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April 25, 2011


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Mental health and managed plans in NY: Capitation at work


be on Medicaid rates for the next several years. Medicaid is partly funded by the federal government and the state. As we know both are running deficits, especially New York and California. But wasnt Medicaid Managed plans supposed to reign in healthcare costs for the states implementing them? Yes and no. Medicaid Managed Care plans can reduce costs through oversight and efficient utilization of services, however as we all know healthcare in America is complicated. It is that way at the State level right down to the county level. The issue in New York is that MMC (Medicaid Managed Care) providers manage services for those enrolled in a Medicaid HMO except for several mental health services. The end result was managed care for many services but fee for service (unmanaged) Medicaid for most mental health outpatient services. Mental health costs are rising especially with in-patient hospitalizations and New York is looking for a way to reduce costs while keeping those who require mental health services as healthy as possible. At this time MMC providers can manage physical healthcare for the SSI population through open enrollment, however once a recipient of mental health services is enrolled in Medicaid Managed Care, in-patient psychiatric hospitalization as with all other hospitalizations are covered by the MMC and not the fee for service Medicaid cave out. So then, at this time in-patient psychiatric hospitalization is covered under MMC plans, while outpatient clinical treatment including detox services are covered under a carved out Medicaid fee-for-service reimbursement policy. This has led to difficulties in coordination between MMCs and a fee-for-service provider, because disengagement from treatment by patients is not adequately tracked by their MMC plans. People with mental illness who have chronic

health has its price

On January 5, 2011 Governor Andrew M. Cuomo signed an Executive Order establishing the Medicaid Redesign Team. The Medicaid Redesign Team was given the task of providing guidance, advice and recommendations to the Governor on ways to save Medicaid dollars while improving medical outcomes. The board consisted of 25 members whose task was to submit a report by March 1, 2011 of its findings and its recommendations for consideration in the budget process for the 2011-12 New York State fiscal year.
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Why is this important for us in New York as well as everyone else? According to the Council of State Governments of the top five health issues they need to address Medicaid was the first. Therefore, the focus of the states will

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CHCCFINC. A Christian Community


Mental health and managed plans in NY: Capitation at work

April 25, 2011

chemical dependency and physical disorders are among the 20% of New Yorks special needs Medicaid recipients who are driving 75% of the spending. They comprise 1/3rd or 300,000 of the 865,000 total Medicaid recipients with chronic illness though use 20% of the 24.3 billion dollars expended by the state in Medicaid reimbursements this year. Like it or not, it costs a lot. However, 395 million of the 814 million New York state spent in 2007 on potential preventable hospital readmission were for medical readmission of people with mental health and substance abuse disorders. The Chronic Illness Demonstrations project population illustrates the failures of MMC providers in managing this population. Over 93% have a mental illness or substance abuse disorder and over 65% have both. Of that population, from 83% to 94% have had one chronic disease and 61.4-81.1% had multiple chronic disease, yet over 25% did not have a primary care visit in the baseline 12 month period survived and over 70% did not have a specialty care visit during that time. The management of patient compliance by MMCs was particularly low. The NYCs Care Management Initiative has documented that 40% of the individuals in the CMI who triggered an alert for disengagement with treatment were enrolled in MMC plans operated by 10 companies, half with full benefit plans. In each case, their MMC case managers were not aware of the any attempt to coordinate mental health services for a disengaged individual.

Good health costs

MMCs have shown to do a poor job in New York at preventing, identifying and averting high cost medical care for these populations. As mentioned above, even though their health care is now managed, there is strong evidence that carving in of the behavioral health benefit for those with serious mental illness and substance abuse disorders into MMC plans will lead to a less efficient system. Again, fee-for-service Medicaid has been inefficient as well. Thus the goal of BHOs or Behavioral Health Organizations is to coordinate behavioral health treatment for the mental illness/chronic chemical dependency and physical disorder population, something that MMCs have not previously been able to accomplish. BHOs would work closely with providers in coordinating out-patient/in-patient psychiatric and/or chemical dependency treatments for clients, a goal that has not been realized by managed care companies currently. The Medicaid Redesign Teams recommendations included the establishment of BHOs or Behavioral Health Organizations, capitation as opposed to fee-for-service Medicaid and the establishment of behavioral health homes. Interim behavioral health

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CHCCFINC. A Christian Community


