UPDATE Email from Derald Walker, CEO of Cascadia to all staff, June 12, 2008 – SUBJECT: We’ve reached an agreement
from the Portland Business Journal May 16, 2008 (how did we miss this?)
Beleaguered nonprofit’s new boss faces big task
Derald Walker doesn’t want to be known as the last CEO of Cascadia Behavioral Healthcare.
He’s pragmatic enough to know, however, that that’s a distinct possibility unless he can quickly turn around the fortunes of the ailing agency, Oregon’s largest adult mental-health services provider.
“The $64,000 question remains: Is it too late, or with progress being made, will Cascadia continue to stabilize financially?” asked Walker.
He’s stepped in to lead the agency, the state’s largest provider of adult mental health services, as it teeters on the brink of financial ruin following changes to how it gets paid by Multnomah County, compounded by years of skimpy payments for services.
The $58 million agency’s entire executive staff has turned over, and it employs 20 percent fewer workers than it did a year ago due to layoffs and a freeze on replacing workers who quit.
In just three weeks, Walker — who has worked in the mental health field 32 years — has been consumed by a whirlwind of meetings with state and county officials, employees and client advocacy groups — most of which have been tense, to say the least.
Walker has his share of challenges.
* A $2.5 million line of credit from the county and the state will ensure the nonprofit will meet payroll only through the end of June.
Jana McLellen, deputy chief operating officer for the Multnomah County, said it’s not inconceivable that the county could contract with other agencies to provide services currently furnished by Cascadia once those contracts expire in June.
* Capital Pacific Bank also called in a $2 million loan it made to the agency in April, taking most of Cascadia’s liquid cash in the process.
* Former employees criticized Cascadia’s bulky management structure, its leaders’ lavish spending on consultants and other non-core expenses, weak board leadership, and the rocky roll out of its digital billing system.
* The agency still owes the federal Centers for Medicaid and Medicare Services about $1.8 million for improper billings accrued in 2001, and the nonprofit is facing a drive to unionize workers.
Walker, a veteran mental health executive, started work at Cascadia in February 2008 as vice president for clinical services and was promoted April 23 to CEO, replacing Leslie Ford. He routinely works 14-hour days to make the hard changes necessary to keep the agency intact.
He’s wasted no time in shaking up senior leadership, naming a new chief clinical officer, a new IT director and eliminating the chief operating officer position, now vacant. He also spun off the agency’s social venture that helps its customers gain job skills, WellSpring, to another agency.
But the potential loss of state contracts following the end of Cascadia’s fiscal year on June 30 is a looming threat. The agency relies on county funds for the biggest slice of its budget — and it has proven a risky business strategy.
“When most of your dollars come from counties you get strangled,” said Portland health care consultant Robert McGuirk. “You don’t get the dollars to make capital investments. County dollars don’t fully fund administrative and general costs, let alone a bottom line.”
Walker agreed that the agency must diversify its client base. He also said Cascadia needs to cultivate philanthropy.
Former employees have criticized Cascadia’s bulky management structure, its leaders’ lavish spending on consultants and other non-core expenses, weak board leadership, and the rocky roll out of its digital billing system.
The agency also still owes the federal Centers for Medicaid and Medicare Services about $1.8 million for improper billings accrued in 2001, and the nonprofit is facing a drive to unionize workers.
Many of Cascadia’s current problems can be traced to Multnomah Country’s 2006 transition to a payment system under which providers are only reimbursed for direct services, a switch from the model in which it got a lump sum to care for a population.
Ironically Cascadia gobbled up several other agencies that ran into financial trouble during the county’s last funding change several years ago.
Cascadia is not the only agency that has struggled under the new funding model.
“It’s a huge challenge. There are five hydraulics you have to get right to get paid,” including getting prior authorization for care, documenting accurately and filling out the claim correctly, said Mary Monnat, CEO for LifeWorks Northwest, a Portland based mental health provider with an annual budget of $25 million.
Walker, though, ticks off several developments that bode well for Cascadia.
It collected its largest sum of accounts receivable in its history this month. Also, front-line workers have boosted the portion of their time dedicated to billable services from 30 percent in June to 50 percent today.
Workers at mental health nonprofits must spend a minimum of 50 percent of their time engaged in billable services to achieve financial viability under the fee-for-service model, county officials said.
“Cascadia is an incredibly valuable community service. While there are things we might have done differently in hindsight, to re-build this system would be expensive and time consuming, and there’s no guarantee it would be successful,” Walker said.
Even if Cascadia is able to weather its current challenges, like other mental health agencies it will remain vulnerable to federal and state cuts to Medicaid. More than 70 percent of the region’s Medicaid patients with mental health issues get care through Cascadia. The Bush administration has proposed Medicaid cuts that would cost Oregon more than $865 million over five years.
“It would be disastrous, devastating,” said Monnat of the proposed cuts. “Any remnant of a safety net we have would be unraveled.”