise in Medicaid.  Those dating: What do your friends think?

To watch the video of me speaking as a panelist for Benchmark, click here.  Scroll down until you see the video with Robert and me.

Otherwise, I hope you live happily ever after!

An Ominous Cloud Looms Over NC’s Mental Health System! And Radix Malorum Est Cupiditas!

“There is an ominous cloud over North Carolina’s mental health care system that many fear is limiting access to care and treatment by those who need it the most,” wrote Jason deBruyn in Friday’s Triangle Business Journal article titled, “Mental Health Block.”

TBJ Pic

(Thanks, Jason, for the nice spread:) )

Two phrases that can never be good when linked together: “an ominous cloud” and “mental health care system.”  Upon reading “ominous cloud,” I get this dark (dare I say ominous?), dreary outlook on whatever the “ominous cloud” is  over.  Then to discover that the “ominous cloud” is over our mental health system here in NC, I get goosebumps and a pit in my stomach (and a bit of disgust at the sheer ineptness of the Department of Health and Human Services (DHHS)).

What is causing that “ominous cloud” over our mental health system? Well, according to Jason, the managed care organizations (MCOs) that were implemented across the state only this past year.

What are these MCOs you talk of?

The MCOs were established to manage the Medicaid mental health, developmentally disabled, and substance abuse services in NC.  If you want mental health services or are attempting to get prior authorization on behalf of a Medicaid recipient, then the buck stops with the MCO.  See my blog: “NC MCOs: The Judge, Jury and Executioner.” Or “NC MCOs: Accountability Must Be Somewhere!”

Here is a list of the MCOs along with the “correct toll free number” in case you wanted it:

LME-MCO CORRECT TOLL FREE NUMBER
Alliance Behavioral Health 1-800-510-9132
Cardinal Innovations Healthcare Solutions 1-800-939-5911
CenterPoint Human Services 1-888-581-9988
CoastalCare 1-855-250-1539
East Carolina Behavioral Health (ECBH) 1-877-685-2415
EastPointe 1-800-513-4002
MeckLINK 1-877-700-3001
Partners Behavioral Health Management 1-888-235-4673
Sandhills Center 1-800-256-2452
Smoky Mountain Center 1-800-849-6127
Western Highlands Network 1-800-951-3792

Going back to the “ominous cloud…”

Jason writes further that “under the state’s new payment system, MCOs have the unbridled authority to terminate providers in an attempt to keep costs down – with little accountability for the process.”

The only word I would change is “little” to “no.” But, then, maybe Jason was referring to the little accountability as arising from advocates such as myself who are fighting for the providers.

Have I not been saying this all along?  The MCOs can terminate providers with little (or no) accountability!! To save money!!

And who suffers?? The providers, yes.  And the Medicaid recipients!!   “Patients aren’t going to know where to go to access services,” Goldston says. “Those patients are going to suffer.”

Why? Why are these MCOs terminating providers and denying services to our most-needy population??  Have they no heart? No conscience?

One word answers all these questions:

Money

Radix malorum est cupiditas, meaning, in Latin, greed is the root of all evil.  In the Bible, 1 Timothy 6:10, starts “For the love of money is the root of all kinds of evil…”

“MCOs register as not-for-profit organizations and receive fixed amounts of money from the state, called their “capitation.” Unlike physical health care providers, when Medicaid patients receive mental health services, their providers bill these MCOs instead of the N.C. Department of Health and Human Services. If an MCO doesn’t spend up to its capitation level, it keeps the remainder. And therein lies the problem, say provider advocates,” writes Jason. (emphasis added).

And he is absolutely correct!

What was the MCOs’ response?

“The myth that we are trying to eliminate every provider in our network is not an accurate statement,” says Rob Robinson, chief operating officer for Alliance Behavioral Healthcare, the MCO that covers Wake, Durham, Johnston and Cumberland counties.

