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UNDERSTANDING MANAGED BEHAVIORAL HEALTH CARE
MANAGED CARE AND MENTAL HEALTH
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UNDERSTANDING MANAGED BEHAVIORAL HEALTH CARE Michael A. Hoge, PhD, Neil M. Thakur, PhD, and Selby Jacobs, MD
Managed care is neither a well-defined concept nor a discrete entity. That which we think of as managed care consists of a broad range of strategies for organizing, financing, and delivering mental health and substance abuse services. Each strategy, as it is implemented, is shaped by the host environment and influenced by local history, politics, laws, and regulations. Thus, managed care emerges with many different functions and in an infinite array of forms. Managed care may constitute sweeping, largescale change that completely reorganizes the delivery of health care, or it may be as minor as adding some utilization-management strategies within a single provider organization. At times, managed care may be a highly visible public sector initiative in which the contracting process and review of performance and outcomes is subject to consumer, provider, and legislative oversight. Alternatively, it may be an arrangement between an employer and managed care organization (MCO) in which the contracts and data on outcomes remain proprietary and confidential. In an attempt to comprehend this major force, consumers and providers tend to oversimplify. Many condemn managed care, viewing it narrowly as an unethical attempt to cuts costs by denying needed services. Those with an opposing perspective are at times equally narrow
From the Department of Psychiatry, and the Section of Managed Behavioral Health Care, Yale University School of Medicine, New Haven, Connecticut (MAH); the Cecil G. Sheps Center for Health Services Research, University of North Carolina at Chapel Hill, Chapel Hill, North Carolina (NMT); the Department of Psychiatry, Yale University School of Medicine; and the Connecticut Mental Health Center, New Haven, Connecticut (SJ)
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in their view that managed care is the solution to the many purported ills of traditional services. Consumers and providers most often try to understand and define managed care by example, citing that which was implemented in a specific state or by a specific employer. These are limited views and approaches to understanding managed care and its many complexities. The purpose of this article is twofold. First the origins of managed care are traced, placing it in historical perspective. Then, an approach to examining specific managed care initiatives, to understand better their core structures, processes, and effects, is outlined. A case example that highlights the utility of this approach is included. The authors’ premise is that understanding a specific managed care initiative is best accomplished by examining it on 10 dimensions. HISTORICAL PERSPECTIVES The roots of managed approaches to health care date back to the early 1900s, when prepaid group practices were created in the western United States13;however, these remained rather small and isolated elements of the US health care system. It was not until the federal government passed legislation authorizing health maintenance organizations (HMOs) in the 1970s and then subsequently loosened some of the restrictions on these organizations that managed approaches to health care began to flourish. A Reaction to Rising Costs and Perceived Abuses Managed care for behavioral disorders developed in earnest during the early 1980s in response to rising service utilization and costs. Government deregulation of the hospital industry set the stage for enormous growth of for-profit mental health and substance abuse facilities, often organized as large hospital chains. Service utilization increased dramatically as exemplified by the fourfold increase in adolescent inpatient admissions that occurred between 1982 and 1987. Public attention began to focus on the unethical and illegal practices of some of these provider organizations, such as the use of scare tactics aimed at the parents of adolescents, the payment of financial kickbacks to those who referred patients, and suspect billing practice^.^ Health care payers, such as employers, states, and the federal government, became alarmed by the rising costs and the suspect practices. They also increasingly questioned whether certain treatments were necessary and whether the duration of treatment was appropriate. Private employers were the first to respond to these concerns by contracting with entrepreneurs who had created managed behavioral health care organizations (MBHOs). These organizations contained costs by influencing the type and duration of services provided. Indemnity health
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plans soon began to adopt some of the utilization management techniques of these MBHOs. Somewhat later, government payers followed suit by contracting with MCOs or using the techniques of these organizations in government managed health insurance programs. An Extension of Previous Efforts to Manage Care
When managed care began to develop, some mental health professionals claimed that it was nothing new. These professionals, working predominantly in the public sector, maintained that they had long been managing the care of populations and working within fixed budgets. Much of this claim is true. After deinstitutionalization, four strategies evolved in the public sector for addressing the common service delivery problems in "unmanaged systems of care.1° Case management was the first strategy. It was introduced to address the problems that patients were having in accessing needed services. Next came the development of assertive community treatment teams, designed to overcome the difficulty of coordinating for a specific patient the services of multiple agencies. These mobile treatment teams directly provided most, if not all, of the needed services to severely ill patients in community settings and in patients' homes. The third strategy involved the creation of local mental health authorities. These organizations were given clinical and fiscal responsibility and accountability for service delivery in a specific geographic area. Local mental health authorities were an administrative strategy designed to address the lack of service coordination at the programmatic and individual patient levels. The last major management strategy introduced in the public sector before the era of managed care involved the introduction of novel financing arrangements in which "dollars followed patients" and could be used more flexibly to meet individual patient needs. Viewed from the perspective of these prior developments, managed care was not so much a revolution in the public sector as it was an extension of previous efforts to manage the care for targeted populations of seriously ill individuals. The previous efforts had already emphasized the need to create accessible and accountable service delivery systems offering comprehensive and clinically effective treatments that could be flexibly financed and deployed to targeted individuals in their home communities. Managed care added to these objectives an emphasis on cost control and cost effectiveness that had been largely missing in the public sector.8 Rapid Evolution of Managed Care
Viewing managed behavioral health care as an extension of previous public sector efforts to manage care does not discount the fact that this new force in psychiatry has had significant impact on the field and
