Central Wellness executive testifies RFP architecture could hinder duties, cites heavy Medicaid reliance

Joseph Johnston, executive director of Central Wellness (Manistee-Benzie Community Mental Health), told a consolidated-cases hearing in Grand Rapids that the proposed request for proposals (RFP) architecture could impede his agency’s ability to contract with hospitals and carry out duties required by the Michigan Mental Health Code.

Johnston testified that Central Wellness operates on an annual budget of $21,000,000 and receives roughly $19,000,000—about 89–90%—in Medicaid capitation payments. "It's 21,000,000," he said when asked to describe his budget, and later testified bluntly that without the capitated Medicaid payments the agency could not survive in its current formulation.

Why it matters: Johnston said those capitated payments and contracting relationships underlie Central Wellness’s ability to perform pre-admission screening, arrange involuntary admissions when required, develop prerelease plans, investigate recipient-rights complaints, provide crisis stabilization and follow-up, and coordinate aftercare. He told the court the agency relies on contracts with hospitals (which he identified by example, including Pine Rest, Munson and facilities in Traverse City) to ensure second certifications, timely examinations and continuity of care.

At the hearing Johnston repeatedly pointed to statutory duties in the Michigan Mental Health Code, citing provisions such as MCL 330.1116 and MCL 330.1206 that assign responsibilities to a community mental health services program. On questioning about prerelease plans and access to medical records (MCL 330.1209), he said Central Wellness needs contracting authority to obtain medical records and effectuate a prerelease plan for beneficiaries discharged from hospitals.

On the RFP specifically, Johnston said the proposed architecture would limit his agency to narrow roles—chiefly pre-admission screening—and would require authorization through new regional entities (PIHPs) to admit beneficiaries to facilities not under contract with Central Wellness. He warned that a fee-for-service or new PIHP administrative structure, including an allowance for administrative costs and a medical-loss-ratio approach, could leave his agency with lower net payments than under the current intergovernmental capitation arrangement, undermining its ability to avoid "supplanting" essential services with local funds.

Johnston: "If my costs are $100 and the new entity pays me $75, I cannot use other funds except for local, which I don't have any of or hardly any of... So I can't use general fund dollars to make up the difference. Those entities ... have to pay my cost."

Opposing counsel pushed back during cross-examination. A defense attorney noted the RFP text "still allows for Medicaid funding to go to CMHSPs" and that PIHPs are required under the RFP to contract with CMHSPs; Johnston agreed he had not read the entire RFP and said his concerns depended on whether PIHPs would pay CMHSPs at the rates needed to cover costs. "I have read schedule 8, and that was enough," Johnston said when asked how much of the RFP he had read.

Johnston also described operational details the court asked about: the agency’s 24/7 crisis-stabilization call structure staffed by master's-level social workers, its use of blended funding (Medicaid, general funds, liquor tax dollars and grants) to place social workers in schools, and an array of residential and supported independent placement services. He said about $9,000,000 of the budget is paid to outside providers under contract, noting that those contracts are necessary to provide a full continuum of services.

On recipient rights and complaint investigations, Johnston said Central Wellness employs a recipient-rights officer who reports to him and the advisory board and that, without contractual authority over outside providers, the agency "would have no jurisdiction" to investigate violations occurring in non-contracted settings.

What the court did next: Parties discussed avoiding duplicative testimony and the logistics of calling rebuttal witnesses (including Anne Plattie and others). The court set a recess and agreed to reconvene at 1:00 p.m. to allow depositions and witness coordination to proceed.

Context and limits: Johnston framed many of his concerns as his interpretation of how the proposed RFP would operate; on cross-examination counsel pointed to portions of the RFP that, in counsel’s view, still allow Medicaid funding to reach CMHSPs and require PIHPs to attempt contracts with CMHSPs. The record shows disagreement in the courtroom about how payment flows and contracting obligations would function in practice under the RFP; the court did not resolve that dispute at the time of the testimony.

The hearing is scheduled to continue after the recess, with depositions and additional witnesses planned for the afternoon session.