Mental Health Reform’s ‘Perfect Storm’

So far, mental health reform in North Carolina has not gone smoothly. A report card recently issued by the North Carolina Psychiatric Association said that mental health reform “ran into a perfect storm’ of adverse events, among them budget problems, Medicaid shortfalls and increased populations of those needing treatment.

Other components of the “perfect storm” included more medically indigent (non-Medicaid) consumers needing care, less bridge funding than anticipated, community hospital capacity not increasing (and in fact hundreds of bed being closed over the past decade), and the loss of public sector clinicians (especially psychiatrists).”

In a recent two-part series, the Winston-Salem Journal painted an equally unflattering picture.

“The massive overhaul of the state’s $2.3 billion mental-health system began with the best intentions,” the Journal wrote. “But four years into the overhaul, there is little proof that treatment has improved, and there is growing evidence that the state’s complex system of care is worse than ever.”

In January 2001, state legislation was introduced to reform mental health care by returning its governance and operations to the counties. But the effort to streamline mental health care has only added another layer of bureaucracy.

Many observers think the entire legal, financial, and service structure of North Carolina’s mental-health system is being profoundly altered. Nonprofit agencies that offered mental health services to county residents have become local managing entities. Each agency must submit a local business plan to N.C. Department of Health and Human Services Division of Mental Health, Developmental Disabilities and Substance Abuse Services, after which the state recommends different divestiture offers.

Many of the state’s 30 local entities are in a state of confusion as they struggle to make sure it’s both economically and clinically feasible to divest themselves. Divestiture of clinical services at the entities is a complicated affair. The entities not only have to ensure private contractors are offering services to patients, but also must deal with matters such as asset transfer and annual leave for employees.

Local management entities were supposed to have received financial assistance to aid in the process as the state began closing beds in psychiatric hospitals, a move that would save about $50 million, according to the Journal. Hospitals are gradually trying to move away from primary care as more and advances in treatments and drugs are made. People with manic depression who would be hospitalized 20 years ago are now able to function in society.

But according to NCPY, admission of adult patients increased by 23 percent since 1999 with a dramatic rise since March 2004. Admissions of child and adolescent patients increased dramatically in August 2003, nearly doubling between in three-month phases in both 2003 and 2004.

In a memo to local-entity directors around the state, J. Michael Hennike, the division of mental health’s interim chief of state operated services, let directors know that the spike in hospital admissions would have a profound effect on their budgets.

“We are hopeful that as those programs that have already been funded become operational, admissions to the State hospitals will decrease. As this occurs, we will reevaluate our ability to fund additional mental health community expansion proposals,” Hennike wrote.

There’s considerable doubt among many that the new 488,000 square-foot Central Region Psychiatric Hospital, scheduled to be completed in 2007, will have enough beds to satisfy demand.

In the meantime, local entities and their private spinoff companies are feeling the financial crunch.

In its series, the Winston-Salem Journal reported on the fate of HopeRidge Centers for Behavioral Health, the spinoff company of CenterPoint Human Services, the mental-health agency serving Forsyth County and surrounding areas.

In a letter outlining the contractual obligation with Hope Ridge, CenterPoint said it disagreed with legislation to reform the mental-health system because it would “alter the legal, financial and service structure of all area authorities as a reaction, in part, to the failure of some area authorities to meet established performance expectations.”

Still, CenterPoint pressed ahead with its local business plan to contract with Hope Ridge and finalized it in April 2005. In September, HopeRidge was bankrupt.

Another private contractor, Telecare, informed its client, Crossroads Behavioral Healthcare, that it would no longer be able to treat its patients, who live in Surry, Iredell, and Yadkin counties.

Officials at Telecare told the Journal it had lost $700,000 treating Crossroads’ clients.

“I guess we’re also hoping that the state and county will be patient with us, because we’re one of the largest providers that’s tried, and if we’re having difficulties perhaps the issue is the system needs to be adjusted,” Anne Bakar, Telecare’s chief executive, told the Journal.

On top of all this, the recent budgeting process was not kind to local entities. HHS was to adjust the number of local entities to 20, meaning treatment will be further regionalized. Until that goal is achieved, entity budgets will have to tighten to the tune of $28 million.

When advocacy groups such as the Mental Health Association in North Carolina voiced their opposition, the department backpedaled, saying it will find the $28 million somewhere else.

MHA/NC officials said that for true mental health-care reform to work, both hospitals and community programs still need adequate funding.

“Reform proponents have known from the start that both systems would need funding during the transition; the freeze on shifting funds is yet another barrier to having a mental health system that meets people’s needs in their community,” the association wrote in a recent public policy update.

Heib is a contributing editor at Carolina Journal.