The director of a mental health nonprofit falsely posed as the landlord for a building he didn’t own for nearly a decade, collecting more than $371,000 in rent on office space that in fact belonged to Haywood County, according to a civil lawsuit.

Since 2003, Tom McDevitt, the director of Evergreen Foundation based in Waynesville, collected monthly rent on two office buildings in Waynesville that were owned by the county — unbeknownst to the county.

The former director of Smoky Mountain Center for Mental Health has lost his CPA license over allegations he backdated his first day of state employment to bolster his retirement benefits.

There are many issues to discuss in the wake of the tragedy in Arizona that left six dead and 13 wounded.

The ugliness of the political discourse in this nation is one. We took that subject up last week in news article and column form in The Smoky Mountain News, and I suspect we’ll probably explore this particular topic in greater depth in the future. Gun rights might be another subject to eventually tackle. Though I, frankly, find this particular angle as a potential outcome to the Arizona shootings less than convincing. Perhaps because I own firearms, my family owns firearms, and I grew up in these mountains where almost everyone I knew growing up had guns in their homes, too.

Having acknowledged my tepid interest in the debate concerning gun ownership, I do concede controls of a sort might be worth discussion — such as whether we should truly allow the insane easy access to weapons such as a semiautomatic handgun with a high-capacity ammo clip.

Which ties neatly into what I believe is the single most important lesson being offered in the wake of the Arizona shootings: the consequences of denying the mentally ill the care and monitoring required. The potential outcome of such neglect has been spelled out in graphic, heartbreaking detail. We can ignore what happened in Arizona only at great peril. And, if we choose to do so, I think it should be openly acknowledged that a repeat of what happened there could easily happen elsewhere, and probably will.

Just making sure we’re all on the same page: does anyone have the smallest doubt, simply by looking into the alleged Arizona killer’s eyes in that creepy mug shot taken a short time after police say he gunned down so many, that this young man is seriously mentally ill?  

I’ll give a nod of approval to the community college he once attended. After Jared Lee Loughner exhibited bizarre, scary behavior, they apparently acted properly and promptly. Officials expelled him, and agreed they’d let the 22-year old back into school only if he underwent a mental health evaluation (and, I assume, passed it, if one “passes” such a thing).

Then what happened, though? There the storyline of attention paid to Loughner seems to end. At least until all the dead and wounded piled up outside a Tucson grocery store.

In case you’re curious, North Carolina doesn’t offer much support to the mentally ill or their families these days, either. In the name of savings, the state largely dismantled a not-that-great-to-begin-with system a few years ago. Here’s a bit of what I wrote in 2008 in a series of investigative articles on the state’s mental health system for a local newspaper chain. We were examining North Carolina’s then new (translation: cheap) approach to helping the mentally ill:

“Reform, to hear proponents tell it, would empower people with choices. No longer would patients be shut out and shut up when it came time to decide on treatments. Now they would get to pick from a virtual smorgasbord of choices, all conveniently located in their hometown or county.

This, taxpayers were told, would save money – lots and lots of money. Millions, in fact, because more people would be treated in their own communities instead of being admitted to one of the state’s four psychiatric hospitals.

Who could argue with empowerment and saving money? Actually, a few people did, but not effectively enough for anyone in power to heed their warnings.

The result?

A mental health system that has wasted, not saved, millions of tax dollars. And worse, many of the state’s most vulnerable residents are unable to obtain adequate treatments. For those people and their families, the price has been incalculable.”

It is time — it’s past time — to face honestly what we are potentially unleashing with our neglect, and in the name of saving pennies. Take a look again at the massacre in Arizona.

Granted, most of those with mental illnesses do not buy guns and start shooting — God knows, I’m not saying that, so please don’t think I’m stigmatizing those who deserve compassion and help.

What I am saying is that we have a responsibility, a duty, to care for and monitor those who potentially pose a danger to themselves and others. The economic costs of doing so be damned — we need a mental-health system in place that works.

(Quintin Ellison can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..)

Millions in state and county tax dollars have been funneled to Evergreen Foundation, a mental health nonprofit serving the seven western counties. Yet it operates without public oversight.

The board of Smoky Mountain Center, a state mental health agency for the western counties, fears Evergreen has strayed from its mission and needs realignment.

“I don’t know that anybody ever envisioned a day that there would be such a disconnect between Smoky Mountain Center and Evergreen Foundation,” said Shelly Foreman, community relations coordinator for the center.

Evergreen, meanwhile, is resisting forays by Smoky Mountain Center to exert control over the nonprofit and its finances. Evergreen has even accused Smoky Mountain Center of a money grab.

“I cannot in good faith stand by and let [Smoky Mountain Center] raid the foundation,” said Hugh Moon, a member of the Smoky Mountain Center board. “It sounds to me like [Smoky Mountain Center] is saying we want your money.”

However, the money in Evergreen’s coffers was given to it by Smoky Mountain Center in the first place. Evergreen has $20 million — and nearly all of it stems from tax dollars earmarked by the state for Smoky Mountain Center.

“The funds came from the public purse and have always been intended for use on behalf of Smoky Mountain Center and its constituents,” said Brian Ingraham, director of Smoky Mountain Center.

