BreakDown Part 1: Help, Somebody

The massive overhaul of the state's $2.3 billion mental-health system began with the best intentions. State officials hoped to improve the treatment of more than 358,000 North Carolina residents with mental illness by moving patients from the state psychiatric hospitals to community programs.

Better yet, the plan would get the government out of the treatment business. Care for indigent patients would still be paid for by the state, but most treatment would be done by private agencies that would bill the state for their services.

The plan seemed to have all the ingredients for success.

The private agencies said they could do the job. A consultant said that the details could all be worked out. And with most of the money for new services to come from the shrinking of state hospitals, privatization even had a low price tag.

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.

"To be blunt, we're not seeing mental-health reform working," said Allison Breedlove, the interim executive director of the Governor's Advocacy Council for Persons with Disabilities.

"Unfortunately, what we're seeing is people are ending up on the streets. They are ending up in emergency rooms in hospitals. Unfortunately, some people are ending up in jails because they are not being monitored and they are not maintaining their medications."

Total admissions to the state hospitals have not dropped as expected, and adult admissions have grown at a rapid rate, halting bed closings needed to pay for new services. For many private mental-health agencies, operating under the new system has proven to be impossible. In September, the HopeRidge Centers for Behavioral Health, a nonprofit agency in Winston-Salem, went bankrupt after its first year and other private agencies report financial problems.

Just as serious, advocates say that the state ignored many of the most pressing problems of the mentally ill. Most communities have no 24-hour crisis care. The jails are overcrowded with people who have mental illness and addictions. And given few other options, social workers routinely place young adults with mental illness in homes designed for the elderly.

Restructuring of the state's mental-health system began in 2001 with legislation that dismantled the state's system of locally-run public mental-health agencies and turned the care of people with severe mental illness, substance abuse and developmental disabilities over to private agencies.

Critics say that the legislature never put aside enough money to pay for reforms but relied instead on flawed assumptions about federal programs and economic forces that put the care of more than 358,000 North Carolina residents at risk.

"The General Assembly is more interested in the lottery than they were in taking care of sick people," said Dave Plyler, a commissioner from Forsyth County.

Reform was derailed almost from the start, critics say, by poor leadership at the N.C. Division of Mental Health and a legislature that mistakenly believed that it could fix a complex and fragile system without spending substantially more money.

In 2001, the legislature did set aside $47 million in a trust fund for mental health, but within four months the state was in a financial crisis and Gov. Mike Easley used most of the trust fund to balance the budget. The legislature has put some money back in the fund, but has never replaced the full amount.

Most of the money for new services, up to $51 million, was supposed to come from savings at the state's four psychiatric hospitals. But the move to close hospital beds is on hold because of the increase in admissions.

Finally, the state expected close to another $1 million from Medicaid, the federal health-insurance program for the poor, for new, intensive outreach services that would treat the mentally ill in their homes. But the state submitted its plan to Medicaid a year late, and approval has been delayed since March.

"The concept of mental-health reform is still solid in terms of expanding mental-health services," said John Tote, the executive director of the Mental Health Association of North Carolina, an advocacy group. "However, the financial infrastructure and the organizational infrastructure is not there to move it forward.

"Right now the grade for mental health reform is probably about a C-minus, and that might even be somewhat generous," he said.

How patients are faring

The state does not have reliable data on what has happened during this period of change to the people who rely on state services for care. State officials say they are treating more people than they were before reform started, but they cannot track what's happening to individual patients.

But the story of the state's failure can be tracked by anecdote.

In Winston-Salem, psychiatric patients wait long hours for appointments. Parents scrambled to get their mentally ill children the medication they needed to send them back to school this year. And the Forsyth County Sheriff's Department is more overloaded than ever by the volume of psychiatric patients in crisis who require a deputy to take them to a state hospital.

An unmarked van from the sheriff's department pulls up most mornings at 6 outside the emergency room at Forsyth Medical Center.

On busy days, deputies may drive as many as eight patients to John Umstead Hospital, the state psychiatric hospital in Butner that serves Forsyth County.

It's a good two-hour drive along crowded interstates to get treatment for residents in crisis. Some patients sleep all the way from here to Umstead. Others fight, trying to break out of the handcuffs that deputies use to restrain every patient committed to the state's care.

The van returns to the hospital at 6 most evening, barely keeping up with admissions that have grown to more than 1,000 a year from this region alone.

According to a study by the N.C. Psychiatric Association, adult admissions to state hospitals have grown with reform, increasing 23 percent between July 1999 and March 2005.

