Hear the report by KUAR's Michael Hibblen.

A court hearing is scheduled for Wednesday afternoon in Little Rock as a group of healthcare providers is asking a judge to delay Arkansas’s transition to managed care. The changeover is set to take place Friday, but the plaintiffs say the state hasn’t adequately set up the new system which will lead to disruptions of service.

A court filing says three managed care companies, known as Provider-led Arkansas Shared Savings Entities, or PASSE, aren’t ready to take responsibility for recipients’ care. Especially concerned are mental health providers who, after 25 years of seeing no changes in funding, are grappling with cuts over the last 18 months.

Several facilities say that changes instituted by the state Department of Human Services at the start of the fiscal year have left them in a precarious situation.

"Right now our mental health system is in crisis," said Luke Kramer, executive director of the STARR Coalition. STARR stands for Stakeholders in Treatment, Research and Recovery and the coalition works with providers throughout the state.

"There are multiple facilities that are on the verge of closing their doors which could send potentially tens of thousands of individuals throughout the state with mental illness onto the streets, possibly in jails and with families not having any idea of what to do."

The state transitioned to a new system in July called Outpatient Behavioral Health Services. But Ro Garcia, chief operating officer for Inspiration Day Treatment, says as a result it now takes much longer to get reimbursed for treating those on Medicaid. Facilities also can’t bill Medicaid for multiple services on the same day.

"You’ve got providers that care, like we do, that were barely making it," he said. "Now it’s impossible; there’s no way to do it. If our owner Carol Witham hadn’t put in $325,000 [of her own money] since July, we’d be out of business. 140 clients would be somewhere in Little Rock, because that’s the area we serve, and the 50 staff that help these clients would be without a job as well."

The facility on Kanis Road in Little Rock is a busy place providing group therapy, individual therapy and nurses dispensing medication to help stabilize people suffering from mental illness. Danny Smith is a regular patient.

"We can use the washing machine, they feed me, do all kinds of good things," Smith said. "They should save a person by give a hand, not a hand down, a hand up. That’s what Inspiration did for me."

Changes in how the state pays for mental health services came as a result of a bribery scandal involving Preferred Family Healthcare, with several state lawmakers and a lobbyist implicated in the investigation. In an interview with KUAR last week, Gov. Asa Hutchinson said the changes rule changes were implemented after a public hearing and adopted by the legislature.

"You think back through with Preferred Family that was in behavioral health in which the executives were indicted for draining tens of millions of dollars out of the system for executives, and so there was clearly a lot of waste in the system and so there had to be these kind of corrections to wisely use the taxpayer’s dollars," Hutchinson said. He argues that the state is making sure the changes to the system aren’t negatively impacting existing mental health providers.

"We continue to monitor it to make sure that it works fairly and that we have mental health services provided in the community, but these changes were necessary in order to make sure that the system is not filled with waste. Most of them are great providers and we want to make sure that they stay strong and the reimbursements are there for them," Hutchinson said.

But Kramer responded by saying, "I think that everyone can agree with the governor that the fact that what happened with Preferred Family Health is a blight on the mental health system in the state of Arkansas. But those folks that were a part of this particular scandal, they’ve gone to jail, and there may be others that are going to jail. So we need to close this chapter and we need to stop defining all providers as those out there scamming millions of dollars off the system."

Kramer said many of the state’s non-profit facilities are now trying to determine how to continue providing mental health treatment amid the cuts.

"When you have providers who have been providing services for decades who are on the verge of closing their doors, they are not committing fraud. And I am sure that every provider out there welcomes complete transparency when it comes to what they’re doing to provide services," Kramer said.

When told that many providers say they’re on the verge of shutting down because of the changes, which would leave some clients on the streets or in jail, Hutchinson said, "Well, it shouldn’t. And first of all we want to make sure the payments are made in a timely fashion, so it should not impact the timeliness of payment. But in terms of access to mental health services, that’s very important to me."

The governor said he initiated pilot programs for crisis stabilization units, which are designed to provide a way for people to get mental health in their local communities rather than going to jail.

"We’ve tried to extend those services. When it comes to our division of youth services, we’ve closed some of our youth services institutions so we can return more services to our communities," Hutchinson said. "So we’re trying to increase that availability to mental health services, not diminish it. And so the rule changes that we’re adjusting to are simply an adjustment and not a diminishing of local services."

Kramer says modifications to the system need to be made by the legislature, but that lawmakers are now hesitant to get involved because of the recent scandal.

"My worry is the fact that what happened with Preferred Family Health has caused mental health to become the third rail of politics. We have few legislators who are willing to go in and explore this area because of the possibility of them being seen as a part of that problem, or part of that corruption," he said. "We need to have champions throughout the state. Many times the individuals that are suffering the most because of what’s happening on the state level do not have a voice in the system."

Kramer argues the next planned change, the implementation of the PASSE system to transition to managed care, would further exacerbate the situation. Kramer says he is not against the PASSE system, but is concerned that the state hasn’t completed setting it up, which he fears will lead to further delays in facilities getting reimbursed for treating those on Medicaid.

"One of the concerns I think the providers are going to have, if there is a delay in services, that are they going to be able to keep their organization floating above water until everything is panned out for the new PASSE."

A lawsuit filed last Thursday on behalf of 15 residential care facilities in the state asks a judge to halt the implementation. It says the three managed care companies aren’t ready to take responsibility for recipients’ care. Pulaski County Circuit Judge Chris Piazza is to consider the request for an injection at a hearing that begins Wednesday 1 p.m.