REPORT/RECOMMENDATION TO THE BOARD OF SUPERVISORS
OF SAN BERNARDINO COUNTY
AND RECORD OF ACTION
September 22, 2026
FROM
JOSHUA DUGAS, Acting Director, Department of Behavioral Health
SUBJECT
Title
Agreements for the California Advancing and Innovating Medi-Cal Behavioral Health Payment Reform Intergovernmental Transfer
End
RECOMMENDATION(S)
Recommendation
1. Approve Intergovernmental Agreement, including non-standard terms, regarding manual transfer of public funds with the California Department of Health Care Services for the provision of Specialty Mental Health Services, and termination of Intergovernmental Agreement No. 23-1191 (State Agreement No. 22-20127), for the period of July 1, 2023 through December 31, 2026.
2. Approve Intergovernmental Agreement, including non-standard terms, regarding manual transfer of public funds with the California Department of Health Care Services for the provision of Drug Medi-Cal services and termination of Intergovernmental Agreement No. 23-1192 (State Agreement No. 23-30118), for the period of July 1, 2023 through December 31, 2026.
(Presenter: Joshua Dugas, Acting Director, 252-5142)
Body
COUNTY AND CHIEF EXECUTIVE OFFICER GOALS & OBJECTIVES
Operate in a Fiscally-Responsible and Business-Like Manner.
Foster Sustainable Development Through Strategic Partnerships.
Provide for the Safety, Health and Social Service Needs of County Residents.
FINANCIAL IMPACT
Approval of this item will not result in the use of Discretionary General Funding (Net County Cost). The average monthly amount of approximately $12,057,472 for Specialty Mental Health Services (SMHS) and $638,277 for Drug Medi-Cal (DMC) will be transferred from the Department of Behavioral Health (DBH) to the California Department of Health Care Services (DHCS) through the Intergovernmental Transfer (IGT) process to fund the non-federal share of eligible Medi-Cal services. DHCS combines the transferred funds with applicable Medi-Cal federal financial participation and state funds, as appropriate, and makes Medi-Cal payments to DBH for eligible services. The non-federal share for SMHS and DMC services is supported by the following eligible local funding sources: Mental Health Services Act funding or Behavioral Health Services Act funding, 1991 Realignment, and 2011 Realignment. As a result, the IGT process will not result in a loss of revenue to DBH.
BACKGROUND INFORMATION
DBH is responsible for providing mental health and substance use disorder (SUD) services to San Bernardino County (County) residents experiencing severe mental illness and/or SUD. Through California’s 1991 and 2011 Realignment initiatives, the responsibility for funding the majority of the non-federal share of costs associated with SMHS and DMC services was shifted to California counties.
As part of the DHCS Behavioral Health Payment Reform (BHPR), DHCS was required to establish and implement IGT-based reimbursement methodology to replace the certified public expenditure-based reimbursement methodology for Medi-Cal eligible SMHS and DMC services and the administrative costs incurred by counties to provide those services. Under the California Advancing and Innovating Medi-Cal (CalAIM) BHPR, counties transitioned from a cost-based reimbursement model to an IGT funded reimbursement methodology designed to support fee-for-service and, ultimately, value-based payment structures. This new methodology eliminates the need to reconcile payments to actual costs and instead promotes improved quality of care, better health outcomes, and enhanced quality of life for Medi-Cal beneficiaries while simplifying the overall reimbursement process.
On November 14, 2023 (Item No. 24), the Board of Supervisors (Board) approved Intergovernmental Agreement (IGA) No. 23-1191 regarding the transfer of public funds with DHCS for the provision of SMHS and IGA No. 23-1192 regarding the transfer of public funds with DHCS for the provision of DMC services and authorizing DBH to either conduct manual IGT fund transfers or authorize the State Controller’s Office (SCO) to withhold the specified percentages of the Behavioral Health Subaccount for both SMHS and DMC in the Local Revenue Fund 2011, Mental Health Subaccount of the Sales Tax Account of the Local Revenue Fund, and Mental Health Services Fund from the County’s monthly distribution and transfer into the Medi-Cal County Behavioral Health Fund to be used to fund the County’s non-federal share of Medi-Cal payments for the period of July 1, 2023 through December 31, 2026.
On April 30, 2026, DHCS informed counties that the IGT withhold option of the SCO will be discontinued effective May 30, 2026. To that end, DHCS terminated its Interagency Agreement with SCO, which had authorized the SCO to process county withholds if elected by each respective county. As a result, all counties are now required to complete the manual transfer process for SMHS and DMC services.
Because the existing IGAs included the SCO withholding option, DHCS required those agreements to be terminated and replaced rather than amended. DHCS subsequently issued standardized replacement agreement templates, retroactive to July 1, 2023, which removed the SCO withholding option and established a consistent agreement period for counties, regardless of when their original IGAs were executed.
Given that DBH has consistently utilized the manual transfer process and has not elected to participate in the SCO withholding option, the execution of the Intergovernmental Agreements under Recommendation Nos. 1 and 2 will not result in a fiscal or programmatic impact to DBH.
The recommended IGAs contain the following non-standard terms:
1. The Agreements do not require DHCS to meet the County's insurance standards as required pursuant to County Policies 11-05, 11-07, and 11-07SP.
• County policy requires contractors to carry appropriate insurance at limits and under conditions determined by the County's Risk Management Department and as set forth in County policy and in the County standard contract.
• Potential Impact: The County has no assurance that DHCS will be financially responsible for claims that may arise under the Agreements, which could result in expenses to the County that exceed the Agreement amounts.
2. The Agreements do not require DHCS to indemnify the County, as required by County Policies 11-05 and 11-07.
• The County standard contract indemnity provision requires the contractor to indemnify, defend, and hold harmless from third-party claims arising out of the acts, errors, or omissions of any person.
• Potential Impact: DHCS is not required to defend, indemnify, or hold the County harmless from any claims, including indemnification for claims arising from DHCS’s negligent or intentional acts. If the County is sued for any claim, the County could be solely liable for the costs of defense and damages, which could exceed the Agreement amounts.
3. The County may not terminate the Agreements for convenience.
• County Policy 11-05 requires that the County have the right to terminate the contract, for any reason, with a 30-day written notice of termination without any obligation other than to pay amounts for services rendered and expenses reasonably incurred prior to the effective date of termination.
• Potential Impact: The County can only terminate the Agreements during the term upon mutual agreement with DHCS, which could result in DHCS not agreeing to the termination.
DHCS’s agreement templates are retroactive to July 1, 2023, and terminate the existing IGAs. The manual transfer agreements were received on April 30, 2026, and required extensive fiscal review to verify that execution of the agreements would not impact existing fiscal processes and to ensure compliance with all fiscal provisions and standard agreement terms. This item is being presented to the Board at the earliest available meeting following completion of all required program, fiscal, administrative, and legal reviews. Approval of this item will allow DBH to remain in compliance with the CalAIM BHPR requirements governing the manual IGT process.
PROCUREMENT
N/A
REVIEW BY OTHERS
This item has been reviewed by Behavioral Health (Marianna Martinez, Administrative Supervisor II, 383-3940) on August 18, 2026; County Counsel (Dawn Martin, Deputy County Counsel, 387-5455) on September 16, 2026; Risk Management (Stephanie Pacheco, Staff Analyst II, 386-9039) on August 11, 2026; and County Finance and Administration (Iliana Rodriguez, Administrative Analyst, 386-8392) on August 28, 2026.