The Santa Cruz County Health Services Agency’s Consultants and Indigent Medical Care

In a November 9, 1999 letter of resignation, the HSA administrator warned the Board of Supervisors that it should exert greater fiscal oversight over the HSA. He stated, “Given that the budget of the Health Services Agency is in excess of $70 million with approximately 85% of the budgetary support coming from non-County sources, it is even more essential that the health administration and fiscal management be closely monitored.” Response: Santa Cruz County Board of Supervisors DISAGREES. The former HSA Director was concerned that the Chief of Administration did not have a strong fiscal background in terms of health cost reports, claims, and audits. This was remedied when this individual retired and a health finance manager with extensive experience was hired to be Director of Administration. The current HSA Director was recommended because of her strong fiscal as well as clinical skills by the former HSA Director.

ECG Management Consultants, Incorporated (ECG): ECG serves as a consultancy firm and is based in Seattle, Washington. It specializes in “hospital and physician The Santa Cruz County Health Services Agency’s - 85 relationships, strategic and business planning, and the complexities of the healthcare enterprise.”2 Total Compensation for 2001-2003: $597,565 A. In the 2000-2001 Santa Cruz County Board of Supervisors’ budget hearings, the HSA argued for the need of a new software program to replace HSA’s COSTAR billing system and the set up of an Electronic Medical Records (EMR) system for the county clinics. The HSA pointed out that federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) imposed a deadline of October 16, 2003 for healthcare clinics to develop EMR systems. The Board authorized HSA to proceed with a new computer system for the clinics. To fund the system the Board authorized $535,000 from the state audit settlement of $2,156,430 to be placed in the County’s Technology and Productivity fund for use toward the computer upgrade. The state audit settlement resulted from HSA’s increased billings for county mental health psychiatrist visits under the Federally Qualified Health Center (FQHC) designation that the county clinics received starting in 1988 as a result of a healthcare services for the homeless grant. The state questioned the increased billings and had not funded its share of costs. The state allowed the increased billings using the FQHC designation, which resulted in the settlement of $2,156,430. Thus, clinic physicians generated most of this money, which was derived from Medi-Cal revenues. B. The HSA also looked into creating a clinical practice management information system (MIS) network, which would incorporate the new computer system to link the two county clinics to the Santa Cruz County community clinics. The community clinics consisted of the four Planned Parenthood clinics (South, Westside, Cabrillo, Valley), Salud Para la Gente, Women’s Health Center, and Dientes. The linked clinics could share information from patient medical and pharmacy records, as well as laboratory and radiology results. The HSA contacted the Health Resources and Services Administration (HRSA) and a former HSA administrator for advice on how to proceed. HRSA and the former HSA administrator pointed out that the Oregon Community Health Information Network (OCHIN) based in Portland, Oregon was in the process of finalizing its vendor selection for setting up a community clinic network, which would link the EMR of the community clinics throughout Oregon. OCHIN had selected Epic Systems Corporation (Epic) as its software vendor. The HSA staff met with OCHIN and ECG representatives. ECG had acted as a consultant to assist OCHIN in setting up its MIS network. HSA learned that OCHIN had received its network financing through a federally funded 2 ECG Web site. - 86 The Santa Cruz County Health Services Agency’s Community Access Program (CAP) and Healthy Community Access Program (HCAP) grants. C. In the 2001-2002 budget hearings, the HSA asked the Board of Supervisors to approve the hiring of ECG to assist the agency on the medical information technology upgrade project. The HSA pointed out that the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) imposed a deadline of October 16, 2003 for healthcare clinics to develop EMR systems. The HIPAA requirement for an EMR system did not extend beyond individual clinics and did not require a linked MIS between clinics. D. The HSA contracted with ECG without getting bids from other companies. ECG signed the first of two contracts with Santa Cruz County on August 28, 2001. The cost of the first contract was not to exceed $130,000. ECG’s rates were $375/hour for the project officer, $270/hour for the project manager, and $185/hour for their associate. This contract stipulated that ECG would provide consultant services to the HSA related to development, analysis, evaluation, and selection of a MIS for the county clinics. E. In October 2001, ECG initiated the MIS vendor selection process. HSA staff (at an expense of $2,000 per person) and ECG consultants attended a Medical Group Management Association conference in San Antonio, Texas. F. In November 2001, ECG and the HSA narrowed the choice of vendors to four: Companion Tech.; McKesson, Inc.; Medical Manager Health Pro; and NextGen, Inc. In that same month the HSA sustained a loss of revenue from a decrease in federal and state money to FQHC clinics and the repeal of the utility tax for the unincorporated areas of Santa Cruz County. G. In December 2001, the four vendors presented and demonstrated their products in Santa Cruz. In January 2002, NextGen returned to present its full product demonstration. H. In March 2002, the HSA proposed expanding ECG’s role to include a study on management assistance “to implement operational and organizational solutions that will enhance efficiency and improve clinic performance.” The proposed fees would be $34,000/month for an estimated time period from