Memorandum
Date: June 10, 2025
To: The Honorable Lake County Board of Supervisors
From: Elise Jones, Behavioral Health Services Director
Subject: Consideration of Short-Term Loan from the General Fund to Behavioral Health Services in the amount of $2,000,000.
Executive Summary:
Lake County Behavioral Health Services (LCBHS) is requesting a short-term loan of $2,000,000 from the General Fund to sustain operations during the State’s annual Medi-Cal claims payment pause, which spans from mid-May through late August. This loan addresses a temporary cash flow challenge caused by the Department’s successful and strategic expansion under Medi-Cal payment reform-not a structural deficit.
Background
As part of Medi-Cal payment reform, counties must maintain an account balance with the State to draw down matching federal funds through the Intergovernmental Transfer (IGT) process. Lake County uses 2011 Realignment funds as the non-federal share to participate in this process.
Over the past two years, LCBHS has expanded its service delivery significantly, aligning with State reform goals and securing the highest Specialty Mental Health Services (SMHS) fee-for-service rates in California. This expansion has resulted in a dramatic increase in submitted claims-and with it, the matching funds required to access full reimbursement.
As of May 2025, LCBHS has contributed $6,932,914.68 in IGT match for FY 2024-25 SMHS claims and has received $5,184,008.77 in IGT funds back to date. Though this funding flows with a delay, the overall return is strong: for every dollar LCBHS commits to IGT, the County typically receives more than twice that amount in combined reimbursements from the State General Fund (SGF), Federal Financial Participation (FFP), and returned IGT.
However, nearly all of the funding returned must immediately be reallocated to the IGT account to maintain claim flow. This creates a low-cash, high-throughput cycle that prevents LCBHS from building the reserves needed to stay ahead of the rapidly accelerating payment volume.
Compounding this challenge is the annual DHCS claims processing freeze, which begins May 15 and runs through late August, with reimbursements not resuming until September. This well-known year-end pause places additional strain on the Department’s cash flow at a time when claims are peaking.
Loan Request and Justification
To navigate this predictable but impactful gap in reimbursement, LCBHS is requesting a $2,000,000 short-term loan from the County’s General Fund. This funding will ensure continuity of care, timely payroll, and fulfillment of vendor obligations during the claims processing suspension.
The loan will be repaid in full within 12 months using Medi-Cal reimbursements expected in fall 2025. Given the Department’s strong claims volume and high reimbursement rates, this loan is a low-risk, high-return investment for the County.
For every dollar temporarily committed to the IGT cycle, the County typically receives over two dollars in return. This loan is not just a cash flow tool-it is a strategic mechanism to unlock millions in federal and state matching funds that are otherwise delayed due to structural timing, not operational failure.
This request reflects LCBHS’s commitment to fiscal responsibility, service expansion, and efficient leveraging of all available resources. It ensures that Lake County continues to meet the behavioral health needs of its residents without interruption, while also maximizing its position under State reform.
Recommendation
Approve the attached Resolution authorizing a $2,000,000 short-term loan from the General Fund to Lake County Behavioral Health Services. This action supports operational stability, protects essential services, and positions the County to continue drawing down enhanced reimbursement at scale under the reformed Medi-Cal payment structure.
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Recommended Action: Approve the attached Resolution authorizing a $2,000,000 short-term loan from the General Fund to LCBHS, to be repaid within 12 months, in order to ensure stability of County behavioral health services during the State reimbursement hiatus.