Instead, Evergreen has enriched its own balance sheet, according to Smoky Mountain Center (see related article).

Now, Smoky Mountain Center wants Evergreen to come back under its auspices rather than operate independently.

County commissioners from all seven western counties have unanimously joined the call.

“We unanimously concluded that the money was public money, and it should have public oversight,” said Joe Cowan, a Jackson County commissioner.

Smoky Mountain Center wants control over who sits on the Evergreen’s nonprofit board, with the aim of stacking the board with many of its own members. But to do so, the current Evergreen board would essentially need to dissolve itself and agree to the new structure.

“All the other disagreements can be overcome if we can figure out a system of governance that both boards support,” said Ronnie Beale, board member of Smoky Mountain Center and chairman of the Macon County commissioners.

But that seems unlikely. Instead, it appears the boards of Evergreen and Smoky Mountain Center have reached a stalemate.

“I will never vote to dissolve. I would never support any governance other than the way we are going right now,” said Don Bunn, an Evergreen board member from Swain County. “I was offended by the accusation that we were not properly handling the money.”

A joint meeting between the two boards will be held this week. The last such meeting failed to reach a consensus.

The board of Smoky Mountain Center has indicated in a letter to Evergreen that it will pursue legal recourse if diplomacy fails.

Evergreen’s board may well test Smoky Mountain Center’s resolve to follow through with that threat.

Moon said it would be “blatantly inappropriate” for the foundation to be under the oversight of Smoky Mountain Center.

“I will do my best to ensure it remains a private nonprofit,” Moon said.

The nine-member Evergreen board meets only four times a year. Its meetings are not open to the public, nor are its finances. That troubles Don Barrier, a board member of Smoky Mountain Center from Caldwell County.

“I do believe it is public money and deserves public oversight,” Barrier said in the last joint meeting between the boards.

Barrier said he is uncomfortable with a private organization — one with no obligation to disclose its activities — holding the purse strings to millions in public dollars.

Barrier also takes issue with the board appointing its own members. Known as a self-perpetuating board, existing members handpick who will join their ranks when someone steps down. There is no limit to how many years a board member can stay on.

That’s not how oversight of public money typically works, Barrier said.

“That is a point of disagreement,” said John Bauknight, an Evergreen board member from Cashiers.

Bauknight challenged the extent to which Evergreen’s assets can be traced to Smoky Mountain Center. Evergreen’s coffers have grown significantly in the past decade due to “real sharp investments,” Bauknight said.

“When public money is invested, then the interest generated is still public money,” Barrier countered.

Evergreen board members contested the notion that Tom McDevitt, the director of Evergreen, said any money given to Evergreen ceased to be public funds the minute they were given to the nonprofit.

Ingraham disagreed.

“The funds transferred from Smoky to Evergreen did not lose their identity as public funds,” Ingraham said.

Ron Yowell, a member of the Evergreen board, said the critical question is whether the funds are still considered public after being transferred to a private entity.

“Once that’s decided, answers can be found to all of these things,” Yowell said. “Until that fundamental question is answered, I don’t think we can resolve much of anything.”

Communication breakdown

Evergreen has grown increasingly estranged from Smoky Mountain Center over the past two years. Historically, the director of Smoky Mountain Center also served as the director of Evergreen. The dual roles worked well for three decades.

But two years ago, Tom McDevitt stepped down as the director of Smoky Mountain Center amid controversy. His departure from Smoky Mountain Center was less than amicable, yet the Evergreen board voted to keep him at the helm of the nonprofit. Relations between the two have since been strained.

“We all agreed there has probably been a disconnect,” Beale said.

For example, the director of the Smoky Mountain Center should be an integral player in handing out grants, Beale said.

“Nobody knows what the counties need more than the director,” Beale said.

It’s Smoky Mountain Center’s responsibility to know where there are gaps in mental health and substance abuse services, thus making it suited to know what grants are needed most.

“Why wouldn’t you want the organization involved that is recognized as the locus of control over planning and system development?” Ingraham said.

McDevitt said he, too, envisioned Smoky Mountain Center staff involved in ranking grants that come in to Evergreen.

“Evergreen had every intention of working hand and glove with Smoky Mountain Center, but when there isn’t a vehicle to sit down and talk with them and get feedback and do planning, we had no choice but to do it autonomously,” McDevitt said.

Evergreen board members say that communication is a two-way street. Evergreen invited a member of Smoky Mountain Center’s board to sit in on their meetings, but no one ever took them up on the offer.

Over the past two years, Evergreen has officially distanced itself from Smoky Mountain Center on paper. A new set of bylaws and new wording on its nonprofit tax filings have eliminated any reference to Smoky Mountain Center.

Historically, Evergreen’s tax filing listed its mission as “supporting Smoky Mountain Center.” But in 2009, the year McDevitt parted ways with Smoky Mountain Center, the wording was changed.

“[Evergreen] no longer characterizes itself as supporting Smoky Mountain Center,” said Jay Coward, the attorney for Smoky Mountain Center.

Beale said Evergreen appears to be moving away from what it was established to do.

