Non-profit mental health agency tight-lipped about its for-profit arm

jcheves@herald-leader.comJune 3, 2012 

  • What is the Bluegrass Regional Mental Health-Mental Retardation Board?

    Bluegrass is a state-backed non-profit that provides psychiatric care, addiction treatment and counseling for people regardless of their ability to pay. It also manages two of Kentucky's largest mental health centers — Eastern State Hospital in Lexington and Bluegrass Oakwood in Somerset — and private community homes for the mentally disabled. There are 14 regional mental health boards around Kentucky, under the aegis of the state Health and Family Services Cabinet. Bluegrass — by far the largest — is the board serving Central Kentucky.

  • Bluegrass executive compensation in 2010

    Shannon Ware, chief executive officer: $250,016 base pay, $25,002 bonus pay

    Joseph Toy, retired CEO/consultant/CEO of Bluegrass New Directions: $127,621 base pay, $665,339 from deferred compensation plan

    Tambara Nalle, chief financial officer: $154,066 base pay, $5,392 bonus pay, $255,666 from deferred compensation plan

    Tricia Salyer, chief administrative officer: $154,066 base pay, $5,392 bonus pay, $264,878 from deferred compensation plan

Since 1999, the non-profit Bluegrass Regional Mental Health-Mental Retardation Board has used a for-profit subsidiary, Bluegrass New Directions, to sell software based on expertise it developed from decades of running public mental health programs.

Scott Gould, chairman of the Bluegrass board of directors, initially declined to reveal much to the Herald-Leader about Bluegrass New Directions, other than that it employs retired Bluegrass CEO Joseph Toy and reports to the Bluegrass board.

Tax returns show that the for-profit and its non-profit owner share financial resources, although the for-profit maintains a separate office at Hamburg Place, away from the Bluegrass campus.

"It has zero public funds and does not do business with the government," Gould wrote in an email. "Our financial department and auditors make sure we are following all IRS regulations properly and have the proper processes in place to be in compliance. Beyond this, you should have no further questions."

However, the Herald-Leader determined through tax records and interviews that Bluegrass New Directions sells its wares to other state-funded regional mental health boards. Clients include Communicare in Elizabethtown, which says it pays the company $260,000 a year, and Four Rivers Behavioral Health in Paducah, which last year reported paying $219,788.

James Hillman, Communicare's finance director, said his agency buys billing, scheduling and payroll software from Bluegrass New Directions.

"The real secret to Bluegrass' success is in their billing expertise. We've been very satisfied with this," Hillman said.

After the Herald-Leader identified these public clients to Gould, he provided more information. Other than Toy, "nine or 10" employees of the non-profit Bluegrass also have done work for Bluegrass New Directions, he said. The company generated $641,534 in revenue last year, with net profits going back to the non-profit, he said.

"This private venture has allowed for diversification of revenues outside the public sector," Gould said.

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