The Detroit Wayne Mental Health Authority last week was granted a temporary restraining order against Gateway Community Health by the Third Judicial Circuit Court in Detroit that protects against improper expenditures of state Medicaid funds and preserves documents, according to Circuit Judge Brian Sullivan.
Gateway Community Health is a Detroit-based mental health provider network that has been under contract with Detroit Wayne the past 10 years to offer mental health, substance abuse and developmental disability services through providers to about 50,000 people.
In a 10-0 decision May 18 after a closed executive session, the Detroit Wayne board voted to terminate Gateway's three-year, $120 million contract, effective June 17, after three audits found potential financial problems with Gateway, according to documents obtained by Crain's. Sources told Crain's that Detroit Wayne's decision to terminate and file a lawsuit against Gateway stemmed from long-term problems with the network's operations and its ability to pay mental health providers for services rendered.
For example, Gateway in 2013 opened a clinic, Gateway Integrated HealthCare, which some believe was in violation of the contract with Detroit Wayne because it provides direct clinical services to patients with mental and physical health problems. Gateway's contract with Detroit Wayne is to administrate a provider network.
Problems with the treatment center were documented in February by a WDIV-Channel 4 news report. Clients of the clinic were seen going to and from counseling sessions at Gateway to purchase alcohol at a liquor store next to the clinic and openly drinking on the streets.
After the state of Michigan last year mandated mental health provider networks to divest themselves of provider ownership, Gateway reportedly complied. The complaint does not state who now owns the clinic, and Gateway officials did not respond to interview requests from Crain's.
However, Detroit Wayne alleges in its 121-page complaint that Gateway "had improperly transferred approximately $20 million between it and the provider it was in the process of divesting."
Audits performed on Gateway's accounting and business practices came from Detroit-based UHY Advisors and Troy, Mich.-based Rehmann Robson. Detroit Wayne hired Detroit-based Alan C. Young & Associates P.C. to conduct its own audit.
"Those reports have raised concerns about, among other things, (Gateway's) long-term ability to pay providers," the Detroit Wayne board said in a statement last week signed by Detroit Wayne CEO Thomas Watkins and Dr. Herbert Smitherman, board chairman.
The Alan Young audit also determined that Gateway CEO Radwan Khoury, M.D., received $70,000 in bonus payments in 2014 and an additional $41,000 in expense reimbursements. Other Gateway executives also received bonus payments for unspecified work. The former COO received a $62,000 severance package only to return to his job several months later.
Gateway paid vendors nearly $1.5 million without a contract, and without validating whether the services were properly completed, said the Alan Young audit.
The UHY audit concluded Gateway had negative assets of $7.5 million in 2015 and "auditors effectively concluded that (Gateway) was insolvent."
According to Detroit Wayne's complaint, Khoury informed the authority it would need a "cash infusion from an outside source, presumably (from Detroit Wayne) to avoid insolvency." Audits estimated at least $12.2 million in provider-related liabilities and only $5.6 million in cash and accounts receivable.
The Detroit Wayne board also authorized the release of the Alan Young audit on Gateway to Michigan Attorney General Bill Schuette, the Michigan Department of Health and Human Services and the U.S. Department of Health and Human Services' office of inspector general.
Sources said that Schuette and U.S. Attorney Barbara McQuade in Detroit launched an investigation into Gateway several months ago.
Meanwhile, Detroit Wayne plans to transition services formerly provided by Gateway to CareLink Network Inc., another Detroit-based manager of a provider network with which the health authority contracts.
Last week, Khoury said in a statement to its providers that Detroit Wayne gave no warning to Gateway about the impending action and characterized the audits as routine with no willful illegality or fraud identified.
"A fair-minded person reading the reports would conclude that there is no disclosure or negative information that would justify a sudden contract termination," Khoury said.
Khoury did not respond to an interview request from Crain's.
"Detroit Wayne Mental Health Authority wins temporary restraining order over Gateway Health" originally appeared in Crain's Detroit Business.