Cleveland’s ARPA Budget Includes $2 Million for Problem-Plagued NEON Health Services

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  • Photo by Lee Chilcote

  • NEON is a mess, and desires $2 million in ARPA funds

Originally released by The Land. Republished here with authorization.

Behind a six-foot, wrought iron fence on Payne Avenue near East 55th Street sits the head office of Northeast Ohio Neighborhood Health Services (NEON), a federally certified health care center (FQHC) that serves a few of Cleveland’s poorest areas. It would be simple to drive by the structure — it doesn’t have an indication other than for the name of the company discreetly engraved into black granite on its nondescript exterior.

The metal security screens on the windows, probably indicated to prevent trespassers, likewise avoid anybody on the outdoors from searching in. And possibly with great factor: According to current audits, the company might be on the verge of collapse, even as its CEO, Willie Austin, made $501,964 in 2019. That’s more than 20 times what a common NEON client makes every year and $300,000 more than the yearly wages of CEOs of 2 other FQHCs in Cleveland, Care Alliance and Neighborhood Family Practice.

Now, NEON is asking for $2 million from the city’s American Rescue Plan Act (ARPA) budget to offer neighborhood health programs and fix the Hough Medical Center, which suffered a destructive fire in May of this year. Yet even as Mayor Frank Jackson’s outbound administration has actually backed this demand in its latest ARPA budget, NEON has actually been adding deficits, defaulting on its financial obligations, and losing clients and personnel for years, leading worried staff members to question the future of the company.

The Land just recently spoke with NEON member, who consented to be priced estimate anonymously for worry of losing their tasks, who stated that NEON is bleeding personnel. Currently, NEON just has one-third of the nurses that it as soon as had, they stated.

“Every department remains in a deficit attempting to maintain,” a member informed The Land, including that having enough personnel to cover positions has actually ended up being a significant concern. “People are leaving since everybody else pays much better and treats you much better.”

The Land gotten in touch with NEON to ask for an interview for this story, however did not get an action. It likewise sent a public info demand to the city of Cleveland asking for extra info about how the $2 million for NEON would be invested, however did not hear back. Nonetheless, a path of public files reveals a company stuck in problem.

According to a current audit, NEON’s losses stem in part from a suit from a previous staff member who declared wrongful termination. After NEON lost its appeals, that suit eventually cost the firm more than $1.3 million. The staff member, James O’Donnell, was fired after questioning billings by Arthur Fayne, a NEON board member and head of a consulting company, Business Development Concepts, who was employed to handle The New Eastside Market task. On December 7, 2020, Fayne was prosecuted for supposedly embezzling $855,000 from the task. The case was still being prosecuted since the publication date of this story.

Moreover, according to records acquired by The Land from the Health Resources and Services Administration (HRSA), NEON lost one-third of its clients from 2016-2020, dropping from 31,804 clients served in 2016 to 21,605 clients in 2020. An internal memo shared at a NEON personnel conference and acquired by The Land states that NEON experienced “constant decrease over 5 years without any durations of incremental development.” The firm has actually lost 47% of its customer base or 10,199 clients in the previous 5 years.

Additionally, the memo states, “We likewise got just 2 quality acknowledgment badges: PCMH (patient-centered medical house) and -19 information reporting (for the weekly HRSA reports).” HRSA offers moneying to firms that offer health care to susceptible groups, consisting of low-income neighborhoods of color in Cleveland such as those served by NEON.

The issue, according to member, is that NEON does not offer suitable staffing or high levels of care and is losing clients to other FQHCs in the market, consisting of Neighborhood Family Practice, Care Alliance, and Signature Health.

The firm, established in 1967, runs 7 centers in Cleveland and East Cleveland. Yet in spite of its trustworthy history, over the last few years NEON has actually run with big deficits. The firm lost $915,798 in 2019, the most current tax year readily available, according to the internal revenue service. The group’s overall operating incomes were $24,883,972 throughout that year. Of that amount to, $14,214,652 originated from contributions and grants, while $10,124,766 originated from program service profits (such as Medicaid repayments). In 2018, the company ran a deficit of $669,722.

Despite these heavy losses, the board of directors offered Austin a $100,000 raise, up from $402,351.

The Land gotten in touch with Rev. Rodney Thomas of Imani Temple Ministries, board president of NEON, who did not react to our interview demand.

An unpleasant audit

A December 31, 2019 audit from BKD licensed expert accounting professionals and consultants offers a window into the scope of NEON’s issues. “The accompanying monetary declarations have actually been prepared presuming the company will continue as a going issue,” it states. “The company has actually suffered repeating losses from operations and has an operating capital shortage, which raises considerable doubt about its capability to continue as a going issue.”

The audit exposes a company attempting to stay above water, even as it does not have correct monetary controls within its own company.