four ($136,000) to six ($204,000) months. I. On April 9, 2002, the HSA argued before the Board of Supervisors that cost reductions to the clinics could be achieved through ECG’s evaluation of The Santa Cruz County Health Services Agency’s - 87 clinic productivity and efficiency. The board approved the expansion of ECG’s study. The HSA stated at the same meeting that the primary mission of the agency was to protect the community from communicable diseases and health issues that threaten the community. J. On October 24, 2002, the second contract expanded ECG’s scope to include the clinics’ practice management system consultation, clinics’ operations assessment, clinics’ operations implementation, and contract facilitation and negotiation, with hourly rates from $185 to $410. The additional cost of $85,000 brought the total to $215,000, which would come from the $535,000 allocated earlier by the Board of Supervisors. K. On May 7, 2002, the HSA submitted the CAP grant application to the Health Resources and Services Administration (HRSA) for the first year of funding. The application stated “we have prepared the safety net clinics and hospitals to cooperate on an unprecedented level by implementing common EMRs and clinical messaging, improving both the efficiency and quality of care provided to the County’s safety net clinics.” NextGen was listed as the HSA’s software vendor. HRSA approved the $1,403,450 grant, which included $601,000 for information technology software. L. On September 24, 2002, the HSA informed the Board of Supervisors of ECG’s recommendations to improve clinic/Medi-Cruz finances and services. At that same meeting, it was noted that reduced funding resulted in reductions in the care capacity for Medi-Cruz patients. M. On November 5, 2002, the Board of Supervisors approved an additional contract amendment for ECG, which added $268,000 for consultation, clinic software and operational charges. The cost of ECG’s services now totaled $483,000. ECG’s original estimate of $130,000 had now increased by $353,000. N. On January 10, 2003, the Board of Supervisors approved an additional ECG contract amendment for ECG’s consultation on clinic operational charges, which amounted to $95,000. The total cost for ECG’s consultancy services now reached $578,000, which exceeded the $535,000, the Board of Supervisors had allocated for an upgraded EMR system. O. On August 25, 2003, the HSA applied for and received approval from the Health Resources and Services Administration (HRSA) for the Healthy Communities Access Program (HCAP) grant, which funded years two and three after the first year of funding of the CAP grant. HSA’s practice management system vendor changed from NextGen to Epic software. The OCHIN network had agreed to add the Santa Cruz County community - 88 The Santa Cruz County Health Services Agency’s health MIS network to its Epic system, which eliminated the need for the NextGen system. However, as of January 2004 due to delays in the set-up of the OCHIN network, the Santa Cruz system is not in operation. Negotiations are underway to determine the costs of the linkage to OCHIN. P. Both the CAP and HCAP grants required in-kind funding which has not been arranged as of January 2004. The CAP grant money for the MIS has been partially spent on the set-up of the Axoltl physician messaging/dictation/ pharmacy/lab system. Q. In the meantime, an additional charge by ECG amounted to $19,565. On November 19, 2003, the HSA presented to the Santa Cruz County Board of Supervisors the implementation of recommendations of ECG to increase the productivity of the County clinics. The Board of Supervisors accepted the findings of the report. R. The original ECG timeline targeted a completed practice management system conversion and implementation by July 2002, which has not been met. The HIPAA deadline of October 2003 has passed, and very few of the national healthcare entities are in compliance. S. As of January 2004, only two of the community clinics, Salud Para la Gente and the Women’s Center Clinic, have agreed to link with the county clinics. More than half of the community clinics (the four Planned Parenthood clinics and Dientes) have not signed up to be part of the network. Response: Santa Cruz County Board of Supervisors PARTIALLY AGREES. The Health Service Agency was facing two significant challenges which ECG helped to address--a failing data system and operational problems which were driving up costs. First a specialized ECG information technology team assessed the automation needs of the clinics related to the practice of primary care in a public health environment. The clinic data system was installed in 1983 and was very difficult to change and maintain. It generated many expenses for the clinics in terms of staffing because of its lack of flexibility. Registration, appointments, eligibility, billing, posting, and reconciliations were all very labor intensive. For the clinics to survive with new requirements and demands and limited new revenues, the clinics had to be as efficient as possible. It is important when making a significant purchase of a new data system to have a comprehensive assessment of your needs, as well as expertise in the available software and the reliability of software vendors. No County Health Departments have this type of internal expertise. ECG had conducted a very similar assessment for the Oregon community clinics network and was well respected by the Oregon The Santa Cruz County Health Services Agency’s - 89 Counties and community clinics that participated in their software selection process. It was important to have a consulting firm which understood public sector needs in a clinic environment as well as the business of practicing medicine in this era of managed care. Oregon staff invited Santa Cruz to come observe their process. The Santa Cruz clinic team was very impressed with the knowledge and expertise of the ECG Information technology team. The County contracted with the ECG information technology team for several completely