Community mental health centers in a managed care environment

Administration and Policy in Mental Health Vol. 21, No. 4, March 1994

COMMUNITY MENTAL HEALTH CENTERS IN A MANAGED CARE ENVIRONMENT

Anthony Broskowski, Ph.D., and Morris Eaddy, Ph.D.

A B S T R A C T : Managed care has become the dominan t force in both public and private mental heal th and substance abuse services. The authors describe how one communi ty mental health center organized itself to take advantage of the increasing demands for managed mental health services.

Community mental health centers (CMHCs) are facing opportunities, albeit largely unrecognized, emanating from the movement toward managed mental health care in the private and public sectors. For several reasons, mental health and substance abuse stepped into the limelight of corporate attention (Broskowski, 1991). While hospital admissions and lengths of stay for medical conditions have declined, utilization of alcohol, drug, and mental health (ADM) care has increased to the point where it now represents 15-20 % of the medical costs for employers (Frank & Lave, 1992; Wallace, 1987). The primary payors of care, self-insured employers and insurers, are seeking to control and manage the escalating costs of ADM services through a variety of cost containment mechanisms (Anderson, 1989; Bagby & Sullivan, 1986; Feldstein, Wickizer, & Wheeler, 1988; Sullivan, Flynn, & Lewin, 1987). Furthermore, employers increasingly express concern with the issues of access and quality of care, as they read about the abuses of some hospital chains promoting inappropriate admissions of insured persons. It is not just employers and commercial insurers who are concerned. Several state govern- ments have taken steps to manage the mental health care provided through the Medicaid program.

Anthony Broskowski is Director, Health Care Research and Development, Prudential Insurance Company of America. Morris Eaddy is President and CEO of Lakeview Center in Pensacola, FL.

Address for correspondence: Anthony Broskowski, Ph.D., Prudential Life Insurance Company of Amer- ica, 56 N. Livingston Ave., Roseland, NJ 07068.

335 �9 1994 Human Sciences Press, Inc.

336 Administration and Policy in Mental Health

Managed A D M services is only one component of a larger movement to manage all aspects of health care (Goran, 1992). It is important for C M H C s to understand the broader context or environment of A D M services, namely the structure and operations of managed health care if they expect to take full advantage of the emergent opportunities.

MECHANISMS AND ORGANIZATIONS IN THE MANAGED CARE ENVIRONMENT

After years of benign neglect, employers have chosen to begin managing their employees' health care costs. Understanding that total health care costs are determined by the formula:

Total Costs = (Units Consumed) x (Cost per Unit)

employers and insurers have instituted a range of mechanisms designed to either reduce the overall rates of utilization or the average price per unit of service (Herzlinger & Calkins, 1986). Some of these mechanisms are also designed to improve access to care or improve the quality of care. When organized in a coherent fashion, these component mechanisms constitute the types of"managed care" programs sold and operated by a range of managed care organizations. Figure 1, based on an adaptation of Curtiss (1989), sum- marizes these mechanisms and the service organizations that provide them. Given this wide range of managed care mechanisms and service organizations, there are a number of ways for C M H C s to participate in managed care opportunities. Seeking out the most appropriate opportunities requires the C M H C to understand the primary types of service organizations and the attributes that distinguish them from one another.

Health Maintenance Organizations (HMOs)

H M O s are one of the most common forms of managed care organizations. The essential feature of an H M O is that a defined, comprehensive benefit plan is financed on a prepaid, per member per month fee basis. Generally, the cost of any care incurred outside of the H M O network is not covered unless the member was traveling outside the geographical area covered by the H M O and it was an emergency procedure.

The H M O industry is now beginning to offer more flexible benefit plans. An open-ended or point-of-service H M O allows the member to go to whatever provider they choose on any given occasion. However, the insurance benefits, primarily the level of coinsurance, deductibles, and "stop-loss" limits, are set up to give financial incentives to stay within the "network" of preferred providers.

