Mental-health funding: A bitter pill

Non-profit agencies that provide mental-health services in Maricopa County failed to tighten their belts on administrative costs in recent years, despite public funding declines that left some clients waiting months for services and others denied them entirely.

A five-month Arizona Republic investigation, including a review of financial records for 28 non-profit mental-health agencies and their clients, found that:

--Since the Great Recession began in fiscal 2007-08, average executive compensation at 19 non-profit charitable mental-health organizations has quadrupled the rate of inflation.

--Some non-profit executives with six-figure salaries received annual bonus-and-incentive packages ranging from a few thousand dollars to nearly $100,000. One had a car allowance large enough to lease a Porsche.

--Inequities exist in public funding for provider agencies, especially for two Phoenix agencies serving minorities.

--In at least four instances, non-profit agencies whose mission is to serve Arizonans used hundreds of thousands to millions of dollars in loans to bail out new mental-health-care businesses that are struggling financially in New Mexico.

At the same time, underfunded agencies say families have been denied services or waited months for them because of diminished public funding that passes through the organizations in question.

Misty Kidder, a Phoenix mother, said she has spent the past nine years fighting to get appropriate services for her now teenage son, Austin Tautfest, and she adds that it has become more difficult since the Great Recession.

"We have a mental-health system that won't help those who really do need help," Kidder said. "It is so frustrating for how hard I have tried and gotten nowhere."

She said Austin, who is 5 feet 8 inches and weighs about 260 pounds, has a pervasive developmental disorder and attention-deficit issues that sometimes cause him to become agitated and violent.

Kidder carries a stack of business cards of agencies she has sought help from. She said some of those among the 28 reviewed have told her that a lack of funding prevents them from providing the teen with after-school care. As a result, Kidder said, she has been unable to receive respite services so she can get a break and spend additional time with her two daughters.

"How many parents have given up because they won't fight anymore? I won't give up," she said. "But sometimes, I just break down. ... Who is going to step up and help?"

Kidder said her daughters at times are afraid of their brother because of his size and his explosive outbursts. The lack of mental-health care has forced the family to rely on police for assistance when he loses control.

Kidder added that she is furious at the amount of money being spent on executive compensation by mental-health providers while treatment languishes for patients like her son.

"How long has he been denied a chance at success because some executive wanted a healthy bonus at the end of the year?" Kidder said. "The money they put in their pockets could have helped my son."

If you're a low-income family in Arizona and your child needs mental-health care, you can turn to the state for help. To qualify, a person must be Medicaid-eligible or be diagnosed with a serious mental illness. Then, services are delivered regardless of income.

Those who have low income qualify if they earn up to 133 percent of the federal poverty level. For a family of three, that's $26,321.

The federal government sends money for services to the Arizona Health Care Cost Containment System, or AHCCCS, which then sends the money to the Arizona Department of Health Services.

That money, along with any state funds allocated for services, then goes to a Regional Behavioral Health Authority, a local clearinghouse that helps the state distribute all the government funds. Mercy Maricopa Integrated Care is the behavioral-health authority that oversees funding in the Valley, replacing Magellan Health earlier this year.

Mercy Maricopa then sends money to a group of "provider networks," non-profit agencies run by independent boards that provide some services but primarily distribute government funds to individual health-care agencies treating patients.

Service agencies can provide housing, counseling and treatment to those needing mental-health care. Typically, at least 90 percent of an agency's budget comes from state and federal funds.

Maryann DeYoung, a north Phoenix mother, said Terros Inc., one of the largest agencies and one with a highly compensated CEO, has provided intensive counseling and therapy for her 12-year-old daughter, Miranda.

Miranda has Asperger syndrome and attention deficit hyperactivity disorder. DeYoung said Terros' services have helped her family find coping strategies.

"Terros helped all the way to the end," DeYoung said. "They saved our lives. They are amazing. For their staff, it's not just a job, it's a way of life for them. Their mission is to save lives. In a crisis situation, they make you feel human, that you are important and you matter."

However, funding fluctuations prompted governments to make it harder to qualify for services and forced caps on the number of clients programs could serve after the recession. That resulted in a decline of more than 5 percent in the number served in metro Phoenix, according to state human-resources data. Most of the cuts occurred to adult services, but families say some juvenile services also were affected.

ADHS records show that public funding has risen and fallen repeatedly since 2008. At one point, state funding declined by 11 percent. As of 2012, the most recent year for which full data was available, total funding had declined slightly.

Despite the waxing and waning of government funding, executive compensation and perks continually rose at many of the non-profit organizations whose records were reviewed.

Yet those who qualify for services say it can take months to get help because of the funding issues.

Kristine Owen of Gilbert said she battled three non-profit providers for 11 years to get additional services for her daughter, who is now 18 and had serious behavioral and emotional issues. She agrees that it was more difficult to get assistance the past few years, following the Great Recession.

Owen said her daughter is bipolar. Owen had to remove knives from the kitchen, and there were times that family members locked their doors at night for their safety.

She said the family waited months to get an in-home behavioral coach to develop strategies to help her daughter. Owen said some non-profit providers told her the girl was too difficult and they wouldn't assist her. "They don't want to spend the money on them (children). You have to back them into a corner," Owen said.

