Why are treatment programs closing in San Mateo County?

“Last summer, a series of events and financial decisions and outcomes changed that ability to borrow. We maxed out our line of credit, and now we don’t have anything to go to,” Bilby said. “So we have lucked out for the last four months since I’ve been here.”

In addition to a two-day payroll delay, StarVista — one of the county’s largest behavioral health contractors — laid off 26 people, furloughed about 44 employees for nine days and announced it was closing a counseling center, which provides therapy for Medi-Cal beneficiaries. On March 19, according to a company email, the board had “determined that a leadership change is needed” and announced that CEO Sara Larios Mitchell was taking a leave of absence. 

Over the course of the last year, the organization has also announced it was closing several programs, including a detox center, women’s enrichment center and DUI program. 

But the county-based nonprofit isn’t the only behavioral health contractor that’s been shutting down services. In October, Caminar, another one of the biggest behavioral health contractors, announced it was closing Redwood House, a 60-year-old crisis residential center, the only facility of its kind in the county, as well as assisted outpatient treatment and case management services for its youth transition program. The shutdown led to layoffs and a confused staff blindsided by the announcement.  

Leaders at both StarVista and Caminar attribute much of the fiscal hardship to a new statewide reimbursement model known as CalAIM. The updated structure made sweeping changes across the entire Medi-Cal system. For the county’s behavioral health contractors, it meant getting paid based on each service rendered, rather than receiving a fixed amount as part of a pre-negotiated contract with the county’s Behavioral Health and Recovery Services Division — the agency that administers Medi-Cal for specialty mental health care such as substance abuse services. 

For crisis residential facilities like Redwood House, Medi-Cal would reimburse about $602 per day per client in San Mateo County, and BHRS generally took about one-third of the rate for its own administrative costs. 

The state Department of Healthcare Services rolled out CalAIM in 2023, and BHRS gave its providers another year to adjust to the changes before implementing the new rate changes last July. 

“With fee-for-service, if you don’t have the service you don’t get paid,” Dr. Jei Africa, director of Behavioral Health and Recovery Services, said. “You have to be able to accommodate the referrals and really keep the beds filled … when we rolled this out last year, we gave [providers] a budget tool, and we said, ‘you can use this tool to look at how many units of service you need each month,’ so that tool helps them project out.”

The state calculated each county’s rate using data collected during the pandemic, creating a potentially distorted picture of providers’ true needs and costs. 

Caminar CEO Mark Cloutier has said providers in other areas have often been able to make do with supplemental funds from their respective counties, specifically for services like engagement and outreach, to increase referrals and enrollment levels in residential care. But that hasn’t been the case in San Mateo County. 

StarVista acting CEO Shareen Leland has also said that the CalAIM rates have played a significant role in some of their programs’ fiscal health. 

Jaime Campos, CEO of Horizon Treatment Services, said via email that the rate for some withdrawal management care, such as its Palm Detox Center, has not been adequate, however, they’ve been able to make operational changes and work with the county to stay afloat. 

In addition to the new Medi-Cal rates, Leland said workforce shortages have exacerbated the nonprofit’s already stretched financial predicament. 

“Some of it was an overanticipation of what the revenue would be for many of the different programs,” Leland said. “And in programs that are reimbursed based on the staffing … if you have a staff shortage, you don’t fill the spot, meaning you’re not able to invoice for that, so it becomes a revenue shortfall.”  

Employee mistrust 

But sources familiar with StarVista said the payroll delays, closures, layoffs and even executive turnover isn’t just the fault of CalAIM or regional hiring challenges.

The organization had been taking out lines of credit for years to cover payroll — well before CalAIM — and knew the situation was getting increasingly dire for months, they said.  

Bilby, only with the nonprofit for several months, quit around the time the payroll debacle was announced, an anonymous source said, but decided to come back temporarily to help with the company transitions. And Mitchell’s leave of absence soon after didn’t help temper skepticism about the organization’s executive team. 

Leland said she is unable to discuss specific reasons for leaves of absence. 

The tumultuous transition has left some individuals affiliated with the organization questioning various statements and actions they heard and experienced over the years. For instance, some program budgets included dubious line items, such as a child and family program budget showing about $23,000 in expenses for rent and phones, despite staff working from schools. They were not provided with an office, cellphones or voicemails, a source familiar with the program said. A similar instance happened with a foster youth program, another school-based program, that included similar types of line items for a program with only a few full-time staff, one source said.

The county sometimes increased funding for certain programs — even if it wasn’t expanding via additional services or new staff — and were told the additional funds couldn’t go toward staff raises, since it couldn’t give raises to all company employees, the source added. But information surfaced suggesting that, despite the ongoing budget deficit, the leadership team was given pay raises, which were justified on the basis that separate funds had been allocated specifically for executive compensation.

The recent payroll challenges and layoffs come about a year and a half after the nonprofit’s former clinical director was charged with embezzlement. According to the charges, Clarise Blanchard funneled $700,000 worth of donations intended for StarVista to a personal account from around 2009 to 2022.

Leland said via email that “no funds were taken from StarVista and no service partner assets were misappropriated” and that it was their own “effective internal controls that brought this to the attention of law enforcement.”

Running Medi-Cal programs are notoriously burdensome and difficult, given the generally low rate of pay and high administrative requirements, one source conceded, but a lack of board oversight allowed such egregious behavior to allegedly continue for over a decade. 

