Special Report
Contracting for Public Mental Health
Services Opinions of Managed
Behavioral Health Care Organizations

Service coordination does not work when public payers introduce requirements intended to address an historical lack of cooperation across agencies or a deficiency in services. Moreover, some coordination requirements do not clearly delineate between coordination and service delivery, leaving the MBHO potentially responsible for providing these services.

Participants spoke of difficulties with performance measures that could not be measured or had never been measured before the contract’s inception. Requiring performance levels based on targets used by other States is unfair, because it does not account for variations in baseline measures.

The participants’ other criticisms focused on the magnitude and range of expected improvement built into some RFPs. Participants believed that performance measures should include quality-of-life indicators. However, expectations must reflect the level of funding and the MBHO’s ability to influence the particular measure under the terms of the contract. Meeting participants described situations in which payers continued low funding levels yet introduced aggressive expectations regarding improved outcomes and quality of life. In some cases, the measures were tied to information that the MBHOs could not capture or track. For example, although reducing the number of days in jail or days absent from school are laudable goals, the MBHO cannot track such information. Applying a financial penalty based on annual performance in these areas would defeat the purpose of performance measures, because the MBHO could not monitor and improve its own performance throughout the year.

Too many measures can distract the MBHO’s administrators and divert attention from key determinants of the program’s success. The expense of tracking a large number of measures is wasteful for both the MBHO and the payer. Study participants identified several characteristics of effective performance measurement approaches. The most important involved focusing performance measures on essential operations during the first contract year to ensure stability of services. Such measures include timely provider claims payments (e.g., clean claims processed within 30 days) and responsiveness to enrollees and providers (e.g., acceptable telephone abandonment rates). The contract can include standards for service delivery to ensure that utilization levels and the proportion of the eligible population receiving services remain within a certain range of the previous year’s level.

Focusing on these select measures does not diminish the importance of other program goals. Instead, it recognizes the many activities required of a new contractor during the transition to a new delivery system and management approach. The participants suggested that, in the early stages of the contract, MBHO staff must not be distracted from essential program elements. The first year of the contract should include the implementation of the data collection mechanism and methodology for measuring the performance level in order to establish baseline target levels for subsequent years.

Participants cautioned against using consumer complaints as an indication of a poorly operated program. The representatives indicated that a goal of the program should be to increase consumer feedback and establish mechanisms to encourage complaints and questions. A better approach to using consumer complaints as an indication of program performance would be to track how the information is used and whether actions are taken to address the issues raised by consumers.

In particular, meeting participants cited the Massachusetts Behavioral Health Partnership (MBHP) as an example of a program in which the public payer implemented performance measures equitably and effectively. This program exemplified many of the characteristics of an effective performance measurement approach described by study participants, including

C. Grievance and Appeals Process
Meeting participants considered current requirements of the grievance and appeals processes in public programs to be misguided. Instead of emphasizing formal processes, as they currently do, study participants indicated that the guidelines should encourage informal efforts to circumvent problems earlier and more effectively. Programs should emphasize an accessible and responsive mechanism for capturing consumer complaints and feedback. MBHOs should carefully analyze this information to identify potential changes in policy or education. For example, Vermont has established a proactive approach to deal with consumer concerns and complaints. In 1998, the legislature created an Office of Health Care Ombudsman. The ombudsman is an independent voice for consumers, tracking patterns and trends in consumer concerns and conveying information to plans and regulators about how they might better serve the public. Under Benefit Arkansas, an oversight committee of consumers and their families provides ongoing input. This feedback concerns how the project is going, what changes might be needed, and how each of the communities perceives the project.

An increase in the number of complaints received can indicate that consumers view the new program as accessible and receptive to such feedback. Many public programs, however, define consumer feedback as an official grievance and complaints as appeals. By catapulting these interactions into a formal grievance and appeals process, the payer may unnecessarily escalate the significance of the event and create an administrative burden.

D. Consumer Participation in Program Administration
Study participants felt that public payers are successfully including consumers in program design and ongoing administration and oversight. They found that this involvement is extremely beneficial to committees addressing the delivery system, quality of care, and other issues affecting consumers and their families. States and MBHOs have implemented a variety of efforts to elicit consumer involvement.

Colorado Health Networks provides a good example in its creation of many consumer drop-in and peer programs as part of its performance measurement system. Another private managed care company in Colorado has hired a consumer advocate as director of consumer affairs to further consumer rights and promote consumer issues. The State’s RFP required the contractor to designate at least one staff member as the client representative, but the plan itself decided that this individual should be a consumer. This consumer affairs director reviews all complaints and grievances, sometimes handling the call personally. The director also sits on the quality improvement committee, reviews all trend analyses, and makes recommendations to the plan.

Moreover, the National Mental Health Association is advocating ombudsman programs. It has published a report detailing such programs in six States (California, Colorado, Indiana, Minnesota, Tennessee, and Washington) ("National Mental Health Association, 1999). The National Alliance on Mental Illness is strongly advocating third-party, independent consumer entities. Five States (Alabama, Georgia, Massachusetts, Ohio, and Pennsylvania) have established consumer satisfaction teams (CSTs). The programs in Philadelphia, Pennsylvania, and in Massachusetts are directly related to managed care. Philadelphia’s CST is a unit of city government that manages the Medicaid managed care program. Massachusetts’s MBHO finances the CST. Montana, Texas, and Maine also received funding from their legislatures to implement such programs.

MBHO representatives pointed out that, while they support consumer participation, MBHOs sometimes encounter difficulties when they are required to include consumer representatives on the governing board of the organization. Consumers do not share the fiduciary responsibility of other governing board members; therefore, the participants believed that consumers should not have voting power on the governing board.

