Central Kentucky's state-backed provider of mental health care is eliminating more than 60 jobs, 30 of them currently filled, as a first step in reducing a projected $6 million to $7 million operating deficit.
The nonprofit Bluegrass Regional Mental Health-Mental Retardation Board, which recently was criticized for questionable spending by state Auditor Adam Edelen, approved the job cuts Thursday at a meeting of its board of directors. Bluegrass employs more than 2,100 people in 17 counties.
"This is a painful thing, and it does limit our ability to do things in the community that we like to do and that we think are important," said David Hanna, interim chief executive officer of Bluegrass.
Meanwhile, Gov. Steve Beshear is expected to announce big changes Friday in the management contract for Eastern State Hospital, which Bluegrass operates for the state. Beshear has scheduled a 10 a.m. news conference with University of Kentucky President Eli Capilouto at the new Eastern State Hospital, scheduled to open soon in UK's Coldstream Research Campus off Newtown Pike in north Lexington.
Bluegrass has a contract, worth $37.6 million in 2011, to manage the current 251-bed hospital, and it lobbied the state Cabinet for Health and Family Services for the right to run the new hospital. (The existing hospital near downtown Lexington will be razed and replaced with a new Bluegrass Community and Technical College campus.) But cabinet leaders believe Bluegrass needs help, a key lawmaker said Thursday.
UK will play a major role in managing the new hospital, which will provide many services "where a regional mental health agency would have very little expertise," said state Rep. Jimmie Lee, D-Elizabethtown, who oversees health and welfare spending in the House.
"There's going to be a lot more at the new campus than we had at the old Eastern State," Lee said. "You've got a neuro unit that you've never had before. You've got a long-term care unit of 100 beds or more. These are things that our regional mental health agencies just don't have expertise in running."
Bluegrass and UK declined to discuss the new hospital Thursday.
At Thursday's meeting of the Bluegrass board of directors, Hanna, the interim CEO, proposed a round of program and job cuts that he said would be "just the first step" in reducing the agency's operating deficit. Among the services to be affected are therapeutic foster care for children and a Frankfort halfway house for male drug and alcohol abusers. Patients will be referred to other treatment options, Hanna said.
The board unanimously approved the cuts. Some laid-off Bluegrass employees might be able to apply for openings elsewhere at the agency, Hanna said.
Bluegrass officials said the agency's revenue was being reduced by the state's 2011 switch to private management of Medicaid. In December, for the first time in 15 years, Bluegrass's Medicaid income fell to less than $1 million, Hanna told the board. Simultaneously, Bluegrass is being required to make much larger payments to the Kentucky Retirement Systems for employee pension plans, he said.
"This is an unprecedented situation that we are in," Hanna said.
The state paid a total of $156 million to Bluegrass in 2012 to provide community mental health care and manage Eastern State and Bluegrass Oakwood, a Somerset facility for the mentally disabled.
Also Thursday, board members said they were preparing a formal response to a Dec. 20 state audit that criticized the Bluegrass board for lax oversight and its executives for questionable spending in the wake of Lexington Herald-Leader stories. Bluegrass has hired two lawyers, Cecil Dunn and Luke Morgan, to assist with its response.
Some operating changes might be coming. For example, board treasurer Mary Stith Hamlin said the board's audit/finance committee was studying an executive benefits plan that state auditors criticized for giving more than $2.8 million to the recently departed CEO and other top executives without board approval. The board might need to monitor the plan more closely, or the plan simply might have "outlived its usefulness," Hamlin said.
Additionally, Bluegrass might require the CEO and other executives to submit receipts after they use their agency-issued credit cards, and Bluegrass might require more documentation to support the need for hired political lobbyists in Frankfort, she said.
However, Scott Gould, the board chairman, defended the board's actions in an interview after the meeting.
"I think the board takes their job very seriously," Gould said. "I think they want to do what's best by our clients, first and foremost, and then by our staff."
John Cheves: (859) 231-3266. Twitter: @BGPolitics. Blog: bluegrasspolitics.bloginky.com.