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Special Report
Contracting for Public Mental Health
Services Opinions of Managed
Behavioral Health Care Organizations
Executive Summary
This report synthesizes the collective experiences of four managed
behavioral health care organizations (MBHOs) that
hold public sector managed care carve-out contracts. Four
representatives of these MBHOs participated in a daylong focus group
meeting, and two others were interviewed by telephone. The views
presented are solely those of the focus group participants.
The focus group participants represented
the majority of the total managed behavioral
health care market. In the public sector, over
70 percent of the 21 States with Medicaid
carve-outs for behavioral health services contract
with these MBHOs. The discussion and
interviews examined practices used in public
sector managed care contracting.
Today, fewer MBHOs are bidding on
State and local public sector contracts.
Preparing a responsive proposal has become
extremely expensive because of an increasing
number of program design specifications.
Study participants predicted that States will
see even less competition for those programs
that require a large investment from MBHOs
for marketing, start-up, and ongoing administration
yet offer little potential for financial
reward. The following are some of the specific
problems that they cited:
Public payers often fail to resolve design
issues before the procurement process and
do not provide necessary information and
data to bidders. This can create confusion
for both bidders and administrators.
Excessive financial requirements may
preclude generally desirable bidders from
competition for managed care contracts.
Limits on profits that do not recognize
the potential risk involved also may
significantly reduce the attractiveness of
requests for proposals (RFPs) for some
organizations.
Benefits may be vague and/or reflect a
"wish list" of the agency’s stakeholders.
Contracts may identify specific providers
as essential and exempt them from utilization
management requirements imposed
on other network providers. The role of
State facilities and their relationship to
the MBHO may be ambiguous.
Performance measures may not be consistent
with program goals or may be
beyond the ability of the MBHO to
measure.
County-based programs may be too small
to properly support a fully capitated program
and may require excessive protections
for county providers.
Focus group participants expressed the
belief that the future of contracting in public
sector managed behavioral health care
will depend on public payers’ willingness
to design and administer programs that permit
the contractors to succeed. Participants
offered specific recommendations concerning
managed care contracting, financial
requirements and reimbursement, procurement
processes, and implementation and
ongoing administration of managed care
programs. These include the following:
RFPs should specify the requirements
of the payer and ask offerors to describe
how they will operationalize these requirements.
Payers should avoid requirements
that are overly prescriptive and
that redefine an MBHO’s management
techniques and operational processes.
The core benefit package should be specific
and clear in the contract. Expectations
for service coordination across health care
and social support programs should be
reasonable and should support additional
service requirements appropriately.
Clear and specific procurement specifications
should be developed before the
bidding process.
Financial design should be compatible
with the program design and should permit
profit making. At-risk programs must
include a sufficient scope of services and
population size to be financially viable
and actuarially sound. Reimbursement
should accommodate start-up and ongoing
administrative costs.
Consumers should play an active role in
advisory committees focusing on service-delivery
issues and member services.
Contracts should not require consumer
representation on an MBHO’s governing
board.
Performance measures should be tied to
program objectives and should reflect
those factors the MBHO can reasonably
be expected to track.
The participants believed that, despite a
variety of challenges, the MBHO industry
will continue to be interested in public sector
contracting. However, they indicated
that their organizations are calling for more
rigorous evaluation of public sector RFPs
and more cautioun when entering such
arrangements. Given the potential barriers
to executing successful contracts, communication,
cooperation, and coordination
between States and MBHOs is essential. By
establishing a cooperative program management
style in relations with MBHO contractors,
public behavioral health programs can
better meet the objectives of the public payers
and can continue to attract experienced,
high-quality, reputable contractors.
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