But McDevitt said the changes more accurately reflect Evergreen’s mission today. In the past, Smoky Mountain Center was the primary conduit for all mental health services in the region.

But in recent years, the state has privatized mental health. Counselors and psycholoigsts are not longer employed by Smoky Mountain Center, but operate as private practices. The same goes for patient clinics once operated by Smoky Mountain Center.

Since Smoky Mountain Center is now solely an administrative arm, it made sense to have a more generic mission statement dedicate to supporting mental health services “and not specifically one government entity,” McDevitt said.

Evergreen has agreed to few concessions as a result of the prodding.

McDevitt said Evergreen will expand its board by three members. The seven western counties will take turns nominating people for those seats, but the Evergreen board will ultimately select the person.

McDevitt said Evergreen has already started doling out more in the form of grants. Evergreen will share its finances, and allow Ingraham to review grant applications that come in.

“We are not going to go back and jeopardize Evergreen to satisfy their control needs, but we will open up to generate public oversight,” McDevitt said. “I hope both sides will decide it is more important to concentrate on what we do rather than how it is done.”

Tom McDevitt, the director of the Evergreen Foundation, has kept a tight hold on the nonprofit’s purse strings. Rather than putting money toward the cause of mental health and substance abuse, McDevitt has instead focused on growing a nest egg to the tune of $20 million.

The nonprofit makes $1 million a year on average through investments and on rent from an expansive inventory of office buildings leased to those in the mental health and substance abuse fields in the seven western counties.

But Evergreen gave out only a single grant of $50,000 to benefit mental health services in the 2008-2009 fiscal year.

This upset board members of Smoky Mountain Center, who see needs going unmet while Evergreen’s coffers grow.

“A percentage of the money that Evergreen takes in each year after expenses should be returned back to the seven far west counties,” said Ronnie Beale, board member of Smoky Mountain Center and a Macon County commissioner.

Concern that Evergreen is hording its assets has led Smoky Mountain Center to attempt to regain control over the nonprofit (see related article).

County commissioners in the seven western counties unanimously endorsed supporting Smoky Mountain Center’s position.

“You’re really not helping your entity if you’re just sitting there with a pot of money,” said Haywood County Commissioner Bill Upton.

Smoky Mountain Center made rounds to each board of county commissioners seeking support. The counties all passed a resolution that hints at legal action if Evergreen won’t play ball.

“I’m doing this for the people that have mental illnesses in Haywood County, since this may free up some of the money that may benefit them,” Haywood County Commissioner Kirk Kirkpatrick said when voting on the resolution.

Where Evergreen

got its money

Evergreen owes its wealth in the first place to Smoky Mountain Center. Smoky Mountain Center funneled state and county tax dollars to the nonprofit over the years, allowing it to amass an inventory of 25 rental properties across seven counties, which is now a major source of revenue.

The real estate holdings include offices for mental health counselors and psychologists, group homes for people with disabilities, the Balsam Mountain Center outpatient clinic — and even the office headquarters for Smoky Mountain Center.

While the buildings were purchased or built with state tax dollars, Evergreen pockets the money it makes on rent. Evergreen even makes Smoky Mountain Center fork over $140,000 in rent a year for its offices — offices built with money from Smoky Mountain Center in the first place.

If Smoky Mountain Center was relieved from paying rent, it could spend that money helping people with mental health and substance abuse problems, said Brian Ingraham, director of Smoky Mountain Center.

But that was never the deal, McDevitt said.

“What the foundation is in the business of doing, and what is was contracted to do, was to build that building and then turn around and rent it,” McDevitt said.

When Evergreen was created in 1977, state agencies couldn’t buy and sell property. Evergreen was created expressly to manage an inventory of office buildings for Smoky Mountain Center’s therapists, psychologists and counselors. And that’s exactly what it’s done, McDevitt said.

As a charity, Evergreen gives mental health service providers discounted rent, which is an incentive to those in the field to locate here, according to McDevitt.

Smoky Mountain Center hired a private CPA firm to track just how much money Evergreen has gotten in state and county tax dollars. From 1977 to 2009, $13.7 million in public funds were funneled to Evergreen through Smoky Mountain Center. Another $4.2 million in state money has been paid to Evergreen by Smoky Mountain Center on rent for buildings.

Step up the giving

This year, under pressure to ramp up its grant making, Evergreen has given out $357,000 in grants. McDevitt said the foundation’s assets finally grew enough that it could part with some of its money without jeopardizing its long-term capital.

“The board said we did not need to accumulate money just for the sake of accumulating money,” McDevitt said.

But it still fell short of what Smoky Mountain Center wants to see.

Despite a $2 million state budget cut that forced Smoky Mountain to cut services to mental health patients, Evergreen only gave Smoky Mountain Center $200,000 to offset the cuts, when its deep pockets could have afforded more to help the center through the crisis, according to Ingraham. The budget cuts have been restored this year.

And when Smoky Mountain Center needed to expand the parking lot at the substance abuse and mental health outpatient clinic in Balsam, Evergreen agreed to foot 75 percent of the bill, even though it owns the building and collects rent on it.

