Kerry Venegas struggles to sleep these days, worrying about the 55 children who will lose services once her Humboldt County nonprofit closes an outpatient counseling program in January.

David Mineta gets emotional when he talks about his organization’s decision to close six mental health programs serving about 650 children and adults in Santa Clara County by the end of December.

“Talking about it really makes me want to cry,” he says.

Depending on who you ask, these mental health program closures are either an unfortunate aberration or a harbinger of more to come as the state transforms its Medi-Cal reimbursement system.

Venegas, executive director of Changing Tides Family Services in Eureka, and Mineta, president and CEO of Momentum For Health in San Jose, say their organizations are being forced to cut crucial mental health programs in order to keep the rest of their agencies afloat. They attribute that to CalAIM, a multi-year, multi-billion-dollar overhaul of Medi-Cal that dramatically changes how California’s public mental health care programs are funded.[CORRECTION: Changing Tides contacted the Outpost to let us know that their agency and their other programs have not been impacted by the change to CalAIM.]

“I would love to invite Gov. Newsom and his team to come talk about what CalAIM is in an area like ours,” Venegas said. “Instead of making it better, I really think this has made it worse.”

CalAIM’s behavioral health initiative, which Gavin Newsom’s administration began rolling out in 2022, is designed to provide a more integrated approach to care. It offers a “no wrong door approach” so that people seeking help will have an easier time getting it.

This past July, a new payment system kicked in for most counties. The goal? Increase efficiency, reduce paperwork and offer counties more flexibility.

The problem, some nonprofits say, is that their organizations are no longer reimbursed specifically for time spent traveling to see patients or filling out documentation. In addition, the state is giving counties latitude to decide how much Medi-Cal money they pass along to their nonprofit behavioral health contractors.

Los Angeles County is passing along about 85% of the funds it receives from the state, according to Adrienne Shilton, a senior policy advocate with the California Alliance of Child and Family Services, while others are providing less.

She shared survey data showing nonprofits in a dozen counties told the alliance they worried they might have to close programs.

“There’s still a dire picture,” Shilton said. “We’re concerned about what this is going to look like in another three months.”

Amie Miller, executive director of the California Mental Health Services Authority, a state agency that works with counties to transform mental health services, said she hasn’t heard of programs closing directly as a result of payment reform.

Some providers are struggling with longstanding financial problems, Miller said, and others are “used to not having to be as attentive to the bottom line.”

“This is the next piece of our evolution,” she said.

Some providers have said they stand to do well under the new model, she added.

Still, some nonprofit organizations have been sounding the alarm since summer that the rates are too low and eventually will lead to program closures.

Dozens of mental health providers in October penned a letter to the state Department of Health Care Services, warning of “potentially catastrophic consequences.”

But until recently, programs have not actually closed. That’s beginning to change.

“It’s the end of the year. Folks are looking at the books saying ‘we’re not going to make it,’” said Le Ondra Clark Harvey, CEO of the California Council of Community Behavioral Health Agencies, an organization that represents some nonprofit providers.

Venegas, of Changing Tides, called the decision to close the program “a knife in the heart.”

“If we had any other choice, we wouldn’t be ending these services,” she said.

Modernizing Medi-Cal payments

Most everyone agrees that the system serving California’s more than 15 million low-income Medi-Cal enrollees was overdue for a change.

“Updating and modernizing how we pay for services in behavioral health is crucial,” said Michelle Doty Cabrera, executive director of the California Behavioral Health Directors Association, which represents county behavioral health departments. “We need to propel ourselves into the 21st century.”

Increased efficiency is one of the desired outcomes of payment reform. County behavioral health departments are working hard to support their nonprofit mental health providers during this transition, Cabrera said, but nonprofit providers also need to reach more Medi-Cal patients. There are just too many people in need, she said, and the workforce to meet those needs is too scarce.

A survey published this month by the California Health Care Foundation showed that satisfaction with CalAIM is lower among behavioral health providers than other provider types “by a pretty significant margin,” said Melora Simon, associate director of the foundation’s people-centered care team.

“There’s signal there; it’s not just noise,” she said.

Even without the threat of mental health programs closing, the state has struggled to keep up with a growing mental health crisis amid huge provider shortages. A state audit published in November found that children in Medi-Cal already face long wait times to receive behavioral health treatment.

