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Among the entrants was Dominion, selling mental-health services the way some publishers sell magazine subscriptions.

Community support, the most basic of the new services, is supposed to help people with mental illnesses or addictions stay in their homes or in school by focusing on needed skills. The guidelines provided leeway for workers to help meet individuals' needs.

An adult, for example, may be taught how to manage bus schedules or a budget, while a child may be focused on ways to stay out of trouble in school.

Within the first few months, community support was costing taxpayers $50 million a month, 10 times more than state administrators had expected. About a year after the service started, the state cut the $61-an-hour rate it was paying by about $10. By that time, the state had spent $619 million in 12 months.

While money flowed to community support, serious treatment suffered. From March 2006 through the end of January 2008, community support cost $1.4 billion, 90 percent of all spending. During that period, the government spent $78 million -- 4.9 percent -- on the seven services that department officials say are more likely to keep people out of hospitals.

Officials had intended to spend more on intensive services than on community support.

In September, 43,579 people received federally funded community support, at a cost of $74.6 million. Assertive community treatment, a more intensive service for severely mentally ill adults, was the second-most costly service that month. Companies were paid $2.2 million to help 1,698 people.

Dominion has one psychiatrist under contract who is the company's medical director, but she does not bill through the company for individual treatment. Dominion makes nearly all its money from community support.

Searching for clients

Traditionally, companies receive referrals from county or regional mental-health offices, social workers, schools or juvenile courts. Sometimes, a potential client will get a recommendation from a friend or family member.

Local mental-health officials complained about Dominion's practice of searching neighborhoods for clients and sometimes having a minister make follow-up calls.

Wake County's mental-health administrators called Dominion customers in October 2006 to find out how they came to sign up with the company. One mother said her child's therapist mentioned the company, "but then they were going door to door ... they came to our door handing out flyers," Miki Jaeger, head of the Wake mental-health office's quality management team, wrote in a letter to the state Mental Health Division.

State officials don't like the companies' scouring neighborhoods for clients, but they allow it.

"We do not, to our knowledge, have any authority to stop that from happening at this point," said Tara Larson, an acting deputy director in the state Medicaid office.

In a little more than a year in the community support business, Dominion received more in Medicaid payments than older nonprofit corporations such as Easter Seals UCP.

Notes by a Dominion community support worker detailing activities with a client, a woman, described the same activities day after day. The worker refers to herself by the initials CSSQP, for community support services qualified professional. The worker and client spent 3 1/2 hours together each time, according to the notes on April meetings, allowing a bill of about $180.

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