Mental health and managed plans in NY: Capitation at work

April 25, 2011

organizations are to be established to manage carved-out behavioral health services while moving toward integrated care financing and delivery models. These BHOs will manage behavioral health services currently remunerated for via unmanaged fee-for-service Medicaid and not otherwise covered under the states various Medicaid Managed Care plans. These BHOs would exist for approximately two years. People with chronic illnesses who are not currently enrolled in a managed care plan will remain in feeforservice Medicaid until they are transitioned to a managed care plan and/or care management; they will continue to obtain medically necessary medications through the Medicaid fee forservice pharmacy program. According to the Medicaid Design Team recipients of mental health services would need to be automatically enrolled in a BHO. These BHOs are to be established by April 2013; although a behavioral carve out could start as early as fiscal year 2012 by OHM if there is a temporary waiver of competitive procurement requirements. In addition to the establishment of BHOs there will be the possibility of the establishment of Special Needs Plans. SNPs for high need enrollees with behavioral health problems may be established where the capacity exists to operate them or to develop fully capitated arrangements directly with integrated provider systems whom have demonstrated capacity to serve the behavioral and physical health needs of those enrollees. The establishment of BHOs will be contracted out rapidly through a no-bid process. These BHOs will be accountable to the state government and would work as non-risk bearing Administrative Service Corporations or ASOs. These ASOs or Administrative Service Corporations will receive administrative fees, but not profit-maximizing fees. These BHOs would, according to NYAPRS, improve engagement of consumers into care, raise the level of provider accountability, and set up comprehen-

sive care coordination and utilization management (UM) systems for the existing FFS inpatient and possibly day treatment systems. Community behavioral healthcare services would remain in an EMedNY (fee-for service) environment.

Each BHO will cover a specific region of the State to avoid cost shifting to the providers (approximately 5-6 BHOs for the state). Each BHO will provide administrative and management services for the identified groups by serving as accountable entities. These BHOs will also conduct prior approval and coordination of specific behavioral health service and additionally, promote the integration of medical services into behavioral health services. Again, BHOs will determine prior authorization requests for behavioral health care impatient and possibly day treatment services based on documented patient medical need. Financial stress on agencies providing mental health services may be incurred as a result of the shift from fee-for-service Medicaid to capitated health plans. As stated by the Medicaid Redesign Team, provider revenues per person could decline due to BHO utilization management and care coordination, however they did add a qualifier; reductions of revenues would probably be offset by an increase in the number of people engaged in care by the BHOs. The establishment of BHOs will also require the creation of eligibility criteria to obtain behavioral care; this would include the combination of clinical diagnosis with measures of significant disability or service need. For example, those receiving SSI/ SSDI or meeting the definition of having a serious mental illness for adults or for children having a serious emotional disturbance would qualify for mental health services under potential new eligibility criteria. Recipients of mental health services would be required to automatically enroll in a BHO. Utilization management and responsibility for care

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CHCCFINC. A Christian Community


Mental health and managed plans in NY: Capitation at work

April 25, 2011

planning would be placed with the BHO, medical homes and health/behavioral health homes and removed from providers. BHOs will have access to Medicaid claims data. BHOs will also have access to OMH/OASAS data platforms like PSYCKES, which will allow managed care organizations and providers to access the medical records of Medicaid patients. OMH expects that some savings will occur through the transitioning of targeted case management to the 90/10 federal Medicaid reimbursement program for effective care management provided by trained care managers as part of the new health/ behavioral health home network or as adjuncts to these providers. By 2013 OMH, OASAS and DOH would jointly designate on a regional basis a limited number of specialized managed care plans, special need managed care plans, and/or integrated physical and behavioral health care provider systems. Once these plans are designated, DOH will arrange to enroll patients/ clients in such plans or integrated provider systems and to pay such plans or provider systems through capitated means or perhaps by another type of managed payment system. Since capitation is a fixed revenue stream, each enrolled patient makes his/her claims against the full resources of the provider (the value of the capitation). Providers, in exchange for a fixed payment per enrolled client agree to provide the unknown future benefits and to absorb the costs associated with clinical care. I believe there will be some cost shifting to the provider, even though they say it will not occur. Therefore, the size of the provider may come into play, as larger providers tend to manage their health insurance risk assumption better than smaller service providers, in terms of predictability of their costs. A larger roster of clients means less variation in annual costs. It is my opinion that NYS is attempting to get ahead of the mandates proposed by the PPACA, which call for an extension of Medicaid eligibility to 133% of the federal poverty line as well as a shift from chil-

dren under CHIP between the FPL of 100% to 133% to Medicaid. The PPACA also broadens the eligibility for coverage with a new mandatory Medicaid category. The means NYS is going to shift high cost coverage (those who require expensive services) to segregated-capitated Medicaid. In essence, the high needs Medicaid clients will be pooled in a high-risk group managed by the BHOs while those with low utilization thresholds will be pooled in the MMC groups that are now established in New York, such as Healthy Choice, Fidelis and Wellcare. The result will be to restrict utilization of the high-risk group, which could not be done if both high and low utilization groups were pooled together. There are two key methods of reducing Medicaid costs (or any healthcare costs for that matter) restricting eligibility or restricting usage of the benefit. Since the PPACA makes it clear that eligibility will be expanded, the only means left for NYS is to restrict usage. Segregating high and low usage Medicaid groups allows the state to eventually restrict utilization of services for the high needs group differently than the MMC groups already established in the state; however, there is the opportunity for a better menu of services to divert unnecessary hospitalizations. Like it or not utilization management, evidence based treatments and cost shifting is going to occur here in New York and in your state. Whether, this will include better patient treatment outcomes we will have to see.

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