Mr. Robinson’s comment, however, is incorrect on, at least, two fronts: (1) the “myth” is not that the MCOs are trying to eliminate every provider; and (2) it is no myth.  The MCOs are, without question, terminating as many providers from the networks as possible without the appearance that services will not get rendered.  The MCOs need a certain number…just to appear that services are not getting cut.

So what is that magic number?

A client informed me a couple of months ago that Smokey Mountain Center (SMC) told him that SMC wants two providers per service per county.  If correct, hundreds and hundreds of providers will be put out of business.  And, hello…I thought the current Republican administration was pro small business!

Alliance has chopped its provider network recently.

Just recently, Alliance called for Requests for Proposals (RFPs) from all contracted providers within its catchment area.  Kinda like a tryout.  When I was in college at NCSU, I was on the cheerleading team.  I will never forget being a freshman and learning these routines that I would have to perform in front of a judge’s panel.  Literally hundreds of young men and women were all learning the same routine…all to perform for the tryouts.  In the middle of learning the routine with hundreds of people, I looked around and realized that only 8 girls and 8 guys would be chosen.  Which meant 90% of the people there would not be on the team.  I tried to remove the thought from my head.

When the D-Day arrived, there was simply a white piece of paper taped to the gymnasium’s window on the outside for anyone to see.  I had to walk up to the piece of paper, shuffle through the small crowd surrounding it, ignore others’ tears and congratulations, and look for my name.

Holding my breath, I searched for “Knicole Carson” (my maiden name). And I did not see it.  For a moment, I was crushed.  Then I saw “Nicole Carson.”  My name was on there, just misspelled.

What does college cheerleading tryouts have to do with NC Medicaid?

Alliance’s RFPs created a provider tryout.  Hundreds submitted.  Only a few were chosen.  Those few chosen were written on a piece of paper for all to see, and providers had to scan the list to see if they were chosen.

For Wake county, Alliance decided to award a 1 year contract for community support team (CST) to only 6 companies.  For the entire county of Wake, Alliance has determined that only 6 companies may provide CST to Medicaid recipients (with a 1 year contract).  Only 6 names were on the list.

For Durham county, Alliance decided to award a 1 year contract for CST to only 5 companies.  For the entire county of Durham, Alliance has determined that only 5 companies may provide CST (with a 1 year contract).  Only 5 names were on the list.

Now let’s go back to Mr. Robinson’s comment:

“The myth that we are trying to eliminate every provider in our network is not an accurate statement,” says Rob Robinson, chief operating officer for Alliance Behavioral Healthcare, the MCO that covers Wake, Durham, Johnston and Cumberland counties.

You are right, Mr. Robinson, you aren’t trying to eliminate “every provider.”  Just the ones that Alliance, in its subjective discretion, doesn’t want to deal with (I don’t care that I ended the sentence in a preposition).

Oh, and what about our State Plan?

Our State of North Carolina MH/DD/SA  Health Plan Renewal, states, in pertinent part, as an answer regarding concerns as to provider choice with MCOs, “network capacity studies and gap analyses were conducted by Cardinal Innovations Healthcare Solutions (CIHS) annually and prior to expansion the coverage area, and by the new PIHPs prior to start-up, as required. Access and provider choice appear to be as good as or better than it was prior to waiver implementation, although there is room for improvement in several areas.” (emphasis added).

Obviously, that was written a while ago and Cardinal, an MCO, was the entity conducting the study (cough, cough…bias…cough).  Regardless, we told the federal government that “provider choice appears to be as good or better than it was prior implementation.”  Are you kidding me???

How many providers didn’t make Alliance’s cut?

How many providers have MeckLINK terminated? Smokey Mountain?

Jason deBruyn was dead on when he said, “There is an ominous cloud over North Carolina’s mental health care system that many fear is limiting access to care and treatment by those who need it the most.”

The Future of NC Medicaid Behavioral Health: Will We Soon Be Down to Eight MCOs? Two More Monkeys Jumping off the Bed?!

Remember the song “10 Little Monkeys Jumping on the Bed?”

