More than a year ago, New River Behavioral Healthcare began experimenting with a financing model that some hoped might solve part of the puzzle surrounding North Carolina's mental-health-care crisis.
But now New River, one of two public providers of mental-health care in the state, is reporting an operating loss of more than $1.5 million.
State officials say that it's still too soon to say whether the model will work. Three to five years are probably needed to see how successful New River can be, said Dick Oliver, a spokesman for the N.C. Department of Health and Human Services.
"They will have to watch their costs," he said.
New River's financing model was meant to ensure a continuous cash flow to provide all the mental-health services in the mountain counties. The agency, which is based in Boone, provides a comprehensive list of services, including substance-abuse treatment, family therapy and day treatment programs for the chronically mentally ill.
The idea behind the financing model was to spread the money around. Where one service, such as psychiatric care, lost money, others wouldn't.
But reimbursements did not equal the true cost of care, no matter how hard New River tried, officials say.
The loss was covered by New River's fund-balance reserves.
"It's almost impossible to break even on the cost of the basic outpatient services," said Pam Andrews, the chief executive of New River. The agency operates in Alexander, Alleghany, Ashe, Avery, Iredell, McDowell, Surry, Yadkin, Watauga and Wilkes counties.
The first fiscal year for the financing model ended in June, but New River officials did not discuss the year-end results until December because of an audit.
North Carolina's estimated $ 2.3 billion public mental-health system is in crisis after more than seven years of what most experts say is a failed reform effort.
State officials hoped that New River's operation in the mountain counties would provide a model for services across the state. New River is overseen by public officials in those counties. Most providers are private agencies, which rely on state reimbursements for each service.
The state's reform took effect in 2001. When most local mental-health agencies turned to private companies and nonprofit agencies to provide care, as requested by the state, New River struck out on its own and kept lots of its staff members.
A common theme in such spinoffs is that these providers bring with them very experienced people but on average a higher level of expenses, Oliver said.
"They don't stay in business very long," he said. "They can't compete with a private network."
Part of the pilot program was that New River would get about $5.7 million in state money last fiscal year as a single source, with an agreed-upon amount broken down by months.
But the needs in the mountain counties went up, Andrews said, and referrals went up.
As volume grew, New River delivered more services but was not reimbursed to cover the actual cost.
One big money loser was basic outpatient services for such things as individual psychiatric therapy and marriage and family therapy, in which clinicians see patients one-on-one to develop treatment plans.
In order to stretch dollars further, New River has opened several recovery-education centers. The centers have clinic staff members but also peer-support specialists -- people who are in recovery themselves and have been through specialized training and can participate in the program with other patients.
"In recovery-education centers, if you're in a class setting, you could have 10 or more. You could have an unlimited number of consumers. You could see 20 or more in an hour versus that one person who could have spent time with a clinician," said Gail Hawkinson, a local mental-health administrator for New River. "It's cost effective that way."
New River has recovery-education centers in Caldwell, McDowell, Watauga and Wilkes counties.
Another is expected to open late next week in Statesville.
New River is still looking for other ways to cut costs. It could mean reducing services to clients, Andrews said. That would mean a possible shift in which services are offered in which locations.
New River is also re-evaluating staffing levels and benefits.
■ Sherry Youngquist can be reached in Mount Airy at 336-918-6119 or at syoungquist@wsjournal.com.
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