The rise was far more pronounced locally. According to figures provided by the state, CenterPoint Human Services, the area program that covers Forsyth, Stokes and Davie counties, sent 578 patients to John Umstead in 2001. For the fiscal year that ended in June, that number had nearly doubled to 1,056.

"The community capacity isn't there," said Marvin Swartz, the head of the psychiatry and behavioral sciences department at Duke University. "We just don't have the local safety net to keep people out of crisis."

State officials say that the increase in hospital admissions is not an indictment of mental-health reform. They attribute the increases to the state's population growth, layoffs in manufacturing communities and an unexplained increase of patients with drug problems. Nearly 40 percent of the new admissions are patients who have abused drugs or alcohol.

But there's no denying that the state has had to stop closing hospital beds, which means that there is less money than expected going to local programs for new services.

The state plan called for closing 691 beds. So far the state has closed 441 beds, mostly in nursing and long-term-care wards, which freed up $20 million for local programs. Meanwhile, contruction has begun on a $110 million hospital in Butner that will replace nearby Umstead and Dorothea Dix in Raleigh. It will have fewer beds than the other two combined.

The state was supposed to shut 250 beds at its four hospitals this year, freeing up an additional $3.7 million for community mental-health services. But in September, state officials sent out a terse memo to area programs saying that the money wouldn't be coming.

"The bottom line is admissions are up," said Mike Hennike, the acting director at Umstead. "It got to the point that we simply had to bite the bullet and could not send money out. You've got to take reasonably good care of people that are presenting themselves to you. You cannot say, 'There's no more room at the inn.'"

Many of the state's 30 local-area programs have turned their caseloads over to private agencies. But what happens when a private agency fails?

Forsyth County is home to the most dramatic example. Last year, CenterPoint Human Services, the area's mental-health agency, decided to set up an independent, nonprofit agency to provide community services for people with mental illness.

CenterPoint had a statewide reputation for good care, but by September, its spinoff company, the HopeRidge Centers for Behavioral Health, was bankrupt. Two months later there is no reliable measure of what happened to patients during the turmoil, but patients and doctors report that many were left without the services they depend on.

Other private companies are having trouble surviving under the state's convoluted reimbursement system.

Telecare Corp., a private mental-health company in California that served patients in Surry, Yadkin and Iredell counties, gave notice in September and asked the area program to find other providers to take over its patient load this month.

Critics say that the problems at Telecare and HopeRidge stem from change that came too quickly. State officials assumed that area hospitals would be able take care of some of the patients previously served by the state hospitals, but they didn't anticipate that financial pressures would ultimately force many private hospitals to shut down their psychiatric units. Over the past five years, hospitals across the state have closed about 500 psychiatric beds, or nearly 30 percent of the total.

Officials also assumed that Medicaid, the federal health-insurance program for the poor, would start paying for intensive community services, bringing health-care workers to people in their homes and schools. But approval for these new services is stalled, which means that providers can't get paid for the innovations needed for reform to work. State officials blame federal health officials for the delay. And federal health officials said that state's application was incomplete.

No one counted on turnover at the division of mental health either. The previous director, Rich Visingardi, left under a cloud after Secretary Carmen Hooker Odom allowed him to take a consulting job in Michigan while running North Carolina's mental-health system.

Mike Moseley, the fourth director of the N.C. Division of Mental Health, Developmental Disabilities and Substance Abuse Services since mental-health reform was passed, said that when he started in April 2004, he saw immediately that local agencies had been asked to transfer their caseloads to private agencies too quickly.

"I sought to slow the process down," Moseley said. "Because I was already hearing programs were divesting themselves of service provision when it appeared there were not adequate providers in place. I encouraged local management entities to slow down; I did that my very first day."

In the beginning

The push for reform began in 2000 with a report by Ralph Campbell, who was then the state auditor, that the state was spending too much money on hospital care that could be better spent treating people at home. Campbell brought in a Boston consultant, the Public Consulting Group, to review hospital financing and state programs. The consultant concluded that the state could save up to $51 million by closing Dorothea Dix hospital and reducing the size of its remaining three hospitals.

Other forces pushed legislators to act.

A 1999 U.S. Supreme Court ruling, known as the Olmstead decision, requires states to treat disabled residents in their home communities, opening up the potential for lawsuits against states that kept large numbers of patients institutionalized.

Meanwhile, emboldened by the Public Consulting Group report, organizations that represent private agencies, such as the N.C. Providers Council, lobbied for a reform plan that used private providers.

"There was such a felt sense of urgency that the legislature was demanding such fundamental change that it led people to embrace reform uncritically," said Swartz, the professor at Duke. "The legislature just got to the point where they said, 'This thing is broke.'"