Ten little monkeys jumping on the bed.
One fell off and broke his head.
Mama called the doctor and the doctor said,
“No more monkeys jumping on the bed!”

Nine…Eight…Seven…Six…Five…Four…Three…

I used to love that song as a kid.  I have two siblings and I distinctly remember our jumping-on-the-bed-game-while-trying-to-push-the-others-off-game.  Many times we would sing “10 Little Monkeys Jumping on the Bed,” while trying to push our siblings off the bed.

Here in North Carolina we started with 11 managed care organizations (MCOs) across NC to manage behavioral health care for Medicaid recipients.

MCO map

See the map? We began with 11 MCOs.  Today, we have 10 (Western Highlands Network (WHN) is no more) with strong possibilities of reducing the number of MCOs to 9…and then 8.

Rumor has it that Centerpoint Human Services (Centerpoint) and MeckLINK Behavioral Healthcare (MeckLINK) are on the brink of nonexistence.  “One fell off and broke his head.”

Centerpoint and MeckLINK are, however, moving forward to nonexistence in entirely different ways.  Centerpoint is looking to merge with two MCOs.  Both Partners Behavioral Health Management  (Partners) and Smoky Mountain Center (SMC) are getting updates as to Centerpoint’s merger plans.  Will Centerpoint break up its catchment area and merge with 2 MCOs? Or are those 2 MCOs the contenders?  Not sure. But either way, Centerpoint will be eliminated in the near future.

If SMC absorbed Centerpoint entirely, SMC will be HUGE!!

SMC began with Alexander, Alleghany, Ashe, Avery, Caldwell, Cherokee, Clay, Graham, Haywood, Jackson, Macon, McDowell, Swain, Watauga and Wilkes Counties (15 counties).  Then SMC ate up WHN and acquired Buncombe, Henderson, Madison, Mitchell, Polk, Rutherford, Transylvania and Yancey counties. (15 + 8 = 23 counties).

Centerpoint manages behavioral health care for Forsyth, Stokes, Davie and Rockingham counties.

(15 + 8 + 5 = 28 counties).  Over 1/4 of NC’s counties.  The MCO map would be dominated by dark blue, and, as North Carolinians, let me ask you, do we want our state dominated by dark blue? What about Wolfpack red? 

Here is the MCO map, as of October 2013:

October 2013 MCOs

Partners’ catchment area is light yellow and includes Burke, Catawba, Cleveland, Gaston, Iredell, Lincoln, Surry, and Yadkin counties (all in the west and bordering SMC’s catchment area).  If SMC continues to expand, like Stephen King’s “The Blob,” SMC may ooze into Partners. 

Unlike Centerpoint, at least on paper, MeckLINK is not willingly jumping off the bed and breaking its head.  MeckLINK is the only MCO run by a county (Mecklenburg county).  See the lone red county? In May, state lawmakers passed a bill that says a county can’t run its own organization.  Mecklenburg County Commissioners voted last Tuesday to work out a deal with Cardinal Innovations Healthcare Solutions (Cardinal) or dissolve MeckLINK when its contract expires next April.

Cardinal’s catchment area is purple and includes 15 counties.

But do not underestimate the power of usurping MeckLINK, even though it is only one county.  Mecklenburg county is one of NC’s most populous counties, which means it receives a hefty Medicaid budget.

Ten little MCOs jumping on our heads
One fell off; its assets in the reds,
DMA called the doctor and the doctor said
No more MCOs jumping on our heads.
 
Nine little MCOs jumping on our heads…

So which MCOs will survive? How soon until we only have 8 MCOs? Will all the MCOs be replaced with out-of-state, huge MCOs?  Will the future MCOs manage all Medicaid services?  Will there be carve-outs?  These are unanswered questions as we embark into the future of NC Medicaid managed care. 

One thing we do know is we started with 11 MCOs (all of whom were deemed solvent and competent by a state contractor) and, not even 1 year later, WHN falls…MeckLINK falls…and Centerpoint falls.