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accelerated the pace of change. Managed behavioral health care has been difficult to understand because it has evolved so quickly over its short life span. One useful model that has been offered for thinking about its rapid evolution identifies several "generations" of managed care.5 This model is useful in understanding what has transpired in the private sector. The first generation involved managing benefits by limiting coverage for specific disorders or treatments and instituting deductibles, copayments, and benefit maximums to discourage utilization. This was the standard approach used by traditional indemnity insurers. The second generation involved managing access. This was the common approach used by managed care organizations in the 1980s as they focused on limiting access to costly inpatient services without giving much attention to authorizing other suitable treatments if inpatient care was denied. The third generation to emerge involved managing care by developing a network of comprehensive services, matching patient need to an "appropriate" level of care, and moving patients through the continuum of services as patients' clinical status and needs changed. Although managing care has remained the predominant paradigm, additional generations have been emerging. The fourth generation involves managing outcomes and has focused on examining the costeffectiveness rather than simply the cost of care. Interest in outcomes has been driven in part by the fact that reducing the cost or duration of one service may result in unintended costs caused by subsequent events, such as an inpatient readmission or increased use of medical, nonpsychiatric services. Although the rationale for focusing on cost effectiveness is compelling, the science of measuring outcomes in treatment settings is still limited. Thus, managing outcomes is an objective that has yet to be realized. A fifth emerging generation involves managing health. This places the focus on illness prevention and health promotion as a means to improve health outcomes and reduce expenses associated with costly secondary and tertiary care. Intervention strategies include early detection, such as depression screening; support services for "at-risk children; stress-management programs; and self-help groups. The notion of managing health remains more of an ideal than an actuality because existing knowledge regarding effective illness prevention and health promotion remains limited. TEN DIMENSIONS OF MANAGED CARE
These historical perspectives provide a useful framework for understanding the origins of managed care. Consumers, family members, and professionals, however, are faced with the challenge of understanding managed care as it unfolds in their communities. In an earlier work,9 the authors outlined a model for examining and understanding managed care initiatives. From a review of existing programs, the authors identi-
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fied 10 dimensions that define efforts at managing care and suggested that examining any managed care initiative on these dimensions would yield clarity about its form and functions. Each of the 10 dimensions is described in the accompanying box. Examples are given of the common ways in which managed care initiatives vary on these dimensions.
10 Dimensions of Managed Care
Objectives Cost containment Increased coverage of the uninsured Enhanced quality of care Scope Populations included and excluded Population size Geographic coverage Organizational Structures and Authority Payers (employers and governments) Management (carve-out versus carve-in) Service providers Enrollment Voluntary versus mandatory Options of managed care programs and health plans Enrollment process Benefit Plan Covered and excluded services Co-pays, deductibles, and annual and lifetime maximums Coverage of rehabilitation services Managing Utilization Provider network Access procedures and restrictions Care management Best Practices Clinical effectiveness Cost efficiency Unique innovations Financing Resources pooled Funds flow Financing method Risk arrangements Level of funding Quality Management and Outcomes Measurement Continuous quality improvement systems Accreditation Federally mandated evaluations Performance contracting Continued on following page
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Impact on Elements of the Public Mental Health System State mental health authority Locakounty mental health authorities MCOs State hospitals State operated community services Private and general hospitals Community providers, for-profit and nonprofits Social services Correctional systems Consumer and family participation/advocacy Academic departments
Objectives
The principal objective of any managed care effort tends to shape its characteristicsand overall operation. Although all efforts at managing care are portrayed as attempts to ”do good and avoid evil,” the primary objective may be obscured by such claims and difficult to discern? In understanding a managed care program it is useful to identify the single objective that it must accomplish to survive. Three principal objectives have characterized managed care initiatives. The reduction or control of costs is the most common. This is the objective that most individuals associate with managed care; however, two other objectives at times have been prominent. Some initiatives have been designed specifically to expand coverage to the uninsured through the use of the cost savings achieved by implementing managed care. The third objective has been to enhance quality of care. This has been the driving force in some of the public sector managed care initiatives that were designed to improve the quality of care to individuals with severe and persistent mental illness.13 Scope
Considerable variability exists in managed care initiatives with respect to the populations included, population size, and geographic coverage. Employer-based plans are fairly straightforward, encompassing employees, their family members, and retirees. In the public sector, many initiatives have been narrow in terms of the population served. It has not been uncommon for a single category of eligible individuals to be included, such as those covered by a state’s welfare program or those in a single category of Medicaid eligibility. In contrast, other public sector initiatives have been broadly inclusive with respect to the populations covered, folding, for example, Medicaid and non-Medicaid groups into large managed care programs. The potential groups of individuals in the public sector plans include the aged, indigent, children in the child
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welfare system, and persons disabled by AIDS, severe mental illness, or developmental disabilities. In terms of size and geographic reach, many managed care initiatives have been statewide, regional, or national endeavors involving hundreds of thousands of individuals. Employers, for example, contract with MBHOs to cover their employees and retirees who may be scattered across the US. In contrast, small demonstrations of public sector managed care have focused on a single city and have had less than 200 patients.l Organizational Structures and Authority
Understanding managed care requires identifying the organizations involved and their specific roles. Typically, three tiers of participation exist. At the first tier is the payer, usually an employer for privately funded health care and a government entity for publicly funded health care. In addition to financing care, these payers also regulate the provision of services by setting various parameters regarding the administration and delivery of services. An organization responsible for managing care is usually at the second tier. This responsibility can be "carved-out" to an MBHO that specializes in managing mental health and substance abuse services, or it can be integrated into a contract with an HMO or other MCO that is responsible for all medical care. It is critical to study the table of organization, however, for in some seemingly integrated arrangements, the HMO or MCO subcontracts the management of mental health and substance abuse services to a specialty MBHO, thereby creating a carve-out. At the third organizational tier are the providers. They most often hold responsibility for service delivery while having minimal influence, authority, autonomy, or control over the managed care initiative. Enrollment
The concept of enrolling employees in an insurance plan has a long history; however, in public sector mental health, individuals generally have not been identified until and unless they seek services. Under all managed care plans, private and public, individuals are identified and placed on the rolls as eligible to receive services. Understanding enrollment requires an examination of three variables. Most basic, is whether enrollment is voluntary or mandatory. Employer-sponsored health care plans and small, public sector demonstration projects tend to fall into the voluntary category. Large-scale public sector projects, such as managed Medicaid, are typically mandatory. Often overlooked is a second variable, involving enrollment options. In the private and public sectors, only one option may exist for