While H M O s initially had the reputation of offering extremely limited mental health benefits, the trend in the H M O industry has been to expand

Anthony Broskowski and Morris Eaddy 337

FIGURE 1 Managed Care Mechanisms and Service Organizations

Prlmmry Mechanisms m m m m m m m n i m m m m l m m i

Usual & Customary fees

Negotiated discounts

Prospective pricing

Bundled services/payments

Capitation payment

Share of premium

Referral/precertification

UtiliT~tion review

Peer review

Benefit (re)design

Employee cost-sharing

Employee incentives

Benefit carve-outs

Quality criteria

Outcome Measurement

Health promotion

Risk appraisal/screening

Database integration

Flaud/abusr d e t e c t i o n - -

Primary Goals I l i i l i l l i l l i

Price

Access 4=~

- - ~ QuaUty ~ -

Types of Service Organizations K I n N I N N I N U U N N U N U N n U l N u n l N

Health Mainteuance Org~ni~'~tions

Staff

Independent Practice Association

Croup Practice

Network

Preferred Provider Organizations

Insurer/payor

Provider

Employer

Independent

Managed Fee for Service

Employer

Insurer

"Ilfird Party Admini.~trator (TPA)

Derivative OrganDations

Open-ended/Point of service

Specialty vendors (UR/PPO)

Hybrid risk sharing

Exclusive Provider OrganiTations

coverage through a range of paid staff who are mental health specialists, or through subcontracts with specialty organizations such as C M H C s (Inter- Study, 1992).

Methods of provider reimbursement can vary widely among H M O s . Staff model H M O s pay the primary care providers a salary, but may pay sub- contracted specialists on the basis of a discounted fee-for-service. In some cases the H M O may pay the provider a percentage of a "risk-pool" that represents the difference between the premiums paid by the employers and members, and the costs of the provided care. In other H M O s , the professional staff, primary care physicians, specialists, and other facilities, hospitals, and clinics, may be


paid on a capitated basis, a percent of premium basis, a "per case" or "per episode" basis, or for some, a discounted fee-for-service basis. In addition to this compensation, some providers may earn incentive payments based upon savings from the "risk pool." More recently there have been efforts to allocate incentives based upon quality of care indicators rather than on financial savings alone.

The H M O may ask the insured member to choose a primary care physician (PCP), who then serves as the "gatekeeper" for any further care. Typically, the PCP assesses the need for care, provides as much as he/she is qualified to provide, and authorizes any referrals to appropriate specialist providers. Therefore, the PCP has the case management responsibility within the H M O . In some cases the member may simply visit the H M O clinic to be treated by the most suitable physician for the presenting complaint. C M H C s must expect to work within such referral and case management systems.

In summary, the H M O provides an array of services covered by a capitated payment, putting the H M O at risk for the cost of the care it provides. Care is case-managed and authorized by the primary care physician, who may or may not share the risk of the H M O , but who has incentives to keep the cost of care at a minimum.

Preferred Provider Organizations (PPOs)

Another route for C M H C participation in managed care is to join a PPO. A PPO is a network of providers that collectively offer comprehensive services, or specialty care (Cowan, 1984). The providers may not be linked to one another in any way other than that they contract with the PPO administrator to provide specified types of care within the limits of the benefit plan. Members of the PPO may include hospitals, group practices, private individual providers, and private agencies. C M H C s must realize that the providers are invited to join the network for one or more different reasons; reputation for quality, geographical location, provision of a necessary specialty service or procedure, or the ability to provide a comprehensive range of subspecialty services.

Generally PPO providers contract to be paid on a discounted fee-for-service basis, after rendering services. Their primary risk is that their discounted fee, based on an expected incremental increase in the volume of new patients, will not compensate for the actual volume of new patients referred to them by the PPO administrator. In addition to addressing the issues of discounted fees and patient volume, most PPO contracts also include specific references to the providers' obligations to abide by specific review and authorization mechanisms.

The PPO administrator may be an insurance company, an employer or coalition of employers, a major provider group, such as a hospital and one or two large group practices. The administrator markets the services of the network to employers, and usually provides some managed care mechanisms,


such as utilization review, or claims payment. Or a coalition of employers may develop their own PPO and hire a managed care company to serve as administrator. The PPO administrator generally assumes all or most of the financial risk for care, in some cases sharing those risks with the employer or providers.

