The State’s Largest Provider of Community Mental Health and Addiction Treatment Services Seeks a Bailout

Cascadia Behavioral Healthcare's budget crunch could not come at a worse time.

More than 18,000 Oregonians depend on Cascadia Behavioral Healthcare for treatment of serious mental illness and addiction, conditions that for many have been exacerbated by the COVID-19 pandemic.

The Portland nonprofit employs nearly 1,000 workers and provides services at 75 facilities, ranging from walk-in crisis centers to supportive housing for more than 700 clients, including at its new 52-unit Garlington Center apartments on Northeast Martin Luther King Jr. Boulevard.

Kevin Fitts is executive director of the Oregon Mental Health Consumers Association and a former Cascadia client. He says the state's largest community mental health care provider is "too big to fail."

Records show it's in danger.

In a Jan. 15 letter to the Oregon Health Authority that WW obtained through a public records request, Cascadia CEO Dr. Derald Walker asked state officials for an immediate, $4 million bailout.

"Cascadia Behavioral Healthcare has incurred significant revenue losses and significant increases in costs that began early in the pandemic's arrival last year," Walker wrote. "The combination of these two incredibly unfortunate and unforeseen forces of escalating operating expenses and continued drop in revenue has left Cascadia with a very serious financial position, and created immediate challenges."

Cascadia's budget crunch could not come at a worse time.

Oregon regularly ranks among states that provide the least treatment for mental illness and addiction. Amid a pandemic, economic devastation and civil unrest, the symptoms of that crisis are all too visible on Portland's streets: people screaming, harming themselves, shooting up in plain sight or just staring forlornly from soiled tents or junk vehicles as the world passes them by.

Cascadia plays an outsized role in providing care and shelter for traumatized people the state would otherwise leave behind.

"Cascadia provides crisis drop-in services, Project Respond, that goes out to people, and peer support services that are incredibly important," Fitts says. "What happens if those are gone? There's a lot of need out there."

Cascadia's cash squeeze came as a surprise to its longtime local contract partner, Multnomah County, which serves as the local mental health authority.

"Regardless of where the funding comes from or who has responsibility, our entire continuum is impacted by a provider's ability to serve," says Ebony Clarke, interim director of the Multnomah County Health Department. "When people cannot get care, we all see the impacts—from emergency departments, to the Oregon State Hospital, to jails."

Cascadia spokeswoman Nicole Rideout says the nonprofit is confident its struggles will be "short-lived."

"Our concerns today are reflective of two big impacts: lack of funding by the state and the impacts of COVID-19," Rideout says. "These are circumstances well beyond what any organization can know in advance."

But the story of how Cascadia found itself in dire circumstances at a uniquely inopportune time is more than another unfortunate coincidence during the public health disaster surrounding COVID-19. It reflects the challenges of trying to repair a long-frayed social safety net, and the difficulty of securing stable funding in Salem for mental health.

BIG PLAYER: Cascadia opened the Garlington Center in 2018, providing housing and health care under one roof.

If financial troubles at Cascadia sound familiar, that's because the nonprofit also experienced serious problems in 2008. Then, it was almost entirely funded by Multnomah County, and the county came to its rescue. After restructuring and a change in management, Cascadia returned to health.

Since 2008, a lot has changed.

Multnomah County is still a significant contract partner for Cascadia: It has 16 active contracts with the nonprofit that paid Cascadia $15.6 million in fiscal 2020 and will yield about $11 million this year.

Despite that close connection, Cascadia did not alert county officials to its dire straits until Jan. 19, when Walker emailed Clarke and sent her a copy of his letter to the state.

"I apologize for not giving you a call earlier as this challenge increased in seriousness," Walker wrote to Clarke.

Today, the bulk of Cascadia's funding comes from the Oregon Heath Authority via the state's Medicaid program, the Oregon Health Plan. OHA in turn is dependent on the federal government and state Legislature.

Cascadia posted revenues of about $75 million in 2019.

But although the nonprofit finished in the black in 2018 and 2019, its tax returns showed warning signs: increasing debt and accounts receivable—in other words, it borrowed more and struggled to collect money it was owed.

At the root of Cascadia's problems, it appears, were two related decisions. The first was Cascadia's move to expand its business model in 2017 to become a "certified community behavioral health clinic."

Oregon got federal funding for a two-year pilot program that aimed to provide clients a more holistic range of care, including primary medical care.

The idea was to generate better outcomes at a reduced cost by addressing all aspects of patients' physical and mental health.

Walker told the state in his request for assistance that Cascadia decided to build its own primary medical care capacity, rather than contracting with outside doctors.

But in 2019, when federal grant funding for the pilot program ended, Cascadia couldn't persuade Oregon lawmakers to provide the state funding necessary to continue Cascadia's expensive new program—even though the feds had offered a 4-to-1 match.

"People weren't sure about the model or if we should try another approach," says state Rep. Rob Nosse (D-Portland), who co-chairs the Human Services Subcommittee of the Joint Ways and Means Committee.

A second request for state funding ended prematurely in 2020 when Republicans walked out of the Capitol.

In his letter to the state, Walker says the Legislature's decision not to fund Cascadia's new program has cost $7.25 million since July 2019.

Hardship pay and the purchase of personal protective equipment during the pandemic cost Cascadia another $1.4 million, and it lost $1.5 to $2 million in revenue for services it could not provide during the past year. The nonprofit burned through $3.5 million of its $5 million in cash reserves.

To save money, Cascadia cut 38 positions, saving $3 million. But that wasn't enough.

"[We] are perilously close to defaulting on our ability to meet payroll expenses without significant cuts to personnel and serious disruption to programming offered," Walker wrote to OHA. In that letter, Walker asked for a bailout: "temporary support in the amount of $4 million."

OHA behavioral health director Steve Allen had a follow-up meeting with Cascadia on Jan. 19, in which he sought more specific financial information. Allen says OHA examined Cascadia's financials and suggested how the nonprofit could "stop the bleeding."

Funding approved by the Legislative Emergency Board on Jan. 8 will help Cascadia, Allen adds. He expects to meet with the nonprofit later this week to discuss next steps.

The county says Cascadia has not sought additional funding, but county officials are eager for more information. "Until we have a more clear picture of the need," Clarke says, "we won't know what our next steps might be."

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