RCOC says contract processing delays have caused late payments, while DDS says the authorization transition should not be affecting provider cash flow.
Key Takeaways
- Regional Center of Orange County has told its vendors in writing that a backlog in processing and authorizing Purchase of Service contracts has caused late payments, and has asked them to keep delivering services while it works through the queue. Executive Director Larry Landauer wrote that Early Start and Behavior service vendors have been the most affected.
- The volume behind the backlog is substantial. POS contracts authorized rose from 78,425 in fiscal 2021-22 to 151,053 in 2025-26, a 39.4 percent increase in the most recent year alone, which Landauer attributed to new subcode requirements under rate reform.
- The state and the regional center describe the same transition differently. The Department of Developmental Services said appearing on its outstanding authorization report does not prevent billing and should not affect cash flow relative to historical norms, while RCOC says its processing delays have caused late payments.
- Providers say the risk is solvency. One behavior services provider described colleagues at risk of closing after months without payment, with no cash reserve to bridge the gap.
Larry Landauer, the Executive Director of the Regional Center of Orange County, has been receiving formal complaints from the agencies that deliver its services, and some have warned they may have to suspend or terminate care. In a letter to vendors obtained by Acuity Media Network, he acknowledged why: a backlog in processing and authorizing Purchase of Service contracts has left some vendors waiting to be paid for work already performed.
His request was that they keep working anyway. “I am pleading that vendors please continue to provide services while allowing RCOC time to get beyond the backlog,” Landauer wrote. He noted that responding to a single formal complaint can take RCOC staff four or more hours to research and draft, and that expediting any one contract or payment pushes every other contract further back in the queue.
The letter is an unusually direct account of an administrative failure from the organization experiencing it, and it corroborates what behavior services providers in Orange County have been describing at vendor meetings all summer.
What Regional Center of Orange County Told Its ABA Vendors
Landauer did not frame rate reform itself as the problem. The vendor community waited years for it, and it is, in his words, “a great thing.” But he wrote that it has also created an unfunded, immense additional workload for regional centers, on top of staff members’ regular duties.
The mechanism he described is volume. RCOC has been adjusting long-overdue rate increases since April 2022, with a second increase 18 months later and the final increase effective January 2025, and the most recent change, the move to new subcodes, has affected a significant number of existing and new POS authorizations. The numbers in his letter show what that did to the workload: 78,425 POS contracts authorized in fiscal 2021-22, 82,530 the following year, 89,182 in 2023-24, 108,366 in 2024-25 and 151,053 in 2025-26, an increase of 39.4 percent in a single year. Through the current fiscal year to date, the count stands at 73,859.
Early Start and Behavior service vendors have been the most affected, Landauer wrote, because of the number of new subcodes required to identify the specialty and qualifications of the staff delivering each service. When an error is identified in the subcode selected during a contract transition, it causes further delay in processing and payment, which he said reflects the strain the new requirements are placing on a legacy accounting system. RCOC has hired seven accounting staff and continues to hire, though he noted that onboarding and training take time.
That account matches what a behavior services provider vendored with RCOC described in an interview. The provider, who was present at an August vendor meeting and spoke on condition of anonymity because of an ongoing business relationship with the regional center, said the problem is not only slow payment. “Not only are people not getting paid, they’re getting paid incorrectly,” the provider said. “They’re not able to bill at all, because if the POS isn’t loaded into the regional center system, you cannot even do a bill to them.”
The provider described a recent case: an infant referral accepted and services started, followed by a call from the regional center saying the contract had not been loaded correctly and the agency was not vendorized for the service it had already begun delivering. What follows is less a correction than a queue. Accounting fixes the record, a new authorization is issued, the authorization is entered into the system, and only then can the agency bill. The provider’s estimate for how long that takes is about three months, and that is the optimistic version.
How California Rate Reform Rebuilt Regional Center Provider Payments
California does not deliver developmental disability services directly. Under the Lanterman Act, the Department of Developmental Services contracts with 21 private nonprofit regional centers, which determine eligibility, write each person’s Individual Program Plan, approve providers through a process called vendorization, authorize hours and pay the invoices. The providers, known in the system as vendors, are the agencies that actually deliver the therapy. The regional center is also the payer of last resort: when insurance and Medi-Cal both decline, the obligation defaults to it for anyone who is a client.