different scopes of work. The Grand Jury findings imply that the original contract of $130,000 was for everything needed to implement the new computer system. This is incorrect. Phase one of the work with ECG was an assessment of the current system and extensive review of all components of clinic business and clinical operations to define the ideal functionality of a new software system. The clinic staff clearly needed a strong practice management system with automation of many of the current manual functions, good tracking systems and reports, electronic systems for billing and posting, and good management of schedules and support resources for clinical providers. Staff from all levels of clinics gave input into the ideal software functionality and its user friendliness. Once this phase of work was complete, the next phase of work was a “request for qualifications and proposals.” ECG was responsible for developing this and sending it out to the software vendors in the field. As part of this phase of the process, a team of staff went to a meeting of the “Medical Group Management Association” in Texas because all the software vendors were going to be there demonstrating their products. Customers would also be there to whom County staff could talk about customer service, reliability, etc. This phase of the process was very time consuming because the County received 10 proposals. ECG staff worked with clinic staff and the HSA and County data staff to review the proposals in depth and narrow the focus to four vendors. Again all types of staff (business office, reception, medical records, nursing, physicians, and medical assistants) in the clinics needed to be involved to get the best evaluation of the products. Next there were actual demonstrations from the vendors which were a full day or more each. Again this required extensive time to review and evaluate each component of the software from each vendor. During this time ECG did extensive customer reference checks in and out of California. Finally the HSA data group recommended NextGen as the best match for the clinic’s needs. The clinic staff had been interested in Epic all along after seeing it in Oregon, but Epic generally works with systems with a million visits per year or more. Kaiser and Sutter have this software as it is considered one of the best in the medical field. - 90 The Santa Cruz County Health Services Agency’s ECG then recommended the County see the software in action live and be able to talk to staff using it. NextGen was an East Coast company whose nearest clinic was in Texas. So staff from clinics and data support went to Texas for several days to see the system up and running and talk to the clinic program staff who used it. The team felt the software was able to meet the need of the County and contracted with ECG to do the negotiations and develop contract language to meet clinic needs and protect the interests of the County. Again, this added to the scope of work of this contractor. This was a difficult phase for the project particularly where customization was needed for California specific billing systems. After several months, things were not moving and the County approached the Oregon Community Clinic Information Network (OCHIN) to see if Santa Cruz might join and get access to Epic software at a reasonable price as well as share overhead with them and other clinics. The response was favorable and negotiations began to explore the viability of this data partnership. At this point ECG developed a detailed feature/function check with additional specifications from our needs and asked OCHIN and NextGen to submit new bids on the software purchase, support, and maintenance as well as customization. OCHIN proposed the most favorable package to the County and ECG then focused exclusively on contract specification and governance issues with OCHIN. Santa Cruz County wanted a seat on the Board of Directors as part of the partnership. This was approved in the final arrangement which went to the Board for approval in December 2003. This concluded the work of the ECG information technology group for the County. The Epic practice management system went live on June 28th in the County clinics. With billing outstanding in the old system, it will take approximately 18 months to be completely off of the old software. The clinic and data staff are to be commended for all the hard work they did to get to this point. The program is already experiencing benefits of improved automation. Separate from the data project, ECG medical management team was hired to do a comprehensive assessment of the business practices, costs, and work flows of the HSA clinics to improve efficiency and quality. This consultation was to examine how the make the clinics more productive with the resources available and increase patient flow and satisfaction. The medical management team did an extensive assessment, which was concluded in 2003. ECG was asked to stay on and help the clinics with implementing the many complex system changes outlined in the report. They worked with an implementation team from clinics for 7 months and then assisted on a limited basis after that on technical issues. The Santa Cruz County Health Services Agency’s - 91 The report which went to the Board of Supervisors in April 2004 shows the tremendous job the clinic staff have done changing and improving health systems in the clinics. Clinics have increased the patient visits from 1.7 per hour to 2.2 which resulted in significant new MediCal revenues. Costs were also reduced in pharmacy and administration by over 1.7 million dollars. The clinic established physician treatment teams with dedicated support staff. Patients now have a specific ongoing relationship with a doctor or team. There are new billing practices for accounts receivable and new collections systems are being analyzed. Productivity improved across all teams, and patient satisfaction improved due to reduced waiting times, staying open at lunch, and same day appointment systems. The rest of the ECG