The pandemic threw gasoline on the blaze. Just as mental health needs have spiked in recent years, so has provider burnout.

Mental health services in rural California

Prior to payment reform this summer, Venegas, of Humboldt, said her organization already struggled to hire enough clinicians to provide outpatient therapy; the therapy program she is closing would have had room for 125 to 130 children if the organization was fully staffed.

Many of the 55 children in the program waited months to be assigned to a provider. Because the county has its own staffing challenges, she said, these children will now likely be put back on waitlists for care.

In the vast rural and forested county, many of the children live an hour or two drive away from services. They are often directly impacted by domestic violence and drug and alcohol use. Some are in foster care. Many are at risk for suicide.

“Fifty-five clients may not seem like a big number, but every one of those is a kid. Every one is a kid in crisis and every one has a story.”
— Kerry Venegas of Changing Tides Family Services

Once payment reform began, the organization struggled to keep the program afloat — transportation and documentation time was no longer directly reimbursable, leading to a significant financial hit. Still, the organization considered the counseling program that serves these children to be so critical that the board allowed it to continue while accruing a deficit, Venegas said: “We stayed with it until we no longer had a choice.”

“Fifty-five clients may not seem like a big number,” she said. “But every one of those is a kid. Every one is a kid in crisis and every one has a story.”

Humboldt County Behavioral Health Director Emi Botzler-Rodgers wrote in an email to CalMatters that the county is gathering data to evaluate the impact of the new rates. She acknowledged concerns across the state about whether the rates adequately cover the cost of services.

The state Department of Health Care Services refused to make anyone available to directly answer questions about the changes; instead it provided a series of answers to emailed questions. The department is “actively engaging” providers and counties, developing technical assistance and monitoring and enforcing the new rules to make sure counties maintain an adequate network of Medi-Cal services and providers, the email said.

The department is continuing to monitor payment reform rates “and will adjust them as appropriate,” the email said.

Staffing stresses San Jose provider

Like Changing Tides in Humboldt — and other behavioral health nonprofits across the state — Momentum for Health, in Santa Clara County, has struggled with a shortage of qualified staff. This inadequate staffing, says Mineta, makes certain programs difficult to sustain financially, because overhead costs are often fixed no matter how many patients they see.

The six programs the organization is closing include intensive treatment for children and adults, including programs for people with addiction and those who have experienced their first episode of psychosis. Mineta says the programs employ about 85 staff members and currently serve around 650 people, though they reach about 1,500 people during the course of a year.

Sherri Terao, director of Santa Clara County’s behavioral health department, said in an email that Momentum is closing the programs “to address ongoing fiscal and staffing challenges” and that her department is working closely with the organization to ensure smooth transitions for patients.

Momentum for Health facilities in San Jose on Dec. 19, 2023. Momentum for Health provides behavioral health care for youth and adults in Santa Clara County. Photo by Loren Elliott for CalMatters

While Mineta acknowledged his organization had financial challenges before this summer, he said payment reform ultimately caused the program closures. Staff in intensive outreach programs need to spend a lot of time out in the community, he said, and CalAIM’s new rates don’t adequately reimburse the hours it takes to provide that kind of care.

Given how quickly everything is changing, Mineta says, he sometimes feels as though he has the bends — the medical condition that can occur if a scuba diver surfaces too quickly. A little more than a year ago, Newsom held a press conference in front of Momentum’s San Jose campus, signing legislation to introduce one of his signature mental health initiatives, CARE Court.

But even as the administration continues to provide historic levels of attention to — and make unprecedented investments in — the state’s behavioral health system, Mineta has found himself cutting programs in the face of escalating need.

He describes this as the toughest time in his 30 years in the field.

“It’s just confounding to me,” he said.

Neither he, nor Changing Tides, blame their counties. Mineta said Santa Clara County has been deeply supportive over the years. In fact, on Dec. 12, the county board of supervisors heard a report about the challenges many behavioral health nonprofits have been facing and voted to provide extra funding to help them weather the payment reform transition.

Unfortunately, Mineta said, that won’t help with the programs Momentum has already slated for closure: “It came too late,” he said.

###

CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.