Smoky Mountain Center would like something more concrete than a verbal pledge from Evergreen that it will start allocating more money to mental health. Beale wants a formula that guarantees a certain percentage of annual revenue will be put toward grants.

“Most foundations have giving guidelines they have the grant process it is usually a pretty established process so of course that is what we want to see,” said Shelley Foreman, community relations coordinator at SMC.

But Evergreen’s foray into grant making won’t happen instantly, McDevitt said.

“You don’t go from being an organization that builds buildings and rents them for less than fair market value to making $800,000 in grants over night,” McDevitt said.

Other grants by Evergreen this year included $80,000 to Haywood Vocational Opportunities for pilot program tracking developmentally disabled people from employment to retirement; $10,000 to REACH for workshop series to educate parents at risk of abuse; $20,000 to Meridian Psychological Services to develop volunteer network; and $15,000 to put on training workshop for substance abuse counselors.

Western North Carolina’s mental health agency may be headed for a civil war with its partner foundation.

Smoky Mountain Center, a quasi-state body that oversees mental health in the region, hopes to wrest $20 million in assets away from its sister nonprofit, citing a lack of oversight for public funds.

For three decades, the Smoky Mountain Center has relied on its nonprofit foundation Evergreen to bolster mental health and substance abuse services in the region.

But the foundation has grown increasingly estranged from the agency it was intended to support, according to board members of Smoky Mountain Center.

“There has been a disconnect there,” said Ronnie Beale, a member of the Smoky Mountain Center board and Macon County commissioner.

Communication between the two entities is sparse to nonexistent. The center’s requests for financial assistance have repeatedly been turned down, and the foundation won’t even disclose how its funds are being spent, according to Brian Ingraham, the executive director of Smoky Mountain Center.

“It is not supposed to be some organization off on their own with no public oversight,” Ingraham said.

Ingraham and his board of directors have proposed a major overhaul of the foundation to bring it under the auspices of Smoky Mountain Center.

“The bottom line is the board thought these funds should be under public scrutiny,” Beale said. “We feel it is public money, and it should be under public oversight.”

A letter was sent to foundation board members this week asking for a meeting within 30 days to discuss the issue.

Tom McDevitt, the executive director of the Evergreen Foundation, has little to say for now.

“Until whatever meeting takes place between Smoky Mountain and whoever, we are not going to be able to comment,” McDevitt said.

Until recently, the foundation and Smoky Mountain Center shared the same director — McDevitt. But McDevitt resigned from Smoky Mountain Center under pressure in fall 2008. McDevitt had come under scrutiny for using his position for personal financial gain.

He managed to hang on to his position as director of the Evergreen Foundation, however, which had a different slate of board members.

McDevitt disagrees with the line of argument Smoky Mountain Center is presenting.

“I don’t feel there is any disconnect whatsoever,” McDevitt said.

McDevitt said he has met with the board of Smoky Mountain Center whenever he’s been asked. But when Smoky Mountain Center needed an emergency meeting over state budget cuts, Ingraham said it took weeks to get it arranged.

State budget cuts axed $10 million over two years from indigent care — a fund that covers mental health and substance abuse treatment for those who can’t afford it. The 20 percent cut means poor people who need therapy or treatment won’t be able to get it now.

Smoky Mountain Center asked the foundation for a $2 million grant to make up some of the difference.

“Wouldn’t this seem like exactly why the foundation was developed?” Ingraham said.

But the foundation granted them only $200,000. Smoky Mountain Center also asked the foundation to forgive their rent for the year.

Smoky Mountain Center pays $280,000 a year in rent to the foundation for office space and a mental health and substance abuse clinic called The Balsam Center.

The two buildings were bought and paid for with state money given to Smoky Mountain Center but were then passed along to the foundation, which manages the properties.

The foundation owns the buildings as a result. Ingraham said it is wrong that the foundation won’t cut Smoky Mountain Center a break on rent when they paid for the buildings in the first place, Ingraham said.

“We gave them the money, but now they say ‘We aren’t going to help you,’” Ingraham said. “That was the point where people realized there was nothing appropriate or correct about this any longer.”

But McDevitt said the foundation’s purpose is about more than helping Smoky Mountain Center. Its mission is to support people with mental health, substance abuse and developmental disabilities throughout the seven counties.

“That is the sole purpose of the Evergreen Foundation,” McDevitt said. “We have done a very good job of that over 33 years.”

That mission, he said, can include making grants to private practices that offer counseling and mental health treatment other than Smoky Mountain Center. McDevitt said that the foundation has given out $200,000 in grants to private mental health practices this fiscal year.

Ingraham said he has asked McDevitt to share what grants have been given out and how the foundation is spending money.

“We have asked for that information, and it has not been forthcoming,” Ingraham said.

McDevitt disagreed.

“They did know about them. Of course they knew about them,” McDevitt said of the other grants.

How it all started

When Evergreen Foundation was created in the late 1970s, it was out of necessity. State agencies couldn’t buy and resell property, and Smoky Mountain Center needed to amass an inventory of office buildings for mental health and substance abuse counselors to work out of throughout the seven western counties.

