The U.S. attorney's office has asked the county to repay up to $17 million in Medicare reimbursements as a result of improper billing practices for nearly a decade, officials said Tuesday.
The multimillion-dollar settlement would include at least $2.5 million paid to a whistle-blower who uncovered the mental health billing problems.
The settlement would mark the worst political blunder in Ventura County's history, said several county officials, adding that the county could be forced to pay millions more in Medi-Cal reimbursements.
The proposal comes seven months after county supervisors dismantled a superagency they created last year that merged the county's mental health and social services departments.
"The merger lit a match," said Supervisor John Flynn, who voted for the merger with Supervisors Susan Lacey and Kathy Long in April 1998. "It didn't cause all the problems, but it caused the problems to become exposed, and caused an explosion."
Harold S. Pittman, county treasurer and tax collector, said the county could spend most of its $25-million reserve fund to cover the debt.
"The money comes out of our hide," Pittman said. "Reserves are like an insurance policy. If something were to go wrong, that would leave us in a very bad situation."
Perry Young, director of public finance rating for Standard & Poor's Corp. in New York, reported the federal settlement offer June 30 in a news report on the company's wire service to brokers and businesses.
Earlier that month, the bond-rating firm awarded Ventura County top marks in credit-worthiness for short-term loans, despite the state and federal audits that threatened to cost the county millions of dollars. Such a rating means the county can secure lower interest rates on money it borrows, thereby saving taxpayers money.
In his report, Perry wrote that while "no settlement has yet been reached, the county has about $25 million in reserves that could be used for any fiscal 2000 settlement payments."
In a telephone interview Tuesday, Perry said an empty reserve fund would adversely affect credit ratings for the county's long-term loans.
"We don't think the Medicare repayment would affect the county's ability to pay the [short-term] loans," Perry said. "But we think it might have an impact on the long-term rating."
County Auditor/Controller Thomas O. Mahon voiced concern over the possible deterioration of the county's long-term bond rating. But Mahon said he believed the county would overcome the crisis.
"Do we have a problem? Yes, we have a problem," Mahon said. "Will we be able to resolve it? I'm sure that we will. One way, shape or form, we will resolve it."
Late last year, the U.S. attorney's office launched an investigation after doctors complained their names and provider numbers were being used on Medicare claims for services actually provided by social workers.
After the 1,400-employee superagency was created, psychiatrists worried their authority would begin to erode, which they feared would in turn lead to the misdiagnosis of mentally ill clients.
In December, supervisors reversed the merger after federal health-care officials said the consolidation violated Medicare billing rules.
The failed merger touched off several federal and state audits, including the U.S. attorney's probe. Assistant U.S. Atty. Wendy Weiss declined comment on the case Tuesday.
In its probe, the U.S. attorney's office alleges illegal billing practices at the county's mental health department dating back to 1990. About two weeks ago federal officials offered to settle the matter if the county repaid $17 million in Medicare reimbursements.
Flynn believes the county will ultimately negotiate a lower settlement of about $15 million.
The money would be repaid over three years, Flynn said. "We won't fight it. If there's overpayment, there's overpayment."
County Counsel James McBride said he hopes the U.S. attorney's settlement proposal resolves many of the outstanding audits prompted by the failed merger.
The U.S. attorney's office took the lead on most of the federal inquires, including a separate one by the U.S. Health Care Financing Administration. That agency is investigating whether the organization of the county's mental health department complies with federal standards.
The agency is also investigating whether the county's 43 public health clinics meet federal Medicare billing rules. Flynn doubted the proposed settlement would include Medicare money the county may have to repay as a result of any out-of-compliance clinics.
But McBride said he hoped all disputed Medicare payments could be included in the settlement. "Our goal is to reach a agreement on everything," McBride said.
"It's absolutely not me," said Craig Duncan, a county psychiatrist who last week revealed that he gave federal officials information on the case. Duncan believes his wife, Sandy, was placed on an indefinite leave of absence from her county job because he cooperated with federal authorities.
Flynn said supervisors could vote on the settlement proposal as early as their Aug. 3 meeting, before submitting the matter to federal Judge J. Spencer Letts for final approval.