Lawmakers concerned about early stumbles with mental health finances

A $3 million cost overrun by Western Highlands in the first half of this year came after state officials identified key problems with the agency's computer systems and financial monitoring. Those problems persist and led to the firing of Western Highland's executive director, Arthur Carder.

Western Highlands' problems would be a concern under ordinary circumstances. However, they are the first to make the transition to a managed care organization model piloted by Piedmont Behavioral Health. Lawmakers openly worried that they would see similar problems with the other local systems.

Statewide, there are 11 mental health agencies that have or are making the transition to managed care. Of those, six are scheduled to make the switch in January. 

"The may become a real budget issue," said Sen. Harris Blake, R-Moore.

Officials with the state Department of Health and Human Services said that problems with Western Highlands would be fixed. In the meantime, they said, other local mental health agencies were learning from the experience.

Reaction to the department's assertions varied.

Sen. Martin Nesbitt, D-Bucombe, said that real reason for the cost overrun was that the state expected local agencies to drastically cut their budgets as a part of this latest reform effort. Western Highlands' $138 million budget is 11 percent less than what the state had spent the year before.

"These are Medicaid recipients. You just can't cut them off," Nesbitt said. Even with overspending, Western Highlands spent less than the state did the year before.

"The idea that we're going to take all this stuff statewide in a year and have everything be hunky-dunky is wrong," Nesbitt said.

DHHS Secretary Al Delia and other officials responsible for the state's mental health and Medicaid programs said they had changed how they worked. They point to the experience of Sand Hills, another local mental health agency, which delayed its transition to managed care when problems like ones with Western Highlands were spotted. That agency is now functioning smoothly as a managed care organization, the officials reported. 

Some of the committee debate has a partisan edge to it. Democrats attempted a mental health system reform in 2001 when they controlled the legislature. Over the past decade, there were high-profile and costly problems with that effort. When Republicans took over the General Assembly in 2011, they pushed the managed care transition.

Rep. Nelson Dollar, R-Wake, responded to Nesbitt by pointing to those earlier failures and said the GOP-led effort should be given a chance.

"It's very unfortunate we're where we are with Western Highlands, but I don't think anyone can say, 'Oh, the model doesn't work,'" Dollar said. 

Others on the committee were more concerned with how DHHS had carried out the reform work. Mercer, a consultant to the department, spotted problems with Western Highlands in reports issued 120 days and 45 days before the transition took place. Still, state officials gave the agency permission to proceed with the transition.

"Now you've done another review, and those same issues have not been addressed?" asked Sen. Tommy Tucker, R-Union. 

"Yes," replied Michael Prinski, a principal with Mercer.

Tucker questioned how a management team could be allowed to continue working after not fixing a major problem for more than a year.

Delia pointed out that he couldn't hire or fire people in local agencies like Western Highlands but pointed out there was a new executive director and that the agency had agreed to a written "plan of correction."

Still, Tucker wondered if other agencies would get similar approvals if they weren't ready.

"Would you make that same decision today," Tucker asked Mike Watson, who heads the department's Division of Medical Assistance.

"In hindsight, where we are now, probably not," Watson said. 

Other agencies making the transition were meeting their budgets, Watson, Delia and other agency officials told the committee. Still, committee members worried about problems going forward.

For example, Sen. Fletcher Hartsell, R-Cabarrus, said that model contracts drafted by the department for local mental health agencies might not have provisions needed for those making the transition to managed care. 

And Blake, after hearing the day's testimony, said that it sounded like not everyone in the mental health system was prepared to work toward the switch.

"What I think I saw reflected in your report (is) your people are not all on board with you," he said.