Community Mental Health of Ottawa County leaders told the board on Nov. 21 that a pending state Request for Proposals (RFP) and a related court process could reshape how Medicaid benefits are managed in Michigan and that the agency faces a substantial budget shortfall for fiscal 2025.

Michael, the agency's chief executive, told the board a December court ruling and the state's RFP timeline may result in a change to how many PHP/PIHP entities run regional Medicaid services and whether CMHs retain a co-management role or become contracted providers. He said the state has the authority to set the number of PHPs and that any selection would subsequently be reviewed by the Centers for Medicare & Medicaid Services (CMS) for federal approval.

The most immediate financial concern, Michael said, is a regional Medicaid revenue projection that is about $2.8 million lower than previously expected. That reduction increases an anticipated deficit that had been estimated at up to roughly $3 million in a worst-case scenario. Michael said volatility in year-end invoicing and shortcomings in forecasting tied to authorizations, utilization and paid expenditures have amplified the shortfall.

"We were asked to submit a new expense plan," Michael said, describing how shifts in the region's allocation model since 2022—from a needs-based approach to a per-eligible model—have disadvantaged counties such as Ottawa and Kent. He added that the region and the CMHs are pursuing a needs-based feasibility study and will press the state with data and metrics early next year.

Providers and board members described operational impacts. Krista Mason of Benjamin's Hope told the board she serves 34 individuals (16 from Ottawa County) and expects to serve 44 after two new homes open. Mason said labor costs have risen about 70% since 2018 and that Benjamin's Hope has not received a rate increase from Ottawa County CMH since 2018; she warned that losing millage funds would reduce the provider's revenue by about $370,000 — roughly 23% — and could force the organization to discharge the highest-need Ottawa residents.

"If rates remain unchanged and we lose millage funds, Benjamin's Hope is facing a $370,000 reduction in revenue," Mason said during public comment.

To address cost pressures, the agency has already taken internal steps, Michael said: a hiring freeze and position-control measures that produced about $1.1 million in administrative savings, a new fiscal system implemented in June to improve reporting, contracts to build an authorization-based forecasting model, and the creation of utilization-management and rate-setting committees. He said a draft forecasting report will be presented to the finance committee in December.

Michael urged that both better utilization-management tools and increased revenue will be required to close deficits. He cautioned the board: "I don't think you can get to 0 without changes in revenue." He also described how Medicaid fair-hearing decisions at the administrative law judge level can increase individual service budgets dramatically — examples noted ranged from about $300,000 to $1,000,000 per year for individual budgets after appeals — and that lack of statewide uniformity in utilization-management contributes to budget instability.

Board members discussed the Internal Service Fund (ISF) that now helps cover regional Medicaid shortfalls, and whether funds held by the current PIHP/LRE would transfer if the state reorganizes regions; Michael said that point remains uncertain. The board also previewed an advocacy plan to present data to the state in January and discussed pursuing a regional rate-calculator comparison to support requests for increased revenue.

The board approved consent items later in the meeting, including multiple amended and renewed contracts and new provider agreements intended to expand autism services, via roll-call vote.

Next steps: the board will review the director's forthcoming forecasting report in December, the finance committee will examine detailed budget scenarios, and the board plans coordinated regional advocacy to press for revenue and allocation changes after the state RFP and any related court rulings become final.