But the law has since changed, and state agencies can now act as their own property management arm.

While the foundation has always had its own board of directors, it was historically tightly controlled by Smoky Mountain Center. Early on, the Smoky Mountain Center appointed the foundation board, and many of the members sat on both boards.

But in 2001, when the state launched mental health reform, everything was on the table from privatizing mental health services to consolidating the regional agencies like Smoky Mountain Center.

In the ensuing turmoil, Smoky Mountain Center feared the state would attempt a money grab to seize the assets of the foundation. So it purposely built a firewall around the foundation. Bylaws were rewritten to make it a private entity, separate from Smoky Mountain Center.

“It was done to protect the assets for their intended purposes,” said Shelly Foreman, community director for Smoky Mountain Center.

At the time, no one envisioned that the foundation would one day end up with a completely separate director and board that had little interaction with Smoky Mountain Center, Foreman said.

“It was never the intention that Evergreen be disconnected from what the service needs and funding needs are in the community,” Foreman said.

Ingraham and his board hired an auditor to track all the money that had gone into the foundation since its creation in 1977. They determined $14.5 million in county and state tax dollars have flowed into the foundation’s coffers.

Nearly all of the money was for purchasing buildings in the seven western counties — from office space for mental health counselors to substance abuse clinics to the central headquarters for Smoky Mountain Center.

Smoky Mountain Center once operated its own teams of mental health counselors, therapists and psychologists throughout the region, housed in the office space owned by Evergreen but paid for initially with state funds.

The state has since privatized mental health, so most of that office space is now rented to private mental health practices — or in some cases to whoever is willing to rent the building whether the tennant was in the mental health field or not. The foundation keeps all the rent money.

Ingraham said the foundation is operating more like a property management and investment company than a nonprofit with a mission to fulfill.

“It is income that was generated from public money,” Ingraham said.

But McDevitt said the origin of the money isn’t relevant. It started out as public money, but was given to a private organization to carry out its mission.

“Where it goes to, it loses its identity as public funds,” McDevitt said.

The upshot

Smoky Mountain Center wants a new governing structure for the foundation. The proposal calls for the current foundation board to be dissolved. A new foundation would then be created under a new set of bylaws — stipulating that Smoky Mountain Center gets to appoint the board and hold a majority of the seats.

While the board of Smoky Mountain Center is a public body — meaning their meetings, financial records and actions are open to the public — the foundation meets in private and has no obligation to share its financial information other than its annual nonprofit tax filing.

The aim is to restore public oversight, Beale said.

The 30-member board of the Smoky Mountain Center voted unanimously for the proposal earlier this month.

To back-up the proposal, county commissioners from the seven western counties have been asked to pass similar resolutions over the next two weeks. Macon County commissioners were the first to do so this week.

Macon County’s resolution says if diplomatic efforts fail, legal routes may be necessary.

John Bouknight of Highlands, the president of the Evergreen Foundation board, would not comment in detail until after meeting with the Smoky Mountain Center board.

He said Evergreen’s mission goes far beyond just supporting the needs identified by Smoky Mountain Center.

“They aren’t everything,” Bouknight said. “I think we are following our mission statement. These are all very dedicated people.”

The foundation board only meets four times a year. Beale said he trusts that their primary interest is serving mental health and substance abuse needs, but he isn’t sure how informed they are.

“The only thing they know is what their director tells them,” Beale said. “I do have a lot of respect for some members on that board, and I think their heart is in the right place and will do the right thing.”

In the meantime, Smoky Mountain Center has alerted the state attorney general’s office of the unusual situation.

“We are talking about state funds that now exist within an organization that has no affiliation within Smoky Mountain Center and chooses to do whatever they want with it,” Ingraham said.

Smoky Mountain Center, the mental health management entity for Western North Carolina, has finally gotten itself out of the game of providing services.

The suite of programs known as Smoky Operated Services would be handed over to a partnership forged between Appalachian Community Services and Jackson County Psychological Services, two local mental health providers.

Those services include the Adult Recovery Unit at Balsam Center, the psychiatric walk-in and outpatient services at Haywood Regional Medical Center, and mobile crisis services in a seven-county area. Meridian Behavioral Health of Waynesville had also submitted a bid to take over the services, which are supported by approximately $4.5 million in state funding each year.

Smoky Mountain Center CEO Brian Ingraham said the partnership between Appalachian Community Services, which operates in the far western counties, and Jackson/Haywood Psychological Services is best equipped to serve the large region, which was one of the chief criteria in the decision.

“We have all the seven counties covered in one beautiful model which will create a continuum of services with a synergy that didn’t exist before in the seven counties,” Ingraham said.

Under state mental health reform, Smoky Mountain Center could no longer provide services directly to patients since it acts as a Medicaid payer, dispersing state and federal money.

Duncan Sumpter, CEO of Appalachian Community Services, said the partnership with Jackson County Psychological Services stems from a desire to guarantee access to the people who need these services.

Ingraham said the handover would not result in any interruption of services to the clients.

“We want this to be seamless. We don’t want anyone out there worrying about not having services,” Ingraham said.

