Government and Health Care

County to vote on fund appropriation

One-time payment of $1.5M would help finance Lakeshore Regional Entity’s internal service fund for 2018.

June 22, 2018
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Kent County may appropriate $1.5 million to assist the organization that oversees the area’s community mental health service providers.

The Kent County Board of Commissioners will vote June 28 on whether to approve the funds for Lakeshore Regional Entity, following an approval from the Finance and Physical Resources Committee on June 19.

The one-time payment of up to $1.5 million — half from the community stabilization revenue and half from budget lapse — would help finance LRE’s internal service fund for 2018, meant to act as a cushion in case the organization runs a deficit.

Having this internal fund is one of five issues outlined by the Michigan Department of Health and Human Services in a letter to the organization dated March 30, informing LRE its contract as a prepaid inpatient health plan organization (PIHP) would be canceled if the problems were not solved.

The total Medicaid revenue for LRE was $240 million in 2017. The organization ended the year with a $24.3-million deficit. The internal service funds were $15.5 million that year.

The other four issues have been resolved, and this is the final and most important issue, according to Stan Stek, a Kent County commissioner, board member of the CMH Network180 and board chair of LRE.

LRE is one of 10 PIHP organizations in the state, whose purpose is to oversee funding for CMH service providers. LRE oversees funding for organizations that work in Allegan, Kent, Lake, Mason, Muskegon, Oceana and Ottawa counties.

LRE is required to have an internal service fund established for 2018 in the approximate amount of $2 million to $3.56 million, according to the proposal issued to the Kent County board, prepared by Stephen Duarte, the county’s fiscal services director.

LRE is asking for a commitment of funds at a pro-rata share of at least $2 million and up to $3.56 million from 14 “participating community stakeholders” in the state, including $1.5 million from Kent County; $500,000 from Ottawa County; $250,000 each from Ottawa CMH and Network180, two of the organizations LRE oversees; $500,000 each from the Grand Rapids Community Foundation and Doug DeVos Foundation; and smaller amounts from several other organizations.

“Frankly, if the county is unable to do this, I would predict that within 30 days, the state will pull the contract, and the system would be down,” Stek said.

Lynn Sutfin, MDHHS public information officer, said if the contract is canceled, the CMH organizations will receive Medicaid dollars from another source and added services will not be affected.

However, if the contract is canceled, Stek has concerns about what could happen next, such as the possibility of the state contracting with a private health insurance company.

“What we believe is at risk here is, at a minimum, the entire public component of the funding mechanism that we currently have,” he said.

These funds from the stakeholders only will be drawn upon if there is a deficit LRE’s other operating reserves do not cover.

Stek said the amount drawn upon depends on how much LRE is sure it can pay back.

He explained the plan is to repay using bonus participation incentive payments funds paid annually to LRE by the state, as well as capitated rates paid by the state as contributions to the PHIP risk management plan. These payments — defined as “qualified revenue” in the contract — are expected to reach $2 million in 2018 but could be slightly less.

Since qualified revenue is expected to be around $2 million, he said stakeholder contributions will tentatively be capped at $2 million.

The contract from LRE says the organization “shall repay” these contributions on a pro-rata basis “as soon as these funds become available until the full amount of the contributions have been repaid.”

Kent County Commissioner Harold Voorhees voiced concern the contract does not “guarantee” repayment and therefore voted against sending the issue to the board.

“That’s a conflict to me,” he said. “I can’t vote for something like that.”

Voorhees said he would like to keep the county from becoming a “cash cow” for struggling organizations.

Stek said the reason for its wording is because if qualified revenue payments are less than $2 million, it may take more than one year for LRE to repay stakeholders.

“It will get paid back because of the commitment to pay the (qualified) revenue, and we don’t take the draw unless the revenue is guaranteed,” he said.

Because of this, the county is not expecting to be at a loss, said Wayman Britt, the county’s administrator/controller.

“I do not believe that this will put us in a deficit position, or I would not have recommended it,” Duarte said.

The state said it acknowledges the plan as an “acceptable part of the LRE risk management plan” and also said it will work to “resolve all outstanding issues and promptly settle” what it owes LRE for 2015-17. Stek said calculations suggested that number is $10.7 million.

Stek said this plan is only for 2018 in order to satisfy the state’s request outlined in the March 30 letter. He said plans for 2019 and thereafter will be “addressed in an entirely different way.”

Kent County Commissioner Roger Morgan agreed the plan seems like the best option.

“We cannot get the state to bend to do what we think it should without taking them to court to sue them, and when you do that, all bets are off,” Britt said.

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