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accessing mental health or substance abuse care, such as a carve-out to a single MBHO; however, many employers and some public sector managed care programs offer enrollees an option with respect to the type of health plan (e.g., HMO versus a managed behavioral health care carve-out) or a choice from among similar health plans (e.g., selecting to enroll with one of several available HMOs). Also critical to examine is the enrollment process. To the extent that employers offer options, they generally provide information about these options and then allow the employee to make a selection. This has been a much more problematic issue in the public sector, where health plans have at times retained recruiters, paid on commission, to convince eligible individuals to enroll in their plan. More recently, governments have hired independent organizations or “brokers” to assist eligible individuals in enrolling and selecting from among available options. Benefit Package
Managed care initiatives vary widely with respect to the services that enrolled individuals are eligible to receive. Thus, it is essential to review the benefit package, identifying services that are covered and those that are excluded or nonreimbursable. For covered services, it is also important to establish whether deductibles, copayments, and annual or lifetime maximums circumscribe the benefit. A critical issue to examine in public sector managed care initiatives is whether rehabilitation services are covered in the benefit package or available through some other means. Such services are considered essential for individuals with severe and persistent mental illness but typically are excluded from a managed care benefit. If available outside of the managed care plan, such as through state supported rehabilitation agencies, the question to pursue is whether such services are adequately linked to the clinical care that is authorized and reimbursed as part of the managed care plan. Strategies for Managing Utilization
At the heart of most managed care initiatives are strategies for controlling and directing utilization. At the most global level, MCOs may attempt to influence utilization by creating a network of providers who are selected because their treatment approaches and practice patterns are compatible with a managed care philosophy. A second strategy focuses on control of access to the network. Open access in which individuals may self-refer is characteristic of some managed care initiatives. Others use gatekeeper models, in which a primary care physician or employee of an MCO must authorize access. Care management is a third and common approach to managing utilization. Requests for services and the continuation of services are
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reviewed for medical necessity. Care managers apply level-of-care criteria to determine the most ”appropriate” service and the frequency with which the service is authorized to be delivered. Although the care management policies and procedures of different managed care organizations often look similar, considerable variability exists in terms of how aggressively utilization is controlled. Providers and consumers can provide a valuable perspective on the actual practices of managed care organizations with respect to utilization management. Best Practices Managed care has popularized the concept of “best practices.” Glazer6has defined this notion as the best care at the lowest cost in realworld (nonexperimental) settings. Given that research seldom yields definitive conclusions about the optimal treatment for specific patients, the selection of best practices is heavily influenced by professional treatment guidelines, provider profiling, and even anecdotal clinical evidence. Best practices are, in theory, the heart of a managed care initiative, representing its approach to treatment and to managing services. Thus, understanding a managed care initiative requires identifying its best practices and assessing whether they are in any way unique. A best practice may focus on an effective clinical intervention, such as offering assertive community treatment to severe and persistently ill individuals. Alternatively a best practice may be administrative, such as performancebased contracting, which is described in the forthcoming case example. Close examination may at times, reveal that there is little unique about the approach to treatment of a managed care initiative and that it is simply dominated by efforts to restrict care to minimize costs. Financing Gaining an understanding of a managed care initiative can be greatly facilitated by asking five basic questions about the financing of the project. First, which funds are pooled to pay for services? For example, are Medicaid and general fund dollars from the state combined or is just one funding source being managed? Second, how do the funds flow? In other words, who pays whom for what? Third, what is the financing method? Are reimbursement payments made after services are delivered or are prepayments made on a capitated basis to cover the anticipated cost of care? Fourth, what are the risk arrangements? Who covers the cost of care if it exceeds the budgeted funds available, and what happens to excess funds or profits if the cost of care is less than expected? And fifth, what is the overall level of funding for the initiative? Compared with similar managed care programs for similar populations, does it seem adequately funded, richly funded, or underfunded?
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Quality and Outcomes Management Managed care initiatives purport to monitor and enhance the quality of care; however, initiatives vary widely in the extent to which they pursue this agenda. The first step in assessing this dimension is to determine whether a substantive quality improvement program is designed to identify and rectify problems with the provision of care or with administrative systems used to manage care. Second, organizations such as the National Committee on Quality Assurance (NCQA) have issued relatively new standards regarding how managed behavioral health programs should be designed and operated. It is useful to examine whether a managed care initiative is attempting to comply with these rigorous standards and is seeking accreditation from NCQA. Third, the federal government requires formal evaluations of managed Medicaid demonstrations. These evaluations have varied in scope but can be a potentially significant source of information about the impact of a managed care program. As a final indicator of efforts to ensure quality! it is informative to identify performance criteria included in contracts between a payer and MCO and to examine actual performance on those criteria. Impact on the Unmanaged Delivery System
A final approach to understanding a managed care initiative is to examine its impact on the existing system of care. By asking the simple question, What changes?, when a program is implemented, the key characteristics of the managed care program can be better defined. Central to such an examination is to consider how the accountability, financing, managing, and delivery of care are altered and the impact on the various government agencies, MBHOs, and social services agencies. It is especially important to identify whether any cost shifting occurs as a result of implementing managed care. This involves the shift of the responsibility for care or payment for care to individuals, families, organizations, or government agencies that did not previously have that responsibility. Case Example In 1995, the state of Iowa introduced managed mental health and substance abuse initiatives for Medicaid recipients.1zThe published objectives for these initiatives were to improve access and enhance the quality of services for eligible individuals. Achieving cost savings for the state, however, seems to have been the principal objective at the inception of these initiatives. More recently, the state has scaled back its expectations of cost savings, recognizing the potentially negative impact of further reducing funding for the behavioral health service delivery system.