Managed Fee for Service (MFFS)

This broad category refers to the usual range of health care offered through traditional indemnity or self-funded insurance products. Members have the freedom to choose their own providers but may also be subject to one or more limits on the range and volume of services. For example, an indemnified or self-insured employer may purchase a "second surgical opinion" program, or a precertification program, requiring surgical care to be preauthorized, while leaving the choice of surgeon up to the patient. MFFS is a common transitional phase used by employers who are unwilling, or unable, to use more comprehensive approaches. For example, the employees may be too geographically scattered to allow a simple H M O or PPO network to work effectively. Unions or employers may not want to relinquish the freedom of patients to choose their own providers.

Derivative Organizations (UR, CM, Claims Review, Data Management, and Health Promotion)

A number of specialty organizations have evolved to provide one or more of the managed care mechanisms listed in the left column of Figure 1. There is no simple way to summarize all of these organizations, but is possible to describe some of the most common ones that are relevant to the C M H C industry.

The prevalence and popularity of utilization review (UR) has led to the establishment of specialty UR firms. These firms subcontract to insurers, self- insured employers, or other managed care organizations to apply their review procedures to specified types of care, such as mental health and substance abuse, or physical disabilities. The most common types of review are pread- mission certification and concurrent review of hospital care. Until recently there was little attention paid to the utilization of outpatient care, although that is increasingly an area of focus.

In these organizations, the reviewer is usually empowered to authorize or deny payment for care, but may be limited to authorizing only those services explicitly covered by the benefit plan. In cases when the employer is self- insured and need not comply with state insurance laws and mandates, the reviewer may have the authority to "flex the benefit plan" and authorize services that may fall outside what is written in the benefit plan.

The early criteria used by reviewers were informal. Now they depend heavily on written criteria, some of which are related to patient outcomes. Most UR firms also rely on properly trained and experienced review professionals who are specialists in the type of service they review.


Seldom do basic UR-only firms offer case management of a single patient across multiple providers. When they do it is usually minimal, such as letting the treating facility or physician know about some other resource available in their community. The basic "UR-only" organization does not directly offer alternative services nor does it provide access to a contracted network of providers.

Recently some specialty U R firms have evolved into case management (CM) organizations, coupling specialized U R with the ability to assess, refer, and case manage patients within a PPO network. Case management represents a shift in orientation from passive U R to more active involvement in treatment planning and disposition. Rather than the provider system responding passively to the requests of the patient, or the review system responding passively to the requests of the provider, the case management firm actively responds to needs of the patient and works closely with selected providers. This collaboration leads to greater efficiencies since unnecessary services are avoided and the patient can receive the level of care best suited to their needs at any given point in time (Brightbill, 1988).

Arriving at the same point but from a different historical basis, Employee Assistance Programs (EAPs) are among these types of specialty CM organizations that have evolved into case management firms.

Such U R and CM organizations do not usually assume total financial liability for care, but may assume partial financial risks, through contracts that pay them a fixed administrative fee (per eligible member) plus rewards or penalties based on performance standards set up by the purchaser. Some firms also offer providers, such as CMHCs, the opportunity to share the rewards and risks of meeting these defined goals.

Another type of organization providing some of the managed care mechanisms listed in Figure 1, and which focuses on claims processing and related services, is called third-party administrator (TPA). When self-insurance became popular following the enactment of the federal Employee Retirement Income Security Act (ERISA) employers turned to TPAs to have their claims processed. TPAs then began offering other services, such as investigation of claims fraud and abusive billing practices, services also offered by insurance companies who administer services for self-insured employers. Some TPAs also offer UR services.

While not yet as prevalent, we now witness the growth of organizations that specialize in other services needed to manage costly and complex programs. For example, there are firms that offer employers or insurers specialized software and statistical reporting services. Others market specialized software used by the professionals doing the review process. Others offer health promotion or health risk appraisal services. Still others help employers integrate personnel and health-related information which is fragmented among separate depart- ments and personnel records systems (e.g., health benefits; sickness, disabilities and accidents; workers compensation, EAP, other fringe benefits, etc.).


Other Mechanisms of Managed Care

When describing the types of service organizations, mention was made of the mechanisms listed on the left side of Figure 1 as inherent components of their "product." A few other mechanisms listed warrant additional discussion, particularly the ways that fees are set and paid.