For decades each of those 21 centers ran its own version of the same system, with the same service filed under different codes in different counties at materially different rates. Providers who work across state lines will recognize the pattern from Pennsylvania, where a single statewide schedule is administered county by county. That fragmentation is what California set out to fix. Drawing on the rate study conducted by Burns and Associates, the Department built standardized rate models for every service code, split each rate into a base component worth 90 percent and a quality incentive payment worth the remaining 10 percent, and rewrote the service descriptions so the code identifies who delivers the service rather than simply what it is called. Behavior services are now sorted across separate codes for Behavior Analyst, Associate Behavior Analyst, Behavior Management Assistant and Behavior Technician.
Rates generally rose, as they did in Alaska, where an outside rate study reset the numbers upward, and the January 2026 schedule folded in the state minimum wage increase. “It was a good idea, but the problem was they rolled it out for every service that regional center provides at once with a three-month timeline,” the provider said. Group homes, vocational programs, respite and early intervention all received new codes, new contracts, new billing procedures and new rules in the same window. The Department’s intent to standardize the system and learn who was actually delivering which service, the provider said, “was a very noble intent.”
Why DDS and the Regional Center Describe the Same Transition Differently
The Department has been publicly tracking the conversion work. Since May 29, it has required each regional center to report, weekly, a count of outstanding authorizations still awaiting conversion. On that scoreboard, Orange County looks finished. The report posted for July 31, which plots the counts reported on July 24 and July 31, shows Regional Center of Orange County at zero. Harbor Regional Center is the highest at 500, followed by Regional Center of the East Bay at 215, Tri-Counties at 122, South Central Los Angeles at 120, and Frank D. Lanterman at 93. Seven other centers also reported zero.
The Department, in response to written questions from Acuity for this article, said the count measures something narrower than it may appear. It tracks individual authorizations that must move from a service code being phased out to one established under rate reform, and an authorization drops off the report once it is updated. Appearing on the list does not prevent a provider from billing under existing authorizations, the Department said, and should not affect cash flow relative to historical norms, although it may delay a provider’s access to the new rate.
Services billed under codes being phased out remain reimbursable, the Department said, and providers are paid based on the rates they historically billed while the transition is completed. The counts are self-reported by regional centers, though the Department said it has verified a subset of the outstanding authorizations billing under phased-out codes. Asked about provider cash flow generally, it said it does not hold that information, because providers submit billing and are paid through the regional centers, and added that rate reform raised rates in roughly 80 percent of the service types available through the system and increased provider rates by an estimated $3.5 billion annually, which it said has had a positive effect on provider cash flow and business capacity.
Those two accounts are not easily reconciled. The Department’s position is that a provider waiting on a converted authorization can keep billing under the old code and keep getting paid. Landauer’s letter says the backlog in processing and authorizing POS contracts has caused late payments to some vendors. The gap appears to be between two different queues: the conversion of existing authorizations, which the Department measures and which RCOC reports as complete, and the processing of new and corrected POS contracts, which is what Landauer describes and which no public metric tracks.
RCOC’s board materials show the transition reaching the finance function as well. In documents presented to the board in March, Chief Financial Officer Marta Vasquez reported that the regional center’s Sufficiency of Allocation Report, normally due to the Department on December 10, had been postponed indefinitely because of the workload from full rate model implementation and the move to new service codes and subcodes. The same packet lists accounts payable of $52.7 million as of January 31 and asks the board to approve an $85 million revolving line of credit from U.S. Bank, up from $70 million the year before, noting that if Department advances are delayed the regional center may need to draw on it to continue operations and payments to providers.
Regional Center of Orange County did not respond to a request for comment sent August 21, which asked how it reconciles a reported figure of zero outstanding authorizations with vendors who say they cannot generate an invoice, and what the oldest unpaid invoice month currently outstanding is. Two other Orange County behavior services providers who spoke at the August vendor meeting were contacted for this article. Both declined to comment.
