4 health groups’ merger plan off

Funding worries lead to new idea

Questions about millions of dollars in funding have upended merger plans for four Arkansas nonprofit behavioral-health entities, which announced their intent to join forces in October.

The providers will now stay independent while trying to come under a parent group, Arisa Health, after they learned that a merger as outlined could jeopardize more than $8 million in contract funds.

It’s the latest strategy shift for mental-health servicers in the state, which describe a challenging fiscal and regulatory environment that officials said had put a decades-old Little Rock provider out of business in September.

Under the plan to merge, a “devastating” funding loss also would have contradicted what Counseling Associates, Mid-South Health Systems, Professional Counseling Associates and Ozark Guidance see as their mission, Ozark Guidance chief executive Laura Tyler said in a phone interview Friday.

“Our DNA — our history — over 50 years, for each of us, is being a community mental health center. … Our whole reason for doing this is so we can stay in our

role,” said Tyler, who also will lead Arisa Health.

“That’s when we went back to the drawing board, to see how can we figure this out a little bit differently.”

Issues arose when the groups learned that if they were one entity, procurement guidelines for state community mental-health center contracts would let them keep only one of four such agreements they hold, which range from $1 million to $5.5 million and total about $13.8 million.

Department of Human Services spokeswoman Marci Manley said in an email that the way the contracts are set up permits the holder to serve just one of 12 regions, “because our goal has been to expand our provider networks.”

“Therefore, the contracts would prohibit a single provider from serving more than one area,” she wrote.

Funded with a mix of federal and state dollars, the contracts support entities that offer mental-health services to people without insurance or who have low incomes.

Tyler said the funding gap’s discovery made officials “stop, pause and collect our thinking.” She thought the problem hadn’t come up because the providers are the first such mental-health centers in the state to try to execute such a plan.

Instead of merging, the groups will try to gain approval from the four organizations’ boards to become independent affiliates of Arisa Health, essentially co-branding with an umbrella company that filed articles of incorporation in January.

“It’s a different structure than we originally envisioned, but it’s workable,” Tyler said.

Manley said regulators are in the process of reviewing additional information from Arisa Health’s legal counsel, which may have implications for the contracts.

While the agency doesn’t have to formally sign off on the initiative, Manley wrote that it has been “here to help” the providers with their efforts to join, “regardless of the final direction they choose to take.”

If things go according to plan, Tyler said, changes are expected as of March 1 — roughly the same timeline as was first proposed.

Together, the providers have a presence in 41 of the state’s 75 counties, including six sites in Central Arkansas, and employ more than 1,200 people. Job losses were not expected under either plan.

Administrators for North Little Rock-based Professional Counseling Associates and Conway-based Counseling Associates did not return messages Friday afternoon, and no one answered the phone at a number listed in state records for Jonesboro-based Mid-South Health Systems’ executive director.

“We’re trying to be very optimistic,” Tyler said. “There is no doubt that [this] makes it a little bit more complex, but we feel like it also gives us a little bit more breathing room to get things done.”

HEALTH HEAD WINDS

Some mental-health providers in Arkansas, particularly those that depend on government funding, have reported stressed finances over the past two years.

New payment models and a shift to a managed-care system for Medicaid clients are chipping away at revenue, some providers say, while the Human Services Department has said those moves improve patients’ access to care.

Last fall, officials at Little Rock Community Mental Health Center said that environment contributed to the provider’s collapse, which shook up treatment for its more than 2,000 clients.

The group became insolvent and couldn’t keep going, its officials said at the time. More recently, the shuttered organization filed for bankruptcy protection as of Jan. 17, reporting more than $1.5 million in liabilities.

Those debts include a roughly $751,000 mortgage for its Pinnacle House day treatment site’s building, plus dozens of unpaid bills and outstanding employee wages, records related to that court filing show.

In an interview when the proposed merger was unveiled, Tyler said it was partially an effort to reposition the groups so they could stay viable in newly challenging terrain.

The four providers are “acutely aware of the compression on rates, the changing landscape, the increased competition,” she added on Friday.

She said the groups are committed to continuing to provide services in their Arkansas communities and for people who historically were served by their clinics.

The need for mental-health treatment options remains high around the state, where one in four adults with mental illness report they can’t access care, according to 2019 data from the Mental Health America advocacy group.