The HSA used two out-of-state consultants (ECG and the former HSA administrator) for advice to set up the Medical Information System network. Response: Santa Cruz County Board of Supervisors PARTIALLY AGREES. ECG did 98% of the work on the information technology implementation. Elinor Hall worked largely on revenue, grants, and legislative issues benefiting the County and community clinics.

A former HSA Administrator and a former HSA Medical Director The former HSA administrator now acts as an independent healthcare consultant based in Oregon. The terms of her January 5, 2001 contract with Santa Cruz County indicated an hourly rate of $125. This consultant was to be reimbursed at this rate for hours worked and for travel time between Portland, Oregon and Santa Cruz. Additionally the contract states, “Compensation for necessary per diem, travel, mileage and other costs necessary to accomplish the work done under this agreement is included in the CONTRACTOR’S hourly rates. Travel to California shall be at COUNTY direction for purposes of supporting COUNTY issues.” The former HSA medical director contracted with the county to be paid $80/hour as a consultant. The appendix delineates the yearly payments and work projects of the former HSA administrator and the former HSA medical director. Response: Santa Cruz County Board of Supervisors PARTIALLY AGREES. - 94 The Santa Cruz County Health Services Agency’s The Health Services Agency has used specialized consultants conservatively and in a manner similar to other Health Departments. Ms. Hall worked with County and safety net clinics to bring in over $3.5 million in new health revenues to the County while the County spent an average of $46,000 per year on her services, a tremendous return on investment. All of the start-up funds for the new Healthy Kids insurance product were raised by her foundation work on HSA’s behalf, and new opportunities for federal and state matching funds for local money raised for healthy kids insurance are in final phases of development. Her technical expertise included FQHC, Medi-Cal, Bureau of Primary Care grants and funding, Medi-Cal Administrative Funding, Targeted Case Management funding, federal waivers, and funding issues linked for federal designation such as physician shortage areas, etc. This expertise has proven invaluable over and over again in licensing, audit, and claim disputes as well as finding new funds for critical needs. The Federal Bureau of Primary Healthcare, the California Healthcare Foundation, Counties and other States have also found her assistance extremely valuable. In addition, with her knowledge of local issues and needs, little orientation was needed before grants and projects could be undertaken. Dr. Wolfe, the former medical director, has also been of great assistance to the County. He has worked on issues related to health policy and planning in the community and within HSA. He participated in planning, development and implementation of the Healthy Kids program, with special focus on ensuring provider participation. He has been the County’s lead person in responding to the problem of under-reimbursement of Santa Cruz County physicians participating in the Medicare program. He formed a coalition to respond to a request for proposals from the California Endowment, resulting in a $500,000 grant to Salud Para La Gente for a two-year program. He planned and facilitated the closure of the county- run prenatal clinics, with establishment of that service at Sutter, saving the county $30,000 per year. He helped develop successful funding grants for dental disease prevention. Internally, he updated and redrafted the HSA Illness and Injury Prevention Plan and the Bloodborne Pathogen Plan for the County. He helped develop the county’s plan for smallpox vaccination to medical and health personnel using Bioterrorism grant funds, and developed a panel of specialist consultants to deal with adverse reactions to smallpox vaccination. Dr. Wolfe’s many years of experience in the county and his reputation and relationships with local and state health professionals have made his contributions very valuable. His health planning activities are eligible for state and federal Medi-Cal administrative claiming reimbursement. The Santa Cruz County Health Services Agency’s - 95

A Summary of the Cost of the Health Services Agency’s Three Consultants YEAR ECG Former HSA Former HSA Yearly Total Administrator Medical Director 2000-2001 $130,000 $13,125 $49,320 $192,445 2001-2002 $85,000 $59,844 $61,620 $206,464 2002-2003 $268,000 $88,281 $60,840 $417,121 2003-1/2004 $114,565 $12,250 $13,120 $139,935 Total $597,565 $173,500 $184,900 $955,965 Response: Santa Cruz County Board of Supervisors AGREES.

