Volunteer Services of Carlton County Inc. (VSCCI) Banks Big Profits on Lucrative Contracts with Health Care Providers for Methadone Transportation

by Marvin PIRILA

On October 1, 2014, the Floodwood Forum made an official request for information pursuant to the Data Practices Act from VSCCI.  The request was made to Jill Hatfield, director, and was answered by an attorney from Johnson, Killen & Seiler.  The answers and their analysis reveal a lot about the organizations’ success in making big profits on methadone transportation contracts.

The Forum asked what expenses were attributed to transportation for methadone treatment.  "VSCCI provides transportation to clients for methadone treatment only for clients of private insurers such as Medica, Blue Plus and UCare.  VSCCI bills the private insurer for each ride and payment is made by the private insurer.  No governmental grant pays or reimburses VSCCI for any expenses related to transportation for methadone treatment.  Therefore, this information is not Data required to be disclosed.  Further, the expenses billed to the Transportation fund (which is the general operating fund for VSCCI) include expenses related to VSCCI’s other programs, including transportation to doctor’s appointments, errands, and the purchase and delivery of groceries, among others."

The claim that the Transportation fund “is the general operating fund for VSCCI” suggests it is the place to dump all miscellaneous funds.  In reality, it would suggest that only transportation and transportation related expenditures are part of this fund, or at least should be.  Such lumping of funds fails to provide the transparency desired of any organization.  The Transportation fund should categorize items like the purchase of groceries in a separate category under transportation.

The information shared with the Floodwood Forum was a spreadsheet titled, “Transportation Billing 2014” and doesn’t have the appearance of including anything other than transportation related costs.  Perhaps this is being confused with a separated budget item called “Transportation” claimed to be the ‘General Fund’ by VSCCI.  A non-profit, having such a significant sector such as transportation, would seem to want to designate it as its own fund rather to lump it into a General Fund.

Seeking to clarify the budget item, The Forum asked “Are you standing behind the claim that the “Transportation Budget” is actually the General Fund?  If you are, why wouldn’t it be called the General Fund?  VSCCI responded, “Yes.” While standing behind calling their General Fund the Transportation Fund, they offer no explanation why.

The health care providers that manage the public health-care plans for the state include Medica, Blue Cross and Blue Shield, and UCare, three of the four largest health payers in Minnesota.  These are government subsidized programs and as many as 50% of methadone patients are on public health plans. They are non-profit managed care plans and any charges for methadone treatment figure into the actuarial analysis of plan rates.

These managed-care companies, hiding under the guise of nonprofit status, were paid a combined $3.3 billion in 2010 to care for some 524,000 Minnesotans on public medical assistance.  Federal money is clearly a part of the actuarial figures for each nonprofit and derived in part from taxpayer money.  It is misleading to suggest that such “nonprofits” operate on private money alone and should not be accountable to the public. As public money goes into managed-care companies, and they pay towards VSCCI transportation costs, there must be accountability for its end-use.

Title XIX of the Social Security Act authorizes federal grants to assist states in paying Medical Assistance expenditures.  These monies are then combined with state funds to cover the contracts that have been awarded to MEDICA; Blue Plus; and UCare to provide Medical Assistance services.  All of this money is public money and fails the traditional meaning of “private insurers”. 

Transportation for methadone treatment paid for by public funds, via MEDICA; Blue Plus and UCare, is provided by subcontractors that are only involved with the transportation portion of the treatment.  The subcontractors are paid with public funds disbursed by MEDICA; Blue Plus and UCare.

Medica Shelled out Huge Monies to VSCCI in 2014

An inside source said that from ‘April to June of 2014, MEDICA paid $707,254 to VSCCI for transportation.  Approximately 97% of these rides were methadone treatment related.’

In 2012, Medica paid $231,608 for its Duluth clients on state-funded health insurance to be taken, most by cab, to the Twin Cities or St. Cloud, at an average cost of about $500 per patient per day.  Source:  Getting state of Minnesota to pay for methadone an 'easy scam', Brandon Stahl, Duluth News Tribune, 9/18/12.

"Talking about the public dollar, that is adding substantial expense to the public dollar to transport people to make sure they have access to methadone treatment," said Glenn Andis, the senior vice president of Medica. Mr. Andis noted that Medica pays for transportation for its privately covered clients as well as those who are publicly subsidized.

Who can forget the firestorm that involved UCare in 2011.  UCare, an HMO, started a firestorm in 2011 when it returned $30 million dollars to the state of Minnesota.  One of the reasons it cited was “Historically DHS [Department of Human Services] rates set for General Assistance Medicare Care (GAMC) resulted in health plan losses which were offset by higher Medical Assistance payments.”