Usual and customary (U & C) fee schedules were early mechanisms used to limit the fees paid to providers. These have been ineffective, however, since they are based on some percentile of the distribution of submitted charges (e.g., 80th percentile), giving providers an incentive to raise their charges and consequently shift upward the entire distribution of charges and the U & C percentile limit.

Now managed care organizations typically negotiate discounts from the provider's normal charges, or created fixed fees for given procedures. Payors are also combining separate procedures undertaken for certain surgeries, or given diagnoses, into "bundled" service packages. These fees are set prospec- tively but paid after the service has been rendered. The Medicare "Diagnostic- Related Groups" (DRGs) is an example of such a prospective payment mechanism for inpatient care. In January, 1992 Medicare initiated the Resource- Based Relative Value Scale (RB-RVS), fixed fees for procedures based on their relative consumption of the provider's time, overhead costs, and malpractice expenses, weighted to different geographical areas throughout the country. C M H C s serving Medicare beneficiaries will be affected by this fixed-fee mechanism.

Another mechanism is to redesign the benefit plan to reinforce appropriate utilization by: (1) giving the patient the incentive of greater levels of coverage when using a "preferred provider," (2) "carving out" specific benefits (e.g., mental health and substance abuse treatment), requiring their use be subject to case management or subject to special limits, (3) expanding coverage for less expensive but equally effective treatment alternatives, and (4) requiring greater employee/user cost sharing of the premium expenses (Foster-Higgins, 1987).

The motivations for managed care systems are not exclusively based on economic factors. Many employers are concerned with the quality of care and are also aware that most persons cannot assess the quality of the care they seek. Furthermore, analysts understand that cost is related to quality in several ways (Mechanic, i985; Steffen, 1988). Poor quality care usually leads to additional care, and cost, for the same problems. Fragmented care is often of lower quality, since the synergistic effects of a coordinated system of care are not present. While some argue that quality cannot be measured, most insurers now engage in credentialling providers for evidence of minimum training and experience. Others apply "practice guidelines" and treatment protocols to well- defined conditions, or use psychometric measures to assess patient satisfaction and clinical outcomes.


Financial Risk Sharing

Most managed care organizations use some form of risk-sharing to reinforce appropriate utilization and pricing. Financial risks or cost-sharing may be distributed in some fashion among five entities: (1) the employee or eligible user, (2) the patient or actual user, (3) the provider, (4) the managed care organization, and (5) the employer. The most common methods of allocating costs and risks are as follows.

1. Employees pay part of the insurance premiums, putting part of the cost burden on them, whether or not they use medical services.

2. Patients, those who actually use care, pay copayments and deductibles. Generally there is some maximum limit placed on the user's financial responsibility.

3. The provider assumes risks or contributes to the total cost of care by either (a) agreeing to provide services for a discounted fee, or (b) by contracting to provide care for a prepaid, capitated rate.

4. The managed care company, an H M O , PPO, insurance company or some hybrid U R or C M firm, may assume risks by indemnifying the employer for all or some of the cost of care. When assuming all the financial risks, it will retain any savings as profits. When it assumes only a share of the total risks, the amount of fees it is paid for its services may be tied to the level of savings achieved. Or it may assume responsibility for a percentage of the treatment costs that exceeded an agreed-upon target level.

5. Historically the employer or insurance company has assumed all or most of the risks of utilization and price. Today most large employers are "self- insured," and directly liable for most of the cost of all insured care. Their "insurance company," or TPA acts in an "administrative services only" (ASO) mode, producing benefit information for employees and doing the claims processing for a fixed fee.

Claims Review

Another mechanism that may be present in some managed care systems is a claims review system. Traditional claim review is limited to a determination of an eligible beneficiary receiving an insured service from an eligible provider. Claims review in a managed system will also look at the detailed charges, and determine if the billed charges match the "authorized services," and at the agreed-upon rates. Some automated claims review software look at the type and intensity of care provided, as measured by procedures and units of care, and compare i t to what would be normatively expected given the patient's diagnosis and severity of illness. Claims review may also look for patterns of fraud or abuse.