Smoky Mountain Center has begun the process of transferring its mental health services to private companies in a move that signals the advent of the latest overhaul to the state’s mental health provider network.

Last week, Smoky Mountain Center closed its request for proposals to assume responsibility for the Adult Recovery Unit at Balsam Center, the psychiatric walk-in and outpatient services at Haywood Regional Medical Center, and mobile crisis services in the seven counties of Western North Carolina.

Two local mental health providers — Meridian Behavioral Health and Appalachian Community Services — submitted bids to take over the services, which are supported by approximately $4.5 million of state funding each year. Smoky Mountain Center will award the services to one of the two applicants on March 26.

The transfer of the bundle of psychiatric services generally called Smoky Operated Services will bring the center back in line with the state’s guidelines for local management entities like Smoky Mountain Center that act as payers in the Medicaid system. Under its 2003 reform of mental health care, the North Carolina Department of Health and Human Services asked regional management entities like Smoky Mountain Center to stop providing services in order to create a clear split between service providers and Medicaid payers.

However, the absence of providers for critical psychological services in Western North Carolina led the state to exempt Smoky Mountain Center.

By ridding itself of its remaining services, Smoky Mountain Center can focus on its primary job.

“Our sole responsibility is as a system manager and payer, and this makes the relationship a lot cleaner,” said Smoky Mountain Center CEO Brian Ingraham.

The transfer, though, is just as much a part of the state’s newest reform effort as its last one. The push to privatize mental healthcare had the unintended side effect of factionalizing the provider network. So the state launched a second reform to consolidate service providers.

As part of a new initiative to consolidate its network of mental health providers, the state announced the Critical Access to Behavioral Health Agency program last year.

CABHA is designed to create a new set of standards and requirements by July 1 of this year for behavioral health providers that use state and federal mental health funding. The range of services from providers include substance abuse counseling, crisis intervention, psychological assessments, and treatment for mental health issues like depression.

Under the new rules, mental health service providers must have a full-time psychiatrist on staff, national accreditation, and take on additional administrative duties in order to bill through Medicaid. So far about 40 mental health providers around the state have begun the CABHA application process.

Ingraham said CABHA created a new impetus for Smoky Mountain Center to divest its services, because the local providers had to hire full-time psychiatrists anyway.

“Had it not been for CABHA, this would have been a tough sell,” Ingraham said. “It would have been difficult to attract people to these services. So we’re really trying to use the timing to our advantage.”

Ingraham said his driving aim has been to negotiate the transfer of services without hurting the people who rely on them.

“This is really organized around minimizing disruption. There’s not going to be any loss of service or care,” Ingraham said. “We want this to be seamless.”

For the providers bidding on the services, the transfer offers an opportunity to consolidate a market share in a shifting landscape. Both Meridian Behavioral Health and Appalachian Community Services have begun the process of applying for CABHA status, and both now have full-time psychiatrists on staff.

Meridian currently provides crisis and counseling services to people with addiction and mental health issues, primarily in Haywood County. The company’s CEO, Joe Ferrara, said assuming the Smoky Operated Services will allow Meridian to offer a fully-integrated system of care that meets the intent of the CABHA program.

“It fits very nicely with the state’s vision of the CABHA. What the state is interested in is creating comprehensive provider organizations rather than an array of individual agencies,” Ferrara said.

Ferrara said the short timetable for obtaining CABHA status and the assumption of new services would be a challenge for whoever gets the contract.

“Whoever receives the award is going to have to get on the fast track,” Ferrara said.

Appalachian Community Services, which provides a range of behavioral health services to the rural areas in the small WNC counties, will partner with Jackson County Psychological Services — another main player in the region’s mental health landscape — in its bid to take over Smoky Operated Services.

Duncan Sumpter, CEO of Appalachian Community Services, submitted its proposal because they were worried they would see a disruption of services, particularly in far western counties.

“The main reason we wanted to assume the services is that we want to ensure continuity of care for our rural customers,” Sumpter said.

Both Sumpter and Ferrara said winning the award would guarantee their institutions access to a client base in the seven western counties, but they did not believe it was a make or break competition.

“I’m pretty confident that we’re both safe in the CABHA game and this is really just a decision about who’s going to provide these services,” Sumpter said.

Both also said they intended to keep the experienced staff currently providing Smoky Operated Services intact.

Ingraham said a committee comprised of Smoky Mountain Center staff and community advisors will evaluate the applications and make recommendations to the board, but that he would make the final decision. Ingraham said the decision will be based on which organization’s plan provides the best access to services across the region, the best mechanism for staffing the services, and the best plan to manage the risks and financial challenges posed by presenting the services.

The state agency in charge of implementing new mental health rules this year says those changes will save money and improve quality, but some providers see it as a knee-jerk reaction that will limit access to services and put people at risk.

The Department of Health and Human Services has announced an overhaul of its mental and behavioral health model that will consolidate the state’s network of providers in six months.

“The biggest problem is they’re trying to implement sweeping changes across the system and they’re not giving us time to do it,” said Raymond Turpin, CEO of Jackson/Haywood County Psychological Services.

