Preferred Family Healthcare, one of Arkansas’s largest behavioral health providers, notified its workers Tuesday afternoon that it will no longer be able to operate in Arkansas if the state moves forward with plans to terminate the provider’s contracts.

The news came in a letter entitled “An Update from the Executive Leadership of Preferred Family Healthcare to Our Arkansas Employees,” which was forwarded to the Arkansas Times by an employee on Tuesday. The letter states that PFH “[does] not have a sustained ability to continue operations in Arkansas” if the Arkansas Department of Human Services terminates PFH’s contracts, as DHS announced it would do on Friday.

Update: Preferred Family Healthcare spokesman Reginald McElhannon confirmed Tuesday evening that the nonprofit distributed the letter to employees. McElhannon later sent a statement, which read in part:

Preferred Family Healthcare’s first priority remains the clients served and the more than 700* employees who support them across the state of Arkansas. To ensure an orderly transition with the least amount of disruption to client and employee needs, Preferred Family Healthcare is making every effort to work with DHS to learn and support their transition plans, which are unknown to us at this time.

Preferred Family Healthcare is determined to not let the egregious behavior of a few overshadow the amazing work of hundreds of Arkansas employees for the past 11 years. Many Arkansans have been positively impacted by the exceptional care they have received through the personal efforts of PFH employees. Preferred Family Healthcare acknowledges this dedication and is saddened by the impact this will have on our staff.

PFH provides behavioral health services at 47 sites in Arkansas, many in rural areas. The nonprofit, which is based in Springfield, Missouri, also operates in Oklahoma, Kansas, Missouri and Illinois.

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DHS’ decision to terminate the PFH contracts came after Friday’s arrest of a former PFH executive, Robin Raveendran, on charges on Medicaid fraud. (Other PFH executives have also been implicated in a variety of scandals, including alleged bribery and kickback schemes in the Arkansas legislature.) DHS and the Office of Medicaid Inspector General also said Medicaid payments to PFH would be suspended, and PFH announced it would appeal that decision later that evening. But the letter received by PFH employees Tuesday says an end to the contracts means nonprofit will have to wind down its operations in Arkansas regardless of what happens with the Medicaid suspension.

“We are continuing our appeal with the State; however, without the contracts, even our anticipated success in the appeal would not allow us to continue to effectively function in the state,” the letter says.

The Medicaid payments comprise a much larger share of PFH’s revenue than the non-Medicaid contracts with DHS. PFH received approximately $36.2 million in Medicaid reimbursements in the 2017 calendar year, according to figures provided by DHS. The non-Medicaid contracts total some $7.4 million.

Asked about the letter received by PFH employees, DHS spokeswoman Marci Manley declined to comment. “We haven’t received any official notification from PFH about their long-term plans in Arkansas,” she said. “We wouldn’t feel comfortable commenting on their behalf in terms of their long-term plans.”

However, she said, DHS has been “working with [other] providers for some time … to ensure a smooth transition for clients to continue services.”

Manley said in an email earlier this week that Preferred Family Healthcare has the largest number of Medicaid behavioral health sites of any provider in the state. She said today that the nonprofit has submitted Medicaid claims for 10,408 individual clients since the beginning of the calendar year. However, she added, “not all of those individuals might be current clients of PFH now due to ‘churn’ of clients in and out of the system at any given time.” (Also, patients on private insurance or with other payers besides Medicaid wouldn’t be represented in that number.)

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Here’s the full text of the letter provided to the Arkansas Times:

An Update from the Executive Leadership of Preferred Family Healthcare to Our Arkansas Employees
July 3, 2018

In follow up to our communication yesterday, we have learned additional information which we wanted to convey to you. The Arkansas Department of Human Services (DHS) has indicated they are going to terminate our contracts. We also understand that these contracts will be transferred to other providers.

If and when this occurs, we do not have a sustained ability to continue operations in Arkansas. A transition timeline will be determined in consultation with DHS and will likely be impacted by the specific needs and challenges of the services provided in specific locations.

We are continuing our appeal with the State; however, without the contracts, even our anticipated success in the appeal would not allow us to continue to effectively function in the state.

We are making every effort to work with DHS to better understand their transition plans and to make as orderly a transition as possible. Since we do not yet have this information from DHS, we realize many questions cannot be answered at this time. Do know we will continue to provide you with updates as able.

You have been valiant through so many changes and challenges of the past 18 months. Words are inadequate to express our feelings about you and our clients and the difficult position all of us are experiencing. Please know we are sincerely doing everything possible to make this transition process as seamless as possible for all involved.

*Correction: An earlier version of this post mistakenly said PFH employs 4,000 employees in Arkansas; that figure is for PFH across all five states in which it operates.