Mar. 23—TRAVERSE CITY — Board members of the region’s largest mental health organization voted unanimously to notify the state they plan to exit a $10 million Medicaid program, following an urgent recommendation by an outside consultant.

Richard Carpenter of the Rehmann Group said the Mi Choice Waiver Program, which aims to help older or disabled people care for themselves in their own homes, is not central to the mission of Northern Lakes Community Mental Health Authority.

Northern Lakes runs the waiver program as a so-called “waiver agent” via its Northern Healthcare Management, which some board members have privately said could be separated off as a non-profit, though there was no public discussion about this.

The $10 million is somewhat separated from Northern Lakes’ approximately $90 million annual budget — although, while most of the CMH’s programs serve residents in six counties, the Mi Choice Waiver program covers a lot more ground.

“There’s 22 counties involved,” said Al Cambridge Jr., a longtime board member from Roscommon. “That’s 22 agencies (the organization will need to inform). This isn’t going to be easy.”

Carpenter said, once notified, it would be the Michigan Department of Health and Human Services’ responsibility to seek a replacement — perhaps PACE North or the Area Agency on Aging — to make sure participants were not left without services.

“Northern Lakes is the only CMH that runs a Mi Choice program in the State of Michigan,” Carpenter said, adding he had concerns about how administrative costs for the program had been allocated and reported.

Carpenter’s report was not on the regular board meeting agenda, but provided during a lengthy, and public, pre-meeting, called the Committee of the Whole, where board members discuss issues but make no decisions.

Board members acted quickly, however, once the regular board meeting got underway to unanimously pass a motion to notify the state’s DHHS, they plan to end the Mi Choice Waiver contract, hopefully within six months.

Board members did not appear to be caught off-guard by the first of Carpenter’s two recommendations, but they did have questions.

“Why would this have been done?” asked Mary Marois, a Grand Traverse County board member. “Would it be done in order to show profitability in the program?”

“That could be one reason,” Carpenter said.

“Does that turn into local money that doesn’t have strings?”

“Correct,” Carpenter said.

He went on to explain how some Medicaid-funded programs require organizations to return funds they don’t use, while others, like Mi Choice Waiver, reward “efficiencies” and allow organizations to keep unspent funds, which then are available for general use.

Carpenter said his recommendation, provided in a brief written summary, was not the result of the findings in the ongoing forensic audit, but rather from his assessment of the organization’s finance department.

A full human resources report, initially promised last month and yet to be delivered, as well as results of the ongoing forensic audit, are yet to come, he said.

Board member Ty Wessell, of Leelanau County, said he’d appreciated Carpenter’s work, but expected to receive something more complete.

“It’s been a long time and a lot of money with very little information,” Wessell said. “I was anticipating a lot more.”

Carpenter reminded Wessel and the full board that Northern Michigan Regional Entity (NMRE) was in charge of deciding what information was released and when.

Years of turmoil at the organization precipitated the funder’s involvement last fall as a kind of interim overseer and board members confirmed the NMRE is also paying Interim CEO Brian Martinus’ salary.

Problems surfaced in earnest in 2021, when some elected officials said they’d tried working with a Northern Lakes’ top executive — now on paid administrative leave — and were met with a “my-way-or-the-highway” attitude.

Northern Lakes Board members last year began asking for more detailed financial reports at monthly meetings and, ultimately, in August agreed to pay Rehmann $45,000 a month for an assessment.

Carpenter and another Rehmann staffer, Kereen Conley, have since confirmed multiple systemic financial and human resources failings.

“The environment that they were working in was one of fear, retaliation and a lack of trust,” Rehmann Group consultant Kerreen Conley previously told Northern Lakes’ board, echoing what several employees told the Record-Eagle.

“There are pages and pages of employee comments that were very honest and brutal,” Conley said. “Ultimately, there’s a lot to overcome from the past.”

Carpenter said finance department policies were ineffective, and evidence may point to intentional accounting errors, collusion and other inappropriate activity — the catalyst for the now ongoing forensic audit.

In September, an email hacker netted $283,000 in Medicaid reimbursement funds — a probable scam later investigated by local law enforcement and an agent with the U.S. Department of Homeland Security.

Shortly thereafter, Joanie Blamer, chief operations officer, and Lauri Fischer, chief financial officer, were placed on paid leave, pending an unspecified investigation, although interim CEO Martinus previously said these decisions were unrelated to the email hack.

Fischer no longer works for Northern Lakes; in December, Blamer and Fischer filed “whistleblower” lawsuits against the organization and Martinus in 13th Circuit Court.

Blamer and Fischer, in court documents, state that while employed by Northern Lakes, they engaged in protected “whistleblowing” activities, such as reporting sex discrimination, reporting financial waste and misuse of public funds, deletion of data, union contract violations and failure to properly manage the organization.

The paid administrative leave for Blamer and Fischer, and the subsequent termination of Fischer, the lawsuit states, were retaliatory in nature and both plaintiffs are seeking financial damages and attorney fees.

Board members at Northern Lakes’ regular meeting Thursday went into closed session to discuss the litigation and trial strategy, later agreeing, in open session, to approve attorney Haider Kazim’s recommendation.

But the recommendation itself was not stated or described.

Kazim did not return calls seeking comment; attorney Jay Zelenock, who represents Blamer and Fischer, confirmed there had been discussions about the 13th Circuit Court whistleblower suits.

“I strongly believe in my clients’ cases and we hope to bring them to a resolution,” Zelenock said.

Board members at their meeting Thursday also agreed to get rid of Committee of the Whole meetings and fold them into regular meetings and table a discussion on amending the organization’s by-laws.

Carpenter’s second recommendation — to seek a partner for the organization’s integrated health clinic, which Martinus said has 559 people enrolled — also garnered board approval.

The clinic had a physician partner at one time, Marois said, but they exited in 2015 and the organization continued to run the program on their own, a situation Carpenter said was unusual.