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In terms of scope, managed behavioral health care in Iowa, known as the Iowa Plan for Behavioral Health, encompasses most Medicaid recipients under the age of 65 years, including those dually eligible for Medicaid and Medicare. It also includes two non-Medicaid-eligible groups that receive certain mental health, substance abuse, and residential services through the Iowa Plan. Enrollment in the Iowa Plan is mandatory for all Medicaid recipients with the exception of a few small categories of individuals. A previous option that allowed Medicaid recipients to choose between receiving their behavioral health care from a managed behavioral health carve-out company or one of several HMOs has been eliminated. The statewide carve-out is now the only option available. Approximately 180,000 individuals are enrolled in the carve-out at any point in time. Enrollment in the behavioral health carve-out occurs automatically when the individual enrolls in the state's Medicaid program. Organizationally,the Iowa Plan is governed by federal Medicaid regulations issued by the Health Care Financing Administration (HCFA) and by waivers from the regulations that were granted by HCFA. The Division of Medical Services, which is the state medical authority in Iowa, issued the request for proposals, contracted with an MBHO, and provides oversight of the Iowa Plan. With respect to strategies for managing utilization, the state has not restricted provider memberslup in the network, requiring an open panel. Merit Behavioral Care (MBC), which is the contracted MCO, has introduced standard care management techniques, such as prior certification and concurrent review to assess medical necessity and determine an appropriate level of care. The Iowa Plan is unique in that the required benefit plan includes standard psychiatric services plus supported living and social rehabilitation programs that are important to the disabled population. As a clinical best practice, MBC has voluntarily added a range of additional services to the benefit as a strategy for reducing inpatient hospitalizations. These services include respite care, mobile crisis, assertive community treatment, peer support, and intensive psychiatric rehabilitation. In terms of financing, the Iowa Plan administers three funding streams, including state and federal Medicaid dollars, some mental health block grant dollars, and state and federal substance abuse block grant funds. When managed behavioral health care was introduced by the state in 1995, the counties in Iowa were invited to pool their mental health budgets with the managed care initiatives of the state but chose not to do so. The State of Iowa pays MBC using a capitation arrangement in which the amount paid on a per member per month basis varies with the eligibility category of the Medicaid enrollee. MEK has full risk for the cost of needed services, can spend no more than 14%of the capitation dollars on administration, and must set aside at least 2.5% of the capitation in a community reinvestment pool to be used to address gaps in the service system. MBC pays providers on a fee-for-service basis. One of the most innovative aspects of the financing arrangement in the Iowa Plan has been the use of performance contracting, which ties MBC's compensation to specific performance criteria through a series of incentives and penalties." The federal government mandates that the state evaluate the outcome of the Iowa Plan. Available data indicate that since implementation in 1995, the average length of inpatient mental health stays has decreased from 12 days to 5 days. An increase in the number of enrollees using mental health services during the year, from 5.5% to 11.5%, also has occurred. Measured rates of consumer satisfaction reportedly have been high.
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Examining these key dimensions of the Iowa Plan brings clarity to how managed care has unfolded in the public sector of this state. After a half-decade of experience with these initiatives, the state has been fairly successful in pooling different funding streams, centralizing and coordinating the management of psychiatric, substance abuse, and rehabilitation services for diverse groups of individuals in a single MCO. The open nature of the network and the fee-for-service payment arrangement has afforded providers a great deal more protection than might be expected in private sector managed care. Finally, a unique feature of the program seems to be the assertiveness with which the state of Iowa has attempted to retain control of the project through detailed performance contracting with the MCO.
SUMMARY
Managed care can be understood from an historical perspective as a reaction to perceived abuses by providers or an extension of earlier efforts to manage care in the public sector. It can be viewed as a young and emerging force-a fourth party to the health care transaction-that is rapidly progressing through a series of generations that redefine the approach to organizing and delivering services. And finally, because managed care emerges with so many faces, consumers and providers can perhaps best understand its implementation in a specific state or community by examining the multiple dimensions, such as those outlined herein, on which these initiatives vary. Until the forms and functions are more uniform, no simple definition of munuged cure will exist.
References 1. Agus D, Blum SR, Baron ST Building a capitated public mental health service for seriously mentally ill adults: The Baltimore experience. Adm Policy Mental Health 22~261-271, 1995 2. Babigian HM, Reed SK An experimental model capitation payment system for the chronically mentally ill. Psychiatr Ann 176044309, 1987 3. Babigian HM, Marshall PE: Rochester: A comprehensive capitation experiment. In Mechanic D, Aiken LH (eds): Paying for Services: Promises and Pitfalls of Capitation. New Directions for Mental Health Services, no. 43. San Francisco, Jossey-Bass, 1989 4. Bachrach LL: Managed care: 11. Some "latent functions." Psychiatr Serv 47243, 1996 5. Freeman MA, Trabin T Managed behavioral healthcare: History, models, key issues, and future course. Rockville, MD, US.Center for Mental Health Services, 1994 6. Glazer W. What are "best practices?" Understanding the concept. Hospital and Community Psychiatry 45:1067-1068, 1994 7. Hoge MA: Managed care. In Friedman HS (ed): Encyclopedia of Mental Health, vol 2. San Diego, Academic Press, 1998, p 593 8. Hoge MA, Davidson L, Griffith EEH, et al: Defining managed care in public-sector psychiatry. Hospital and Community Psychiatry 45:1085-1089, 1994 9. Hoge MA, Jacobs S, Thakur N, et al: Ten dimensions of public-sector managed care. Psychiatr Serv 50:51-55, 1999
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10. Mechanic D: Strategies for integrating public mental health services. Hospital and Community Psychiatry 42:797-801, 1991 11. New Iowa Medicaid measures set tone for future contracts. Mental Health Weekly 6:l-3, 1996 12. Rohland BM, Rohrer JE: Evaluation of managed mental health care for Medicaid enrollees in Iowa. Psychiatr Serv 471185-1187, 1996 13. Zieman GL: The Handbook of Managed Behavioral Healthcare. San Francisco, JosseyBass, 1998
Address reprint requests to Michael A. Hoge, PhD Yale University School of Medicine 25 Park Street, 6th Floor New Haven, CT 06519
0193-953X/OO $15.00
+ .OO
UNDERSTANDING MANAGED BEHAVIORAL HEALTH CARE Michael A. Hoge, PhD, Neil M. Thakur, PhD, and Selby Jacobs, MD