CMHC INVOLVEMENT IN MANAGED CARE

Whether or not they realize it, many C M H C s are already in the managed care business based on their history of contracts for local, state, and federal funding which limited their revenue while placing limits on service demands. The early federal funding required that services be delivered to all in need, regardless of a person's ability to pay for services. While some state and local government contracts specify the type and quantity of services, many of them pay only for services to certain priority populations but do not pay based on actual number of people served or quantity of services. In this sense, public sector funding is quite similar to a capitated contract between a C M H C and a private insurer. Consequently, C M H C s have learned to treat patients in the least restrictive modalities and make the most conservative use of inpatient and residential treatment options, relying on crisis counseling, partial hospitalization, focused outpatient treatment, and case management. Managing scarce resources is an approach as comfortable as old shoes for most C M H C s . Their primary reliance on alternatives to inpatient and residential care places C M H C s in the position of being in tune with much of the current managed care philosophy.

However, there are some clear differences between what C M H C s have historically experienced and the current private sector managed care environment. And there are still more differences between the historical methods used to fund C M H C s and the rapidly developing move toward managed mental health care in the public sector.

C M H C s can no longer assume they will continue to be the sole provider of government funded services. In the future, both public and private vendors may have the opportunity to bid competitively in terms of price and quality. Whether or not C M H C s choose to pursue private sector managed care contracting, the public sector is beginning to move in the direction of managed care options for mental health and substance abuse services. Some of these options are purchase-of-services contracts that specify type and quantity of services. This type of contract allows the government to have greater control, to focus services on priority patient populations, and to compare costs and results from one geographical area to another and between various providers.

CMHCs can no longer assume they will continue to be the sole provider o f government funded services.

Especially important is the likelihood that some states will consider capitated mental health and substance abuse contracts for persons covered by Medicaid and Medicare. These two sources of state-federal funding now constitute a respectable percentage of C M H C revenues. Maintaining this funding may require entering into some type of managed care contract. Indeed, such


contracts now exist in several states and are being contemplated in others. Prudent C M H C s will carefully monitor the changes that are taking place and determine how they can best position themselves to retain their present public market and expand their service role in future developments.

Could C M H C s contract to be the gatekeeper and major provider for Medi- caid and/or Medicare services under a capitated agreement? Could C M H C s provide the necessary level of evaluation and triage of patients? Could they carry out utilization review, concurrent review, and quality assurance? Can some C M H C s provide more cost-efficient services under a managed care agreement than currently exists in the marketplace? Affirmative answers to these questions suggest both opportunities and risks for C M H C s .

Many C M H C s are now becoming familiar with private sector managed health care. Some have decided to focus their strategic planning efforts in order to actively participate in this market. While an increasing number of C M H C s are contracting with private sector managed care entities, many are still philosophically and managerially unprepared to compete in this arena. Others may be unwilling to do so for a variety of reasons.

Successful contracting with the private sector requires a managerial and professional level of expertise that is not readily available in some C M H C s . Therefore, this expertise must be developed through some combination of training, contracting with consultants, or by employing persons who have had prior managed health care experience in the private marketplace.

There must also be a strong commitment by the C M H C ' s executive leadership, medical and clinical staff, administrative staff, and board of directors to enter the managed health care business. This commitment requires education, training, and an organizational mission statement that clearly envisions both public and private sector contracting.

A C M H C can expose itself to financial risks if it negotiates a capitated

contract since the revenues will be based on estimates of the probable number of users and the average utilization per user. If the estimates are flawed, a C M H C can be required to provide services beyond the available financial resources. Even simple contracts based on discounted fees can result in losses if the increased volume of patients is not sufficient to offset the discount. In brief, the financial risks of managed care contracts must be carefully considered (Broskowski & Marks, 1992).

THE EXPERIENCE OF LAKEVIEW CENTER

In the remainder of this article we describe the experience of one C M H C in dealing with the risks and opportunities inherent in managed health care. This C M H C does not have a model approach that others should imitate. Rather, it has struggled, as has every other C M H C involved with managed care, to learn new technical language, to develop the necessary actuarial, managerial, nego-


tiating, and clinical skills, and to deal with the special financial issues that emerge.