Turpin and other local behavioral health providers are concerned that the new program, dubbed the Critical Access to Behavioral Health Agency or CABHA, will put small providers out of business in the short run and threaten the stability of the provider network long-term.

CABHA is designed to create a new set of standards and requirements for behavioral health providers that use state and federal mental health funding. The range of services from providers include substance abuse counseling, crisis intervention, psychological assessments, and treatment for mental health issues like depression.

Under the new rules, mental health service providers must have a full-time psychiatrist on staff, national accreditation, and take on additional administrative duties in order to bill through Medicaid — which are tall orders for a small office of counselors.

Whether it succeeds in improving the quality and integration of services, CABHA will most certainly instigate a rapid consolidation of the provider network in a short time frame.

“The environment is going to become more and more harsh for smaller providers,” said Brian Ingraham, CEO of Smoky Mountain Center, the local management entity that oversees mental health services in WNC. “The state is clearly going in the direction of larger consolidated providers.”

Streamline or rollback?

When CABHA is introduced in July, many small providers who aren’t able to meet the program requirements will not be able to bill Medicaid-funded services, forcing them to close, contract with other companies, or lay off staff.

Marcia Lewis –– executive director of Mountain Youth Resources a provider of mental health services that contracts with Macon County Schools –– runs one of the small providers that stands to lose as a result of the changes.

Lewis said her agency could potentially join up with one of the new CABHAs, but is in limbo until the state makes key decisions about how providers will be reimbursed, from what type of services are eligible to the hourly billing rate. Until then, there is no way for companies to create a new business model.

“My own personal view is the state is reacting to things without thinking them through and without determining how they’ll operate and in the meantime clients will suffer,” Lewis said.

Lewis said the CABHA program will add another level of bureaucracy to the service delivery system and create a new layer of costs.

“They keep adding levels of cost instead of levels of service,” Lewis said.

Lewis’ complaint gets at the philosophical debate underpinning the current changes. During the state’s 2003 reform effort, the implementation of community support services was a wide-ranging attempt to offer people in need of behavioral health services more contact with their providers.

The community support model failed. But while the providers that billed for community support agree that its cost spiraled out of control, they also maintain that the state’s poor implementation of reform deserves the lion’s share of the blame for its failure.

“North Carolina was moving so fast that we were being pushed to implement services even before the service definitions were set,” Turpin said.

Turpin said his agency spent big money bringing in state-mandated trainers who couldn’t even explain what types of services community support would cover. He fears the newest round of changes will be managed the same way, preferring a political mandate to the reality on the ground.

Either way, with the General Assembly ordering the department to kill community support by July, systematic change is a political reality.

“The time frames are what we have to deal with,” Watson said. “We’re operating with specific direction from the General Assembly to phase out community support by June 30.”

So far the DHHS has gotten letters of interest from 200 providers who want to establish CABHAs and 20 full applications. Ingraham said he thinks the state will end up with around 100 CABHAs, and only three or four in WNC.

Turpin said the rapid consolidation will hit rural areas hardest, because many people who need services won’t know where to go to get them.

Watson acknowledged access could be an issue initially.

“There may be some access issues initially and that’s something we’ll have to monitor closely with the LME’s,” Watson said.

Duncan Sumpter, CEO of Appalachian Community Services, a mid-size provider that serves rural Graham, Cherokee, and Swain counties, sees the consolidation as a step back to a model that prioritizes economics over human needs.

“There’s a difference between covering a community and serving a community,” Sumpter said. “As we move back towards consolidation, we may go back to covering instead of serving.”

Between theory & practice

Turpin believes the requirement that CABHAs maintain a full-time psychiatrist as an administrator is a deliberate attempt to put rural providers under the gun.

“Now they want to go back to a few huge Wal-Mart agencies and they’re using the psychiatrists as the magic bullet to wipe us out and make room for some national provider to come in and take over,” Turpin said.

Brian Ingraham –– CEO of Smoky Mountain Center, a regional entity that manages the network of private providers –– said psychiatrists are already a scarce resource in the state’s rural areas and shouldn’t be used as administrators.

“The psychiatrists we have now in this part of the state need to be working in a clinical and medical capacity, not in an administrative one,” said Ingraham.

Watson explained that the requirement is intended to create built-in medical oversight in a system that supports medical programs.

“These are Medicaid services and they are supposed to be medically necessary,” said Watson. “With community support you had a program where 90 percent of the providers were high school graduates.”

The difference of opinion over the medical director requirement points to a lack of trust between the state and its provider network.

The state feels it has been burned by providers milking the system. Its providers contend the state never defined its programs in a way they could be administered properly.

Ingraham believes the CABHA program is based on good theory, but he wonders whether the short timetable slated for its implementation will create a new kind of problem.

“The good news is it’s an opportunity to integrate services that really should be bundled under one roof because we are dealing with a fragmented system right now,” said Ingraham.

Not every provider sees CABHA as a threat and most providers agree that the system could benefit from a more regional approach in which services are better integrated.

For instance, under the current system a patient could receive counseling from one agency but their prescription from another.

Joe Ferrara, CEO of Meridian Behavioral Health based in Waynesville, said CABHA could improve the quality of behavioral health services. Ferrara agrees with Watson that the reform effort didn’t work.

