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Even as Guilford County’s mental health authority braces for another round of deep cuts from Raleigh, the local agency sent more than $3.2 million in state funds back for the year ending June 30, and sent $4.6 million back the previous year.

Why? Under mental health reform, administrators say, the doling out of contracts to private health care companies has become so cumbersome, and eligibility rules for consumers so strict , that it is difficult to use up the money.

Compounding the issue is North Carolina’s economic disarray: As of Friday, department heads didn’t yet know their budgets for the fiscal year that started July 1.

“It’s going to be impossible for us to spend all that money. Impossible,” said Billie Martin Pierce, director of the Guilford Center, the local mental health and substance abuse agency.

“No need to get bent out of shape about last year. Next year is going to be worse.”

Last year, the Guilford Center was approved for more than $13.7 million in state service funds for child and adult mental health, developmental disability and substance abuse. It spent all but about $3.2 million.

Lapsed salaries from nurses and therapists who left without being replaced could have made up a portion of the unspent money, Pierce said.

But Guilford Center business manager Glenna Harford said the biggest challenge is spelled out, at length, in a 189-page ring binder of “service definitions,” “billing guidelines” and “documentation requirements” printed by the state.

The upshot of these densely worded rules and regulations is this: If a private provider spends state money incorrectly, that contractor has to pay back the money — perhaps a few hundred dollars, perhaps a few hundred thousand.

“The state has to be very cautious — they don’t want to open the door too wide,” Harford said, recalling widely chronicled bilking by dishonest contractors of the since-discontinued community support program.

“But it’s difficult for the people who are dedicated. The rules keep changing.”

For an example of how the Guilford Center lost out on approximately $200,000 in anticipated state funding last year, consider the county’s effort to open a “drop-in” center for the mentally ill.

The idea was for a safe haven that would be informal, come-as-you-are. State regulators had a different concept, citing “N.C. Administrative Code T10:14V.5400.” From a section titled “Documentation Requirements” on page 49:

“Documentation is required in a client record,” the rule book says, “or in a separate or pending file (some type of form which identifies the individual by name, or unique identifier on a daily basis is recommended.)”

As the Guilford Center staff read it, that meant people with diagnoses ranging from clinical depression to schizophrenia, looking for a calm place to stay for a few hours, would need an ID badge and a file.

“That kind of defeats the purpose of a drop-in center,” noted Harford, who holds an MBA and a master’s in social work. “We couldn’t figure out how to make it work.”

For private providers and nonprofits without the staff and expertise of the Guilford Center, navigating these ever-shifting regulatory channels is even more daunting.

Some contracts put out for bid simply draw no takers, Pierce observed, explaining part of the unspent money. And when the rules are being rewritten and the budget still in negotiation two months into the fiscal cycle, private providers have no way of know what services will be reimbursed.

“They’re at a total standstill, waiting for some regulatory agency to tell them what they will pay for,” said Frank Cleary, a founding board member of the non-profit Sanctuary House in Greensboro.

Cleary, also a newly sworn member of the board of the Guilford Center, called the lateness of the decision-making process “a total disaster” for mental health programming.

“It’s very frustrating,” said Cleary, a retired school superintendent. “You might be told you’re getting $10,000. Then you get $30,000. But you have to spend it by next week.”

It is not uncommon for local mental health agencies to return money to the state, according to a spokesman for the Department of Human Services, which includes the Division of Mental Health, Developmental Disabilities and Substance Abuse.

Final 2008-09 spending reports from local agencies, including Guilford Center, were due in Raleigh last week, spokesman Brad Deen said Friday, and will be available Tuesday.

Much of the tumult surrounding the mental health system stems from the reform the legislature began in 2001. The state sought to shut down big psychiatric hospitals and return mentally ill people to their communities for treatment close to home.

Public agencies such as the Guilford Center, which once offered treatment and services, meanwhile divested themselves of that role, outsourcing services to private providers.

So far, a key problem for reform is that the large state hospitals have downsized or closed without community services set up to replace them.

That is why the new Central Regional Hospital in Butner, which serves the Piedmont, reached capacity shortly after it opened in July 2008, and operates with a wait list.

Under the pending cuts expected to be finalized this week, the outlook goes from bleak to grim.

Pierce said she expects approximately $2 million in state reductions to the Guilford Center’s roughly $19 million state budget, which includes administration. But Pierce said a state memo also circulated warning of a possible additional 5 percent cut.

At Guilford Center, Pierce said her staff’s most pressing task is to maintain the $10 million bare-bones safety net funded by county taxpayers. This consists of:

• Crisis emergency services.
• Medication management .
• Physicians and nursing .

“We are focused on it like a laser beam,” Pierce said.

“I am at all costs looking at how to keep that in place. If we cannot keep that in place, the safety net is gone.”

Contact Lorraine Ahearn at 373-7334 or lorraine.ahearn @news-record.com