11…10…9…8…

Maybe the 11 MCOs were not solvent and competent in the first place.  Why else would the MCOs keep jumping off and breaking their heads?  Silly monkeys.

NC Taxpayers Demand Accountability as to Behavioral Health Care Medicaid Funds (And That Medicaid Recipients Reap the Benefit of Such Funds).

I ask you, why do employees of an MCO receive better health care plans with Medicaid dollars than a Medicaid recipient with Medicaid dollars?

The State of North Carolina is accountable to me, and every taxpaying citizen, for taxes spent. 

Similarly, executives of a corporation owe a duty to shareholders to account for stock crashing.  Remember Enron? What a disaster!

Enron has been dubbed the biggest audit failure.  Enron shareholders filed a $40 billion law suit after the company’s stock price, which achieved a high of US$38.44 per share in mid-2000, plummeted to less than $1 by the end of November 2001.  And why did the shareholders sue?  Because they lost money?  Well, yes, but it is much more.  The reason the shareholders lost money is because the executives of Enron owed a duty to the shareholders, basically, to be accountable to report correct data on financials.

Apparently, Enron’s financial statements were complex and confusing to shareholders.  It has been said that from 1997 until its demise, “the primary motivations for Enron’s accounting and financial transactions seem to have been to keep reported income and reported cash flow up, asset values inflated, and liabilities off the books.” Bodurtha, James N., Jr. (Spring 2003). “Unfair Values” – Enron’s Shell Game. Washington, D.C.: McDonough School of Business. p. 2. CiteSeerX: 10.1.1.126.7560.  Arthur Anderson was the audit and accounting firm, which also went belly up due to Enron.  But Enron’s financials were false and, ultimately, led to numerous convictions.

Now, I am certainly NOT comparing the State of North Carolina to Enron.  I am merely providing an example of a possible result when accountability is ignored.  When the fiduciary duty owed is not fulfilled.

Not completely unlike corporate financials, North Carolina creates a budget every fiscal year (yeah, I get it, not completely similar either). 

When the Medicaid budget is created each year, which is more than $18 billion, I, as a taxpayer, expect those Medicaid dollars allocated to the Medicaid budget to be spent for the benefit of Medicaid recipients.  Medicaid money should be spent on Medicaid providers, who service Medicaid recipients.  I expect that administration costs be kept at a minimum.  I expect that Medicaid providers receive timely, prompt payments, and I expect that Medicaid recipients receive good, quality, and continuing health care.

I do not expect the State to cover the health care for everyone.  Not even most people.  I understand that funds are not limitless in government and that there must be limitations on spending, otherwise our great State will become another Detroit. 

However, I do expect that the funds that ARE allocated to Medicaid to BE allocated for the benefit of the Medicaid recipients. Period.

In the past year, we have implemented the Managed Care Organizations (MCOs) to manage Medicaid behavioral health care.  In theory, the MCOs were implemented to cut down the administrative costs for DHHS.  Basically…outsourcing.  In theory, it sounds good.

DHHS’ administration costs are out-of-control.  After the January 2013 Performance Audit on DHHS, State Auditor Beth Wood said North Carolina’s administrative costs are 38 percent higher than the average of nine states because of “structural flaws” in how DHHS operates the Medicaid program.

So, in response to these high administrative costs (among other things), we took the administration of behavioral health from DHHS and delegated that administration to the MCOs.  With the number of employees in Health and Human Services over 17,000 employees and the average MCO employing only a couple hundred, it seems, on its face, to be a good idea.  Surely these MCOs can and will run more efficiently that the government! Right?

(The other assumption in outsourcing is that DHHS administrative costs would actually decrease due to the MCOs, but I have seen no indication of this). I have seen no indication of the “structural flaws” in how DHHS operates the Medicaid program being fixed.