Lakeview Center, Inc. (LCI) began operations in the late 1960s as a federally-funded center and has grown substantially since that time. A rela- tively complete range of services for people with mental health and/or substance abuse disorders is available, and more than 10,000 people receive treatment services annually. LCI receives about half of its funding through government contracts. Fee income makes up the balance. Medicaid represents the greatest portion of fee income.

Over six years ago LCI entered a capitated mental health services contract with a local H M O for two primary reasons. One, the total health care market was swiftly moving in the direction of managed care and LCI decided it could not risk being left behind in the early stages. Two, its comprehensive range of mental health and substance abuse services was competitive in the local managed care market. Because it had become heavily dependent upon Medicaid fee income, being centrally involved in any future Medicaid managed care contract was a primary future goal. Managed care contracts with the private sector were clearly compatible with LCI's overall mission. And such contracts could provide valuable experience to compete for future managed care contracts with the public sector. Consequently, LCI believed there was an opportunity to earn significant revenue, meet overall financial and clinical objec- tives, while gaining a valuable learning experience.

Currently, LCI has two capitated H M O contracts, seven PPO contracts, one direct EAP contract, and eight EAP subcontracts. The following is a summary assessment of its local and state managed care environment, future changes in that environment, and the action necessary for a center like LCI to remain successful in this environment.

The Center's Vision of Managed Care

Some analysts predict that by 1995, 75% to 90% of all health insurance financed care will be "managed" (Coile, 1991; Friedman, 1991). In the local area, H M O and PPO plans are steadily increasing their market share. In 1990 almost 60 % of covered employees in the local area had either an H M O or PPO health care plan, an increase of 6 % from 1988 to 1990. This rate of increase is expected to continue.

There is a clear movement toward capitated and other managed health care plans for Medicaid and Medicare (Hadley, Schinnar, & Rothbard, 1992). Hawaii, Arizona, Utah, Massachusetts, and perhaps other states are attempt- ing to restructure their public health care systems. By December 1987, 28 states had enrolled 947,000 Medicaid participants in some form of managed care plan (Fox & Neuschler, 1991). These numbers are also likely to increase.

Changes in the design of behavioral health care benefits continue to evolve. These changes include increasing emphasis upon planned brief outpatient and partial hospitalization services, a reduction in inpatient and residential treat-


ment bed days, greater limitations on annual and lifetime benefits, and higher co-pays and deductibles. Requirements for precertification and concurrent review of care is becoming commonplace.

Some large companies are now contracting directly with mental health and substance abuse providers, or hiring vendors to do so on their behalf. Locally, managed care firms are contracting with sole source providers like LCI because it is better for them to deal with a single, well-positioned organization than with many independent, single service providers. Some employers are "carving out" their insured behavioral health benefits for direct management by selected providers and managed care firms. These managed care firms offer creatively designed plans which allow employees more choices and freedom to choose their provider, while giving them economic incentives to select a provider from among a "preferred" list.

As more services are carved out and managed, more agencies and solo providers are likely to move into the local managed care market. This trend is creating increased competition for outpatient services and could stimulate "price wars" in the area of inpatient and partial hospitalization services. In- creases in volume will be needed to offset the discounts being demanded by managed care vendors. Providers will have to be increasingly cost conscious and settle for lower profit margins. Under these circumstances CMHCs may have advantages over some organizations that support inefficient overhead expenses.

Major health care reform at the state or federal level will change the nature of the health services paid for by federal and state dollars. State agencies are likely to seek capitated or other managed care contracts with local providers. The issues of cost-effectiveness, least restrictive treatment, quality assurance, accountability, fee negotiation, and competition on price and quality, are the new priorities in both the public and private sectors. More sophisticated patient and program outcome information will be necessary to show clinical effectiveness. Although past contracts may have been awarded primarily on price, future contracting will increasingly be based on price and quality.

Finally, health prevention and wellness programs are becoming accepted in the workplace. These programs offer opportunities to mental health organizations that have the skills to help individuals change their behaviors and lifestyles from those that increase susceptibility toward sickness and death to those that support health and longevity.