In 2019, NEON had “an operating loss of around $2,089,000 and a total loss of around $2,614,000, in addition to unfavorable money streams from operations of around $2,303,000 and continued declines in working capital,” the audit from BKD states. At completion of 2019, NEON likewise had numerous notes payable and credit lines that remained in default.

Additionally, NEON “participated in several arrangements to offer its future receivables to 3rd parties at a discount rate” at this time, the audit states, sustaining interest of around $745,000 in 2019.

According to the audit, in 2013, NEON started to pursue management of The New Eastside Market task. NEON’s for-earnings subsidiary, Community Integrated Services (CIS), contracted with Arthur Fayne’s business Business Development Concepts, LLC (BDC) to handle it. According to the 2019 audit, CIS paid BDC $3,057,000 in 2018 and $718,000 in 2019.

According to a Dec. 4, 2020 release from the U.S. Attorney’s workplace from the Northern District of Ohio, Fayne supposedly embezzled almost $1 million from The New Eastside Market task. He sent billings to CIS/NEON to pay the professional, then utilized the funds the pay his gaming financial obligations rather. According to the release, Fayne is “implicated of accessing some funds from BDC at a gambling establishment and losing around $1 million on different celebrations.”

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PHOTO BY LEE CHILCOTE

Additionally, throughout this time, NEON was an offender in a suit that asserted wrongful termination of previous primary monetary officer James O’Donnell, eventually costing the company around $1,365,000 as part of the preliminary judgment. O’Donnell died in December 2020.

In 2020, the company got a $3,642,800 forgivable loan from the Paycheck Protection Program as an outcome of the CARES Act. The firm likewise got $216,000 in service provider relief funds and $1,588,000 in extra health center financing awards.

In April of 2020, NEON likewise protected 2 home mortgages for $8,500,000 and $500,000. According to the audit, follows the loans were utilized to pay costs, settle arrearages, and settle staying balances related to the advances from sales of receivables.

The firm lacked a primary monetary officer for 6 months in 2019, leading to “a crucial absence of comprehensive supervisory evaluation of particular month-end price quote estimations, preparation of particular subsidiary basic journal info, and other essential schedules prepared throughout the monetary declaration close procedure,” according to the audit. The firm sold more receivables to 3rd parties at a discount rate in April 2020, recommending that its difficulties are still far from over.

The New East Side Market

NEON was picked as designer of The New Eastside Market in 2015, and consequently rented the residential or commercial from the city for $1 annually in 2015. Prior to that time, the city had actually invested its own resources supporting the residential or commercial property and establishing a demand for propositions. NEON reacted to the RFP and was eventually picked as the designer and operator of the brand-new market.

“We’re interested in holistic health — real estate, tasks, nutrition,” Austin informed Crain’s Cleveland Business in 2015, discussing why a health care company was opening a supermarket. “There’s no location in the location to get fresh food. One constituent informed Councilman Kevin Conwell, ‘I’d enjoy if I might simply purchase an apple.’ That truly shows the issue that we’re having.”

In addition to the $1 annually lease from the city, the task was likewise supported by a $750,000 capital grant from the State of Ohio and $166,000 from the City of Cleveland. The city likewise offered the marketplace a 75 percent tax reduction for 15 years on enhancements made to the residential or commercial property, consisting of brand new pipes, electrical, and roof. When it encountered expense overruns in 2018, the city supplied an extra $500,000 recoverable grant to The New Eastside Market.

In a release when The New Eastside Market held its grand opening in 2019, Mayor Frank Jackson stated: “Cleveland is happy to be part of the Eastside Market’s historical restoration serving the individuals of Glenville, Collinwood and surrounding neighborhoods. The city has actually bought this task to assist make sure homeowners can have access to a full-service supermarket.”

Yet while the marketplace had an objective of supplying fresh and health services to a location that does not have a full-service supermarket, it hasn’t measured up to its guarantees. As the task advanced, the preliminary budget of $3.5 million swelled to $6.7 million with expense overruns and hold-ups. NEON vowed to open a health center, presentation kitchen, and center for business owners, however those never ever emerged, in spite of NEON’s popular signs on the exterior of the structure.

According to Cuyahoga County tax records, the city now owes $101,067.86 in taxes on the residential or commercial property. The overall includes charges of more than $13,000 due to absence of payment for 2019 taxes that were owed in 2020. Lou Gentile, a business appraiser with Cuyahoga County, stated that the residential or commercial is not exempt from paying taxes since the supermarket is a for-earnings company. The city did not respond to an interview demand looking for talk about the concern.

Brad Rosselot with Mazzullo’s Market in Bainbridge and Aurora, who was initially associated with running the The New Eastside Market task, likewise did not return 2 telephone call looking for remark. The Land checked out The New Eastside Market and spoke to supervisor Alonzo Barker, who is likewise the Chief Information Officer at NEON, however Barker decreased to be spoken with.

