After audit raises dozens of concerns, OC cuts short a key mental health services contract

Orange County officials are taking control of services at the county’s signature mental health campus, a move that pushes out a nonprofit organization that was paid tens of millions of dollars in public funds to run it for the last two years.

The action terminates a three-year contract early and comes after a damning audit found the organization, Mind OC , failed to ensure proper staffing and effective outcomes of key services.

LAist obtained the audit , which has not been previously reported, through a public records request. It's the first audit of Mind OC’s management of the mental health campus — which began in October 2022. To date, the county has paid the nonprofit more than $38 million to manage services at the campus, according to county records.

Those services include substance abuse treatment and mental health crisis programs. The campus, located in the city of Orange, served some 3,500 people in fiscal year 2023-2024, according to data provided by the O.C. Health Care Agency.

The public-private effort was created pre-pandemic as county officials came under increasing pressure to deal with a very public homelessness emergency and high-profile incidents involving people experiencing mental health crises. The goal was to create mental health hubs where, regardless of your insurance status, people can find treatment.

The shift in operations at Be Well's Orange campus marks the second time the county has lost confidence in a contractor hired to execute their plan. The previous change in 2022 shut down substance abuse treatment services at the Orange campus for more than a year.

County officials say a change was needed

Veronica Kelley, director of the Orange County Health Care Agency, told LAist that the contract with Mind OC to run the campus will end Sept. 30. "What we don't want to do is continue down a road that we know is not going well," she said.

Kelley said that Mind OC did not meet its contract obligations to bring in funding from private insurance or other private revenue to help offset the cost of taxpayer-funded services. She also said it was costing the county twice as much to pay the nonprofit to run the campus as it would for the county to run it themselves.

"We have switched back to a model that we know works so that it is more efficient and that we can ensure directly that services are being provided in an effective and regulatory required manner," she said.

A spokesperson for Mind OC said the nonprofit has a meeting scheduled with county leaders on Wednesday and declined to make anyone available for an interview until after that meeting takes place. Their three-year contract to run the Orange campus had been set to run through next June.

Mind OC will continue in a more limited role at the Be Well campus in Orange, managing the physical property, according to a joint statement released Tuesday by Kelley and Mind OC CEO Phil Franks. Mind OC also has another lucrative county contract to run an even bigger mental health campus being built in Irvine.

The county health care agency intends to continue working with the onsite subcontractors, Exodus Recovery Inc. and HealthRIGHT 360, "to ensure continued high quality psychiatric crisis and substance use disorder services," according to the news release issued late Tuesday after questions from LAist.

Audit flags lack of training, questionable billing

An audit report from July and subsequent memo from Kelley to the O.C. Board of Supervisors notes 38 problems with Mind OC's management of Be Well’s Orange campus including concerns that lack of oversight could have led to “possible fraud.”

Kelley told LAist that the possibility of fraud was under investigation, and no conclusions had been reached.

Among the issues flagged in the audit:

• Inadequate staffing of crisis programs, which are run by subcontractor Exodus Recovery Inc. The audit notes "numerous occasions" of unanswered calls or instances where calls were rerouted to a call center in Los Angeles.
• Duplicative billing for residential treatment claims by subcontractor HealthRight360. The audit also notes Mind OC's lack of "consistent and independent monitoring" of HealthRight360 to ensure appropriate billing.
• Failure to ensure subcontractor HealthRight360 provided appropriate services and procedures for treating substance use disorders.
• No evidence that HealthRight360 employees completed the county's required annual trainings, including on substance withdrawal management.
• No evidence that mental health providers at the campus followed up with clients after discharge to prevent relapses and link them to continued care.
• Failure to meet the goal of having 26% of the campus' services paid for via private insurance. Currently, according to the audit, revenue from private insurance makes up just 2.6% of the total, meaning public dollars are paying for the remainder.
• Failure to meet the goal, laid out in Mind OC's contract, to refer 95% of clients in the crisis residential program to a lower level of care. Only about half of these clients have been discharged to a lower level of care, according to the audit.

In Kelley's memo to supervisors about the audit, dated Aug. 15, she wrote that she had taken a call earlier that day from Phillip Franks, Mind OC's CEO, who told her the subcontractor HealthRight360 "was 'not going to make it'” citing billing issues, poor staffing and poor quality of care.

