Santa Cruz County Health Services Agency 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.”

ECG Management Consultants, Incorporated (ECG): ECG serves as a consultancy firm and is based in Seattle, Washington. It specializes in “hospital and physician 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 2 ECG Web site. The Santa Cruz County Health Services Agency’s - 59 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 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. - 60 The Santa Cruz County Health Services Agency’s 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 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, The Santa Cruz County Health Services Agency’s - 61 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 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.

The HSA used two out-of-state consultants (ECG and the former HSA administrator) for advice to set up the Medical Information System network.

A former HSA Administrator and a former HSA Medical Director - 62 The Santa Cruz County Health Services Agency’s 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.

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

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 The Santa Cruz County Health Services Agency’s - 63 $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 funds are County and the rest are Medicaid, Medicare, grants, and various state and federal allocations.”

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. 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.

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.