Behavioral Health Funds Drained Off for Public Hospital

Ventura County has, for years, systematically shifted millions of dollars earmarked for mental health services to the county’s health agency, supporting critics’ claims that money is being siphoned away to run the county’s public hospital, records show.

Some of the transfers came from a special trust fund designed to treat the mentally ill. Together with two other fiscal practices that channeled money away from the mental health agency, as much as $4 million each year was shifted, critics say.

In all instances, the Board of Supervisors approved the transfers and had legal authority to move the dollars around. But the shifts support allegations, voiced by state Sen. Cathie Wright (R-Simi Valley), that money intended for the county’s mentally ill is instead subsidizing patients at Ventura County Medical Center.

Just how much money was shifted is unclear. The transfers and other spending practices are currently being audited by the county auditor-controller’s office and the state Department of Mental Health.

But a review of documents and interviews with county and state officials reveal the final figure could approach $4 million a year. That is 8% of the $50-million budget for the Behavioral Health Department, also known as the mental health department.

County chief administrator Lin Koester confirmed last week that it has been the county’s practice for several years to transfer money from a mental health trust fund to the Health Care Agency, which runs the county’s public hospital. He said the decisions were made with the supervisors’ full knowledge and approval.

And he lashed out at Wright and other critics for trying to discredit the Health Care Agency’s administration.

“[Wright] believes that someone has been ripping off mental health money. It is not mental health money. . . . It’s a revenue stream that as far as I know has been used in accordance with law,” said Koester.

Health Care Agency Director Pierre Durand agreed. He said every dime his department spends has been approved by the board. He dismissed claims that money is being unfairly funneled to the hospital as a distortion of fact.

“Everything is based on cost,” he said. “Someone is chasing windmills.”

But John Chaudier, chairman of the Mental Health Board, an advisory board that reports to the Board of Supervisors, questioned the fairness of funneling money to one department at the expense of another.

“It’s a big chunk of change,” Chaudier said. “The medical center has a mission to do and they do it well. But it shouldn’t be at the expense of mentally ill patients.”

All of this is part of a larger fight over management of the mental health department. Last year, former mental health director Stephen G. Kaplan attempted to remove the Behavioral Health Department from Durand’s control by merging with the county’s social services agency.

A sharply divided Board of Supervisors approved the merger, but rescinded it nine months later when federal officials said the new structure violated Medicare billing rules. Kaplan was forced to resign March 1 amid allegations that the merger could cost the county millions of dollars in lost Medicare reimbursements.

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But Kaplan’s supporters contend he was ousted because he opposed funding practices that channeled money away from the Behavioral Health Department. Despite the transfers, the budget for mental health rose 19%, or more than $7 million, over the past three years. This is because Medi-Cal billings and other revenues continued to rise.

The money flowed to the hospital in three ways. The first method was to transfer money from a special mental health trust fund to the health agency’s account. Special state funding for mental health has been available to counties since 1991.

Provided by the state sales tax, the money was intended to stabilize mental health budgets that were slashed during the ‘80s, said Ann Arneill-Py, executive officer of the California Mental Health Planning Council.

The Legislature gave counties discretion to transfer up to 10% from one account to another. Forty of the state’s 58 counties did not transfer any dollars during a four-year period studied by the planning council, Arneill-Py said.

The council, which oversees the state’s public mental health system, did the review because it was concerned that counties were transferring the money without good reason, she said. Ventura County was among 17 that had made at least one transfer without providing proper documentation, Arneill-Py said.

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Copies of the planning council’s documents, detailing Ventura County’s transfers, were obtained by The Times. The records show that Ventura County shifted $2.6 million over the four years ending in June 1998. The county is projecting an added $1.5-million transfer this year, said Auditor-Controller Thomas O. Mahon.

All of the shifted money, totaling $4.1 million, was placed in the health trust account, where it was used to run the public hospital, Mahon said.

A second source of money was Medi-Cal payments that the county hospital receives each year because it treats large numbers of Medi-Cal and other low-income patients.

Ventura County receives about $8 million a year in so-called disproportionate-share funding, based on the number of beds at the medical center. Since the 40 beds in the psychiatric unit make up 28% of the total, critics say the mental health agency should receive that portion of the Medi-Cal revenue.

That would amount to $2.2 million a year, sources said, but all $8 million remains in the hospital’s budget.

A consultant’s report prepared last year came to the same conclusion.

The third funding stream involves money charged to the Behavioral Health Department for meals, medications and laboratory services provided to psychiatric patients at the medical center. When Kaplan tried to contract out those services at cheaper rates, he was blocked, mental health department sources say.

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If the services were privatized, the Behavioral Health Department could save $1 million a year, according to the consultants, Deloitte & Touche of Sacramento.

Referring to the funding practices, one mental health source said, “Clearly the river is flowing one way. It’s all downhill from mental health to the hospital.”

Arneill-Py of the state planning council said transfers from the special mental health trust fund are particularly troubling because the Legislature intended that money to be used for mental health services.

“If money is systematically being transferred out of mental health trusts to cover deficits in social services or health, it concerns us,” Arneill-Py said of the 40-member council, which reports to the Department of Mental Health. “In Ventura County, it looks like a trend. It’s millions of dollars that are not available to provide mental health services.”

Durand strongly disputes many of the critics’ claims. Behavioral Health does not get disproportionate share funding because the hospital’s psychiatric beds were not included in the formula that determines funding, he said. Durand said the threshold for receiving the funds was met without including the psychiatric bed count at the hospital.

As for the hospital’s service charges, Durand said, it would be difficult to privatize them because of county labor agreements.

“These are labor agreements. These are not Pierre Durand agreements,” he said.

Supervisor John Flynn defended all of the funding decisions, saying the board approves such fiscal practices because they help the hospital meet administrative costs that are generated in part by the Behavioral Health Department.

“It’s a perfectly sane way to operate,” Flynn said. “There are certain overhead costs that are applied to all departments. They are spread around as overhead costs.”

The bottom line, said Koester, is that every budget decision is a trade-off. The county does not receive enough revenue to fully fund every program it operates, so decisions are made on how to best spread the money around, he said.

“When you give extra money to mental health, you take it away from neonatal care for premature babies,” he said.