"All of this should have been addressed and known about if [Mind OC] was fulfilling the requirements of the [contract]," Kelley wrote to the supervisors.

Kelley told LAist that following the audit’s findings in July, Mind OC submitted a corrective action plan to the county. She said the county was ending its contract with Mind OC for "convenience," not "for cause."

Vitka Eisen, CEO of HealthRIGHT 360, told LAist that she believed most of the problems flagged in the audit were the result of her organization having to work through Mind OC as an intermediary, instead of working directly with the county, as it does with other public agencies across the state.

"It's an extremely unusual relationship," she said of MindOC's role on the Be Well campus.

HealthRIGHT 360 began operating for the first time in O.C., on the Be Well campus, in December 2023. Eisen said, as a new provider in the county, they've had numerous questions about documentation and billing that would have been more easily answered by county health officials, but "we have to go to MindOC with questions," she said.

LAist reached out to Exodus Recovery Inc. by phone and will update this story if we hear back.

The backstory

Mind OC, which does business as Be Well OC, was launched in 2017 with the goal of creating several mental health hubs in Orange County funded through both public funds and private health insurance. The organization has had strong support from the O.C. Board of Supervisors, including Supervisor Andrew Do, who helped craft the concept in 2015 as a member of the board's ad hoc committee on mental health services.

Prior to the formation of Mind OC, county officials faced scrutiny from a federal judge for failing to provide adequate mental health services for unhoused people, and failing to fully spend mental health dollars in the county.

Mind OC, and the Be Well campus, which opened in Orange in 2021 as a public-private partnership, were meant to address those problems. Initially, Kelley said, the county ran the Orange campus, and Mind OC managed the property and security. Then, in October 2022, the county signed a contract with Mind OC to oversee all operations and subcontractors at the Be Well campus.

The following year, county health officials raised concerns about the campus' substance abuse treatment contractor Telecare Corp.

Shortly after those concerns were raised, the county shuttered Be Well's residential treatment program, run by Telecare, for more than a year until the county could find a new contractor.

HealthRIGHT 360 took over. The most recent audit from July found similar problems remain — for example, failing to provide required services and needed follow-up with clients after they're discharged.

This past June, the O.C. Board of Supervisors entered into another contract with Mind O.C. to build an even bigger mental health campus — 22 acres — in Irvine. The board approved $40 million in federal pandemic response money for the construction, and at least another $66 million has been provided through state and federal funds.

Kelley said the county's recent decision to cancel its contract with Mind OC only applies to its contract to manage Be Well's campus in Orange.

She also said the contract cancellation would not affect the separate contracts Mind OC has with O.C. cities to handle psychiatric and drug emergencies in lieu of armed police officers.

Responses to the audit and contract termination

Michael Sean Wright, who runs the street medicine group Wound Walk OC and was briefed on the audit and contract termination by LAist, said it showed county officials hadn’t learned from the past.

He pointed back to a 2022 audit that revealed problems with Telecare's operations on the Be Well campus.

"We gave an additional millions of millions of millions of dollars and allowed the same lack of oversight to continue. Mind OC stayed with the keys and the checks," Wright said.

He added that despite Be Well's original promise of expanded substance abuse treatment services in O.C., it's still difficult to find detox and substance abuse programs for people who want them, many of whom are unhoused.

"Time is of the essence," he said. "There is no place that will take you at night."

Supervisor Katrina Foley said the county's decision to take over management of the Be Well campus from Mind OC was part of the "trial and error" that has come along with the county’s efforts to get mental health care to anyone who needs it, regardless of insurance.

"If something isn't working, we have to be willing to pivot quickly in this dynamic environment," she said.

"Making sure that people are trained and in compliance with rules and regulations and systems … that is something that the county behavioral health staff can do maybe better than a private nonprofit," Foley said.

Foley said the county had made "tremendous progress" since the time, in 2016 and 2017, when large encampments clogged the courthouse plaza in Santa Ana and stretched for miles along the Santa Ana riverbed. At the time, many residents in those encampments said they had untreated substance abuse and other mental health problems.

Per a court settlement, the encampments were cleared in 2018 in exchange for the county and O.C. cities agreeing to build more shelters and permanent supportive housing, and agreeing to connect unhoused people with mental health treatment.

"I'm actually very proud of the work that our county staff have done to build out the system of care, but it's an evolving process," she said. "We want to get this right before we complete building the much bigger [Be Well] campus in Irvine," she said.