Many administrators in the public mental-health system were skeptical about dismantling public programs.

"Initially we didn't like it," said David Swann, the executive director of Crossroads Behavioral Healthcare, the area program for Surry, Yadkin and Iredell counties. "We had built a safety net system and we always felt like it was rather fragile but it had a lot of local control."

Last year, Crossroads contracted with Telecare Corp., the California agency, to treat its mental-health clients.

Officials at Telecare, whose contract with Crossroads began March 1, said that they expected some financial losses early on - but by midsummer, they said, the company had lost about $700,000 treating Crossroads' clients.

Like many mental-health agencies, Telecare officials blame the losses on North Carolina's cumbersome and complex insurance-billing system.

Telecare gave notice Sept. 22. Swann said that gave him time to line up four new agencies, who will start work Dec. 10.

Officials at Telecare said that other states provide a financial cushion for a new provider. Here, there was no room for error.

"I guess we're also hoping 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," said Anne Bakar, Telecare's chief executive.

Some local programs have made the most of reform. Telecare is part of one of those success stories. In 2004 the Durham Center, the mental-health agency in Durham, gave Telecare the contract to open a 24-hour counseling program, which treats psychiatric patients in crisis.

Durham officials say that the new program has helped trim their admissions to John Umstead Hospital. Overall, admissions from the Durham Center to Umstead dropped 14 percent, to 859 in the fiscal year that ended June 30.

The amount of time that Durham residents spend in state mental hospitals has dropped as well - a clear sign that mental-health reform is working, officials said.

Durham's adult psychiatric and substance-abuse patients spent a total of 10,641 days in state hospitals in fiscal year 2005, a 52 percent drop from fiscal 2003.

"Historically, Durham has overutilized the state hospital; now we're closing that gap," Ellen Holliman, the center's director, said in a presentation to state health officials in September.

The Durham Center oversees programs for about 7,000 people and has contracts with about 150 public and private mental-health agencies, and a budget of about $7 million.

Unlike CenterPoint, the Durham Center decided to contract out its services rather than spin off a new company to avoid some of the mismanagement that had previously dogged the Durham Center. Durham Center case managers would neglect to pursue their sickest clients to get them treatment, said Beth Melcher, the center's clinical director.

"We weren't responsive to the needs of our consumers," Melcher said.

But the drop in hospital admissions did not come without a price. The Durham Center lost more than half its employees when it divested its mental-health programs and has dropped some agencies that were slow to provide treatment to clients, Melcher said.

In the new world of mental-health care, "you're either going to buy into it and be a part of what's happening, or you're not," she said.

Critics of the state's plan say that reform can work in an urban area such as Durham, with its gleaming medical centers, research parks and universities. But private agencies aren't clamoring to open shop in much of rural North Carolina. Some towns can't even recruit a psychiatrist.

"We have no adult providers in the community," said Kaye Ratliff, the coordinator of the Anson Unit and a social worker. "Who's going to come to Wadesboro and open up a practice when you can go to Chapel Hill or Raleigh?"

The center in Anson County is part of the Sandhills Center area program, which covers eight counties from Anson north to Randolph and east to Harnett. All eight counties have maintained a public mental-health center, while relying on private agencies to provide services to children and community outreach to adults.

In Anson, public mental-health workers are on call nights and weekends to help emergency-room doctors at Anson Community Hospital evaluate psychiatric cases. Anson sends fewer than two patients a month to Cherry Hospital, the state hospital for that region.

"I just think there are some things that government can do better because government looks at everyone's needs," Ratliff said. "Would you divest your fire and police departments?"

State officials say that critics need to give them a chance to make reform work.

Odom, the secretary of Health and Human Services since 2001, said she is not surprised by the criticism or the setbacks.

"I came in a new secretary and this already had momentum over in the General Assembly. My observation was that this was huge. I wasn't sure everyone really fully understood it, but it got passed, so my responsibility is to implement it," Odom said.

"I think I would have done pilots first rather than have this sweeping transformational law be passed, and make sure that at every level people were ready for it."

Still, critics remain skeptical and impatient.

At N.C. Baptist Hospital, the reforms have increased the numbers of mentally-ill patients turning to the emergency room for help, physicians said. They suspect that the promise of mental-health reform is anything but.

"The numbers of psychiatric patients we are seeing is steadily rising," said James Hoekstra, the chairman of the department of emergency medicine at Wake Forest University Baptist Medical Center.

"The state has decided not to take care of these patients," he said. "The ER departments are acting as crisis intervention for the state. There's just no place to send them."