The fact that these non-profits manage government subsidized programs means that taxpayers are affected by charges that exceed those actual expenses.  In this case, the difference was very significant.

After VSCCI claimed all billing entailed private insurance the Floodwood Forum followed up. “Title XIX of the Social Security Act authorizes federal grants to assist states in paying Medical Assistance expenditures.  These monies are then combined with state funds to cover the contracts that have been awarded to MEDICA; Blue Plus; and UCare to provide Medical Assistance services.  All of this money is public money and does not entail “private insurers”.  Under that pretext list what statute/rule allows you the right to avoid questions regarding public monies?”  VSCCI responded, “The requested information is not Data required to be disclosed.  Without waiving the foregoing objection, VSCCI serves all clients who need the services it provides.  Some of VSCCI’s clients have private insurance, and some clients receive Medical Assistance.  VSCCI does not necessarily know whether a particular client has private insurance or receives Medical Assistance.”

The Floodwood Forum asked what income they (VSCCI) derived from transportation for methadone treatment. "…In addition to reimbursing volunteer drivers for mileage, income is applied to operating expenses, such as salaries, rent, utilities, and the like.  [Notice that the question is not answered – no reference to the amount of money netted from transportation for methadone treatment.]

VSCCI claimed that the Forum mischaracterized some items in its previous article.

We take this opportunity to point out that your characterization of VSCCI’s “net profit” in your article Non-Profit Cashing in on the Methadone Crisis, published on October 14, 2104, and your assertion that taxpayer money (through grants and aid) received for transporting clients for methadone treatment is misused by VSCCI as set forth in your article Volunteer Services of Carlton County, Inc. Fires Whistleblower, published on October 20, 2014 are incorrect.  First, the figures you term as “net profit” do the not reflect the “net profit” of VSCCI.  Notably, the figures are not “after all expenses are accounted for” as you incorrectly asserted.  Instead, these other figures do not take into account the significant reductions after paying operating and other expenses associated with operations and with services provide to VSCCI’s clients.    Either the source of your information provided you with false or mischaracterized information or you mischaracterized the information.  Second, as explained in paragraph 2 above, government grants and aid are not used to reimburse or pay VSCCI for the transportation of clients for methadone treatment; only private insurers are billed and pay for those services.  Accordingly, we request you print a retraction for both articles, the verbiage of which is to be reviewed and approved by us prior to publication.

The Forum article was directed towards the profits taken from the transportation budget of VSCCI.  While realizing that a portion of this budget goes towards other endeavors, the methadone portion is a very significant portion.  The article was on the methadone portion of VSCCI operations, nothing more. The Forum argues that nothing was mischaracterized but is simply being taken out of context by VSCCI representatives.  Again, the article addressed the transportation budget of VSCCI and not all operations.

The Transportation budget shows that the County and County SB, “Special Billing” were billed $15,430 and $31,698, respectively, for the period included in the article.  This was omitted from their answer.  If they are suggesting this was for transportation purposes other than that for methadone treatment, they failed to include the clarification in their answers.

The information they provided does little to disprove any claims of the two articles.  The spreadsheet clearly shows the gross receipts after disbursements.  VSCCI suggests they have additional disbursements not shown in the spreadsheet.  Why would they be separate from the disbursement total in the spreadsheet?  Should VSCCI or their legal representation provide information to the contrary, the Forum will be happy to write a follow up.

The Forum asked what drivers got paid and how are trips assigned.  "By “drivers,” we presume you mean volunteers who drive their own vehicles in furtherance of VSCCI’s programs and mission.  VSCCI reimburses its volunteers for actual miles driven at the business mileage rate set by the IRS each year.  The second part of your request regarding determination of drivers is not Data required to be disclosed.  However, for the sake of transparency, each day a staff member initiates a systematic telephone call to each registered volunteer inquiring who is able to drive the following day.  After receiving response, the drivers are matched with clients based upon each driver’s availability."

The VSCCI response suggests that “systematic telephone calls” are made by automated dialers which do not require human intervention.  A different source says that rides are assigned to maximize the payment for the ride.  If a client lives in Duluth and wants to go to the Duluth methadone clinic, VSCCI will assign the ride to a driver from Cromwell.  The driver will go from Cromwell to Duluth to take the client to a clinic in Duluth, wait for him/her so they can take the client back home, and then return home to Cromwell.

The Forum followed up, “When VSCCI says drivers are matched with clients based upon each driver’s availability, are the drivers closest to the client chosen?”  The answer “…not Data required to be disclosed.  Without waiving the foregoing objection, yes, in most circumstances the driver closest to the client is selected.”  Source:  1/14/15 response to request dated 1/3/15.