“There was a belief that there was going to be collaboration from the providers that would create continuity of care, but it never really happened,” said Ferrara. “The reason community support was removed, let’s be frank, was because the costs associated with it went through the roof.”

But Ferrara also fears that the CABHA program will operate in practice as an unfunded mandate.

“Whenever there are unfunded mandates for the provision of services, the state uses the explanation that they will tweak the rates for the services,” Ferrara said.

The state has promised that the added administrative costs CABHA mandates will be offset by an increased billing rate for case management services, the program that will replace community support.

The state’s budget crisis has created the political reality that those changes must be made by the end of July. In the past year, the state has already cut $40 million out of its mental health system and cuts may be even deeper in the next budget cycle.

With providers strained, the task of overhauling their business models in six months in response to CABHA could force some of them out of business. Even the providers who are well positioned to weather the changes question the wisdom of such a narrow time frame.

“Providers are reeling and all of the sudden they’re going to introduce CABHA and they’re saying the costs will be picked up in the billing rates for case management,” said Ingraham. “Well I really hope so because if not we’ve created a big mess. There’s a lot of risk there.”

The road ahead

At the root of the debate over CABHA is a discussion about winners and losers. Some middle-sized behavioral health service providers stand to grow as a result of the consolidation. At the same time, the regional entities like Smoky Mountain Center that oversee the network of private providers will lower overhead costs by dealing with fewer agencies with better built-in oversight capacities.

Meanwhile though, in Western North Carolina’s rural areas, the people who rely on services will almost certainly face a reduction in service hours and some will likely deal with an interruption in services. In addition, some service providers will likely go out of business entirely.

In the seven western counties, three existing service providers have already begun the process of applying for CABHA certification –– Haywood and Jackson County Psychological Services, Meridian Behavioral Health, and Appalachian Community Services.

All three businesses were created by former employees of the Smoky Mountain Center when the provider network was privatized during the 2003 reform effort.

Now those businesses and many others are facing competition with national providers and forced consolidation.

“It’s just one more change in a stream of changes along the timeline,” Ferrara said. “This is an incredibly difficult time to be providing behavioral health services in North Carolina.”

Michael Watson, assistant secretary at the Department of Health and Human Services, contends the state’s overhaul of its behavioral health system doesn’t amount to an abandonment of its past reform effort of 2003.

“I wouldn’t call it a rollback of reform, I would call it a response to some of the issues that came out of reform,” Watson said. “I think if you look at reform where we really made mistakes is when we preferred access over quality.”

Under a set of changes called the Critical Access Behavioral Health Agencies (CABHA) program, the state is forcing mental health providers that use Medicaid funding to comply with a new set of requirements by July 31.

According to Watson the changes will improve quality by demanding accountability from private providers.

The most significant new requirement is that any agency that wants CABHA certification needs a full-time psychiatrist on staff to function as a medical administrator two months prior to July 31.

The changes were prompted in part by the state’s budget crisis and in part by criticism of a Medicaid-funded mental health program called “community support”.

Under direction from the General Assembly, DHHS will dismantle “community support” services, a major component of a system-wide reform initiated in 2003. The goal of the reform was to improve access to the public by decentralizing and expanding the netwokk of providers in the private sector.

Community support was a service in which mental health professionals, often without advanced degrees, offered clients mentorship and skill-building in real-world settings. The intent of community support was to deepen the contact between mental health providers and their clients. But at least in some systems around the state, the practice was abused, leading legislators to cry foul that the program was akin to expensive state-sponsored babysitting.

Between 2006 and 2009, the state spent over $800 million on enhanced services and a report by the General Assembly claimed that 97 percent of the money went to community support.

That decision set off a domino effect for services billed through Medicaid and led to a total overhaul of the system.

DHHS Assistant Secretary Michael Watson claims the CABHA program will improve quality and save money at the same time.

“The issue with quality really has to do with the problems with community support and the fact that we were beginning to see similar abuses in the services that would replace them,” said Watson.

Duncan Sumpter –– CEO of Appalachian Community Services, a mid-size provider that serves rural Graham, Swain, and Cherokee counties –– thinks the failure of community support had to do with the way the state administered the program.

“The state is saying lesson learned from community support,” Sumpter said. “But the lesson learned by the providers is the rules were never clear and some people took advantage of it.”

CABHA affects businesses that provide “enhanced services,” a catch-phrase for a menu of Medicaid-funded behavioral health services for people with mental health and substance abuse issues.

In 2003, the state moved away from a consolidated area program model in which large regional agencies were responsible for providing services and paying out Medicaid claims.

The reform effort was designed to eliminate the potential for abuse of the Medicaid billing system by ensuring that the same companies –– in the case of the seven western counties the regional entity was the Smoky Mountain Center –– did not both pay out claims and provide services.

The reform effort resulted in a privatized model where multiple service providers answered to a singe local management entity (LME) for paying claims.

The Smoky Mountain Center became the LME for the seven westernmost counties in the state and many of the center’s staff left to start their own companies to provide services.

With the implementation of CABHA, the private provider network will re-consolidate.