According to the website indeed.com, the average salary for a person working at NC DHHS is $47,000.  In addition to the average salary, you also need to contemplate that employees of NC DHHS qualify for basic health benefits at no cost.  However, if a DHHS employee wants to have his or her spouse covered or an insurance plan above the “basic plan,” there is a nominal cost. (The standard plan (above a basic plan) for an employee is still low, only $22.76/mo).

Health insurance premiums are a HUGE expense.  So when calculating salaries, if an employee receives free health care, in essence, the salary is higher…due to not having to pay premiums every month.  Health care premiums add up.  For example, I pay $750.00 monthly for health insurance for me and my husband. That’s $9000/year! Yikes!! (No, for real, yikes!!)  If Williams Mullen paid my health insurance premium, in essence, my salary would increase by $9000/year.

Including health care and trying to underestimate instead of overestimate, I calculate the average salary, including health care premiums, at NC DHHS at about $52,000-ish.

Since the MCOs went “live,” the Medicaid tax dollars that would have been held by NC DHHS, are now divvied up and bestowed upon each MCO.  Today, we have 11 MCOs, but soon Smokey Mountain Center will take over Western Highlands, bringing us to 10 MCOs.  Plus, according to a recent article published, “Frustrations With MeckLINK Grow as Denials for Care Increases,” MeckLINK is financially unstable.  We may soon be down to 9.  But, as for now, 11 MCOs receive the federal and state tax dollars for Medicaid behavioral health.

Key point? Tax dollars.

CenterPoint Human Services (CenterPoint), one of the MCOs, staffs approximately 200 employees (about 19 part-time). Out of the 200-ish employees, 41 employees receive salaries over $75,000 (including health care).  Almost 1/4 of CenterPoint’s employees have salaries OVER $75,000. 

145 employees receive salaries over the NC DHHS average salary: $52,000. 

Let’s talk about the price of health care.  Remember, these are OUR tax dollars.

Employee A has a base salary of $45,500.  But A received $16,965 in medical contribution.  Remember, my insurance for me and my husband costs $9,000/year.  For $16,965, how big of a family are we taxpayers covering?

Employee B has a base salary of $43,500. (Now, let me preface this example with…I hope…I pray…that this one example is a typo on CenterPoint’s financials, because, if not, this is outrageous!).  According to CenterPoint’s financials, Employee B gets $84,658 in medical contributions. Including FICA contribution, dental, short and long-term disability, 401K, etc., Employee B receives $136,716 in total compensation.  Admittedly, I have no way to confirm whether this is a typo….and, I must admit, I really hope it is. Regardless, according to CenterPoint’s financials Employee B receives $84,658 in medical contributions for a total of $136,716 total compensation, but with a base pay of only $43,500.

But here it is in black and white (and yellow) (toward the bottom):

Health Insurance

Three other employees, C, D, and E, have base salaries of $49,750, $49,000, and $47,100, respectively, and medical contributions of $12,007 each.  And here I thought MY health insurance was expensive…

The number $12,007 is popular.  12 employees in total receive $12,007 in medical contributions for a total of $144,084 (for 12 employees).

Another employee gets $16,965 in medical contribution with a base salary of $47,100.

Now let’s talk about the Medicaid recipients’ behavioral health care services.

Since the MCOs went live, it is indisputable that less behavioral health services are being authorized by the MCOs.  (Why the government has not addressed this tragedy, I do not know).  Another question is how many less behavioral health care servies?  I have my suspicions that if we were shown the number of behavioral health care services authorized last year compared to this year, the line would look like \. 

Remember the chart from yesterday?

MeckLINK_June_Slide

And this chart only shows one county. One MCO.

NC DHHS is handing over millions (just the behavioral health portion of the Medicaid funds) of Medicaid dollars to the MCOs.  But the money is not going to service Medicaid recipients.  The Medicaid dollars are paying salaries at every MCO, as well as the employees’ families’ health insurance plans.  What Medicaid funds go to the recipients for medically necessary services?  Seems to decrease every day.

I ask you, why do employees of an MCO receive better health care plans with Medicaid dollars than a Medicaid recipient with Medicaid dollars?

