Mental health board fires CEO, scrambles to address funding shortfall

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The board of directors at Western Highlands Network voted to terminate CEO Arthur Carder Jr. on Friday. The organization, which offers mental-health and other services to patients in eight Western North Carolina counties, has posted a $3 million deficit recently. Peggy Manning/Carolina Public Press

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.


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About the Author

Peggy Manning

Peggy Manning is a contributing reporter for Carolina Public Press. Contact her at pntmoody@bellsouth.net.

5 Comments on "Mental health board fires CEO, scrambles to address funding shortfall"

  1. HEAD ROLLING TIME: Ask not for Whom the Guillotine Chops

    Peggy Manning: you did a good job of providing the basic information. However, God, or the devil, is in the details. While it is important to have included the Mercer audit which was done July 23, 2012 (wonder who tipped off that independent auditor as to why they should take a look at the WHN LME records?), its very difficult to understand even for someone who has been studying NC mental health reform for years now—-and blogged about minute details.

    The Director of Clinical Operations of WHN LME stated these to be the problems which caused the $3 million overspending: “(1) an encumbrance with contractual obligations inherited from former managed-care agencies Value Options and Crossroads;(2) increases in the cost for some services; (3) and the lengthy duration of some services meant to be short-term in conjunction with service stacking.”

    As regards No 1, for outpatient therapy, which is what this psychologist does, ‘the Medicaid year’ starts 1.1. (whatever year). After 8 outpatient therapy sessions, authorization must be approved for more sessions. Moreover, I imagine that outpatient therapy, which SHOULD be the work-horse of mental health care, devoured very little of the LME’s money.

    As a doctoral level psychologist, for a 45-50 minute session which is what they mostly will approve you for, I get paid about $75. I have Medicaid clients that I see weekly (not as associated w/ WHN LME) and even at that frequency, that would be $3700/ year. Moreover, outpatient therapy for these kinds of SPMI (Severe Persistent Mental Illness) clients would encompass psychosocial aspects which bear a closer resemblance to social work e.g., assistance w/ finding jobs, transportation, etc., that the way that one usually thinks of as therapy.

    It is an unusual Medicaid patient that receives this weekly outpatient therapy. Moreover, most patients who are disabled, have Medicare as primary, which pays significantly better than Medicaid, and Medicaid simply picks up some pocket change. Medicaid is the payer ‘of last resort.’

    So, when the Clinical Director is talking about ‘encumbrances inherited’ I have no idea what she is talking about. WHN LME knows very well how difficult it is to obtain authorizations for any service, including the expanded services such as PSR or Psychosocial Rehabilitation. This is a modality offered by the private companies which were created when NC started mental health reform in 2002 that includes DAILY 6 HOUR classes intended to teach social skills, etc. Also as associated with those private companies there are therapy charges (I refer to the ‘stacking’ matter which the Clinical Director indicates in No 3 is sucking down the bucks), etc.

    As re: No 2, I certainly have not received any pay increase from Medicaid so I don’t know what that’s about either.

    As re: No 3, the LME authorizes the duration of services and if they believe that there should be a cut-off point, then they could have limited the services. But then—-using the example of Psychosocial Rehabilitation offered by the private companies—–it is typical for clients to stay in PSR, for instance, for months and months.

    There is background information to all of this as associated with the treatment of mental health challenges: are these people to be REHABILITATED or do they have CHRONIC ILLNESSES, like diabetes or hypertension. When it comes to the SPMI population, their trajectory follows one associated w/ a chronic illness—-not something that is going to get thorough treatment, like cancer, and then go away. Nevertheless, the entire push / thinking behind much of what NC DHHS has put forward is associated with REHABILITATION.

    So, you have intensive services meant to rehabilitate someone when in fact, the ‘cure’ as much as is possible, is slow, takes place over years, is dependent on variables that cannot be impacted by an intensive quick application of PSR, for instance. People with SPMI get better over time, gradually, when they have consistent therapy, probably from the same person for a long period of time, which is someone they learn to trust, who gently and deliberately challenges them to overcome things like avoiding other people or thinking they cannot work at all or managing anxiety and depression. Yes, the PSR provides some of the cognitive skills training in an attempt to rehabilitate the person but these are basically chronic illnesses—-if a chronic illness can be termed to be something that lasts for a few years +.

    Thus, the state is spending an enormous amount of money on these Expanded Services, which are gobbling up the money (the private companies are glad to take it) when the treatment is slower, persistent, deliberate, and consistent.

    Basically, the model for ‘the cure’ vis a vis NC DHHS is all wrong.

    And basically, just as with all that money ‘lost’ under the old Community Support Services, which was an Expanded Service, ‘the cure’ is a slow, deliberate, planned-out, trust-based, professionally delivered mental health service and not some intense what-to-do-with-the-mentally-ill-person-during-the day.

