The board of directors for Western Highlands Network voted Friday to fire the organization’s chief executive officer after learning that he knew about a $3 million deficit for the organization but failed to notify the board members prior to adoption of a new budget.
The action came after a two-hour fact-gathering session of the board, followed by a briefer closed session. When the board returned to public session, it announced it had voted unanimously to immediately terminate CEO Arthur Carder Jr.
The board appointed Charles Schoenheit, chief operating officer for WHN, to serve as interim CEO while a search begins to replace Carder.
Sharon Lentz, chief financial officer, said she did not notice the financial deficit until the first week in June 2012, even though WHN had been operating as a managed-care agency since January under the new 1915 (b)(c) Medicaid Waiver Program approved by North Carolina legislators.
“I said, ‘Whoa, we’re in trouble,’” Lentz told the board. But she had not previously shared her concerns with the board, a fact that did not set well with board members, many of which serve as county managers for the eight counties served by WHN.
Mandy Stone, assistant county manager and director of social services for Buncombe County, expressed the most frustration at being blindsided by the budget shortfall.
“I e-mailed you May 30 to ask about the finances and you said, ‘We’re fine,’” Stone said to Lentz. “I met with you June 11 and you assured me everything is alright. I really don’t understand. Numerous times I’ve asked about this. It’s shocking to read something in the media opposite of what I’ve been told.”
Lentz told Stone she wanted to gather all the information she needed to be sure that the agency was operating in the red before “crying wolf.”
Marsha Ring, WHN’s director of clinical operations, outlined three factors that contributed to the financial shortfall: an encumbrance with contractual obligations inherited from former managed-care agencies Value Options and Crossroads; increases in the cost for some services; and the lengthy duration of some services meant to be short-term in conjunction with service stacking (adding more than one service to a treatment).
Carder said he knew that there were issues, such as the service stacking, but said the focus was on processing claims and paying employees.
“I communicated it the best I could, when I could,” Carder told the board members. “I also wanted to have a plan for corrective action.”
Other board members said they felt blindsided and should have been told about the financial problems as soon as Carder and Lentz were aware of them.
Transylvania County Manager Artie Wilson said that people in other areas of the state and even in other states knew about the shortfall before the WHN board was informed.
“To me that is not acceptable,” Wilson said.
Mental-health reform still a work in progress
In 2001, the North Carolina General Assembly passed the Mental Health System Reform Act, which required local jurisdictions to separate the management of mental-health services from their delivery of those services. When that reform effort failed, the 1915 (b)(c) Medicaid Waiver Program was chosen by the N.C. Department of Health and Human Services’ Division of Medical Assistance as a way to control and more accurately budget for the rising costs of Medicaid-funded services.
Last year, the legislature passed a law reqiring all local mental-health offices to convert to managed-care agencies by January 2013, copying a system started in the state in 2005 by Piedmont Behavioral Health. PBH is a managed behavioral-healthcare organization serving the citizens of Alamance, Cabarrus, Caswell, Chatham, Davidson, Franklin, Granville, Halifax, Orange, Person, Rowan, Stanly, Union, Vance and Warren counties.
As managed-care agencies, each local office is given a set amount of Medicaid and state money to treat patients. If they spend too much, they have to cover the costs.
WHN was the first regional office to convert in January, with all 11 local offices to be managed-care agencies by January 2013.
One of the problems, Carder said, is that the lump-sum payment Western Highlands received to care for patients was based on outdated information from 2009 that did not take into account increased costs in 2010 and 2011.
WHN — which provides mental-health, substance-abuse and developmental-disability services in Buncombe, Henderson, Madison, Mitchell, Polk, Rutherford, Transylvania and Yancey counties — is working with the N.C. Department of Health and Human Services’ Division of Medical Assistance on a plan of correction. That report should be completed and presented to the board by Aug. 1.
The Division of Medical Assistance asked the Mercer Health & Benefits consulting firm to perform a financial review of WHN, which was completed July 12. [See a report from Mercer, below.]
Mike Watson, state Medicaid director, said that in his opinion WHN’s problems can be attributed to management and accountability problems, and that “maybe what’s even more important is having the right information.”
“Once the January claims were paid, you should have had the technical data you needed to be a managing agency,” he told the board. “That’s what you signed up to do. You have to have the skills and the information to do that. Once you get through all the jargon, it’s common sense and good business practices.”
Steve Owen, chief business operating officer for the Division of Medical Assistance, was also present at the meeting.
Schoenheit explained some options for recouping some of the losses and reversing the downward trend for the agency’s finances, which include: reworking claims to potentially recoup $1.5 million; making deadlines for submitting claims mandatory; providing adequate resources to recoup money from overpaid providers; and enforcing rules and limits for services that result in service stacking.
Board member Minnie Jones asked Owen if it is possible to overcome the shortfall and become a profitable agency.
“If you (put in) place the recommendations made by Mercer, you can turn this around,” Owen said.