Maryland lawmakers plan to examine the operations of a Baltimore mental health clinic in the wake of an investigation by The Baltimore Sun that revealed high Medicaid billings, and a state regulator said six family members on the nonprofit's board must relinquish voting authority to comply with state law.

Del. Peter A. Hammen, a Baltimore Democrat and chairman of the Health and Government Operations Committee, said Wednesday that he plans to hold a hearing on issues raised about Baltimore Behavioral Health Inc., the clinic in Southwest Baltimore, when the General Assembly session opens in January. He said the inquiry could lead to legislation.

"There are a number of questions that need to be answered," Hammen said. "Depending on those responses, it will determine whether or not we move forward on any changes with regard to laws or regulations."

Hammen plans to meet in the coming weeks with officials at the Maryland Department of Health and Mental Hygiene to discuss their oversight of Baltimore Behavioral Health. The center, which specializes in treating people with co-occurring mental illness and drug addiction, received about $17 million in public funds in fiscal 2009 and about $11 million in fiscal 2010.

"The demand for these services is greater than the supply, and unnecessary spending causes further stress to an already stressed system of care," Hammen said.

According to The Sun's investigation, former BBH patients and employees, as well as some outside doctors, say the clinic has been diagnosing mental illness — and collecting public funds to treat it — in some patients whose main affliction is drug addiction. As billings to Medicaid rose in recent years, so did the salaries of top BBH executives, reaching $1.4 million last year for the six family members on the company's board of directors.

Also Wednesday, Nancy Grimm, director of the state Office of Health Care Quality, said all six family members who sit on BBH's board — and thereby control the nonprofit's operations — must give up their voting rights to comply with state law.

"I would say none of the six can serve as voting members of the board," she said.

Under a state law passed in 2005, no one can serve on the board of an organization receiving state mental health funds if an "immediate family member" works for the organization. The six, related by blood or marriage, have long occupied six of BBH's eight board seats, and five hold executive jobs paying six figures.

According to Grimm, BBH Chief Executive William "Kris" Hathaway told the state office this week that some of its board members have switched to nonvoting "ex-officio" status. But he did not identify the members, she said.

Hathaway, who has said that BBH provides quality care to a difficult population, did not respond Wednesday to an e-mail message from The Sun.

Founded in 1997, BBH mostly bills Maryland's public mental health system, principally Medicaid. A patient's main affliction must be psychiatric rather than drug addiction for treatment to be billed to that taxpayer-funded system.

The Sun also found that BBH offers many patients a bed in unregulated rental homes around Southwest Baltimore. More than a dozen former patients and staff members described illicit drug use by patients at some of the houses and at BBH facilities.

State Health Secretary John M. Colmers said Monday that his department has intensified its interest in BBH. "We will take steps that are necessary to be sure the public dollars are being spent appropriately," he said. His agency began an investigation in May, after The Sun began its examination.

While Hammen said it's too early to determine whether new legislation or regulations might be needed, he said the state's oversight appeared lax.

State data show that by 2004, BBH stood out from other providers for its use of a high-cost treatment called "intensive outpatient," and some years it accounted for 85 percent of billings statewide. Yet officials at the state Mental Hygiene Administration, a unit of the health department, said they didn't notice the large billings until spring 2007. Even then, they did not act to limit such payments until fall 2009.

"It seems like they had a lot of information, and it seems they were a little slow in acting," Hammen said. "Why did the department not take more appropriate action sooner?"

State Sen. Catherine E. Pugh, who said the newspaper's findings "shocked" and "amazed" her, wondered the same thing. "What took so long?" the Baltimore Democrat said in an interview.

Pugh said she would support legislation giving the state new power to regulate the type of housing that BBH offers to about 150 of its 800 patients in its network of rental homes. "That's an easy policy to change," she said. "I would require state oversight."