Impending Funding Cuts Lead to Merger of Morris, Essex Mental Health Providers

A number of jobs will be eliminated but new entity promises same level of service. Some observers concerned it could become a wider pattern that harms patient care

sad woman mental health
Two 60-year-old county-based mental health agencies will join forces to save on administrative costs and protect client services, a move leaders said is necessary given the funding loss they anticipate under New Jersey’s pending behavioral health payment reform.

In the coming months the Mental Health Association of Morris County, which provides case management, housing assistance, and other services to some 850 clients, will fold its operations into the Mental Health Association of Essex County, which cares for 1,000 patients on an average day. While several senior-level positions at MHA Morris are being eliminated to balance the budget of the combined organization and ease the process, leaders at both associations insisted direct-care staff and all patient services will be protected entirely.

“Not one person with a mental illness will lose one hour of treatment,” according to Louis Schwarcz, president and CEO of MHA Morris, who is stepping down as part of the process. “The whole purpose of the merger was to protect these services,” Schwarcz said, stressing that many of the patients they see are among the state’s most vulnerable residents, cycling in and out of jails and psychiatric hospitals with debilitating illnesses. “We’ll sacrifice at the administrative level, not in direct care.”

But some, including Assemblyman Anthony Bucco (R-Morris), who has been monitoring the situation, are more wary. While Bucco supports the state’s payment-reform process and welcomes efficiencies, if they exist, he worries about the unintended consequences of these changes. “The problem is, I don’t know if services are going to be the same. That remains to be seen,” he said Monday, noting that merger could become a wider pattern across the state.

Millions to be cut from their budget

While mental health providers have struggled for years with limited resources — and some have combined forces to save costs — Schwarcz said this merger was precipitated specifically by the state’s shift from a system of annual contracts to paying community behavioral health providers on a fee-for-service basis, slated to take full effect in July, which is likely to cut millions from their budget. The MHA Morris model for providing care “was not financially viable under the new structure,” Schwarcz said. “We made a strategic decision rather than close services or lay off staff we would merge with a larger organization.”

Officials at the Department of Human Services, which oversees community providers, have added federal dollars and tinkered with the fee schedule to boost payments, provided up-front funds to ease the transition, and delayed the change for some providers. But a number of mental health leaders insist the shift will leave them millions of dollars short, endangering programs for as many as 20,000 patients, according to a survey of providers conducted last year by the New Jersey Association of Mental Health and Addiction Agencies.

Providers convinced state lawmakers to pass a bill requiring the state to monitor the fee-for-service transition, but it awaits the governor’s signature, and mental health advocates have continued to underscore the need for more money. Earlier this month, nine organizations joined together as the New Jersey Community Mental Health Coalition to elevate this campaign.

“Unless the state adds safeguards to the new fee-for-serving funding, NewBridge and other community mental health providers will cease being the safety net that has sustained people in need for more than 40 years,” warned coalition founder Robert L. Parker, president and CEO of NewBridge Services, which cares for clients in Morris, Sussex, and Passaic counties.

But Schwarcz and Robert Davison, executive director of MHA Essex, underscored that patients in both Morris and Essex counties should not experience any changes in service during the merger or after it is complete, in August. Schwarcz said the two agencies use many of the same administrative systems, run similar programs and share “values, history and culture,” as well as the same commitment to caring for the most vulnerable citizens.

Contract signing this week

“Economy of scale is the key to the whole merger,” said Schwarcz, who led the search for a new partner after his board agreed the agency could not continue on its own, a process that has been going on for months. Together, “we’ll be a bigger, stronger agency more able to meet the changing demands,” he added, “although it will still be a challenge for the new organization.”

MHA Morris had a $6.5 budget last year; MHA Essex spent nearly $9 million. The departure of Schwarcz and a few other top MHA Morris officials will provide some $360,000 in annual savings to the combined organization, to be called the Mental Health Association of Essex and Morris. The two organizations will sign a contract Thursday and officials at DHS, who have been informed of the merger, will assist with the transition. (Details of the state’s role in this process were not available late Monday afternoon.)

“Basically we’re going to become more streamlined and efficient,” Davison explained. While there are advantages to having each agency led by its own leaders, he said the current funding picture doesn’t allow for such an option.

“I don’t think it’s a good thing or a bad thing; it’s reality, given the rates that the state is paying and what looks like is going to happen to Medicaid in the future,” Davison continued, referring to federal efforts to limit Medicaid spending. “As the public dollar gets tighter and tighter, you’ll see more consolidation.”

That’s an issue that greatly concerns Bucco too. The fee-for-service transition could impact other organizations the same way it shook up MHA Morris, he said, but not all providers will have the same options. “The next organization that projects a loss under this (fee-for-service model) may not have the opportunity to merge with a similar organization,” he said. “I think we really need to keep a close eye on this. (MHA Morris) is just the first pin to fall.”

We’re in this together
For a better-informed future. Support our nonprofit newsroom.
Donate to NJ Spotlight