Mental hospital will lose up to $10M in federal funding

RALEIGH, N.C. — The Department of Health and Human Services must reallocate $8 million to $10 million in its budget to cover expenses associated with treating some patients at one of the state's four psychiatric hospitals.

Dr. Michael Lancaster, co-director of the Division of Mental Health, Developmental Disabilities and Substance Abuse Services, said Wednesday the state is expected to pay an estimated $800,000 a month over the next year as Cherry Hospital works to regain its certification to be reimbursed for treating any new patients on federal insurance programs.

The Centers for Medicare & Medicaid Services last month revoked the Goldsboro facility's certification following the death of a patient who died after choking on medication and being left sitting in a chair unsupervised for nearly 24 hours.

Lancaster says the hospital will continue to treat patients and won't cut services associated with patient care, but he would not specify where the money would come from within the $14 billion DHHS budget.

"We're not going to cut back our services or decrease just to save the money that it's going to cost us," Lancaster said. "Now, is that going to put pressure on the rest of the system to come up with that money? Yes, it will."

But John Tote, executive director of the Mental Health Association of North Carolina, says he is concerned that same pressure – coupled with Gov. Mike Easley's recent mandate for all state departments to cut 3 percent of their budgets – will, in some way, have an impact on patient services.

"It's a difficult time to be in state government, right now, and this is a difficult time for this to happen," Tote said.

In addition, DHHS will pay Compass Group Inc. more than $400,000 to help restructure Cherry Hospital's management team and to help get it reinstated.

In a report released earlier this month, the independent consulting firm said that fixing the dysfunctional organizational culture will require time, attention and additional resources.

"This system has been in place for a long time," Lancaster said. "We certainly need to be aware that it's going to take us a long time to change this."

In a two-part plan, Compass Group will bring in a team of experts to work with the hospital's management to design and implement a comprehensive plan to address cultural, operational and developmental needs.

Then, it plans to address the issues necessary to help Cherry Hospital be reinstated by CMS. It's unclear how long that will take.

But DHHS officials are using Broughton Hospital, another of the state's psychiatric hospitals whose federal funding was cut in August 2007. Its certification was reinstated in July.