Managed care is neither a well-defined concept nor a discrete entity. That which we think of as managed care consists of a broad range of strategies for organizing, financing, and delivering mental health and substance abuse services. Each strategy, as it is implemented, is shaped by the host environment and influenced by local history, politics, laws, and regulations. Thus, managed care emerges with many different functions and in an infinite array of forms. Managed care may constitute sweeping, largescale change that completely reorganizes the delivery of health care, or it may be as minor as adding some utilization-management strategies within a single provider organization. At times, managed care may be a highly visible public sector initiative in which the contracting process and review of performance and outcomes is subject to consumer, provider, and legislative oversight. Alternatively, it may be an arrangement between an employer and managed care organization (MCO) in which the contracts and data on outcomes remain proprietary and confidential. In an attempt to comprehend this major force, consumers and providers tend to oversimplify. Many condemn managed care, viewing it narrowly as an unethical attempt to cuts costs by denying needed services. Those with an opposing perspective are at times equally narrow
From the Department of Psychiatry, and the Section of Managed Behavioral Health Care, Yale University School of Medicine, New Haven, Connecticut (MAH); the Cecil G. Sheps Center for Health Services Research, University of North Carolina at Chapel Hill, Chapel Hill, North Carolina (NMT); the Department of Psychiatry, Yale University School of Medicine; and the Connecticut Mental Health Center, New Haven, Connecticut (SJ)
THE PSYCHIATRIC CLINICS OF NORTH AMERICA
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in their view that managed care is the solution to the many purported ills of traditional services. Consumers and providers most often try to understand and define managed care by example, citing that which was implemented in a specific state or by a specific employer. These are limited views and approaches to understanding managed care and its many complexities. The purpose of this article is twofold. First the origins of managed care are traced, placing it in historical perspective. Then, an approach to examining specific managed care initiatives, to understand better their core structures, processes, and effects, is outlined. A case example that highlights the utility of this approach is included. The authors’ premise is that understanding a specific managed care initiative is best accomplished by examining it on 10 dimensions. HISTORICAL PERSPECTIVES The roots of managed approaches to health care date back to the early 1900s, when prepaid group practices were created in the western United States13;however, these remained rather small and isolated elements of the US health care system. It was not until the federal government passed legislation authorizing health maintenance organizations (HMOs) in the 1970s and then subsequently loosened some of the restrictions on these organizations that managed approaches to health care began to flourish. A Reaction to Rising Costs and Perceived Abuses Managed care for behavioral disorders developed in earnest during the early 1980s in response to rising service utilization and costs. Government deregulation of the hospital industry set the stage for enormous growth of for-profit mental health and substance abuse facilities, often organized as large hospital chains. Service utilization increased dramatically as exemplified by the fourfold increase in adolescent inpatient admissions that occurred between 1982 and 1987. Public attention began to focus on the unethical and illegal practices of some of these provider organizations, such as the use of scare tactics aimed at the parents of adolescents, the payment of financial kickbacks to those who referred patients, and suspect billing practice^.^ Health care payers, such as employers, states, and the federal government, became alarmed by the rising costs and the suspect practices. They also increasingly questioned whether certain treatments were necessary and whether the duration of treatment was appropriate. Private employers were the first to respond to these concerns by contracting with entrepreneurs who had created managed behavioral health care organizations (MBHOs). These organizations contained costs by influencing the type and duration of services provided. Indemnity health
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plans soon began to adopt some of the utilization management techniques of these MBHOs. Somewhat later, government payers followed suit by contracting with MCOs or using the techniques of these organizations in government managed health insurance programs. An Extension of Previous Efforts to Manage Care
When managed care began to develop, some mental health professionals claimed that it was nothing new. These professionals, working predominantly in the public sector, maintained that they had long been managing the care of populations and working within fixed budgets. Much of this claim is true. After deinstitutionalization, four strategies evolved in the public sector for addressing the common service delivery problems in "unmanaged systems of care.1° Case management was the first strategy. It was introduced to address the problems that patients were having in accessing needed services. Next came the development of assertive community treatment teams, designed to overcome the difficulty of coordinating for a specific patient the services of multiple agencies. These mobile treatment teams directly provided most, if not all, of the needed services to severely ill patients in community settings and in patients' homes. The third strategy involved the creation of local mental health authorities. These organizations were given clinical and fiscal responsibility and accountability for service delivery in a specific geographic area. Local mental health authorities were an administrative strategy designed to address the lack of service coordination at the programmatic and individual patient levels. The last major management strategy introduced in the public sector before the era of managed care involved the introduction of novel financing arrangements in which "dollars followed patients" and could be used more flexibly to meet individual patient needs. Viewed from the perspective of these prior developments, managed care was not so much a revolution in the public sector as it was an extension of previous efforts to manage the care for targeted populations of seriously ill individuals. The previous efforts had already emphasized the need to create accessible and accountable service delivery systems offering comprehensive and clinically effective treatments that could be flexibly financed and deployed to targeted individuals in their home communities. Managed care added to these objectives an emphasis on cost control and cost effectiveness that had been largely missing in the public sector.8 Rapid Evolution of Managed Care
Viewing managed behavioral health care as an extension of previous public sector efforts to manage care does not discount the fact that this new force in psychiatry has had significant impact on the field and
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accelerated the pace of change. Managed behavioral health care has been difficult to understand because it has evolved so quickly over its short life span. One useful model that has been offered for thinking about its rapid evolution identifies several "generations" of managed care.5 This model is useful in understanding what has transpired in the private sector. The first generation involved managing benefits by limiting coverage for specific disorders or treatments and instituting deductibles, copayments, and benefit maximums to discourage utilization. This was the standard approach used by traditional indemnity insurers. The second generation involved managing access. This was the common approach used by managed care organizations in the 1980s as they focused on limiting access to costly inpatient services without giving much attention to authorizing other suitable treatments if inpatient care was denied. The third generation to emerge involved managing care by developing a network of comprehensive services, matching patient need to an "appropriate" level of care, and moving patients through the continuum of services as patients' clinical status and needs changed. Although managing care has remained the predominant paradigm, additional generations have been emerging. The fourth generation involves managing outcomes and has focused on examining the costeffectiveness rather than simply the cost of care. Interest in outcomes has been driven in part by the fact that reducing the cost or duration of one service may result in unintended costs caused by subsequent events, such as an inpatient readmission or increased use of medical, nonpsychiatric services. Although the rationale for focusing on cost effectiveness is compelling, the science of measuring outcomes in treatment settings is still limited. Thus, managing outcomes is an objective that has yet to be realized. A fifth emerging generation involves managing health. This places the focus on illness prevention and health promotion as a means to improve health outcomes and reduce expenses associated with costly secondary and tertiary care. Intervention strategies include early detection, such as depression screening; support services for "at-risk children; stress-management programs; and self-help groups. The notion of managing health remains more of an ideal than an actuality because existing knowledge regarding effective illness prevention and health promotion remains limited. TEN DIMENSIONS OF MANAGED CARE
