Lacey Defends Agency Merger Despite Fallout

Moments after a sharply divided Ventura County Board of Supervisors voted to merge the county’s mental health and welfare agencies last spring, Frank Schillo walked over to his colleague Susan Lacey and thrust out his hand.

“Congratulations on the coup you just pulled off,” Schillo sarcastically said to Lacey, the architect behind the merger.

Less than 10 months later, Lacey’s plan has collapsed, and the county could lose millions of dollars in Medicare and Medicaid reimbursements. As a result of the merger fiasco, the usually low-key Lacey has found herself in the spotlight and on the defensive.

But the five-term supervisor makes no apologies. She says if she could do it all over again, she would. She would do it for two family members who suffer from mental illness, she said, and for people like them.

Her critics are less certain that her motives are pure. They say the merger was politically motivated, aimed at wresting control of the mental health division from Health Care Agency Director Pierre Durand, who has butted heads in the past with Lacey and some of her county allies.

“It was a power struggle,” said Lou Matthews, director of the Ventura County chapter of the National Alliance of the Mentally Ill.

Lacey--who denies the accusation--has been under fire ever since the board voted 3 to 2 last April to merge the Behavioral Health Department and Public Social Services Agency into one superagency called the Human Services Agency, despite warnings from legal experts about the huge financial risks.

The supervisors had held only one public hearing on the matter--on the day of the vote--and each speaker was limited to one minute. Chief Administrative Officer Lin Koester had advised taking more time to study the issue.

Yet, Lacey and Supervisors John Flynn and Kathy Long had argued that the merger would lead to a more “team-oriented” approach to dealing with the mentally ill. Psychiatrists and social service employees working hand in hand would provide better treatment, and would eventually save the county money, they said.

Supervisors Schillo and Judy Mikels dissented, citing a lack of sufficient information to make such a crucial decision.

Then in November, just as consultants hired by the county had predicted, the federal government warned the county that the merger violated Medicare and Medicaid billing rules. Fearing the county could lose as much as $15 million in medical reimbursements, the supervisors voted Dec. 22 to dismantle the superagency. Despite the warning by federal authorities, Lacey refused to back down and cast the sole dissenting vote to overturn the board’s April decision. County staff had been working behind the scenes on the reorganization for nearly a year, she explained, and she couldn’t let them down.

Indeed, Lacey, who prior to becoming a supervisor taught children with severe emotional and learning disabilities in the Santa Paula school district, remains defiant over her decision to push for the merger.

Critics Blamed

In a recent interview, Lacey blamed a handful of critics--residents, members of the alliance of the mentally ill and county employees whom she refused to name--for the demise of the superagency. The critics, she said, repeatedly called federal officials until they finally buckled under, giving the reorganization a thumbs down.

“It’s four or five people, that’s all,” Lacey said. “They have been calling [federal officials] trying to put pressure on them not to approve what we did.”

But officials at the Health Care Financing Administration in San Francisco denied that they were swayed by any lobbying.

“We did get calls from the public, yes,” said Helen Gookin, a billing specialist at the administration. “But we did not consider what they were saying. We looked at the regulations.”

Gookin said the investigation found that the merger violated federal organizational requirements, which mandate that the county medical center directly supervise the doctors in the mental health unit.

Lacey also defended her decision to ignore advice from the $44,000 consulting report by Deloitte & Touche released about two weeks before the merger vote. The consultants cautioned that the county could lose up to $15 million in medical funding if the federal government found the county out of compliance with licensing requirements.

“We don’t have a licensure problem,” Lacey said. “That’s never been a question. They [federal officials] perceive a problem with who is in control.”

But the question of licensing had been raised. A month after the merger vote, a Los Angeles law firm specializing in medical licensing issues that was hired by the county to advise on the merger, warned that the reorganization raised serious legal concerns.

“Under a worst-case scenario, noncompliance with these [Medicare and Medicaid] requirements could result in decertification and/or de-licensure of the hospital’s mental health services,” consultant David P. Henninger advised in a memo to the board last May.

Lacey, however, said federal officials on several occasions assured her there was no billing problem. She wanted to continue moving forward with the plan, hoping to build stronger working relationships between doctors and social service employees. Under the team approach, a doctor monitors a patient’s medication, and a social worker may counsel the patient on housing, education and employment opportunities.

“To me, we should be talking about patient care; that is what’s important,” Lacey said. “This is about a little bureaucratic thing; it’s about people trying to see who can bench press more. This is government at its worst.”

Differing Views

Nearly every week since the board voted to approve the merger April 7, members of the Alliance of the Mentally Ill had attended supervisors’ meetings and urged them to rescind their action. Matthews, the local chapter’s director, has argued that by placing the emphasis on “mainstreaming” those with minor mental illnesses, the county ignores those who are not capable of living on their own.

Although the county is spending money to hire more crisis teams, there is no move to build supervised housing for those with major mental illnesses, she said.

Again, Lacey says Matthews and others do not represent the majority.

