Finances troubled Cascadia from start
Source: Oregonian, Portland, Oregon, USA
Mental care - As the nonprofit tries to right itself, critics trace the crisis to early leadership
Even though he moved to France more than two years ago, the chief information officer at Cascadia Behavioral Healthcare continues to collect a hefty paycheck as a full-time employee, telecommuting across many time zones.
Like the other three members of Cascadia's executive team, Jeff Poolin worked at the small predecessor organization that aggressively built itself up into the state's biggest provider of mental health services.
Critics say that small team, leading an insular and top-heavy management, played a big role in steering the massive nonprofit toward collapse.
The organization has tried to answer its critics and change its culture with a leadership overhaul that has for the first time shifted the agency out of the hands of the small group that built it. Upper managers were cut by 40 percent. Most strikingly, Poolin is the only longtime executive still there (and he is still in France).
The changing of the guard might help explain why the state and Multnomah County stepped in this week to ensure that Cascadia could continue to work with the 23,000 people it serves each year. Their eleventh-hour $1.5 million cash infusion will keep Cascadia operating for at least another two weeks.
But how the company will go on after that and in what form are the complicated questions now facing the governments that send millions of dollars to the agency to treat their hardest cases.
To explain the current crisis, it makes sense to go back to the beginning.
How did Cascadia start?
In the 1970s, after years providing mental health services itself, the county decided to decentralize the local mental health system. It divided the county into quadrants and contracted with four nonprofit companies to provide the bulk of care in those areas.
But in the mid- to late 1990s, those agencies and a number of smaller mental health nonprofits struggled financially. Leslie Ford -- the CEO of Network Behavioral HealthCare in Southeast Portland, one of the four geographic companies -- made a series of aggressive mergers and acquisitions with the goal of consolidating services under a single banner.
In 2002, Ford successfully united the companies and called the new amalgam: Cascadia Behavioral Healthcare.
Cascadia struggled financially from the start, partly because the merger included the debt-laden nonprofit charged with providing mental health services for the west side of Portland.
But it has continued to expand. In the five years since its inception, the company grew an additional 45 percent. It now has an annual budget of $58 million, with more than 1,000 employees and 90 facilities.
Cascadia provides a full spectrum of mental health care -- from housing to counseling to crisis treatment. The roles include operating walk-in clinics, crisis response and a network of housing for low-income people with mental illness. Though the bulk of its business occurs in Multnomah County, Cascadia also provides services in Clackamas, Lane, Marion and Washington counties and directly to the state.
Why is Cascadia struggling?
Cascadia has been constantly shadowed by looming financial crisis. While management decisions and rapid growth played a significant role, much of the trouble is linked to the thin margins that come with working in the mental health field, experts say.
Most of the money in Oregon's mental health system comes from the state and federal government in the form of Medicaid reimbursements. That money is passed to counties, which determine how to spend it. Some counties provide their own services, but most contract with private nonprofits to provide service.
Because of the dependence on government funding, mental health providers have coped for years with budget cuts and, more recently, with mandated changes to how they conduct business. The most significant is a switch in how they get paid.
Multnomah County and other counties until recently provided up-front payments to mental health agencies for each client and allowed broad spending discretion. In 2006, Multnomah County mandated a change: Agencies now would be reimbursed for specific services after clients received them. The move was touted as a way to increase fiscal transparency and ensure that money was going for services rather than administration.
But Cascadia managers said that while the new system was good at caring for people with mild or moderate mental illness, it failed to provide resources to care for the very sickest clients. That's because it provides no money to track down and help people too ill to enter or stay in the system on their own. Cascadia's success reaching out to those individuals before they ended up in expensive hospital beds or jail beds was core to the company's mission.
In June, a consultant estimated that Cascadia employees spent about 30 percent of their work days providing billable services and would have to double that ratio to break even. That same consultant warned about incorrect record-keeping. Months later the state ordered the nonprofit to pay back $2.7 million because of improper payment records. Cascadia still owes the money.
What has happened so far?
In recent months, Cascadia has laid off more than 250 staff, or about of a fifth of its work force. Last week it replaced Ford as CEO with Dr. Derald Walker, who has worked at the nonprofit for just two months.
County and state officials still refused to bail out the agency by backing its loans.
On Wednesday, the Capital Pacific Bank drained most of Cascadia's cash accounts, saying the company had defaulted on a $2 million loan. Cascadia was only able to make payroll because the state and county accelerated a $1.5 million payment for services Cascadia already has provided.
The company remains deeply in debt and many of its vendors have stopped providing services unless paid cash in advance.
Nevertheless, Walker said this week that Cascadia's focus on cutting staff and increasing productivity are starting to pay off with growing revenues.
What happens next?
County officials already have spent weeks working with state and local mental health leaders planning to shift contracts from Cascadia to smaller providers and have drafted detailed plans for an emergency partitioning of the rest of the company's services and assets should it be forced to declare bankruptcy.
The county will wait until an independent audit of Cascadia's finances is completed later this month before making any big decisions.
Arthur Sulzberger: 503-221-8330; email@example.com
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