Owen wonders why more of the public money allotted to providers is not used to hire and train additional counselors for tougher cases — for example, children with symptoms of personality disorders.

"It doesn't seem like the money is being used efficiently for kids," Owen said. "What are they getting bonuses for?"

The average annual revenue for the group of agencies is $30 million. Revenue by individual agency ranges from just more than a half-million dollars at Rio Salado Behavioral Health Systems Inc. to $138.7 million at Chicanos Por La Causa Inc.

Most of that is government funding, though some organizations also solicit private donations. Besides offering mental-health programs, they provide education, housing, foster care and family counseling services to low-income residents.

Agencies reviewed by The Republic on average spent 89 percent of their revenues on services. Individual figures ranged from a high of 102 percent (the organization spent more than it took in) to a low of 72 percent.

Twenty-five of the 28 organizations reviewed had financial records in which comparisons could be made from fiscal 2007-08 to fiscal 2012-13, the most recent records available.

Over that six-year period, annual compensation packages increased for the top executives at 19 agencies by an average of 45 percent — four times the 11.17 percent rate of inflation.

Among the group of 28 mental-health organizations reviewed, all but five chief executives make more than Arizona Department of Health Services Director Will Humble, who is paid $142,800 to run a $2.34 billion state and federally funded agency that provides social services across Arizona.

Tom Pollak, program director at the Urban Institute's National Center for Charitable Statistics in Washington, D.C., said paying large salaries at mental-health non-profits "smells a little bad."

"The prevailing mind-set in the non-profit sector is, if you operate like a business, then you want to attract good executive talent and you need to pay for that," Pollak said. "I'm not a big fan of that. My theory is, we should be willing to take a vow of moderation. ... If you want to keep your charitable mission, you don't want to pay outrageous sums."

Terros in fiscal 2010-11 paid its outgoing chief executive, Dale Rinard, nearly three-quarters of a million dollars, including a bonus and a $452,119 lump-sum retirement payment.

Peggy Chase, Terros' current CEO, acknowledged that executive compensation may seem high to the general public. But she said organizations like hers need top-level executives to manage tens of millions of dollars and large staffs. She said Terros provides a multitude of mental-health- care services, including crisis intervention, to more than 40,000 people a year.

"Yes, we do serve the poor, but our quality of service is monitored and managed at a much higher level than non-taxpayer- funded organizations," Chase said.

Chase added that she and her peers make less than executives at Valley non-profit hospitals and some other service non-profits like Goodwill Industries.

Scottsdale-based Magellan Health operated the local Regional Behavioral Health Authority from 2007 until earlier this year. It was during Magellan's tenure overseeing the distribution of state and federal funds that significant increases in executive compensation occurred at recipient agencies in Maricopa County.

Magellan said in a written statement that its enforcement powers extend only to "contractual administrative caps, profit limitations, and performance expectations to ensure maximum resources were directed to service delivery." It is the individual agencies' boards of directors that set executive compensation.

Mercy Maricopa Integrated Care took over as the Regional Behavioral Health Authority from Magellan on April 1 after winning a bid for the $1 billion annual contract to administer mental-health services. Mercy Maricopa declined to comment on the matter.

The state and federal governments distribute funds used by non-profit mental- health providers, but their spending oversight is restricted to making sure services are actually provided. No government entity has oversight of executive compensation. Instead, it is up to volunteer boards to decide how much to pay CEOs.

ADHS officials declined to be interviewed or answer specific questions regarding executive compensation at the agencies. Instead, the ADHS issued a statement saying the agency "oversees the provision of behavioral health services through managed-care contracts. These contracts have set profit/loss corridors, limits on administrative service costs and service requirements that require member needs to be met."

A state Department of Economic Security spokeswoman concurred, saying the state has no "role or authority over how any private company chooses to allocate resources."

But large salaries and perks could catch the eye of the Internal Revenue Service, said John Moore, chief financial officer of Marc Community Resources Inc., a mental-health-services provider in Mesa.

Moore said his organization followed IRS guidelines, did a national compensation study and received advice from a non-profit attorney before increasing total compensation and retirement benefits for Marc's chief executive. The CEO's total compensation last year was $370,850.

"You can't pay anyone or purchase services that are above market value. You will get in big trouble and be in trouble with the IRS," Moore said.

GuideStar USA Inc., a non-profit public charity that has a database of more than 5 million tax-return forms of other non-profit organizations, said the IRS can impose fines or revoke an organization's non-profit status for unreasonable, excessive compensation.

However, in a manual on non-profit executive compensation, GuideStar states that although the IRS permits non-profit executives to receive "fair and reasonable" compensation, there is no universal standard defining fair and reasonable.

An IRS spokesman declined to comment on The Republic's findings.

Chuck McLean, vice president of research for GuideStar, said he is skeptical the IRS has much bite, though it is responsible for enforcing "market rate" compensation.

"In practice, there is not much enforcement going on," McLean said. "There's not a lot of oversight going on in the non-profit sector. It's pretty easy to get away with anything you want, unfortunately."