M/4 HOUSE OF REPRESENTATIVES HOUSE POST AUDIT AND 312Dbb01t,5 3 50 37 OVERSIGHT BUREAU ROOM 146 STATE HOUSE BOSTON, MASSACHUSETTS 02133-1053 CHARLES RIVER HOSPITAL - WEST INTERIM REPORT March, 1994 '% Sc < ^l/aAW ^ C^/W ss p>uya; - HOUSE OF REPRESENTATIVES HOUSE POST AUDIT AND llll OVERSIGHT BUREAU H P A O ROOM 146 • STATE HOUSE • BOSTON, MASSACHUSETTS 02133-1053 CHARLES RIVER HOSPITAL - WEST INTERIM REPORT March, 1994 <***, *** '%, %^,-,. n\, Summary Financial problems at Charles River Hospital-West have remained serious enough to raise questions about whether adequate services can be provided to state patients there in both the short and long term, according to an interim report by the House Post Audit and Oversight Bureau. At the same time, according to the Bureau's final report, current and former administrators at the hospital have been reimbursed for tens of thousands of dollars in expenses during the past two years that include meals, conferences in other states, college tuition in Connecticut for one top administrator and memberships in an exclusive club in Springfield, Massachusetts, for at least two administrators. The Bureau has spent more than a year investigating a $7 million per-year contract arrangement between Charles River Hospital -West and the Department of Mental Health and is recommending that its findings be referred to the state attorney general and state auditor. After issuing a preliminary report in October 1993, the Bureau examined court records involving the hospital, subpoenaed bank, financial and other records at the hospital, and interviewed current and former employees there. . - JUL - The Bureau concludes that the Charles River Hospital-West state units have remained beset by financial problems, including a failure to pay vendors for services and equipment and to make mortgage payments for at least eight months in the past year. The Bureau reviewed 16 complaints filed by vendors in Springfield and Chicopee district courts seeking close to $300,000 in damages from Charles River Hospital-West. An additional 11 vendors said they were owed approximately $36,000. The Bureau also found that the hospital failed to pay nearly $2 million in payroll taxes to the state and federal governments and bounced hundreds of thousands of dollars in employee paychecks in 1993 and early 1994. Among other findings in the Bureau's interim report: 1. Charles River Hospital-West has been unable for financial reasons to provide certain basic safety services to its patients, such as installing covers on radiators in all rooms to prevent patients from burning themselves. 2. Charles River Hospital -West and affiliated companies have periodically transferred hundreds of thousands of dollars among themselves in a diff icult-to-trace pattern of wire and check transactions 3. The DMH vastly overestimated the amount of federal Medicaid funding which Charles River Hospital -West would be eligible to receive. As a result, the state has been required to pay a . - AAA. - far larger portion of the cost of care at the hospital than anticipated 4. The Medicaid licensing arrangement for the hospital does not appear to meet federal guidelines. 5. A series of close relationships among consultants and the DMH in the Charles River Hospital -West contract arrangement raises questions about the process of selecting the hospital, developing its budget and obtaining the Medicaid license. Based on all documents reviewed to date, the Bureau further questions the rationale given by Charles River Hospital -West for future improvement in its financial condition -- a rationale based on questionable projections of increases in patient census and revenues. It appears the hospital's major means of improving its financial projections has been to increase its per diem rate for the care of privately insured patients from $631 to $750 this year. Yet, this increase would affect only a handful of patients at the facility who receive no public assistance. Finally, the report concludes that the DMH has failed to exercise necessary oversight over the state units at Charles River Hospital-West and appears to lack comprehensive plans for either recitifying problems there or selecting a more appropriate vendor for the hospital services. As a result of its investigation, the Bureau is recommending that the DMH institute improved financial review mechanisms for its contracts with psychiatric hospitals throughout the Commonwealth.