Early Start Hours, Quality Incentive Tiers and ABA Provider Cash Flow
At the August vendor meeting, according to the provider, the response from the regional center was apologetic rather than remedial. Staff said they understood how difficult the situation was, that they had added people and that it had not fixed the problem, and that everything entered in the previous two months would be in the system by that Friday. “They don’t have solutions,” the provider said. Vendors pushed back that a two-month catch-up does nothing for invoices dating to the winter. One described the situation as a breach of contract, and the room grew uncomfortable when someone asked, several times, whether the regional center’s own staff would still be showing up if they had gone three months without pay.
“At the end of the day, if we don’t get paid, we can’t pay our staff, and if our staff don’t get paid, they quit, and then we can’t provide the service,” the provider said, describing colleagues whose main business is regional center children and who are at risk of going out of business after months without payment, with no cash reserve to bridge the gap. That is the pressure that has been pushing founder-led providers toward consolidation, and the closures it produces leave almost no public record.
There is at least one alternative explanation for a payment that arrives short, and it is not a processing error. The quality incentive portion of the rate is not automatic. For fiscal 2026-27, the Department set three tiers: a vendor earns 90, 95 or 100 percent of the rate model rate effective July 1, 2026, depending on whether it has completed independent audits or financial reviews, complied with the federal home and community-based settings rule, and complied with electronic visit verification. A provider that dropped from 100 percent to 95 would see a smaller payment with no error having occurred anywhere, and on a remittance the two look much alike. The status list is published monthly, and any vendor can look up its own number.
The provider draws a further distinction between the payment backlog, which is the urgent problem, and a set of service changes likely to outlast it. The Infant Development Program code that funds early intervention previously carried a single rate covering all services for a child. Under the new structure, the Department assigns separate rates according to who provides the service, with newly defined provider types for Early Intervention Specialists, Assistants and Technicians.
In practice, that has converted a pool of hours into a set of separate buckets. Orange County had authorized early intervention as bulk hours: a child received a weekly allotment, and the agency deployed a speech therapist, an occupational therapist, a behavior therapist and a parent consultant against it as availability allowed. “Now each provider has their own bucket of hours,” the provider said. “So if on Monday the speech therapist is sick, nobody else can pick up that hour, because that’s the speech therapist hour.” The hours do not roll forward. The county has also said makeup sessions are not available when a family cancels and that center-based delivery is off the table, which pushes clinicians into cars and reduces billable hours in a day.
The concern is where that leaves children too young to have a diagnosis. Commercial insurance and Medi-Cal generally require one, and the provider puts the average age of diagnosis in California at four to four and a half and the wait for a diagnostic appointment locally at six to eighteen months. Early intervention through the regional center is what fills that gap.
None of this is unfamiliar elsewhere in the field. A certification portal rebuilt in June left Registered Behavior Technicians waiting on renewals and paychecks; New York froze new provider enrollments for six months; and an Oklahoma provider went to court to restart suspended Medicaid payments. In each case the underlying policy was defensible and the administrative machinery was what failed.
Landauer closed his letter by asking vendors for time and thanking them for their partnership as RCOC works through the additional workload. The provider, who is not arguing against the model, put the stakes differently. “The regional center system is such value to our state, because there aren’t other states that have something similar,” the provider said, calling it a strength of California. “My heart goes out to all of those vendors, but also to all of those families that are at risk of losing their services.”
Update, September 1, 2026:
In a notice of determination responding to a California Public Records Act request filed by Acuity on August 21, Regional Center of Orange County said it did not draw on its line of credit during the 2025-26 fiscal year. RCOC also said it does not maintain a report of invoices that have been reviewed and approved and are pending payment, and does not consider invoices payable until they are reviewed for accuracy and completeness. Complete invoices submitted on time are reviewed and paid within 30 calendar days, according to the notice, while late invoices are processed as time permits within 90 days and can date back to July 1, 2024. RCOC processes approximately $80 million in service provider payments monthly. The regional center identified records responsive to three other items in the request and said they will be made available on or before September 16.
