County May Pay Millions Due to Failed Superagency

Ventura County’s failed attempt to merge its mental health and welfare services departments could cost it anywhere from $344,000 to $2 million in Medicare reimbursements, officials said Thursday.

That’s not counting millions more in Medicaid payments that the county could be held liable for because of the failed experiment.

“There is a significant amount of money at risk,” said Larry Morris, the county’s financial analyst in its administrative office. Losing the federal money “would almost certainly impact the services to the patients” at Ventura County Medical Center, he said.

Last April 7, the Board of Supervisors voted to merge the Behavioral Health Department and Public Social Services Agency into a superagency. Creating the Human Services Agency was designed to improve care of the mentally ill.

But in November, the federal government warned the county that the merger violated Medicare and Medicaid billing rules. As a result, the county dismantled the agency Dec. 22.

Since then, county officials have been trying to persuade federal authorities not to demand reimbursement for money paid during the 259 days that the merged agency existed.

County officials believe that they are most in danger for the period from April 7 to May 19, when officials at the new agency directly supervised doctors at the county’s mental health unit. The county is reimbursed about $8,000 a day from Medicare for patient services.

That move violated federal organizational requirements, which mandate that the county medical center must directly supervise the doctors in the mental health unit.

To address that problem, supervisors May 19 appointed Chief Administrative Officer Lin Koester to oversee the medical center, which they believed established a direct line of authority between doctors and the medical center.

Federal officials disagreed and in December declared that the Human Services Agency was illegal. Faced with the possibility of losing up to $15 million a year in Medicare and Medicaid reimbursements, supervisors dismantled the superagency.

Although concerned about losing millions of dollars in funding, “that claiming period between April 7 to May 19 puts us in the greatest danger,” Morris said. The county received $344,000 in reimbursements during that period.

If required to repay the government for the entire time the agency existed, the bill would rise to more than $2 million, officials said.

Losing any money “could affect people other than just the mental health patients or alcohol- and drug-addicted clients,” he added.

The budget for the medical center is $117.8 million.

Koester shared the view that the 43-day period was the danger zone.

“When I was not the CEO [of the hospital], it could be viewed that there was not a direct line of authority; we acknowledge there is a risk for that period of time,” Koester said. “We feel more confident about the rest of the time period. There are still some concerns, but we will hopefully make our case to the Feds.”

Federal officials said Thursday that they are reviewing the county’s Medicare and Medicaid cost reports for its April to December billings.

“It may be that the county will have to repay Medicare and Medicaid for claims improperly submitted,” said Helen Gookin, a specialist at the Health Care Financing Administration in San Francisco. “But no determination has been made or is expected to be made immediately.”

If the county is ordered to make repayments, it may appeal the decision to the national provider reimbursement board, Gookin said. The appeal process is lengthy.

“It could take years,” she said.

Supervisor John Flynn, who along with board Chairwoman Susan Lacey and Supervisor Kathy Long voted in favor of the merger, was optimistic that the county would not lose any federal money.

“I don’t see where the Feds have a leg to stand on,” Flynn said from Hawaii, where he was vacationing. “No services were interrupted. Having to repay for reimbursements is the same thing as a penalty in my view, and I don’t think they’re going to do it.”

Supervisor Frank Schillo, a vociferous opponent of the merger, differed.

On Thursday, he sent a letter to Koester admonishing the administrative office for allowing the fiasco to occur.

In the letter, Schillo demanded to know why the merger was done “without the usual good background work.” He also asked that Koester’s office find out which department is bearing the cost of reversing the merger and report back to him “in a timely fashion.”

“I want full accountability,” Schillo said in a telephone interview. “What has this cost us and how much will it cost to put Humpty Dumpty back on the wall? . . . I want to know why the staff wasted so much money.”

Morris estimated that the county has spent at least $114,000 on legal fees and consultants associated with the merger. The law firm of Hooper, Lundy & Bookman is still working on the matter and continues to ring up new costs, he said.

That figure does not include travel expenses. In November, six county officials went to San Francisco to talk to federal health care officials. The air fare alone came to more than $1,000, Morris said.