DATE: August 25, 2026
TO: Board of Supervisors
SUBMITTED BY: Susan L. Holt, Department of Behavioral Health
SUBJECT: Retroactive Agreement with BHC Fremont Hospital, Inc. for State Mandated Inpatient Psychiatric Hospital Services
RECOMMENDED ACTION(S):
TITLE
1. Under Administrative Policy No. 34 for competitive bids or requests for proposals (AP 34), determine that an exception to the competitive bidding requirement under AP 34 is satisfied and a suspension of competition is warranted due to unusual or extraordinary circumstances due to the non-competitive/emergency nature of inpatient psychiatric hospital referrals; and
2. Approve and authorize the Chairman to execute a retroactive Agreement with BHC Fremont Hospital, Inc. for inpatient psychiatric hospital services, effective July 1, 2025, not to exceed five consecutive years, which includes a three-year base contract and two optional one-year extensions, total not to exceed $40,000,000.
REPORT
There is no additional Net County Cost associated with the recommended actions. Approval of the recommended actions will allow the Department of Behavioral Health (DBH) to contract with BHC Fremont Hospital, Inc. to provide inpatient psychiatric beds and care to individuals with high acuity mental health needs. The Department, in its role as the County Behavioral Health Plan (BHP), is obligated to provide and reimburse for inpatient psychiatric hospital services and approval of the recommended actions will ensure the Department remains in compliance with Department of Health Care Services (DHCS). This item is countywide.
ALTERNATIVE ACTION(S):
There are no viable alternative actions. Should your Board not approve the recommended actions, the Department will not be able to access Inpatient Psychiatric Hospital services from BHC Fremont Hospital, Inc. for persons served in need of this level of care.
SUSPENSION OF COMPETITION/SOLE SOURCE CONTRACT:
It is requested that the County find under AP 34 that an exception to the competitive bidding requirement is satisfied, and a suspension of competition is warranted due to unusual or extraordinary circumstances due to Inpatient Psychiatric Hospital services being mandated by DHCS for counties to provide the services and pay hospitals for persons served with Medi-Cal. Additionally, the Department does not have control over the referral process to the hospitals by local emergency departments. The General Services Department - Purchasing concurs with the Department’s assessment that this satisfies the exception to the competitive bidding process required by AP 34.
RETROACTIVE AGREEMENT:
BHC Fremont Hospital, Inc. was originally on a Master Agreement for Inpatient Psychiatric Hospital Services. When creating the current Master Agreement (A-25-271), the master agreement template was sent to BHC Fremont Hospital, Inc. the week of April 28, 2025. The team followed up with BHC Fremont Hospital, Inc. multiple times a week to attempt to meet the June 24, 2025 Board date. The legal review for this hospital was 6-8 weeks. The Department was later informed by BHC Fremont Hospital, Inc. that they would not be able to sign onto the Master Agreement due to changes that were happening at DHCS with BHC Fremont Hospital, Inc. During this period, BHC Fremont Hospital was also negotiating rates with their host county, and concerns arose of negotiating rates. BHC Fremont Hospital was unable to negotiate rates with their host county, and DHCS set regional rates were approved to use for this agreement. The formal notification was dated May 28, 2026. After guidance from BHC Fremont Hospital, Inc. legal counsel, it was determined that they could agree to one to one which is being brought to your Board at the earliest possible date due to hospital legal review and internal review deadlines.
FISCAL IMPACT:
There is no increase in Net County Cost associated with the recommended actions. To ensure the Department has sufficient appropriations, the Department will bring forward a separate board item to amend the Master Agreement (A-25-271) to reduce the max compensation, reflecting the transfer of funds to this Agreement. The maximum compensation of BHC Fremont Hospital, Inc. ($40,000,000) is funded with Mental Health Realignment. Sufficient appropriations and estimated revenues have been re-budgeted in DBH’s Org 5630 FY 2026-27 Recommended Budget and will be included in future budget requests. Actual costs will be determined by actual services provided.
The total amount of outstanding invoices received by the Department is $3,391,245 from July 1, 2025 to present.
DISCUSSION:
On October 11, 2022, the Board approved the California Department of Health Care Services (DHCS) Agreement No. 22-452 (State agreement #22-20101) to continue to operate the Fresno County Mental Health Plan (FCMHP) in accordance with all applicable Federal and State laws. The responsibilities include ensuring persons served have access to medically necessary mental health services within and/or outside of the County including inpatient psychiatric hospital services in accordance with Welfare and Institutions Code (WIC) Division 5, Title 42 Code of Federal Regulations, and Title 9 of California Code of Regulations (CCR) Chapter 11 commencing with Section 1810.100.
On January 7, 2025, your Board approved Agreement No. 25-008 (State agreement#24-40134) with DHCS, establishing the Department as the Behavioral Health Plan (BHP) for the County’s Medi-Cal and Drug Medi-Cal Organized Delivery System persons served. This agreement continues the responsibilities discussed above for inpatient psychiatric hospital services.
Inpatient psychiatric hospital services include both acute inpatient psychiatric hospital services and administrative day services. All services are approved through a third party to ensure the services meet medical necessity, per 42 C.F.R., § 438.210(b)(1). BHPs are required to reimburse for these services for individuals between the ages of 22-65 in Institutions for Mental Disease (IMD) which includes these hospitals. These required services are not reimbursable from Medi-Cal/Medicaid for the persons in the age group of 21-64 due to the Medicaid IMD exclusion. The IMD exclusion is a long-standing policy under Medicaid that prohibits the federal government from providing federal Medicaid funds to states for services rendered to certain Medicaid-eligible individuals who are receiving services in IMDs (§1905(a)(30)(B) of the Social Security Act [SSA]).
On June 24, 2025, Master Agreement A-25-271 was executed for Inpatient Psychiatric Services. Historically, BHC Fremont Hospital has been included in the master agreement. However, due to negotiations and upcoming Behavioral Health Service Act implementation with their Host County, BHC Fremont Hospital legal department has requested a one-to-one agreement. From the time period of July 1, 2025 through present BHC Fremont Hospital, Inc. has served 115 persons served for a number of 1,346 services days with a total of pending invoices of $3,391,245. Services are continued to be rendered as emergency departments and crisis mental health services facilities do not consult Fresno County DBH when they refer persons served to an inpatient psychiatric hospital.
Approval of the recommended actions will allow the Department to continue to pay for mandated Inpatient Psychiatric Hospital services provided by BHC Fremont Hospital, Inc. The modification clause of the agreement delegates the board’s authority to the DBH Director to make certain changes to the agreement during the term of the agreement, as further described in Article 15.1, Section A of the Agreement.
OTHER REVIEWING AGENCIES:
The Behavioral Health Board was notified of this Agreement at the February 2026 meeting.
REFERENCE MATERIAL:
BAI #46, June 24, 2025
BAI #18, January 7, 2025
ATTACHMENTS INCLUDED AND/OR ON FILE:
Suspension of Competition Acquisition Request
On file with Clerk - Agreement with BHC Fremont Hospital, Inc.
CAO ANALYST:
Ron Alexander