Funding Sources to Pay the former HSA Administrator and the former HSA Medical Director: A. The source of the funds to pay for the former HSA administrator and the former HSA medical director is less clear than that for ECG. The HSA gave these answers on the funding sources for these consultants who were identified as independent contractors: “Each year in the budget there are line items for various [independent] contractors.” The former HSA administrator and the former HSA medical director “had contracts approved by the Board [of Supervisors].” “In building the budget, HSA identifies and puts in amounts for ongoing [independent] contractors. These amounts were in the original budgets and augmented if needed for new activities with appropriate approvals from the CAO’s [Chief Administrative Officer] office and/or Board if using new appropriations or transfers. Contractors are never allowed infinite amounts of funds. These are negotiated and approved in advance.” The grants written by the former HSA administrator “(CAP, HCAP, and others) include routinely 10% for administration.” Given that the former HSA administrator “brought into Health [HSA] approximately $3.5 million in funds, she was able to pay for her time out of admin (administration) funds.”3 B. According to the HSA, the former HSA medical director may have “charged some of his time to the Bioterrorism grants but otherwise to our central admin [administration] distribution. Central admin is charged out to all of our funding sources through the programs. Approximately 15% of the 3 The Health Services Agency gave the Grand Jury two figures. The second figure was $6,160,000 with no explanation. The correct figure is closer to $3 million. The CAP and HCAP grants awards totaled $2,582,870. - 96 The Santa Cruz County Health Services Agency’s funds are County and the rest are Medicaid, Medicare, grants, and various state and federal allocations.” Response: Santa Cruz County Board of Supervisors PARTIALLY AGREES. Funding for Ms. Hall is from a variety of different revenues from central administration. Some hours were eligible for reimbursement from administration categories in the CAP grant. Other hours are eligible for reimbursement through the Medi-Cal Administrative Claim (federal/state). The balance of funds are from state realignment and county funds. Dr. Wolfe’s time related to health planning was reimbursed through Medi-Cal administrative claiming. Dr. Wolfe did also have a specific number of hours dedicated to smallpox immunizations from a federal grant. The balance is State realignment funds and County funds. The work Dr. Wolfe is doing on Medicare reimbursement rates (locality 99) will improve reimbursement for the whole County and result in $4-5 million in new revenues for community clinics and physicians. It will also help with recruitment and retention of physicians.

Over the past 20 years, the Board of Supervisors has allocated the same amount of money to the Medi-Cruz program. HSA has developed increasingly more stringent eligibility criteria for Medi-Cruz patients. Response: The Santa Cruz County Board of Supervisors DISAGREES. The County has increased funding by approximately $1.5 million over the last 20 years. The State has basically kept the program flat with increases of approximately 1% per year while medical inflation has been 6-12% per year. If adjusted for medical inflation over the last 20 years, the MediCruz program would have a budget of $17 million from the State allocation instead of the current amount of approximately $5 million. Conclusions

Some of the former HSA medical director’s compensation came from funds derived from patient revenues, which could have been used for indigent medical care.

The Medicare reimbursement project done by the former HSA medical director largely benefits private physicians because county clinics see very few Medicare patients. The HSA and the Board of Supervisors accepted the argument used by the Santa Cruz Medical Foundation (SCMF) that an increase in Medicare reimbursement rates would increase physician retention in the community and would benefit the HSA. The SCMF did not guarantee increased county indigent care, if the former HSA medical director helped its campaign. By working with the SCMF, the HSA spent county monies to enrich SCMF, not the county. On another occasion, the Health Services Agency did not give full credit to the employee who wrote a report for the HSA. - 98 The Santa Cruz County Health Services Agency’s

The HSA deleted two county physicians’ positions, while spending almost a million dollars on consultants.5 The shift of the chief of clinical services to the position of chief of detention services left the county clinics with no chief until that position is filled.