Report details New River collapse
by Kellen Moore
No evidence exists that the staff of New River Behavioral
HealthCare misappropriated money or intended to mislead before the organization's demise last fall,
according to consultants hired to review the situation.
Instead, unreliable financial reporting, drastically overstated accounts receivable and a lack of control over services rendered were the root causes of the collapse, they concluded.
Those were the primary messages delivered in a 10-page report from Martin Starnes & Associates released Friday at a meeting of the New River Service Authority board.
After review of the report, the board voted unanimously to have board attorney Bruce Kaplan find a law firm to seek possible litigation regarding questions of officers' errors and omissions, insurance coverage liability and accounting firm liabilities.
The consultants analyzed New River's finances from July 1, 2009 forward and formed several notable conclusions about the organization's failure.
According to the report, the demise started in 2007 when statewide mental health changes took effect but was masked by an unreliable financial reporting system.
As of June 30, 2010, financial statements audited by Lowdermilk, Church & Co. put New River's accounts receivable at $4.18 million. The amount it actually received that fiscal year was about $949,000 — meaning New River overestimated its assets by $3.2 million.
The firm also found other inconsistencies that pointed to an “inadequacy of the internal reporting system.”
While the report at times points fingers at former CEO Pam Andrews, former CFO Larry Aggers and the Lowdermilk, Church & Co. firm, it hesitates to place blame on the New River board.
“The board of directors performed their duties with incorrect information,” the report reads in one section.
The report also notes that New River often provided services that weren't authorized by Medicaid, Medicare or insurance companies, services that exceeded what was allowed or services that were conducted by practitioners without valid Medicaid provider numbers, according to unverified information from staff. That resulted in the denial and resubmission of many Medicaid claims.
The consultants also interviewed Aggers, who served as financial officer from August 2009 to Sept. 30, 2011.
“Mr. Aggers reported that due to the operating losses that occurred prior to his employment, the CEO instructed his emphasis to be on controlling expenses and he did not spend much of his time on the accounts receivable/billing function,” the report states.
The full report is available online at bit.ly/MartinStarnesReport.
Martin Starnes & Associates has charged $23,815 so far for its services, of which $10,000 already has been paid by the five counties involved. The board voted unanimously Friday to request that each county pay its pro rata share of the $13,815 owed as well as a pro rata share of $20,000 in additional funding for Martin Starnes to continue its work.
For Watauga County, that will equate to about $7,890 on top of the amount already contributed.The board did not specify in the meeting what services Martin Starnes will provide going forward, but Ashe County Manager Pat Mitchell said in an email that the firm will be asked to compiled a comprehensive report of all existing or potential debt.
Other business
The board also:
• Approved the signing of a business associate agreement with Marilyn Brothers, an expert recently hired by Smoky Mountain Center to assist with New River's medical records. The agreement will ensure that Brothers is compliant with HIPAA, the Health Insurance Portability and Accountability Act.
• Voted to declare as surplus any remaining vehicles and furniture to sell on http://GovDeals.com or at auction. That will not include computers, which must first be wiped of information.
• Appointed Amy Oliver as chief financial officer and approved the hiring of a person to prepare end-of-year information such as W-2s and other tax forms.
• Approved leases for space used by Daymark Recovery Services in Ashe County.
• Approved a right-of-way agreement with the N.C. Department of Transportation, which will reimburse NRSA $18,995 for less than half an acre of land on New River-owned property in Ashe County.
• Voted 4-1 to comply with an N.C. Medical Board investigator's request for data. Watauga County Commissioner Nathan Miller was the only nay vote, explaining that if the board provided the data to one entity it would have to provide it to all, which would stretch staff too thin.
The next board meeting is scheduled for 9 a.m. Jan. 31 in Ashe County.
Instead, unreliable financial reporting, drastically overstated accounts receivable and a lack of control over services rendered were the root causes of the collapse, they concluded.
Those were the primary messages delivered in a 10-page report from Martin Starnes & Associates released Friday at a meeting of the New River Service Authority board.
After review of the report, the board voted unanimously to have board attorney Bruce Kaplan find a law firm to seek possible litigation regarding questions of officers' errors and omissions, insurance coverage liability and accounting firm liabilities.
The consultants analyzed New River's finances from July 1, 2009 forward and formed several notable conclusions about the organization's failure.
According to the report, the demise started in 2007 when statewide mental health changes took effect but was masked by an unreliable financial reporting system.
As of June 30, 2010, financial statements audited by Lowdermilk, Church & Co. put New River's accounts receivable at $4.18 million. The amount it actually received that fiscal year was about $949,000 — meaning New River overestimated its assets by $3.2 million.
The firm also found other inconsistencies that pointed to an “inadequacy of the internal reporting system.”
While the report at times points fingers at former CEO Pam Andrews, former CFO Larry Aggers and the Lowdermilk, Church & Co. firm, it hesitates to place blame on the New River board.
“The board of directors performed their duties with incorrect information,” the report reads in one section.
The report also notes that New River often provided services that weren't authorized by Medicaid, Medicare or insurance companies, services that exceeded what was allowed or services that were conducted by practitioners without valid Medicaid provider numbers, according to unverified information from staff. That resulted in the denial and resubmission of many Medicaid claims.
The consultants also interviewed Aggers, who served as financial officer from August 2009 to Sept. 30, 2011.
“Mr. Aggers reported that due to the operating losses that occurred prior to his employment, the CEO instructed his emphasis to be on controlling expenses and he did not spend much of his time on the accounts receivable/billing function,” the report states.
The full report is available online at bit.ly/MartinStarnesReport.
Martin Starnes & Associates has charged $23,815 so far for its services, of which $10,000 already has been paid by the five counties involved. The board voted unanimously Friday to request that each county pay its pro rata share of the $13,815 owed as well as a pro rata share of $20,000 in additional funding for Martin Starnes to continue its work.
For Watauga County, that will equate to about $7,890 on top of the amount already contributed.The board did not specify in the meeting what services Martin Starnes will provide going forward, but Ashe County Manager Pat Mitchell said in an email that the firm will be asked to compiled a comprehensive report of all existing or potential debt.
Other business
The board also:
• Approved the signing of a business associate agreement with Marilyn Brothers, an expert recently hired by Smoky Mountain Center to assist with New River's medical records. The agreement will ensure that Brothers is compliant with HIPAA, the Health Insurance Portability and Accountability Act.
• Voted to declare as surplus any remaining vehicles and furniture to sell on http://GovDeals.com or at auction. That will not include computers, which must first be wiped of information.
• Appointed Amy Oliver as chief financial officer and approved the hiring of a person to prepare end-of-year information such as W-2s and other tax forms.
• Approved leases for space used by Daymark Recovery Services in Ashe County.
• Approved a right-of-way agreement with the N.C. Department of Transportation, which will reimburse NRSA $18,995 for less than half an acre of land on New River-owned property in Ashe County.
• Voted 4-1 to comply with an N.C. Medical Board investigator's request for data. Watauga County Commissioner Nathan Miller was the only nay vote, explaining that if the board provided the data to one entity it would have to provide it to all, which would stretch staff too thin.
The next board meeting is scheduled for 9 a.m. Jan. 31 in Ashe County.