E. Requirements for Local Presence
To varying degrees, public payers seek some assurance of a local administrative presence by the MBHO. Meeting participants agreed that some requirements are reasonable and practical; however, others defeat the economies of scale that could otherwise be achieved by engaging an established MBHO. In many cases, an MBHO can offer a higher quality of service by using a centralized function than being required to recreate the function at the local level. Obvious examples of improved efficiency through a centralized resource are claims and data processing activities. Many other centralized functions can effectively serve the needs of the public agency and the enrollees and permit the MBHO to address those needs efficiently.

F. Protection of Existing
Provider Infrastructure Public agencies are typically concerned about the consequences of managed care programs for traditional providers. These providers may find their funding reduced or eliminated under the managed care program. If the MBHO decides to direct patients to other providers, these traditional providers may have little alternative but to close their doors. This outcome runs counter to the historic goals of the public agencies, namely, building provider capacity for serving the population and finding the means to provide sufficient funding to support these providers. The meeting participants believe that the traditional delivery system has inefficiencies and other problems; nevertheless, they recognize payers’ fears that managed care programs may harm the traditional delivery system.

To address that fear, many payers have included protections for these traditional providers in managed care contracts. Some States offer mild inducements in the contract for the MBHO to use these providers. Others, however, carve providers or services out of the managed care program and reimburse them on a fee-for-service basis. In some situations, payers may require significant use of traditional providers without granting MBHOs the authority to use the same utilization management requirements imposed on other network providers. Several States (e.g., California, Pennsylvania, and Michigan) have given county mental health agencies or local mental health programs first right of refusal in the RFP process. The participants said that MBHOs understand the public payer’s need to ensure the maintenance of an adequate mental health infrastructure with the necessary service capacity. However, payers can improve some of their approaches.

The future roles of traditional providers serving the ambulatory needs of the population must also be considered. The most effective approach, the study participants indicated, is for the public agency to describe the desired characteristics of the future delivery system. MBHOs can then redistribute utilization of community-based services to improve quality and cost-effectiveness of care without reducing the delivery system’s capacity. These mechanisms can protect essential capacity rather than focusing on ensuring the continuation of each individual provider. By rewarding progressive providers, MBHOs can encourage the growth of the best providers and incrementally shift patients to sites that are more efficient.

In establishing managed care program objectives, the public payer should identify problems in the existing infrastructure that it intends to solve through the new program. The payer should then decide upon the intended role of the State hospital in the future delivery system. In particular, the public agency must determine its intentions for the State facilities and garner the political support for following through with these intentions. Given the potential for layoffs of public employees in the facilities, and the political backlash that can ensue, this groundwork must occur well before RFP development. By the time of the RFP release, the State should have a thoughtful transition plan for these facilities, with political consensus around the plan.

According to the participants, many RFPs are ambiguous regarding the current and expected future role of the State facility and its interaction with the MBHO under the proposed program. This ambiguity can lead to disputes and disruption in care, delaying the decisions necessary to move forward. The MBHO representatives requested that, in the RFP, State agencies describe the intended role of the State hospital in the delivery system in the short and longer term. The RFP should also discuss the responsibilities placed on the MBHO for use of the facility. The representatives recommended that the State hold the facility responsible for complying with the MBHO’s utilization management rules and for participating in discharge planning with MBHO staff. The participants reported that the State hospital offers the greatest challenge to the public payer and the MBHOs in terms of resolving competing pressures for introduction of cost-effective care coordination and utilization management and the protection of provider capacity.

G. County versus State Programs
In nearly half the States, county governments are primarily responsible for designing and administering public managed behavioral health programs. According to meeting participants, the resulting contractual relationships offer some complications over and above those found in State contracts. County mental health departments represent an important part of the traditional provider safety net. Publicly funded services not only account for a major source of revenue for these county providers but are viewed as supporting county jobs as well. Consequently, the desire to protect the capacity of safety net providers witnessed at the State level is even more pronounced at the county level, where county administrators find that the budgetary and employment implications of shifting to an at-risk MBHO are greater.

The representatives identified two potential problems with fully capitated programs at the county level. First, the desire to protect county jobs can lead to untenable restrictions in the MBHO contract. For example, these specifications may require the MBHO to use the county provider or to assume some responsibility for maintaining the facility and its workforce. Second, the size of the county may be insufficient to support a fully capitated program, so that the large fixed costs associated with specialized administrative functions must be allocated over a smaller enrolled population. As a creative solution to this issue, Oregon’s community mental health program directors came together in 1994 to organize Greater Oregon Behavioral Health, Inc. (GOBHI). This private, nonprofit, public benefit corporation allows the counties to partner with a managed care organization to share the risk of providing care to the State’s most rural populations. Sixteen counties pool resources through GOBHI to provide mental health services across more than half of the State.

Participants suggested that in many instances counties recognize the contradictory incentives they face in protecting county providers while aiming to improve the efficacy of service delivery. As a result, they develop programs that require contractors to assume roles other than those of full-risk managed care plans. Contractors may be required for contracts of administrative services only (ASO) in which they extend assistance in such areas as care coordination, financial management, medical economics, staff training, and information systems. Two counties in the State of Washington (Spokane and King) and one in California (San Diego) have ASO contracts with private managed care firms. In other instances, counties have set up their own MCOs to address some of the contradictory issues. For example, Oregon’s Lane County established an MCO, known as LaneCare. LaneCare has been awarded a single contract under Oregon’s managed care program and is at risk for mental health services provided to all Medicaid recipients. Other counties that have chartered their own MCOs include those around Philadelphia and Allegheny, Pennsylvania.