John Rittelmeyer

The state's only operating managed care organization said Monday that it has restored services to more than 130 N.C. residents affected by developmental disabilities.

Louise Flanagan, a U.S. District Court judge, had ruled Thursday that Piedmont Behavioral Healthcare (PBH) did not properly alert residents about significant changes to the services they would receive.

Nearly 700 people whose providers are overseen by PBH in Davidson, Cabarrus, Rowan, Stanly and Union counties were affected by Flanagan's decision. The home and community-based services help keep those residents out of institutional care.

"These individuals will again receive the amount of services that were previously in place, and PBH will begin the process of properly notifying them of the changes," the agency said in a statement. "This does not affect the more than 450 people who received the same or increased amounts of services due to the changes."

The injunction is not binding on other managed care organizations, John Rittelmeyer, an attorney for Disability Rights N.C., said Tuesday. The group assisted the plaintiffs in the case.

"However, it would be wise for other MCOs to act in conformity with the judge's order," Rittelmeyer said. "We would expect DHHS (the N.C. Department of Health and Human Services) to advise them accordingly."

Julie Henry, a spokeswoman for DHHS, said that the 10 planned MCOs, which includes CenterPoint Human Services, "also will have to comply with the judge’s ruling."

PBH began implementing a cost-cutting initiative with the 700 residents in March 2011.

The plaintiffs said PBH reduced services for beneficiaries "that had previously been found necessary, even though their underlying conditions had not changed, and without the legally required notice explaining why the action was being taken."

A lawsuit was filed in July on behalf of five Medicaid recipients, four minors and one adult. DHHS was listed as a defendant because it oversees PBH and other managed-care organizations.

The plaintiffs said that not only did PBH fail to give proper notice and rights to appeal, they "were told they have to sign new plans of care reducing their services, and failure to do so would result in all of their services stopping."

Flanagan's decision allows the residents to keep their Medicaid services, but it doesn't stop PBH from adopting the cost-cutting measures.

"The court noted that without an injunction, the plaintiffs would experience deteriorating health, financial strains and the threat of having to go into institutions to get care," Disability Rights N.C. said.

Where the larger implications for the ruling come into play is that PBH is considered by state officials as the role model for managed-care organizations.

CenterPoint Human Services, based in Winston-Salem, is one of 10 local management entities (LME) that have received state approval to become a managed-care organization by Jan. 1. It receives taxpayer funding as a local management entity of behavioral-health services in Davie, Forsyth, Rockingham and Stokes counties.

There are 10,000 people statewide participating in a community alternatives program that helps keep developmentally disabled people in their homes, Rittelmeyer said.

"Federal regulations require adequate notice and an opportunity to appeal when services are reduced or terminated as a result of an individual determination of medical need," Rittelmeyer said.

He said the judge's order also directs PBH "to operate in a more transparent manner in the future" because its method for determining level of service need was not clear. He said residents and family members or guardians also did not have an opportunity for a hearing in front of an impartial decision-maker.

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