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Proposed raises questioned at Eastpointe meeting

The Eastpointe Managed Care Organization (MCO) Board of Directors met on Tuesday, May 23rd at Mount Olive College and discussed budget matters. This was the first board meeting since March 2017. The board did not hold their regularly scheduled meeting on April 25th, 2017.

Catherine Dalton, Eastpointe Chief of Business Operations, gave the board an overview of the company’s operating expenses and revenues as well as presenting the proposed budget. The budget carries a four (4) percent Cost of Living Adjustment (COLA) for employees according to Dalton.

Board member from Bladen County, Emery White, questioned the increase. “The United States of America has averaged two (2) percent for the last 10 years. Where did we get four percent from?” asked White. 

“We used four (4) percent as an across the board cost of living as an effort to stabilize the workforce as we are moving towards the consolidation to try and encourage our staff to stay in place so that they are not going to other jobs,” said Dalton. 

White pointed out the staff received pay increases last year of three (3) percent and with four (4) percent in fiscal year 2017-18, pay increases would equate to a seven (7) percent total in pay increases in two years.

White also asked if the four (4) percent included Eastpointe’s Chief Executive Officer (CEO) Sarah Stroud. 

“That 4 percent is for all Eastpointe employees,” said Dalton. 

“She’s under a contract. I don’t think you can give her a raise because she is under a contract,” said White.

Dalton deferred to Board Attorney Jonathan Charleston. The CEO will be given an evaluation, according to Charleston. He said Stroud’s contract is like any other CEO’s and it provides for her compensation and pay increases.

It was asked how the salaries paid by Eastpointe compare to other MCOs/LMEs. Charleston replied Stroud’s contract was near the bottom or in the middle. He added that all other MCOs except two have budgets similar to Eastpointe. 

“There was a report made to the state auditor challenging the legitimacy of this [the CEO’s] contract. It was an anonymous report made about the contract,” said Charleston. The state auditor did review the contract.

Nothing was discussed in the public meeting about the latest North Carolina Auditor’s findings of kickbacks and questionable spending made by Eastpointe employees or the company’s plans from the Auditor’s recommendations. No cuts in spending or staff were mentioned in the public meeting.

It was asked if the four (4) percent COLA was to address issues within the company, and Stroud said the company is beginning to see some attrition and some “jitters” as the company moves forward with consolidation with Cardinal. While the merger has yet to be approved by the North Carolina Department of Health and Human Services Secretary, it was pointed out the Eastpointe board has negotiated to allow all of the Eastpointe employees be absorbed by Cardinal.

As of April 30th, Easpointe’s total assets are $146,087,927, the company’s total liabilities are $21,771,192 and the fund balance is $124,316, 735 according to Dalton, Eastpointe Chief of Business Operations.

Dalton referred to a recent liquidity analysis which was not included in the board agenda packets. The April 2017 finance report was also not included in the agenda packet. BladenOnline.com requested the liquidity analysis report and the April 2017 finance report.  Neither report has been received from Eastpointe as of noon on May 26th, 2017.

Dalton reported it was discussed at the last Eastpointe board meeting in March for an analysis of the items making up the current fund balance. The liquidity analysis reviewed the total fund balance of $124,316,735 and then deducted the totals for the budget line items which are not available to be used for operations, according to Dalton.

These items included:

*A reserve for employment retiree benefits set aside in a separate trust in the amount of $35,701,993;
*$3 million in restricted funds;
*funds which are reserved by NC General Statutes in the amount of $3,899,711;
*board designated funds for reinvestment activities and for replacement of funding cuts in the amount of $18,690,458;
*Medicaid Risk Reserve funds in the amount of $23 million.

Dalton explained Eastpointe is required to set aside two (2) percent each month for payment into fund balance account and the company cannot use those funds. The company must build those funds up until it reaches 15 percent of the company’s projected Medicaid budget, said Dalton.

Dalton explained to the board members, when all of the above reserved or designated funds are removed from the total fund balance, the funds left are $39,770,580, which is unreserved and undesignated.

“That is roughly a month and a half of worth of expenditures for Eastpointe as an organization that is not spoken for,” said Dalton. There were proposed budget amendments included in the evening’s agenda. Those amendments will add another $3 million to the $18,690,458 which was designated by the board to cover reinvestment activities and funding cuts according to Dalton. Additional funds will bring the total fund balance to $22,593,764. Dalton stressed, with those deductions, that would leave the company $33 million in undesignated funds which equates to one and one-half months of operating expenses.

Board Chairman Ron Boyette said in the last meeting conducted in March a discussion was held about looking at the overall fund balance total which is over $100 million. “It was very misleading because some people believe we have all of that money and that we can spend it at any time and that is not true,” said Boyette. He stressed there is a big difference in the total fund balance and the funds which are actually unrestricted.

On the profitability statement, Dalton said the company suffered a net loss of $2,191,352. The company has earned a Medicaid profit for the year of $6,679,429 and suffered a Non-Medicaid loss of $8,870,771. Dalton said the Non-Medicaid losses come from state, federal and local services the company is mandated to provide.

It was asked if other MCO’s are also showing similar loses. “I don’t know how similar, but I know that across the state the other LMEs and MCOs are running at a deficit in their state and federal funding,” said Dalton.

The board also reviewed the budget amendments which included $400,000 to be used in May and June for new intuitive from Governor Roy Cooper to compete Opioid Addiction, Nash and Columbus counties are to receive $16,600 each for prescription drug programs, and to allocate $1,451,074 which is allocated by NC HB 97 to each LME/MCO.

The board was also given their first look at the proposed 2017-18 budget. The budget will be available for review at the Eastpointe company headquarters in Beulaville. The budget projects the company to have total revenues of $317,761,454 for the fiscal year 2017-18 which is a $1.7 million increase over this year’s budget. The company is projecting to have total expenditures of $317,761,454. The company is projecting $279,281,890 to be designated for federal, state, Medicaid, and local services.

Boyette stressed that the budget is to be approved at the board’s June meeting. The only action taken on Tuesday was to allow the document to be made available for public inspection. The board approved making the proposed budget available. The budget can be viewed at the Eastpointe corporate headquarters located at 514 East Main Street, Beulaville.

The board also conducted two closed sessions for discussion of matters involving personnel and NC GS 143-318.11(a)(4) to discuss matters of business expansion and services provided by the area authority.

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