The state’s latest plan for community mental health services has gotten off to a bad start with the first local mental health office to become a managed-care agency falling into a $3 million financial hole in its first six months of operation.
Western Highlands Network, which covers eight counties including Buncombe and Rutherford, is working with the state Department of Health and Human Services on a plan to correct the money problems that started the first day it became a managed-care agency in January.
The changes may involve reducing some mental health treatments the office believes are excessive, telling service providers to return money for services that were not approved, and enforcing rules for providers filing payment claims.
The experiences in the west are significant because, under a new state law, all government-paid mental health services in the state will be handled the way they are in Western Highlands. Advocates for people with disabilities are skeptical that the new system will work, and they worry consumers will be the losers.
Last year, the legislature passed a law that requires all local mental health offices to convert to managed-care agencies by January 2013, copying a system started in the state in 2005 by Piedmont Behavioral Health, a local mental health office now called PBH.
As managed-care agencies, the local mental health offices’ relationships with the state, mentally ill people in their coverage areas, and providers will change significantly. Each local office will be given a set amount of Medicaid and state money to treat patients. If they spend too much, they have to cover the costs. Local offices that save money can spend it on more Medicaid mental-health services.
Though the local offices take on financial risks, they also have more control. Under managed care, they will say which providers will treat patients in the region and what kinds of treatment – and how much government-paid mental-health treatment patients receive.
Choice and uniformity
This is the biggest change to mental-health services in the state in more than a decade. In 2001, the state told local offices to stop offering treatment in favor of having patients seek out private providers. The intent was to give patients more choice and foster uniformity across the state.
That 2001 reform was an expensive failure. Patients were left waiting for beds in state psychiatric hospitals while the state spent millions on low-level services for people who didn’t need treatment. A legislative report from 2009 said the state spent up to $635.3 million too much for community mental-health services between April 2006 and February 2009.
Legislators talked for years about giving more local offices more power and passed a law last year requiring it. Western Highlands was the first regional office to convert. Two more offices have followed. All 11 local offices will be managed-care agencies by January 2013. The office covering Durham and Wake counties will be in the last group converting.
The local offices do extensive prep work before they convert and a consulting firm assesses their readiness to switch.
Western Highlands has been losing money all year. One of the problems, said CEO Arthur D. Carder, is that the lump-sum payment the office received to care for patients was based on outdated information from 2009 that did not take into account increased costs in 2010 and 2011.
Al Delia, the state Department of Health and Human Services acting secretary, said the office has been closely monitoring Western Highlands and is talking about taking another look at whether the $9.7 million a month the office receives to pay for patient treatment is enough.
Delia was in the western counties Wednesday, meeting with members of the office’s governing board.
“There’s going to be some adjustment in culture and attitudes and mindset in leadership of all these organizations in making these transitions,” Delia said.
Skeptics question whether managed care is the best system for all consumers.
“I think we’ve rushed to judgment on this,” said Dave Richard, executive director of The Arc of North Carolina. Parents of children with developmental disabilities and the agencies that provide services to the disabled have been among the most vocal skeptics of managed care, questioning conversion to a system they say isn’t designed to meet their needs.
“If you’re going to give up the system where people had a lot of choice to one where choice is limited and is controlled by one entity, you’d hope to see better outcomes,” Richard said. “We haven’t seen that with folks with developmental disabilities.”
Lawsuit under way
State officials and legislators have looked to PBH as an example for years, but not everyone is a fan.
Disability Rights North Carolina, an advocacy group, is suing PBH in federal court over allegations that it did not give residents proper notice of changes in their services or let them know how they could appeal.
Western Highland’s problems show that the office wasn’t ready to become a managed-care agency, said Vicki Smith, Disability Rights’ executive director.
“It would almost be too simple to say this was predictable,” she said.
Legislators are convinced that managed care is the path to follow for mental-health care. The legislature is committed to a new system where government does more than just pay the bills, said Rep. Nelson Dollar, a Cary Republican.
“We want to manage the care and the individuals receiving the care, and manage the costs and how we’re allocating scarce taxpayer resources,” he said.
Legislators have been working with DHHS since winter on Western Highland’s financial problems, Dollar said. A new law that adds members with experience in managed-care finances, insurance and health care administration to local governing boards is meant to strengthen oversight of Western Highlands and other managed-care operations.
“We’re going to be working with the department to straighten out issues like the ones that are being encountered in Western Highlands and making sure what lessons are learned there are being incorporated in the conversions in other areas of the state,” he said.