Aren’t Medicaid funds supposed to be for Medicaid recipients?

Maybe instead of all this administrative waste, we should just buy private health insurance for all Medicaid recipients. It would probably be cheaper.  And the medically necessary services would

                                                                                                  NOT

                                                                                                            LOOK

                                                                                                                     LIKE

                                                                                                                            THIS.

Going back to the State of North Carolina’s accountability to me and all taxpayers as to Medicaid tax dollars spent, I have not seen any investigation as where the behavioral health care Medicaid money is being spent.

The same article from above stated something that made me extremely concerned.  In “Frustrations With MeckLINK Grow as Denials for Care Increases,” the article cites that “[o]nce MCOs took over, North Carolina stopped tracking what care patients are receiving. A health official said the database goes blank. That means the state does not know how many North Carolinians received services, what those services were, or what was denied. It can compare MCOs financials, but not their care.” (emphasis added).

Are you kidding me? The State of North Carolina, which is accountable to me and all taxpayers, cannot determine whether the Medicaid dollars being handed over to the MCOs are being used appropriately????

Yet 145 employees at CenterPoint receive salaries over the NC DHHS average salary: $52,000!  145 out of 200-ish, to be exact.  Some employees are receiving health insurance contributions of over $10,000/year…and NC cannot determine how many Medicaid recipients received medically necessary behavioral health care??

As a taxpayer, I am appalled. And I want accountability!!

Where is the fiduciary duty to taxpayers?

Higher Medicaid Adminstrative Costs = Less Medicaid Money for Providers to Service Recipients

In dealing with administrative costs, it is only logical that the more people involved (the more salaries, the more paid-benefits) the higher the administrative costs.  Therefore, it is only logical that when North Carolina pushed the management of behavioral health in Medicaid to 11 (now 10) Managed Care Organizations (MCOs) that the administrative costs would go up, not down. More people involved in administration = more money needed to pay those people.

But my question is: How much of the Medicaid budget given to each MCO actually goes to reimburse providers rendering services?

The MCO system started in 2005 when Piedmont Behavioral Health (PBH) became the first behavioral health MCO.  Essentially, the Department of Health and Human Services (DHHS), Division of Medical Assistance (DMA) “farmed-out” the administrative duties of managing Medicaid for behavioral health Medicaid recipients, but only in a limited area (a test MCO, so to speak).  Then, beginning in 2011, and at different intervals, the PBH managed care model was expanded throughout North Carolina.  Now we have 10 MCOs (taking into account the termination of Western Highlands, beginning this summer).

Each MCO gets a lump sum of money each fiscal year to pay for its own administrative costs and to pay providers for rendering services. So I was curious…how much of this lump sum goes to providers for the benefit of Medicaid recipients?  Obviously, since the inception of most MCOs is so recent and the sensitivity of money/Medicaid, I found retrieving the information difficult.  Apparently, no one at the MCOs is eager to hand out financial statements to an attorney…especially one with a blog.  DMA was equally as eager.

The January 2013 Performance Audit conducted by the State Auditor revealed that almost 1/2 of the Medicaid administrative expenditures in the 2012 fiscal  year went to private contractors…such as the MCOs, PCG, and CCME.  The audit states:

“Private contractor payments represent about $120 million (46.7%) of DMA’s $257 million in administration expenditures for SFY 2012. It is always important for a state government to exercise sound management practices with regard to the contracted services, but it becomes even more critical when almost half of the administrative expense is made up of contract payments. Although contract payments represent a high percentage of its administrative budget, DMA was not able to provide a listing of contracts and the related expenditures in each SFY under review for this audit. DMA’s inability to provide this information is indicative of its inadequate oversight of contractual expenditures. The initial list DMA provided only included amounts expended to date per contract. However, we were able to eventually obtain contracted service expenditures for FY12 and compile this information.”

So how much does each MCO get each fiscal year? And how much goes to the behavioral health care providers actually providing services to Medicaid recipients?