These historical perspectives provide a useful framework for understanding the origins of managed care. Consumers, family members, and professionals, however, are faced with the challenge of understanding managed care as it unfolds in their communities. In an earlier work,9 the authors outlined a model for examining and understanding managed care initiatives. From a review of existing programs, the authors identi-
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fied 10 dimensions that define efforts at managing care and suggested that examining any managed care initiative on these dimensions would yield clarity about its form and functions. Each of the 10 dimensions is described in the accompanying box. Examples are given of the common ways in which managed care initiatives vary on these dimensions.
10 Dimensions of Managed Care
Objectives Cost containment Increased coverage of the uninsured Enhanced quality of care Scope Populations included and excluded Population size Geographic coverage Organizational Structures and Authority Payers (employers and governments) Management (carve-out versus carve-in) Service providers Enrollment Voluntary versus mandatory Options of managed care programs and health plans Enrollment process Benefit Plan Covered and excluded services Co-pays, deductibles, and annual and lifetime maximums Coverage of rehabilitation services Managing Utilization Provider network Access procedures and restrictions Care management Best Practices Clinical effectiveness Cost efficiency Unique innovations Financing Resources pooled Funds flow Financing method Risk arrangements Level of funding Quality Management and Outcomes Measurement Continuous quality improvement systems Accreditation Federally mandated evaluations Performance contracting Continued on following page
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Impact on Elements of the Public Mental Health System State mental health authority Locakounty mental health authorities MCOs State hospitals State operated community services Private and general hospitals Community providers, for-profit and nonprofits Social services Correctional systems Consumer and family participation/advocacy Academic departments
Objectives
The principal objective of any managed care effort tends to shape its characteristicsand overall operation. Although all efforts at managing care are portrayed as attempts to ”do good and avoid evil,” the primary objective may be obscured by such claims and difficult to discern? In understanding a managed care program it is useful to identify the single objective that it must accomplish to survive. Three principal objectives have characterized managed care initiatives. The reduction or control of costs is the most common. This is the objective that most individuals associate with managed care; however, two other objectives at times have been prominent. Some initiatives have been designed specifically to expand coverage to the uninsured through the use of the cost savings achieved by implementing managed care. The third objective has been to enhance quality of care. This has been the driving force in some of the public sector managed care initiatives that were designed to improve the quality of care to individuals with severe and persistent mental illness.13 Scope
Considerable variability exists in managed care initiatives with respect to the populations included, population size, and geographic coverage. Employer-based plans are fairly straightforward, encompassing employees, their family members, and retirees. In the public sector, many initiatives have been narrow in terms of the population served. It has not been uncommon for a single category of eligible individuals to be included, such as those covered by a state’s welfare program or those in a single category of Medicaid eligibility. In contrast, other public sector initiatives have been broadly inclusive with respect to the populations covered, folding, for example, Medicaid and non-Medicaid groups into large managed care programs. The potential groups of individuals in the public sector plans include the aged, indigent, children in the child
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welfare system, and persons disabled by AIDS, severe mental illness, or developmental disabilities. In terms of size and geographic reach, many managed care initiatives have been statewide, regional, or national endeavors involving hundreds of thousands of individuals. Employers, for example, contract with MBHOs to cover their employees and retirees who may be scattered across the US. In contrast, small demonstrations of public sector managed care have focused on a single city and have had less than 200 patients.l Organizational Structures and Authority
Understanding managed care requires identifying the organizations involved and their specific roles. Typically, three tiers of participation exist. At the first tier is the payer, usually an employer for privately funded health care and a government entity for publicly funded health care. In addition to financing care, these payers also regulate the provision of services by setting various parameters regarding the administration and delivery of services. An organization responsible for managing care is usually at the second tier. This responsibility can be "carved-out" to an MBHO that specializes in managing mental health and substance abuse services, or it can be integrated into a contract with an HMO or other MCO that is responsible for all medical care. It is critical to study the table of organization, however, for in some seemingly integrated arrangements, the HMO or MCO subcontracts the management of mental health and substance abuse services to a specialty MBHO, thereby creating a carve-out. At the third organizational tier are the providers. They most often hold responsibility for service delivery while having minimal influence, authority, autonomy, or control over the managed care initiative. Enrollment
The concept of enrolling employees in an insurance plan has a long history; however, in public sector mental health, individuals generally have not been identified until and unless they seek services. Under all managed care plans, private and public, individuals are identified and placed on the rolls as eligible to receive services. Understanding enrollment requires an examination of three variables. Most basic, is whether enrollment is voluntary or mandatory. Employer-sponsored health care plans and small, public sector demonstration projects tend to fall into the voluntary category. Large-scale public sector projects, such as managed Medicaid, are typically mandatory. Often overlooked is a second variable, involving enrollment options. In the private and public sectors, only one option may exist for
