One of the five Arizona companies brought in last year by New Mexico to care for the mentally ill and those struggling with addiction will cut hundreds of employees' salaries and reduce other costs beginning next week.
Agave Health Inc. is “currently operating at a significant loss each month” and must make changes after “increased expenses and insufficient productivity since January 1,” CEO Dr. Heath Kilgore wrote in an e-mail last week to 350 employees at 13 outpatient clinics and treatment programs across northern New Mexico.
NMID obtained a copy of the e-mail and reached out to Kilgore about the changes.
"We have had a challenging transition in New Mexico," Kilgore wrote in response Wednesday to a series of questions NMID sent via e-mail about the changes. "Agave hired and assembled staff from 3 companies into one. There have been adjustments needed to make this work."
Kilgore did not say how much Agave is losing each month despite being asked. But he predicted a lengthy stay in New Mexico despite the financial pressures.
"We expect to have a long future in New Mexico," he wrote.
Currently, Agave operates outpatient clinics in Santa Fe, Taos and Raton and treatment programs in Albuquerque, Rio Rancho, Farmington, Las Vegas, Los Lunas, Santa Rosa, Grants, Española and Clayton, according to its website.
In the e-mail Kilgore informed the 350 employees of an across-the-board 5 percent salary cut that will take effect next week (April 5) and of a reduction in the rate Agave reimburses for travel, to 25 cents per mile, which takes effect April 1. It is unclear how much the current reimbursement rate is. Agave also won’t give merit raises this year to supervisors and managers, Kilgore wrote in the e-mail to employees.
The news of Agave’s financial struggles throws another complication into the state’s handoff of care for the mentally ill and those struggling with substance abuse and addiction. Agave and four other Arizona firms took over services such as drug treatment and suicide counseling last summer from 15 New Mexico organizations accused of "credible allegations of fraud" following a 2013 audit commissioned by the state's Human Services Department.
In recent months, questions have arisen as to the thoroughness of the audit the state used as a basis for the fraud allegations and to suspend Medicaid funding to each of the 15 health organizations. Many of those organizations have since gone out of business, replaced by Agave and the other Arizona firms.
Kilgore apologized in the e-mail to employees for the cost-saving measures but explained that “These changes are necessary to preserve the services to our clients and the financial well-being of Agave, and to PREVENT any further reductions, extensive layoffs, or any site closures.”
Despite the financial pressures, Agave is performing well with customers, Kilgore said in his e-mail to NMID.
"We are very pleased with the results of a recent customer satisfaction survey we conducted with the consumers we serve," he wrote Wednesday. "The results reflect high customer satisfaction with our staff and services. We feel that we are on the right track to becoming a valuable service provider and member of the communities we serve."
Here is the text of the e-mail that went out to Agave employees:
To All Agave Employees:
After a critical review of increased expenses and insufficient productivity since January 1st, 2014, we have to make some significant changes in order to be financially stable as an agency. We are currently operating at a significant loss each month and this cannot continue.
Thus, due to these financial considerations, the remainder of this calendar year will require Agave to consolidate functions, reassign duties, and reduce salaries and mileage reimbursement. These changes are necessary to preserve the services to our clients and the financial well-being of Agave, and to PREVENT any further reductions, extensive layoffs, or any site closures. We are committed to Agave Health and the services we provide in New Mexico, this is the reason we are in need of doing these cuts in order to continue to provide these services. As a result, Agave has decided to implement the following:
• Effective April 5th, 2014, all staff will see a 5% reduction in salary.
• Effective April 1st, 2014, Mileage Reimbursement rate has been reduced to .25 per mile. Employees may be able to deduct business miles that were not fully reimbursed by Agave on their federal tax form. For example, employees who keep records of all mileage may be able to deduct the difference of the IRS standard mileage rate of $.56 per mile and the $.25 per mile, or $.31 cents per mile, on their yearly taxes. Please note that this does NOT include your commute miles to and from work. For more information please refer to the following IRS tax publications: http://www.irs.gov/taxtopics/tc514.html
• Effective January 1st, 2014, supervisory and management staff will not be eligible for any type of merit increase until 12/31/14.
• Effective April 1st, 2014, the minimum expectation for direct service providers is 75%.
We sincerely regret having to take these cost-saving measures and we understand the impact this will have on each of you. We appreciate your contributions toAgave and we trust that you will contribute to this transition in a professional and caring manner.
Tiffany and I will be visiting sites within the next 30 days to address any updates, concerns, and questions, or you may contact us directly.
Dr. Heath Kilgore, CEO
Agave Health, Inc.