State Auditor Adam Edelen will examine spending at the Bluegrass Regional Mental Health-Mental Retardation Board, which is Central Kentucky's state-backed provider of mental health care.
In a letter sent to Bluegrass on Thursday, Edelen said he's responding to stories about the non-profit agency that were published Sunday in the Lexington Herald-Leader, and to public concerns recently brought to his attention. Bluegrass is chiefly funded by the Kentucky Health and Family Services Cabinet, which last year paid it $126.2 million, plus $32.5 million in Medicaid.
"The auditor has a responsibility to the public to perform an independent examination to ensure that the public's money handled by Bluegrass is being spent in the best interests of the taxpayers. Accountability and transparency are essential, especially during difficult economic times, to ensure that Bluegrass is providing maximum benefit to the taxpayers from the state funds it expends," Edelen wrote in his letter.
The 25-member Bluegrass board of directors has called a special meeting for Thursday to discuss revelations in the newspaper's stories and what reforms Bluegrass might enact. Employee morale is low, although the board did not realize it until the stories appeared, board members said this week.
On Sunday, the Herald-Leader reported that Bluegrass spends plentifully on executive compensation, political lobbying and real estate while citing tight budgets to its front-line employees, many of whom complain about low pay, no raises and austere working conditions. Bluegrass's annual revenue more than doubled over the past six years to $176 million as it expanded and won more state contracts.
The Herald-Leader also reported that Bluegrass's executive payroll includes chief executive officer Shannon Ware; her husband, Joseph Toy, who is her predecessor and remains as a paid consultant; and their son-in-law, Eric Crabtree, the director of information technology. In 2010, Ware and Toy together took home more than $1 million in total compensation.
Bluegrass expected a state audit once the newspaper stories were published, said Scott Gould, chairman of the Bluegrass board of trustees.
"We intend to be fully transparent and cooperative with the state auditor's office," Gould wrote in an email message Friday.
Over the past week, board members traveled to Bluegrass offices throughout its 17-county territory to meet with employees, board member Bill Alverson said. Aside from providing psychiatric care, counseling and addiction treatment, Bluegrass manages two state mental health centers, Eastern State Hospital in Lexington and Bluegrass Oakwood in Somerset.
Employees are upset because they think Bluegrass spends more generously at the top than at the bottom, where patient care is provided, Alverson said.
"These board members are taking this very seriously," Alverson said. "Our employees are our No. 1 asset. We have people who haven't had a raise in three or more years. My view has been that we need to look into this."
Health and Family Services Secretary Audrey Haynes read the newspaper stories but had no comment, spokeswoman Jill Midkiff said.
State Rep. Jimmie Lee, D-Elizabethtown, said the legislature must keep a closer eye on Bluegrass and the state's 13 other regional mental health boards. The boards — of which Bluegrass is by far the largest — originated in the 1960s with federal and state money, and they remain publicly funded.
"It's always been rumored around the Capitol about some of those executive salaries out at Bluegrass and the relationships between Joe and his wife," said Lee, who oversees social services funding in the House. "It creates questions when you've got various family members overseeing each other and all drawing their salaries from a publicly funded non-profit."
Lee said Bluegrass is aggressively lobbying for the contract to manage the new Eastern State Hospital, now under construction next to its own headquarters on Newtown Pike in Lexington. However, there is no guarantee that that will happen, Lee said.
"We may end up with different companies running different parts of the hospital," Lee said. "You know, we may have one manager for the unit dealing with brain injuries and another manager for the long-term care facility."
In his letter to Bluegrass on Thursday, Edelen said his auditors will examine policies, accounts, transactions, governance and other activities at Bluegrass and its related organizations. He did not say how long the audit is expected to take or what it could cost, although the subjects of audits typically are handed the bill at the end.
In a separate statement, Edelen said: "Bluegrass has a solid record of providing quality care to many of our state's most vulnerable citizens. But an agency that receives a significant portion of its funding from taxpayers has an obligation to be accountable and transparent, not just effective."