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accessing mental health or substance abuse care, such as a carve-out to a single MBHO; however, many employers and some public sector managed care programs offer enrollees an option with respect to the type of health plan (e.g., HMO versus a managed behavioral health care carve-out) or a choice from among similar health plans (e.g., selecting to enroll with one of several available HMOs). Also critical to examine is the enrollment process. To the extent that employers offer options, they generally provide information about these options and then allow the employee to make a selection. This has been a much more problematic issue in the public sector, where health plans have at times retained recruiters, paid on commission, to convince eligible individuals to enroll in their plan. More recently, governments have hired independent organizations or “brokers” to assist eligible individuals in enrolling and selecting from among available options. Benefit Package
Managed care initiatives vary widely with respect to the services that enrolled individuals are eligible to receive. Thus, it is essential to review the benefit package, identifying services that are covered and those that are excluded or nonreimbursable. For covered services, it is also important to establish whether deductibles, copayments, and annual or lifetime maximums circumscribe the benefit. A critical issue to examine in public sector managed care initiatives is whether rehabilitation services are covered in the benefit package or available through some other means. Such services are considered essential for individuals with severe and persistent mental illness but typically are excluded from a managed care benefit. If available outside of the managed care plan, such as through state supported rehabilitation agencies, the question to pursue is whether such services are adequately linked to the clinical care that is authorized and reimbursed as part of the managed care plan. Strategies for Managing Utilization
At the heart of most managed care initiatives are strategies for controlling and directing utilization. At the most global level, MCOs may attempt to influence utilization by creating a network of providers who are selected because their treatment approaches and practice patterns are compatible with a managed care philosophy. A second strategy focuses on control of access to the network. Open access in which individuals may self-refer is characteristic of some managed care initiatives. Others use gatekeeper models, in which a primary care physician or employee of an MCO must authorize access. Care management is a third and common approach to managing utilization. Requests for services and the continuation of services are
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reviewed for medical necessity. Care managers apply level-of-care criteria to determine the most ”appropriate” service and the frequency with which the service is authorized to be delivered. Although the care management policies and procedures of different managed care organizations often look similar, considerable variability exists in terms of how aggressively utilization is controlled. Providers and consumers can provide a valuable perspective on the actual practices of managed care organizations with respect to utilization management. Best Practices Managed care has popularized the concept of “best practices.” Glazer6has defined this notion as the best care at the lowest cost in realworld (nonexperimental) settings. Given that research seldom yields definitive conclusions about the optimal treatment for specific patients, the selection of best practices is heavily influenced by professional treatment guidelines, provider profiling, and even anecdotal clinical evidence. Best practices are, in theory, the heart of a managed care initiative, representing its approach to treatment and to managing services. Thus, understanding a managed care initiative requires identifying its best practices and assessing whether they are in any way unique. A best practice may focus on an effective clinical intervention, such as offering assertive community treatment to severe and persistently ill individuals. Alternatively a best practice may be administrative, such as performancebased contracting, which is described in the forthcoming case example. Close examination may at times, reveal that there is little unique about the approach to treatment of a managed care initiative and that it is simply dominated by efforts to restrict care to minimize costs. Financing Gaining an understanding of a managed care initiative can be greatly facilitated by asking five basic questions about the financing of the project. First, which funds are pooled to pay for services? For example, are Medicaid and general fund dollars from the state combined or is just one funding source being managed? Second, how do the funds flow? In other words, who pays whom for what? Third, what is the financing method? Are reimbursement payments made after services are delivered or are prepayments made on a capitated basis to cover the anticipated cost of care? Fourth, what are the risk arrangements? Who covers the cost of care if it exceeds the budgeted funds available, and what happens to excess funds or profits if the cost of care is less than expected? And fifth, what is the overall level of funding for the initiative? Compared with similar managed care programs for similar populations, does it seem adequately funded, richly funded, or underfunded?
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Quality and Outcomes Management Managed care initiatives purport to monitor and enhance the quality of care; however, initiatives vary widely in the extent to which they pursue this agenda. The first step in assessing this dimension is to determine whether a substantive quality improvement program is designed to identify and rectify problems with the provision of care or with administrative systems used to manage care. Second, organizations such as the National Committee on Quality Assurance (NCQA) have issued relatively new standards regarding how managed behavioral health programs should be designed and operated. It is useful to examine whether a managed care initiative is attempting to comply with these rigorous standards and is seeking accreditation from NCQA. Third, the federal government requires formal evaluations of managed Medicaid demonstrations. These evaluations have varied in scope but can be a potentially significant source of information about the impact of a managed care program. As a final indicator of efforts to ensure quality! it is informative to identify performance criteria included in contracts between a payer and MCO and to examine actual performance on those criteria. Impact on the Unmanaged Delivery System
A final approach to understanding a managed care initiative is to examine its impact on the existing system of care. By asking the simple question, What changes?, when a program is implemented, the key characteristics of the managed care program can be better defined. Central to such an examination is to consider how the accountability, financing, managing, and delivery of care are altered and the impact on the various government agencies, MBHOs, and social services agencies. It is especially important to identify whether any cost shifting occurs as a result of implementing managed care. This involves the shift of the responsibility for care or payment for care to individuals, families, organizations, or government agencies that did not previously have that responsibility. Case Example In 1995, the state of Iowa introduced managed mental health and substance abuse initiatives for Medicaid recipients.1zThe published objectives for these initiatives were to improve access and enhance the quality of services for eligible individuals. Achieving cost savings for the state, however, seems to have been the principal objective at the inception of these initiatives. More recently, the state has scaled back its expectations of cost savings, recognizing the potentially negative impact of further reducing funding for the behavioral health service delivery system.
