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Special Report
Contracting for Public Mental Health
Services Opinions of Managed
Behavioral Health Care Organizations
Procurement Process
The procurement process in public-sector-managed behavioral
health contracts has been a source of frustration and consternation
to both MBHOs and public payers. Both sides
have protested contract awards. These appeals delay program implementation,
increase the administrative costs associated with implementation,
and, in some cases, overturn award decisions. Questions of conflicts
of interest, unfair bidding processes, and poorly executed
evaluations have been raised and, in some cases, supported by the
courts. In addition, the political environment is often highly charged.
Advocates seek to protect the interests of the vulnerable seriously mentally
ill population. Furthermore, county mental health agencies and
other providers largely dependent upon State and local funds seek to
secure sufficient resources to carry out their responsibilities.
The level of effort required to produce
winning proposals diverts staff resources
from other activities. Ambiguous procurement
specifications can lead to misunderstood
program requirements, ill-prepared
proposals, and evaluations of questionable
legal defensibility. In addition, vaguely conceived
contracts can produce difficult contract
negotiations as the winning offeror
seeks clarification and modification to
program requirements and reimbursement
terms. These difficulties can delay the
process and add to the MBHO’s marketing
and administrative costs.
Focus group participants cited the lack
of resolution of design issues during the procurement
as a common frustration. In many
cases, public agencies change program specifications
during the procurement and communicate
these revisions late in the proposal
development process. Such changes can
affect not only the offeror’s descriptions of
proposed approaches, but also the types of
subcontractors needed for the program and
the actuarial analysis of the program. In
some cases, the revisions may influence an
MBHO’s decision to bid, causing an organization
that has already invested substantially
in proposal development to withdraw from
the process. Alternatively, they may cause an
organization to regret its decision not to bid.
MBHOs must recover their marketing costs
if they are to continue to do business in the
public sector. Therefore, procurement problems
that increase the cost of proposal
preparation ultimately are costly to payers.
An MBHO’s assessment of the reimbursement
rates offered, or of the appropriateness
of the rates bid in the proposal, depends on
the quality of the information provided by the public agency. Focus group participants
cited many procurements in which the agency
provides much data but little information.
Payers need to include data that directly pertain
to the population and benefits targeted
by the program and provide the data in a
format useful for actuarial evaluation.
According to meeting participants, evaluation
processes adopted by public payers and
execution of these processes are not always
effective. Organizations may submit proposals
that stand up well under desk reviews but
which describe capabilities, infrastructure,
and outcomes that do not truly exist.
Separating the qualified from the unqualified
offerors requires evaluators with operational
expertise in managed behavioral health care,
thorough on-site inspections and interviews,
careful reference checks, and multiple question-
and-answer sessions with offerors.
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