KHI News Service

Budget surprise means layoffs at KC mental health center

Officials say state contract flaw puts added pressure on local mental health facilities

By Dave Ranney, Mike Shields | December 19, 2011

Officials at one of the state’s largest community mental health centers have laid off 40 workers, saying it was the only way they could deal with a lid on Medicaid payments for mental health services that failed to account for the center’s actual cost of operations.

“It’s about 12 percent of our staff,” said Pete Zevenbergen, executive director at Wyandot Center, describing the layoffs. “We’ve cut just about everything we have the ability to cut.”

Meanwhile, directors of the state’s other community mental health centers are waiting to see if the Kansas Department of Social and Rehabilitation Services will agree to raise the Medicaid payment cap to resolve what is shaping up as a collective $10 million to $12 million shortfall for the state’s 27 centers.

The biggest financial hits would fall on centers that have a relatively high percentage of Medicaid patients. Included among those are COMCARE in Wichita, Four County Mental Health Center in Independence, The Guidance Center in Leavenworth County and the Wyandot Center.

The current spending ceiling was agreed to in a contract signed earlier this year between SRS and Kansas Health Solutions, the managed care company that handles the distribution of state and federal dollars to the centers.

But Myron Unruh, chief executive of Kansas Health Solutions, said the contract was drawn based on actuarial projections that turned out to be inaccurate.

The budget problems the Wyandot Center and some other centers are facing, he said, are an “unintended consequence” of a contract formula based on caseload and client-mix estimates that, as it turned out, missed the mark.

The problem of closely matching mental health service projections and actual experience is a new one for the state and Kansas Health Solutions because previous contracts were “no-risk” — the state reimbursed the centers for Medicaid services without a pre-determined cap on spending.

SRS Secretary Rob Siedlecki earlier this year announced that the state would no longer accept that type of contract. Instead, the centers would be “at-risk” of losing money if they didn’t evenly match services to the predetermined spending levels. The new contract signed this fall was retroactively effective July 1, the beginning of the state fiscal year.

With the contract, Unruh said, Kansas Health Solutions and the centers collectively agreed to deliver 8.5 percent savings to the state, which annually has spent about $200 million on Medicaid mental health services provided through the community centers. But because the projections were off, the centers are on track to deliver about 11 percent savings.

“The contract was supposed to slow the growth in Medicaid managed care (mental health) spending by $17 million and it appears, if nothing changes in the plan, that the savings will be closer to $29 million,” said Mike Hammond, executive director of the Association of Community Mental Health Centers of Kansas, Inc.

The mismatch between the contract projections and the centers’ actual delivery of services was discovered by Kansas Health Solutions and was described to center directors at a meeting in October in Independence.

As a result of that meeting, Wyandot Center officials laid off the 40 employees, anticipating they would need to cut the center’s spending dramatically in order to meet the contract terms.

But Hammond said he and representatives of Kansas Health Solutions began talking with SRS officials about the problem before Thanksgiving with hopes that agency officials would agree to return savings beyond the expected $17 million to the mental health centers and have been told they will get an agency response this week, perhaps as soon as today or Tuesday.

“It simply boils down to some incorrect Medicaid data used that informed the financial decision about the contract,” Hammond said. “Now we know the data is incorrect and it's playing out very differently, and we're asking the state to fix it."

“It was a $10 million to $12 million unintended consequence — that everyone agrees was not intended,” he said. “The solution is simple. You grab the savings and put it back in the plan. You look at the new data with a new forecast and move forward. But something has been holding this up."

By this afternoon, SRS officials seemed about ready to sign a deal that would return about half of the additional savings to the centers, Hammond said.

SRS officials had little to say publicly about the matter.

“SRS is investigating why one CMHC (Community Mental Health Center) has reported layoffs,” said Angela de Rocha, the agency’s communications director. “SRS has reminded the CMHCs that their staffing decisions cannot conflict with their obligation to provide needed Medicaid services. SRS recognizes the importance of community mental health care and we will be consulting directly with KHS (Kansas Health Solutions) and the CMHC as the inquiry unfolds. We expect to have some answers Tuesday.”

At the Wyandot Center, Zevenbergen said it was unlikely he would be able to hire anyone back, even if SRS were to agree to returning a good portion of the unexpected savings.

“There’s no guarantee that we’ll see much of the (settlement),” he said. “It would be wonderful, but I’m probably not going to hire anybody back because come July, somebody could announce that we’re going to lose another $1 million. What’s going on at SRS just keeps getting crazier and crazier, so I doubt we’ll be hiring anybody back.”

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