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In terms of scope, managed behavioral health care in Iowa, known as the Iowa Plan for Behavioral Health, encompasses most Medicaid recipients under the age of 65 years, including those dually eligible for Medicaid and Medicare. It also includes two non-Medicaid-eligible groups that receive certain mental health, substance abuse, and residential services through the Iowa Plan. Enrollment in the Iowa Plan is mandatory for all Medicaid recipients with the exception of a few small categories of individuals. A previous option that allowed Medicaid recipients to choose between receiving their behavioral health care from a managed behavioral health carve-out company or one of several HMOs has been eliminated. The statewide carve-out is now the only option available. Approximately 180,000 individuals are enrolled in the carve-out at any point in time. Enrollment in the behavioral health carve-out occurs automatically when the individual enrolls in the state's Medicaid program. Organizationally,the Iowa Plan is governed by federal Medicaid regulations issued by the Health Care Financing Administration (HCFA) and by waivers from the regulations that were granted by HCFA. The Division of Medical Services, which is the state medical authority in Iowa, issued the request for proposals, contracted with an MBHO, and provides oversight of the Iowa Plan. With respect to strategies for managing utilization, the state has not restricted provider memberslup in the network, requiring an open panel. Merit Behavioral Care (MBC), which is the contracted MCO, has introduced standard care management techniques, such as prior certification and concurrent review to assess medical necessity and determine an appropriate level of care. The Iowa Plan is unique in that the required benefit plan includes standard psychiatric services plus supported living and social rehabilitation programs that are important to the disabled population. As a clinical best practice, MBC has voluntarily added a range of additional services to the benefit as a strategy for reducing inpatient hospitalizations. These services include respite care, mobile crisis, assertive community treatment, peer support, and intensive psychiatric rehabilitation. In terms of financing, the Iowa Plan administers three funding streams, including state and federal Medicaid dollars, some mental health block grant dollars, and state and federal substance abuse block grant funds. When managed behavioral health care was introduced by the state in 1995, the counties in Iowa were invited to pool their mental health budgets with the managed care initiatives of the state but chose not to do so. The State of Iowa pays MBC using a capitation arrangement in which the amount paid on a per member per month basis varies with the eligibility category of the Medicaid enrollee. MEK has full risk for the cost of needed services, can spend no more than 14%of the capitation dollars on administration, and must set aside at least 2.5% of the capitation in a community reinvestment pool to be used to address gaps in the service system. MBC pays providers on a fee-for-service basis. One of the most innovative aspects of the financing arrangement in the Iowa Plan has been the use of performance contracting, which ties MBC's compensation to specific performance criteria through a series of incentives and penalties." The federal government mandates that the state evaluate the outcome of the Iowa Plan. Available data indicate that since implementation in 1995, the average length of inpatient mental health stays has decreased from 12 days to 5 days. An increase in the number of enrollees using mental health services during the year, from 5.5% to 11.5%, also has occurred. Measured rates of consumer satisfaction reportedly have been high.
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Examining these key dimensions of the Iowa Plan brings clarity to how managed care has unfolded in the public sector of this state. After a half-decade of experience with these initiatives, the state has been fairly successful in pooling different funding streams, centralizing and coordinating the management of psychiatric, substance abuse, and rehabilitation services for diverse groups of individuals in a single MCO. The open nature of the network and the fee-for-service payment arrangement has afforded providers a great deal more protection than might be expected in private sector managed care. Finally, a unique feature of the program seems to be the assertiveness with which the state of Iowa has attempted to retain control of the project through detailed performance contracting with the MCO.
SUMMARY
Managed care can be understood from an historical perspective as a reaction to perceived abuses by providers or an extension of earlier efforts to manage care in the public sector. It can be viewed as a young and emerging force-a fourth party to the health care transaction-that is rapidly progressing through a series of generations that redefine the approach to organizing and delivering services. And finally, because managed care emerges with so many faces, consumers and providers can perhaps best understand its implementation in a specific state or community by examining the multiple dimensions, such as those outlined herein, on which these initiatives vary. Until the forms and functions are more uniform, no simple definition of munuged cure will exist.
References 1. Agus D, Blum SR, Baron ST Building a capitated public mental health service for seriously mentally ill adults: The Baltimore experience. Adm Policy Mental Health 22~261-271, 1995 2. Babigian HM, Reed SK An experimental model capitation payment system for the chronically mentally ill. Psychiatr Ann 176044309, 1987 3. Babigian HM, Marshall PE: Rochester: A comprehensive capitation experiment. In Mechanic D, Aiken LH (eds): Paying for Services: Promises and Pitfalls of Capitation. New Directions for Mental Health Services, no. 43. San Francisco, Jossey-Bass, 1989 4. Bachrach LL: Managed care: 11. Some "latent functions." Psychiatr Serv 47243, 1996 5. Freeman MA, Trabin T Managed behavioral healthcare: History, models, key issues, and future course. Rockville, MD, US.Center for Mental Health Services, 1994 6. Glazer W. What are "best practices?" Understanding the concept. Hospital and Community Psychiatry 45:1067-1068, 1994 7. Hoge MA: Managed care. In Friedman HS (ed): Encyclopedia of Mental Health, vol 2. San Diego, Academic Press, 1998, p 593 8. Hoge MA, Davidson L, Griffith EEH, et al: Defining managed care in public-sector psychiatry. Hospital and Community Psychiatry 45:1085-1089, 1994 9. Hoge MA, Jacobs S, Thakur N, et al: Ten dimensions of public-sector managed care. Psychiatr Serv 50:51-55, 1999
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10. Mechanic D: Strategies for integrating public mental health services. Hospital and Community Psychiatry 42:797-801, 1991 11. New Iowa Medicaid measures set tone for future contracts. Mental Health Weekly 6:l-3, 1996 12. Rohland BM, Rohrer JE: Evaluation of managed mental health care for Medicaid enrollees in Iowa. Psychiatr Serv 471185-1187, 1996 13. Zieman GL: The Handbook of Managed Behavioral Healthcare. San Francisco, JosseyBass, 1998
Address reprint requests to Michael A. Hoge, PhD Yale University School of Medicine 25 Park Street, 6th Floor New Haven, CT 06519