Ward 9 council member Kevin Conwell informed The Land that he thinks in the task, which remains in his ward, however that he’s worried it might remain in problem. “They began in 2016, and they had a ribbon cutting 2 years later on,” he stated. “But they still haven’t finished what they stated they would finish. They’re having a hard time. The shop is not resonating with the neighborhood.”

More monetary difficulties

One of the reasons that NEON ended up being stuck in financial obligation over the last few years is since it lost a pricey suit submitted by previous CFO James O’Donnell. Court files expose that O’Donnell had actually attempted to caution NEON CEO Willie Austin about Fayne’s supposedly phony billings, and yet Austin consequently fired O’Donnell for insubordination.

In 2016, NEON was taken legal action against by O’Donnell, who submitted an age discrimination claim after he was fired. O’Donnell was 60 years of ages when he was release, and he was changed by 35-year-old George Voss. O’Donnell likewise declared that he was fired for asking “difficult concerns” about the financial resources of numerous tasks NEON was moneying through CIS, consisting of The New Eastside Market.

NEON, for its part, declared that O’Donnell was ended due to insubordination and disrespect. O’Donnell won his fit for age discrimination in April 2020, and was granted $1,253,738.50 in back pay, offsetting damages, and interest. NEON lost its subsequent appeals.

According to court files, O’Donnell attempted to raise Fayne’s billings with Austin. In a May 25, 2016 e-mail, O’Donnell composed to Austin, “It is significant to see that the very same deals asked for from Arthur yielded no real evidence that the payments were made to his subcontractors, just billings, that rather honestly any 8th grader might recreate on a printer! Let me speak honestly, when you divert a million dollars a year to an unverified entity acting upon your behalf, there is going to be increased examination. We remain in the 2nd year of million dollar losses, that not-for-profit Board members may not completely understood? A Board member’s obligation of ‘Duty of Care’ will be questioned by outdoors customers.”

To which Austin responded, “Be really mindful about the method you interact with me, specifically questioning my intelligence and/or capability to comprehend something you were not present to hear, concern or action [sic]. Insolence appears to be something which you keep in high regard. However, you are not going to resolve me any method you like without there being effects.”

On Jan. 9, 2017, Austin fired O’Donnell and had him accompanied from the structure by another employee and a gatekeeper.

“We’re all in misery”

Conwell stated that he understands NEON is having a hard time economically, however that he does not desire them to go under since they offer essential health care services to the neighborhood. “NEON handles a great deal of health care inequality in our area,” he stated. “They have an up close view of the neighborhood. If NEON goes under, then that’s going to harm our neighborhood.”

“They’re in the material of the neighborhood in such a way that Cleveland Clinic is not in the material,” he included, mentioning health variations dealt with by Black and low-income neighborhoods.

Speaking at the Nov. 8th city council conference, Ward 7 council member Basheer Jones concurred. “If anybody is from Cleveland, you’ll understand about the effect that NEON has actually had on everyone,” he stated. “I keep in mind going there as a young boy. Many neighborhood members feel uneasy going to the big organizations. NEON is a location they relied on.”

The staff members who spoke to The Land stated they fear the company will not make it through, offered its existing trajectory. For something, they state the company does not pay competitive earnings, and has problem recruiting and keeping personnel since of bad working conditions. Additionally, NEON’s centers remain in desperate requirement of an upgrade, these personnel state.

According to one staffer, NEON cannot take on the Cleveland Clinic and other service providers since it pays medical assistants and certified useful nurses $4-8 less per hour. The staffer stated they hadn’t had a raise in 3 years and had actually been required to handle other duties, like acting as a door display for -19 screening, that aren’t part of their tasks.

Another employee declared NEON’s centers are dated. “Before the Hough fire, we had a radiology department, and the mammogram device was so old, it was constantly breaking down,” the staffer stated. “Other times, the devices breaks down and they can’t discover parts, since it’s so old it’s outdated. Then when the devices gets closed down, we’re informed there’s no cash for things.”

“We’re all in misery, a genuine loss of hope,” stated the private, who is looking for another task.

NEON gets financing from the HRSA Health Center Program, and their existing task duration goes through December 31, 2021. Spokesperson Scott Kodish stated NEON’s application for future financing is presently under evaluation.

Nonetheless, numerous east side council members stated they are supporting NEON’s existing ARPA demand for $2 million presented at the Nov. 8 council conference. Conwell stated that he supported the demand since it would be utilized to offer treatment to the neighborhood. Ward 10 council member Anthony Hairston, whose ward includes the St. Clair Superior area where NEON has a healthcare center on Norwood Avenue, likewise supports the company, though he was not familiar with the ARPA demand.

At the Nov. 8 city council conference after the legislation was presented, existing Ward 7 council member Basheer Jones talked to his associates about why he supported NEON and prompted them to do the same.

“If anybody’s from Cleveland, you’ll understand about the effect that NEON health center has actually had on everyone,” he stated. “I’m asking all of my associates for your assistance. Let’s restore NEON. It really has actually had an incredible effect on the neighborhood.”

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