Strategies: Cascadia Behavioral Healthcare’s Survival Story

Written by Portland Business Journal Staff Reporter, Elizabeth Hayes
An early look at the new Cascadia facility at the Garlington Center.

An early look at the new Cascadia facility at the Garlington Center.

Later this year, Cascadia Behavioral Healthcare will break ground on a gleaming $20 million center in Northeast Portland that will combine affordable housing and physical and mental health services.

“We’re seeing this project as a model, we’re hoping, not just for Cascadia, but for other organizations in Oregon and nationally,” said Cascadia CEO, Derald Walker.

Cascadia, a nonprofit provider of mental health and addiction services to low-income people, has plans for three other, similar clinics with integrated services on the drawing board as well.

Yet the $3.5 million center in Northeast Portland and the next wave of projects would have been unthinkable eight years ago, when the nonprofit nearly collapsed. Even after Cascadia returned to profitability two years later under Walker’s direction, the nonprofit was half as big as it used to be.

At its low point, the staff numbered around 350. Now that number has nearly tripled, to more than 900 employees. Revenue has also rebounded, reaching $59.3 million last year, up from $42 million five years ago. Net consolidated income has remained steady, at around $4 million.

“A lot of hard work was done and tears shed,” Walker said. “We’ve increased significantly. The challenge is to control that growth and consolidate the progress we’ve made, before launching into another venture.”

Fiscal meltdown

What led to Cascadia nearly unraveling in the spring of 2008 was a change in the way it was paid for its services, Walker said. The organization went from receiving lump sum payments to provide programs, requiring minimal data, to a fee-for-service model, a highly complex system that required them to produce more detailed records.

“It was rough, but pretty straightforward, and a situation where companies – whether they’re for-profit or nonprofit, especially in health care – can go sideways on,” Walker said.

Cascadia, at one point, had $3.5 million in outstanding claims. Cash reserves were “getting thinner and thinner” and it spent down a line of credit that needed to be renewed, Walker said. The state demanded repayment of $2.7 million to Medicaid, which provides most of the nonprofit’s revenue. Its founding CEO, Leslie Ford, was forced out, while two chief financial officers quit.

Walker came in and obtained a $2.2 million loan from Multnomah County and the state, negotiated the Medicaid assessment down to $1.2 million over five years and transferred several programs to other nonprofits to cut expenses.

Cascadia invested in a new electronic health records system, which fixed the billing and claims coding problems, and expanded its administrative staff, which occupies two full floors of its Northeast Portland offices. Cascadia now uses a quality management system to assess whether its services are benefiting clients. A five-person data intelligence team mines things like the average length of care for someone at a given age and diagnosis.

“We track and trend a lot of what we do,” Walker said. “We can go in through our claims data and come up with an aggregate analysis, so if we find out a large percentage are dropping out prematurely, and there’s evidence they’ve relapsed, we can go back and look at how we’re providing that level of care.”

In the past three years, reimbursement has gone back to the fixed amount per month, based on the seriousness of each patient’s needs. Cascadia, like all mental health providers, has struggled to keep up with the increased demand from the Medicaid expansion, which opened the program to low-income adults. One strategy is to triage patients through a new intake system, Walker said.

Joanne Fuller, Multnomah County Health Department director, said Walker and his team have done “an outstanding job” of turning Cascadia around and navigating the current environment. “It’s extremely challenging,” she said.  “Just because we insured a bunch of people, that doesn’t mean that we have more therapists and crisis workers, so we have to be creative and innovative to meet that demand and continue to improve outcomes.”

Looking ahead

One of Walker’s biggest worries these days is how the rising cost of living in Portland is impacting employees, as nonprofits have a limited ability to keep pace. Staff turnover is a “constant problem,” he said. Employees can often make $20,000 a year more at hospital systems and health plans or a completely unrelated industry.

“If we’re lucky, we get a couple of percentage points increase in rates from year to year and pass as much as we possibly can to employees,” Walker said. “That, more than anything, keeps me up at night.”

The dearth of affordable housing in Portland is one reason Walker is passionate about Cascadia’s planned, 52-unit project on Northeast Martin Luther King, Jr. Boulevard. Cascadia is about halfway through fundraising for the primary care clinic piece, which Central City Concern will partner on. And it’s almost done with raising funding for the housing, which will be geared mostly to low-income people, with about a dozen reserved for those with mental illness.

Cascadia’s existing Garlington Center building will be razed in September to make way for the new project. Walker said it’s the first building he knows of designed in partnership between behavioral/addictions and primary care providers. Teams will work together in “pods” to coordinate patients’ care and ensure that they’re receiving all the services they need.

“We don’t want a cold clinic-type of building, but one that seems inviting, safe and warm for the people we serve,” Walker said.

Closer Look

The Company: Cascadia Behavioral Healthcare, Inc.

What: Nonprofit provider of mental health and addiction services to low-income people; operator of 600 housing units

CEO: Derald Walker

Revenue: $59.3 million

Net assets: $25.7 million, as of June 30, 2015

Individuals served: 13,000 a year

Locations: 75, with four main outpatient clinics

Area of operations: Multnomah, Clackamas, Washington, Marion and Lane counties

Employees: 900