“There’s protocol involved in [donations], so it’s a systemic issue,” the source said. “There were very loose financial practices and little to no board oversight, which is what led them to this place.”

Leland did not respond to each individual claim but said in an emailed statement that StarVista has continued to provide uninterrupted, essential services and that the organization’s financial statements are audited by an independent, certified public accounting firm.

“These audits are conducted by generally accepted auditing standards and provide assurance that our financial records are accurate and comply with all applicable laws and regulations. Audits disclosed no instances of noncompliance. Our complete financial statements and federal Form 990 annual tax returns are available on our website,” the statement said. 

Caminar leadership has neither faced embezzlement charges nor have they announced payroll delays. But that doesn’t mean company morale is high, especially after October’s program closure announcement. 

Individuals close to Caminar said they had asked leadership many times what adjustments they should make to prepare for upcoming CalAIM changes but were told on multiple occasions that the program was in good standing and there were no operational or administrative changes to make. 

With the CalAIM changes, facilities like Redwood House wouldn’t be able to rely on a lump sum from the county anymore. It would instead have to keep up its utilization rate, or enrollment, since it would only get reimbursed for the clients and services provided.

In one Board of Supervisors meeting, the former discharge coordinator of Redwood House said staff could have increased enrollment rates, so “it’s sad that that was not communicated, or we weren’t trusted to do that.”

“I think if there was more in our control, we could’ve increased our capacity,” she said. 

Dozens of public comments — not just employees but others familiar with the program — poured into the board meetings at the end of the year, hoping the residential facility could be saved and warning the county that the rise in closures would only hurt the most vulnerable populations.

Some sources familiar with Caminar also said it was frustrating to hear about a rebranding initiative that was costing, at minimum, hundreds of thousands of dollars, at the same time it was closing important programs. 

Negotiations between the county and Caminar ensued, but the former’s final offer still wasn’t enough, given an existing $60,000 annual deficit, a 20% bump in health benefit costs, cost-of-living increases, as well as hikes in lease and utility costs, Cloutier said.

He added that leadership did notify staff about billing and operational changes that would change as a result of CalAIM.

“The rub is that they felt like they didn’t have the chance to hit 85% [utilization rates]. That is in part true, because I don’t think 85% utilization was going to be possible without closing one of the other facilities,” Cloutier said. 

He added the rebranding was necessary to appeal to private insurance companies in light of the poor financial outlook of public programs, and it’s financed by contributions and donations, not county funds.

“We have a financial discipline that government contract-financed programs need to be able to operate on the revenue that is generated from those contracts. We don’t plan to supplement Medi-Cal payments. It’s a dangerous financial practice,” Cloutier said.

The rebrand highlights the general pivot toward investing in private payer programs and away from programs primarily serving Medi-Cal beneficiaries. The nonprofit has also shut down programs in Solano County and plans to close some in Santa Clara County as well. 

Leland said that in light of StarVista’s fiscal challenges, it’s going to start focusing on their “core” programs, such as suicide prevention work, the crisis hotline and mobile response team  — mostly programs that aren’t Medi-Cal focused. 

No consensus on demand and impacts 

It’s clear fiscal issues are leading to closures, but there is a discrepancy between employees and leadership on the demand for those programs — and what the impact has been on patients and staff. 

Africa said since the Redwood House closure — that was finalized at the end of last year — they’ve been able to place would-be Redwood House clients in appropriate settings, in many cases, less intensive rehabilitation facilities, which is the ultimate goal. The county is required to provide certain services and, so far, despite the closures, it’s been able to make adequate placements. 

Serenity House, now the only crisis residential facility in the county, and Hawthorne House, a Caminar facility considered a step lower than crisis residential, had similar enrollment numbers in the two months post-closure as they did during the same time period the year prior. The numbers suggest the facilities haven’t been inundated with clients since Redwood House closed — though, it’s unclear if that’s due to a lack of demand or other factors, such as staffing shortages or out-of-county placements. 

But even if enrollment hasn’t spiked, one source familiar with Hawthorne House said that since December there have been more higher-needs clients that staff aren’t equipped to accommodate, since the facility is not intended for those in crisis, leading to more transfers. And in December, a handful of county-based psychiatry residents penned a letter to the Board of Supervisors, concerned that the closure would exacerbate an already-present issue where patients “are stuck in hospitals at great cost waiting for beds in step-down facilities.” 

As part of San Mateo Medical Center’s ongoing construction — which had resulted in temporarily shutting down part of the psychiatry unit — one psychiatry source overheard a conversation during which a county official said there wasn’t enough demand to reopen some of the beds, which was “absurd,” the source said. Even though the sprawling Cordilleras campus recently opened, the new locked facilities are not necessarily the same patients who would qualify for psychiatric hospital admission or crisis residential care. 

The county said it cannot yet confirm if there will be more beds added to the San Mateo Medical Center psychiatry unit, known as 3AB. 

What’s the answer?

Africa said efficiency and consolidation — whether in the form of programs, services or mergers — is likely the most effective antidote to future closures, as many small programs have high administrative overhead but not enough volume to make up the costs. BHRS recently started the process of analyzing its Medi-Cal rates, but it’s unclear if and when that will translate to higher reimbursement — which some contractors like Caminar and StarVista say is critical to prevent more shutdowns. 

In the meantime, they’re shifting their focus to programs that don’t primarily serve Medi-Cal patients — and closing those that do.