“Do you know how many people from the alliance are probably going to walk away from that group because of [the stance that some members] are taking?” Lacey said. “There are very few people who are against this.”

Matthews takes exception to those remarks.

“For one thing, our membership is increasing,” she said, adding that 10 of the alliance board’s 11 members voted against the merger. “I just feel very sad that Susan Lacey has not become more informed about major mental illnesses.”

There are those on the 15-member Ventura County Mental Health Board who supported the merged agency.

Dr. Shlomo Kreitzer, whose 20-year-old daughter has been hospitalized as a result of her mental illness, advocates breaking down barriers between agencies.

“Medication can be wonderful, but to not see the importance in helping the parent help the child or helping the school district help the child is not looking at the whole picture,” Kreitzer said.

Matthews said the alliance does not oppose a team approach to treating people with mental illnesses such as depression or bipolar disorder. But treatment for such major mental illnesses as schizophrenia is more complicated. It is dangerous to lump the mentally ill into one category, she said.

“You can have a cold and you can have lung cancer,” she said. “The level of care is not the same.”

In a commentary that appeared in The Times on Sunday, Dr. Robert Paul Liberman, who headed the world-renowned UCLA psychiatric research unit at the former Camarillo State Hospital, underscored Matthews’ argument that mental health services should be led by a medical administration. He added that “medical services that are traditionally supervised by the [county] hospital and health agency have always included interdisciplinary teamwork.

“These teams are led by physicians because the disorders that necessitate teamwork are, at their basis, biomedical disorders,” Liberman wrote. “If the teamwork that is used to produce favorable outcomes for open-heart surgery or AIDS is the responsibility of medical care systems, then why should it be any different for brain diseases such as schizophrenia or depression?”

Matthews said she believes the reason behind Lacey’s merger plan has to do with personality conflicts, not patient care. She thinks Randy Feltman, deputy director of CalWorks, persuaded Lacey to get behind the merger to strip Durand of authority and power. “There was bad blood between Randy Feltman and Pierre Durand,” Matthews said.

In letters to the editor, Supervisor Mikels also suggested that the merger was the result of a power play among county officials.

Feltman, who is still deputy director of CalWorks, the county’s welfare-to-work program, and Lacey are longtime allies. They met in 1974 when Feltman was a county outpatient therapist and Lacey was a special-education teacher. Feltman’s foster child was in her class.

Feltman and Lacey have a close working relationship, Matthews said.

“When I first saw Randy Feltman in 1981, I asked Susan Lacey who he was,” Matthews recounted. “She said to me, ‘That’s Randy Feltman and he walks on water.’ ”

Matthews and others outlined developments as follows:

In 1996, the county merged its alcohol and drug agency into its mental health services department, called the Behavioral Health Department. Feltman, who was the mental health director, wanted to head the expanded agency, according to Matthews. But Durand, who oversaw the expanded agency, passed on Feltman, instead hiring Steve Kaplan.

Feltman then became deputy director of the Health Care Agency under Durand, but within a year quit that post to become the deputy director of CalWorks.

In Feltman’s new position, he works in an office next to Lacey’s. Removing the mental health division from the Health Care Agency was a chance to take authority away from Durand, said Matthews and others in her organization.

Feltman, who supports the superagency concept, declined to elaborate on his working relationship with Durand.

“I’ve worked with Pierre since 1989 and I don’t want to characterize the relationship any more than that,” he said.

The superagency, he said, was about “creating a new culture, about blending disciplines.”

When asked about the merger of the two agencies, Durand, who has headed the Health Care Agency since 1995, said, “In the end, the board is the policymaker. If [members] feel the mentally ill would be better served under a different structure, my job as director is to implement their will,” he said.

Durand and his predecessor, the late Phillipp K. Wessels, have been credited with eliminating a multimillion-dollar deficit at the county hospital.

But Matthews and others said they thought Lacey didn’t like Durand’s cost-cutting methods or what she saw as his anti-union tactics.

Lacey agreed that she disapproved of Durand’s approach, but denied that her feelings had anything to do with her support of the merger.

Under Durand’s leadership, Lacey said, psychiatrists were asked to relinquish their civil service status, which gave them protection to speak out against hospital practices. She also objected to hiring nurses on a contract basis rather than full time.

“We learned about [the hiring and employment practices] in the course of our investigation,” Lacey said. “But it was not the reason [for the merger].”

The fallout is far from over. The county still awaits word from federal officials about whether it will be ordered to repay millions of dollars for Medicare and Medicaid money paid during the 259 days that the superagency existed.

On Tuesday, Supervisors Long and Mikels will ask their colleagues to allow them to lead a committee whose members will consider portions of the merged agency that could remain intact without losing federal funding.

“Any parts we think should move ahead would go before full public review and scrutiny,” Long said.

Schillo has also asked Koester for a report pinpointing the county employees who supplied bad advice to Lacey and others. The report will be presented to the board within the next few weeks.

“I believe Susan Lacey conspired with county staff to put this whole thing together without telling anyone else,” Schillo said. “You can’t do that with government.”