Even as the beleaguered Alcohol, Drug and Mental Health Services (ADMHS) department struggles to stay afloat and out of the red, Santa Barbara County continues to fight state audits that claim it could owe millions because of bad billing practices.
The department had a negative money balance of $19 million as of the end of March due to “cash flow deficiencies,” said Auditor-Controller Bob Geis, who blamed the problem on both delayed billings from the county and delayed reimbursements from the state. A spokesperson for the state, however, indicated the state was up-to-date in processing payments. Regardless, ADMHS will likely need to be loaned somewhere between $15 million and $20 million at fiscal year’s end in June to keep a balanced budget.
Meanwhile, wreaking further havoc on budget spreadsheets are Medi-Cal billing mishaps that occurred over the last decade but have just recently come to light. The county is still trying to figure out how much it owes the state. The number $32 million floated to the surface in fall 2008, while updated numbers suggest $31 million. The discovery couldn’t come at a worse time, as the county is already considering cutting 10 percent across the board. More General Fund cash and strategic reserve funds now must go toward repaying debt. Just two years ago, the strategic reserve boasted $35 million but now holds only $22.8 million, with millions of dollars taken out of that pot in recent years to stabilize ADMHS, and millions more set aside to pay for pending liabilities. “There’s still a lot of work to do,” Geis said. “It’s some tough stuff.”
Currently under appeal are the state’s findings that the county owes $2.2 million because the latter erroneously billed the former. The problems started several years ago with the expiration of a grant that funded mental health services provided by other county departments-mainly Probation, Social Services, and Public Health-though the services are supervised and billed by ADMHS. However, Santa Barbara County-unlike nearly every other California county which had received the funding, known as MISC (Multi-Agency Integrated Service of Care)-continued to bill the program to Medi-Cal. Years later, the county realized what all those others had realized earlier-that it wasn’t a billable Medi-Cal program since the grant had run out-but the damage had already been done.
While the audit of the 2002-2003 fiscal year found that the county owed $2.9 million for services-more than 55 percent of which came from the Probation Department-the county is expected to face similar ongoing liabilities for every subsequent year it used the program, totaling $14.4 million. “Obviously, this is what the county is concerned about,” said Patti Stewart, chief probation officer.
The county is currently fighting payment of the debt that resulted from this mistake, but last month the state Department of Health Care Services (DHCS) ruled against the county. On March 31 the Board of Supervisors unanimously voted in closed session, where most of the discussion on the issue has occurred, to appeal, and the county will be proceeding with a formal hearing before an administrative law judge.
To deal with the mess, the supervisors doubled a contract with the Los Angeles law firm Hooper, Lundy & Bookman, now spending up to $500,000 of the county’s litigation fund for representation from the firm, which specializes in health-care law and billing and compliance issues. A spokesperson for the state DHCS, which adjudicates audit appeals, said he couldn’t comment on specifics because the case is currently in administrative litigation. The county has already paid off the probation chunk of the liability for the current fiscal year, taking more than $1.6 million from the strategic reserve. No other repayment source has been identified for the rest, should the county have to pay.
But it could be an issue other than the erroneous MISC billing that ends up costing more. The county is still determining the costs of settlement issues accrued with the state over the last several years. At last glance, on April 9, the county was still looking at $17 million in liability. Fifteen million in cash is set aside in the county’s $24 million strategic reserve, but that would leave only $10.5 million in the reserve should the payment be made.
More than half of the $17 million in liability resulted from aggressive billing practices that were self-disclosed by the county, while the rest comes as a result of a complicated settlement process of gives and takes that happen every year. This time, however, some of the numbers became bigger, and it appears the county’s take was bigger than its give.
“There were several [billing] practices in administrations previous to mine that were areas of concern to see if we handled them properly,” said Ann Detrick, ADMHS director, who took over the department in January of last year. And questions remain as to who is at fault. “The big question is why didn’t anyone ever ask, from the CEO, to the auditor, to the board?” said one county official. After a year of looking into the mishaps, however, Geis said he hadn’t seen any hint of wrongdoing. “It’s generally not the people, it’s the process,” he said.
While ADMHS doesn’t suck up as many General Fund dollars as other departments, there will be an effect on mental health services, though Detrick, whose department gets the majority of its money from the state and feds, said it’s too early to tell how these potential costs will impact those services. Detrick is expecting a boost to Medi-Cal funding from the stimulus package to offset an anticipated loss of revenue.
With all this being said, it shouldn’t come as much of a surprise that the county in general has been labeled a high-risk auditee. It’s not the first time, but Geis and company are fixing the problem.
One of the problems-that year after year the single audit report would be filed late-has already been resolved, while Geis’s department continues to work on improving in other areas. Budget cuts, however, have stretched resources and increased the risk of exposure for the county. As Geis explained it, outside auditors file an annual audit of the county’s revenues and expenditures every year. Years ago, findings were rarely made and the county was in good standing. But over the years, the auditing guidelines have become a lot more stringent, and the county has consequently found itself in hot water.
And as the results of audits come back poor, the state has stepped up its scrutiny of the county. The greater the investigation, the more extensive the findings. To eliminate the negative findings, more research, more systems, training, and resources need to be poured into fixing complex compliance issues.
But it isn’t easy. And it could cost the county a lot of money. During fiscal year 2007-2008, when the county spent at least $114 million in federal funds, the exposure could be as high as $1 million. And because audits aren’t conducted until several years down the road, it can add up before it’s noticed. “If you don’t get it right, you don’t see it for a number of years,” Geis said.