In January, a task force probing the Washtenaw Community Health Organization told the board that the organization had a $3.8 million hole in its budget. Its recommended solution was just as shocking: close the WCHO, eliminating fifty positions.

Both a service provider and Medicaid distributor, WCHO has an annual budget of $80 million. Almost half, $37 million, passes through to the county’s Community Support and Treatment Services for mental health and substance abuse treatment. WCHO itself serves 1,347 mentally handicapped clients.

“We’re moving the WCHO activities to an agency model where there’s a single line of authority and accountability,” explains retiring county administrator Verna McDaniel, “a county department which will likely be called the department of community mental health.”

McDaniel says she first learned of the deficit last August when “CSTS brought their budget to the board.” The news triggered the review. Task force members included former St. Joe’s CEO Bob Laverty and Brent Williams, medical director of the U-M’s complex care management program.

Ann Arbor commissioner Yousef Rabhi says the deficit has two sources. “The state’s cuts to the general fund for mental health had a significant impact on the budget. And the governor reorganized mental health care in the state into a regional system.” Washtenaw had already set up a partnership with Lenawee, Monroe, and Livingston counties; the reorganization added Jackson and Hillsdale counties.

“WCHO pooled everybody’s money and gave it out,” explains McDaniel. “Now the state has set up regional offices so they’ll distribute the money. The WCHO folks did their very best, but the game changed.”

The county and the U-M created WCHO fifteen years ago. “At its outset the partnership was envisioned as very full,” says the U-M’s Williams, “combining the organization and financing of mental health and medical care services. But several aspects fell apart or didn’t materialize in the first few years. For example, the legal separation in financing streams between medical and mental health services made it impossible to combine these funding streams. So [the U-M’s] involvement was limited to appointing six of the twelve board members and delivering medical services to persons also receiving care in the mental health system.

“The task force concluded that much of the original mission wasn’t accomplished,” Williams continues. “They did a lot of very good things and delivered very good services, but the conclusion was lots of things didn’t happen because the structure was inherently dysfunctional and structurally unstable.

“One of the big conclusions was that the WCHO had to be dissolved, and our recommendation was to bring all of it back under the county and reconstitute the traditional model of a community mental health agency.”

Providing mental health services remains “essential to the county’s mission,” McDaniel says. “I see it as critical,” agrees county board chair Felicia Brabec, a social worker and psychologist. Though the restructuring will eliminate fifty positions, forty-one of them are already empty as WCHO employees have retired or found other jobs. “Some got hired by the new [state] regional office,” says McDaniel, “some were brought over to CSTS. About nine folks either retired or were laid off, and we’re helping them get jobs wherever we can.”

McDaniel says the effect on WCHO’s 1,347 direct clients is “what we’re trying to figure out. For those eligible for Medicaid, there’s probably going to be little to no impact.” For the rest, she emails, “We hope that we can impress upon the State that we need as much Medicaid and General Fund dollars as we can get. We are not alone in this [deficit] situation.”

The shift to a county agency may be just a first step. The task force’s “second big recommendation was to move away from an agency to an authority within two years,” says the U-M’s Williams, creating “an independent entity outside the county budget and populated by mental health experts.”

Again, Smith is optimistic. “Two years from now we’ll have stronger client services for sure. When we regionalize, we’re going to see cost efficiencies and best practices emerge. Jackson and Hillsdale counties are places without the wherewithal of Washtenaw County, and when we all get together we’ll have a smarter team delivering better services.”