    This matter, of course, is not untethered to the: 1. lack of jobs 2. less and less participation of, say, Vocational Rehabilitation Services which used to do ‘job coaching’ and obtain jobs for these kinds of people 3. lack of transportation 4. collapse of sheltered workshops where these people can learn some skills although some people call them ‘sweatshops.’ And the inability to work and improve oneself is not unrelated to the fact that if someone is receiving disability payments—–and most Medicaid patients receive ‘a check’ which is usually around $650-850/ month, not including Food Stamps and Section 8 Housing—-you cannot work/ gross more than about $750/ month or you begin to lose some of your disability check.

    I can’t tell you how many disabled clients I have had who have to watch like hawks how much they are getting paid lest they have to pay back some of their disability monies. This certainly discourages them from working and work is associated with more than just earning money; it is associated with learning social ease around others, having friends, keeping a schedule, etc.

    NC DHHS will NEVER fix the outflow of money for these Expanded Services, which is soaking up most of the Medicaid money, along with the LME employees who all earn 50 grand + / year w/ benefits—-until they get the model right. And the correct model associated w/ this population, which is the SPMI, Severe Persistent Mental Illness population, such as people with schizophrenia; schizoaffective disorder; Borderline Personality disorder; severe depression or bipolar disorder; and Dissociative Identity Disorder (which is present in this population more than most people think and it is associated with severe sexual/ emotional/ physical childhood abuse)—-is a model associated with the treatment of a chronic illness not rehabilitation and a quick voila fix utilizing very expensive, stacked services which the private companies are only too glad to provide.

    Marsha V. Hammond, PhD, Licensed Psychologist, Asheville, NC

    NC mental health reform blogspot since 2007 (can’t put the URL here as it won’t post but it is my name and ‘Madame Defarge’ who, of course, was the old crone in Dickens’ Tale of Two Cities who purled the names of the people whose heads rolled off the guillotine)

  2. Steven Owens July 28, 2012 at 9:52 am ·

    So let me get this straight….the board fires Mr. Carder…and NOT Ms. Lentz? Anybody see something wrong with this picture? You mean to tell me the ONE person who is in charge of the money DIDN’T know for 6 months they were in trouble, lied about it to board members and still has her job. Wow oh wow that is one lucky woman. I think the board needs to really really look at just who all is responsible and who isn’t.

    Ms. Hammond, I have read your blogs and you a a bitter woman who only get half the story right. In all your post you put the blame on someone else for YOU not having your contracts. When does it become your responsibility? Even according to you, you missed your deadlines and haven’t gotten your paperwork right. This tells me that you want WHN to do something that your not willing to do yourself. Is this what you teach your clients? To push the blame and not hold themselves responsible? What a joke.

  3. Leslie Boyd July 30, 2012 at 12:25 pm ·

    Great story. As someone who covered this fiasco for seven years, I know it’s a mess. Please keep on it. A lot of people depend on the media to get this right.

  4. Jane Lindsey July 30, 2012 at 2:37 pm ·

    I thank you for making this information public. It has not appeared in one of our local papers to date. For the CEO to state that his focus was on processing claims, the financial officer not wanting to “cry wolf” or stating “whoa we’re in trouble” I have to ask where is there any statement from anyone involved of how this was gong to impact the consumers of services.due to this financial deficit.What impact was this going to have for the consumers that they are paid to serve? I believe that a power higher than the Board needs to look into what was happening and to why it all was kept so secret. Indeed once again is it the consumer who is going to have to pay for another failure of mental health? Someome is going to have to pay.

    Was there to be oversight from the State? Was any independent organization looking into and watching what was occurring since this was a new operation? Was there responsibility to ensure that continuity of care for the consumer was being protected? Was anyone watching to ensure that appropriate services that the consumers were supposed to be getting was happening? All of the above services are determined on the appropriate use of the funding. It troubles me greatly to hear that the CEO’s focus was on processing claims. Is this what it has boiled down to?

    A report was generated from Mercer dated July 23, who ordered this report and who paid for it? There are a lot of important unanswered questions and questions that must be answered to honor the individuals that this money was supposed to serve. For over a decade this State has attempted to revamp Mental Health and it appears that it is not working. Is it because no one looks into anythng until there is trouble?

    I understand how the Board feels. As a Guardian of an individual who is in one of these programs, many others including myself have told stories over and over and felt that we were not heard. To the members of this board and this State, I only hope that the next time someone comes to you with a story of misuse that this is remembered and that the individual is listened to. It just might make a difference.

  5. Pamela Brokenwolf August 10, 2012 at 2:34 am ·

    Mr. Owens… I agree with your take on Ms. Lentz and Mr. Carder. …but do not understand your shot at Marcia Hammond. What is your point or do you have one or has she offended you in the past or is it a manner of a mother projection?

    Can someone explain this to me: The Director of Clinical Operations of WHN LME stated these to be the problems which caused the $3 million overspending: “(1) an encumbrance with contractual obligations inherited from former managed-care agencies Value Options and Crossroads;(2) increases in the cost for some services; (3) and the lengthy duration of some services meant to be short-term in conjunction with service stacking.”

    Where is the managed care company Crossroads located?

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