Well, I received the information regarding salaries for CenterPoint, the MCO that manages Medicaid for Davie, Forsyth, Rockingham and Stokes counties. (Mind you, this is not even the biggest MCO, in terms of staff).

In 2012, CenterPoint had approximately 105 employees (This data are substantiated by me, so if there are small errors, please forgive me.  The information is based on a chart “Employee Salary Benefits” and was not substantiated by CenterPoint).

In 2013, CenterPoint’s employees grew to over 180, which is obviously rapid growth.  With more employees and more salaries to pay, administrative costs for CenterPoint increases and the amount of money actually used to reimburse providers for services rendered decreases.  Think about a pie.  If you give three pieces of pie to one person, then there is less pie to give to other people.

For fiscal year 2012-2013, CenterPoint oversees a Medicaid budget of $105.7 million coming mostly from Medicaid reimbursement fees and taxpayer money.  Yet, CenterPoint required one-time loans from all four counties it serves at a combined $1.26 million to help pay for its $3.7 million in MCO transition costs.

Yet, according to my information, CenterPoint pays hefty salaries to its top-executives.  In addition to these hefty salaries, CenterPoint pays for all employees’ health insurance, as well as the health insurance for all employees’ families!!

I don’t know about you, but, personally I pay A LOT to insure my husband and myself.  If my firm paid for my health insurance AND my husband’s insurance, my total salary/benefit package would be increased by approximately $7,824.00.  In other words, I would have $7,824.00 more dollars in my pocket each year because I would not have to pay for these premiums.  Multiply that amount by 180 employees and we are talking about close to $1.5 million IN JUST HEALTH INSURANCE BENEFITS.

Am I the only one who sees the absurdity in this?

I don’t have the figures, but I am willing to wager that few employers pay for 100% of employees’ health insurance.  I’m also willing to wager that an even lower percentage pays 100% of health care premiums for the families of employees.

As to the hefty salaries, in 2013, of the 180 employees, 12 employees receive over $70,000 base salary.  That’s a little over 7% of the employees who receive over $70,000 base salary.  FYI: The highest base salary is $240,000.

However, when you take into account the paid benefits (i.e., health benefits, life insurance, retirement, dental insurance), 51 employees make over $70,000.  That’s almost 30% of CenterPoint employees are paid over $70,000, including paid benefits. Almost 1 out of 3 in a company!

BTW: That same employee who makes $240,000 base salary per year also receives $16,176.00/year in retirement. That’s more than some people make all year!  That same employee receives over $11,000.00 in health care benefits.  Remember, my number was $7,824.00, if my firm paid my health insurance? That employee is getting over $11,000.00 in health care benefits.

CenterPoint manages a Medicaid budget of $105.7 million.  Medicaid budgets are comprised of federal and state tax dollars.  Therefore, any entity with a Medicaid budget has an accountability to NC taxpayers.

With 51 employees making over $70,000/year, $4,384,654.20 of the budget is already gone…just for 51 employees’ salaries.  I actually added up all 51 employees’ salaries to get the number $4,384,654.20.  Which means the average salary for the 51 employees that receive over $70,000/year is $85,973.62…not bad for a public servant…

I don’t think other public servants, such as teachers get 100% of their health insurance paid, plus family.

Remember, this $4,384,654.62 only accounts for 51 employees’ salaries and benefits.  There are still 129 other employees.

Imagine this:

Roughly estimate the total of administrative costs for CenterPoint to be $5 million.  Now multiply this number by 10 (the number of MCOs) = $50 million.  Also, imagine that, since the January 2013 DMA audit that showed the high administrative costs of DMA, this additional $50 million is added to the already high administrative costs of DMA.  In other words, in order to offset the administrative costs of the MCOs, DMA did not slim down its own administrative costs.

With more and more Medicaid dollars going to administrative costs and people’s salaries, less and less Medicaid dollars are going to the Medicaid recipients. More cost = less Medicaid services.