Kelly told the board during the meeting that she was looking at laying off as many as seven of the 66 full-time employees her department currently has, in addition to eliminating eight unfilled positions and a case manager slot.
Accompanying Kelly to the Tuesday meeting by Charles Fernandez, her financial officer, who has analyzed the department's fiscal situation and business practices and is assisting her in creating a longterm, sustainable business model. She said that analysis arose while preparing the 2009-10 budget.
“We have some longstanding issues that you've been aware of,” Kelly told the board, with those issues including state audits that found the department needed to reimburse millions of dollars in overpayments.
Fernandez gave a PowerPoint presentation, explaining to the board that the state audited the Mental Health Department from June 30, 1999, through June 30, 2006, and found $5.6 million in overpayments to the county. Of that amount, $4.6 million had been repaid.
He said billing for non-Medi-Cal costs, overreporting service units, and data entry and clerical errors were among the issues that led to the claims being too large. They also didn't get the audit information back from the state for several years.
“We were repeating those errors and those mistakes because we didn't have the results of the audit for a number of years after the year end,” he said.
There also were problems with the department's information technology system, with a consultant who wasn't authorized making changes in the system, which resulted in errors, Fernandez said. A new system is now being implemented.
Fernandez said the department is talking with the state Department of Mental Health about a five-year payment plan for the remaining $1 million, and are in a formal appeal process over $737,000 that the state says the county owes for the fiscal year ending June 30, 2003. He said they've made several visits to Sacramento in recent months over that appeal.
The department has $2.1 million in outstanding bills to contractors, Fernandez said.
Board Chair Denise Rushing asked if a loan from the general fund – which County Administrative Officer Kelly Cox said was for $1.6 million – was included in that $2.1 million total. It wasn't, said Fernandez. Kelly said the budget numbers assume use of realignment reserve monies.
Cox said they'll propose to the board that they transfer realignment funds from the county's Social Services Department to the Mental Health Department to help repay the general fund loan.
Fernandez said the department's 2009-10 budget shows $8.2 million in revenues and $9.3 million in expenses, for a $1.1 million deficit. Those revenue estimates didn't include audit exceptions or the five-year repayment plan to the state.
“What we are requesting is the authorization to pursue staff reductions in concept to address the fiscal shortage,” said Fernandez.
The department's new business model includes evaluating if clients have access to other care providers, focusing on case management versus longterm therapy, exploring new revenue possibilities, and setting productivity goals and standards for providers and staff, said Fernandez. Kelly added that their target population are Medi-Cal patients and indigents.
Fernandez said they're adding internal controls, getting a better handle on their information technology system, analyzing and evaluating their business model, and looking at their policies and procedures for access to care and care standards.
Rushing asked about consumer access to care. Kelly explained that they need to focus on people with the most acute need. Those who aren't seriously mentally ill and are simply using county services because they don't want to travel to find psychiatric services are “going to have to make that trip,” said Kelly, emphasizing the need to focus resources.
Kelly said when people call the agency they're screened and then, if it's determined they have other resources, they're referred to the private sector. She said they're reorienting the department to focus on people at risk of incarceration, institutionalization or hospitalization.
Fernandez said their cost reduction plans include leaving a rented building in Clearlake in April of 2010 to save more than $91,000 a year, and reducing contracts by about $460,000. They also cut eight unfilled positions and won't fill a managed care manager position after that staff retires at month's end. Fernandez, said Kelly, will inherit that person's duties.
Fernandez said the department is under formal appeal for fiscal year 2002-03 and have submitted a corrected cost report for 2005-06. “There could be a positive cost adjustment to what we owe the Department of Mental Health,” he said.
Kelly added, “There's dollars that we have out there that could be coming back to us.”
Rushing asked for a time frame for making decisions about cost cutting, and if that will include laying off active employees. “We'd like to be able to explore that,” said Kelly.
She said they're looking at a $1 million shortfall for the coming fiscal year, and looking at ending this fiscal year on a negative number. Kelly said they plan to cut half that amount through salary reductions.
Fernandez said they currently have 66 full-time employees. Cox said the budget currently includes 78 full-time slots.
Rushing asked about the department's total annual budget, which Cox said is $8.9 million.
“Basically, what you're suggesting is decimating Mental Health to pay the bills,” said Rushing.
Cox said the situation won't improve if they don't reduce staff. “This department increased its staffing significantly in recent years and obviously we should not have let that happen.”
He said the number of staff in that department has been as high as 100. “This isn't something that's going to be corrected in a few months. This is a longterm structural deficit in their budget.”
Supervisor Rob Brown asked how many positions they're looking at cutting. Kelly said about seven.
Cox said Social Service Director Carol Huchingson had contacted him earlier in the day to say that she could pick up some of those employees to fill vacancies in her department.
He also raised concerns over the $2.1 million in unpaid bills, which could cause local vendors to have to do their own layoffs. “The county pays its bills in a timely manner – except for the Mental Health Department right now.”
Kelly said they had made a priority of keeping staff in place and making payroll. “We've reached the limit of our ability to do that.”
Rushing said she supported giving Kelly the go ahead to explore all options, but she wanted to include in that a look at department structure and supervision. She added that she would like Kelly to come back to the board with options and ideas.
Supervisor Jeff Smith suggested tough cuts may be necessary. “The way things have gone and the way things are heading, I really think we need to overcut rather than undercut at this point,” he said.
Rushing suggested calling local legislators to see if they can offer assistance.
Supervisor Anthony Farrington asked about the impact on local contractors. Kelly said they met with those organizations, such as the Lake Family Resource Center, to tell them they would have to cut their contracts in half. “They were painful discussions but they agreed,” she said.
Kelly said she hesitated to paint a rosy picture, but explained that the department once again had Medi-Cal dollars flowing into it.
Farrington said residential programs are big ticket items. Can they be curtailed or are certain service levels mandated?
Kelly said that, in some situations, it's just “flat out dangerous” to return some people to the community. People in residential facilities have their lives planned out by counselors, so transitional housing is important.
She said they are cutting back on placement in residential facilities, but added, “There are some circumstances where we just don't have a choice,” because it's unsafe for the community and the client to let the client out of the treatment center.
Cox said some money could be transitioned back from the Social Services Department to Mental Health, which could help pay back the “considerable amount of money” Mental Health owes the general fund.
He said he wanted to explore other options for paying down the department's bills. “This is the worst possible time to be looking at providing additional loans from the general fund,” he said, noting that some vendors are about to begin refusing vital services.
Cox added that he believed Fernandez and Kelly make a good team, and he has more confidence in the department's management than he has in a long time. “I think we've got the right people siting here to pull us out of this.”
Local resident Sarah Shems, a health professional whose daughter sought help from Mental Health, said the agency is spending about $80,000 a month on hospitalization and jail for mental health patients. She said her daughter couldn't get crisis intervention and ended up in jail and then treatment centers.
Shems suggested taking those staff positions being considered for layoff and training them for crisis intervention, which can head off the more expensive options of hospitalization or jail. She added that her daughter waited 16 hours at St. Helena Hospital-Clearlake before a crisis counselor responded, despite calls from both the hospital and the sheriff's office.
The board agreed to give Kelly direction to begin looking at how to cut costs.
E-mail Elizabeth Larson at
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