A follow up request for ‘a copy of the policy outlining the “systematic telephone call” process was answered as “…not Data required to be disclosed.”  Source:  1/14/2015 answer to 1/3/15 request for information.

Note:  A source told the Forum, “Drivers do not get paid but get reimbursed at IRS rate.  It is not unusual for drivers to earn $3,000 a month, completely tax free. 

This money, because it is a reimbursement does not get reported to the IRS.”

The source says dispatchers are directed to assign the longest and most lucrative rides to select people, rather than matching the best suited person.

The following displays what VSCCI gets for every ride from public funds for transportation from medical providers as agreed by contract in 2014:

Medica 

   $5.00 pickup fee

   $5.00 drop-off fee

   $1.30 per mile driven

Note:  In 2014, the IRS reimbursement rate was 56.5 cents per mile

Blue Plus

  $3.00 pickup fee

  $3.00 drop-off fee

  $1.00 per mile driven

UCare

  $5.00 pickup fee

  $5.00 drop-off fee

  $1.00 per mile drive

Unknown county pickup and drop-off fee

County pays cost plus 30 cents per mile driven

Total Salaries and Other Compensation

The ‘Salaries, Other Compensation (Part IX, Column (A) lines 5-10’ of Form 990 (Return of Organizations Exempt From Income Tax, Part I) show that in 2011 and 2012, it amounted to $306,011 and $381,621, respectively.  In one years’ time, VSCCI added three paid positions, during which time salaries and compensation increased nearly 25%.

Part VII of Form 990 is for reporting the ‘Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees, and Independent Contractors.’  The four members listed for 2012 were Jeffrey Fisher, Kristin Parendo, Charlie Cluka, and Dave Lee, all credited for working two hours a week for no pay.  Jeffrey Fisher and Dave Lee are no longer board members in 2014.  Mary Krohn (Secretary), Bruce MacDonald (Treasurer), Julianne L. Emerson (Vice Chair), and Michael Fossen (Chairman) all worked two hours a week with no compensation. All but Michael Fossen are no longer in these positions.  These eight people comprise the governing board, all holding voting rights.

Executive Director Jill Hatfield earned $80,561 in 2012.  The ‘Reportable compensation from the organization (W-2/1099-MISC)’ was $76,061 and the ‘Estimated amount of other compensation from the organization and related organizations’ was $4,500.  The $4,500 was for Ms. Hatfield’s health care. In 2011, Ms. Hatfield earned a total of $65,837.  Ms. Hatfield, as director, received slightly more than a 22% increase in compensation from 2011 to 2012.

Updated 2/23/20:  Jill Hatfield is now earning an annual salary of $115,000 a year, placing her among the few highest paid executive directors of a non-profit in Minnesota.

Summary of Responses and following Analysis of Answers

Answers were provided by Michele L. Miller, of Johnson, Killen & Seiler, Attorneys, in a October 24, 2014, letter.  The 15 questions were met with 13 answers of “not Data required to be disclosed.”

One of the various points intended to be made by the Forum’s original article on October 14, 2014, was that the large profits from the transportation budget would seemingly cover other expenses in other departments of VSCCI.  In reviewing the article, it does appear it was not as clear as desired, but all figures were expressed in relation to the transportation budget. 

The second sets of answers were provided by Jessica L. Durbin of Johnson, Killen & Seiler, Attorneys, in a January 14, 2015, letter. The 22 questions were met with 18 answers of “not Data required to be disclosed.  Without waiving said objection…”

The answers to the request for information did little to resolve the issue, as did the repeated requests for an interview that went unanswered.

In filing their taxes, VSCCI designates itself as “an organization that normally receives a substantial part of its support from a governmental unit or from the general public described in section 170(b)(1)(A)(vi).  (Complete Part II).”  Source:  Schedule A, Form 990.

Employees and Volunteers

In 2012, VSCCI employed 21 and had 3,183 volunteers.  It reported 18 employees and 3,183 volunteers in 2011.

Follow up in Process

A request for information from Medica, Blue Plus, UCare, and the County will attempt to shed light on how reimbursements are made, and why they seem to be providing twice the actual cost for treatment.

Make no mistake about it, misappropriated monies comes on the backs of taxpayers and consumers.  If the insurance companies are truly paying twice the actual charge, this cost is passed onto its customers.  If the money isn’t used to pay actual expenses, but used to needlessly grow staffing and building expansions/improvements, it comes back to the taxpayers.

No answer was provided on what happens to the profits from the transportation section.  Is it transferred to cover other costs, retained, or another area?  Oddly, VSCCI is calling this their General Fund and assuming it is, they could transfer money from here to other areas.  The requests for information have run its course with VSCCI and further information will be sought from the companies being billed.  Are they in turn, receiving more, and perhaps far more than their actual costs?