Lakeview Center's Strengths and Weaknesses

To compete in the managed care environment, LCI had to have a realistic assessment of its strengths and weaknesses and know how these compared to its primary competitors. Consequently, LCI staff surveyed the local treatment community and developed a written analysis of the competitive environment in which LCI operated. This understanding of the local treatment community provided LCI an advantage in its planning and subsequent decision-making.


Strengths. Attractive and well-designed facilities are a requirement of private managed care services. Fortunately, over the years LCI had invested in its residential and outpatient facilities so that they were well-designed, attractive, and safe.

Like many C M H C s that were started with federal funding, LCI has kept comprehensiveness of services as a cornerstone of its planning and operations. This comprehensiveness was a major strength since it permitted LCI to bid for managed care contracts based on its ability to provide inpatient, residential, partial, and outpatient services as required by the specific clinical needs of each individual patient.

LCI services are located within easy travel distance for most of the enrollees of potential third party payors. Therefore, geographical access was considered a positive feature.

Success in the managed care market requires a strong commitment by the CMHC.

Length of stay in inpatient units is a major consideration for all managed care contracts. A review of LCI's inpatient statistics showed shorter length of stays compared with other local inpatient units. LCI's history of emphasizing the least restrictive modality of treatment resulted in fewer inpatient admissions. The economic usage of inpatient treatment, therefore, was seen as a major competitive strength.

Furthermore, LCI's longstanding philosophy of providing treatment in the least restrictive modality was well accepted and practiced by staff. Conse- quently, the cost of treating any given condition within the LCI framework was less expensive, and therefore competitive in the local market. Cost- effectiveness of services was definitely a relative strength in the marketplace.

Appropriate accreditation of facilities and services is usually required if a C M H C is to be seriously involved in managed care. For many years LCI had been accredited by The Joint Commission on Accreditation of Healthcare Organizations (JCAHO). Its vocational programs were accredited by the Commission on Accreditation of Rehabilitation Facilities (CARF). Such accreditations are important to the insurance industry which attaches to accreditation of hospitals and other health care programs.

The availability of qualified professional staff, with many areas of specializa- tion, is an essential requirement for entry into the managed care marketplace and LCI had scored high on this factor. A list was made of all LCI staff, their licenses or specialty credentials. All credentialed staff were required to be members of LCI Professional Staff Organization (PSO) and their qualifica- tions for providing evaluation and treatment services were monitored by the PSO on a regular basis as required by J C A H O standards.

LCI learned quickly that competing effectively would require a great deal of staff teamwork and the necessity of strategically positioning Lakeview to participate in the private as well as the public managed care arena. This


realization came as the result of attending workshops on managed care, through readings, and the experience of reductions in insurance revenue as the result of competitors receiving managed care contracts that excluded LCI services from reimbursement. LCI's CEO, CFO, and executive staff were committed to active participation in private and public managed care opportunities and were willing to provide the necessary leadership. The board of directors reviewed and revised LCI's corporate mission to address the changes that were taking place in the health care industry and along with the staff, assumed proper "ownership," of this new mission.

LCI's board of directors, as a result of accepting "ownership" of the strategic changes necessary for LCI to participate in managed care, were willing to tolerate a higher level of corporate financial risk than they had when financial sources had been more stable. They wanted LCI to remain in the mainstream of health care delivery and their understanding, support and encouragement increased staff confidence and made the process of learning an exciting, growth experience for staff.

Finally, over time, LCI had developed a sophisticated management information system. This system maintained the basic revenue and cost information needed for the successful negotiation and administration of managed care contracts.

Weaknesses. Although LCI's strengths positioned it well for moving into managed care, staff analysis also indicated areas where changes and improvements would be necessary.

Clinical and administrative staff required more specific information and training on the concepts and practices of managed care and its important implications for the continued growth and development of LCI services. Not all LCI staff accepted this notion, and it became apparent that a plan for continuing inservice training would be required, together with more focused leadership from LCI management.

The screening and triage of managed care clients needed to be improved. Many meetings were held to address the changes necessary to assure an efficient, user-friendly system of accepting clients into the managed care system and expediting their movement from one treatment modality to another. For example, a careful review of the intake process helped staff realize the need to decrease the client's waiting period for services.

There was also a need to develop a partial hospital program appropriate for the managed mental health population. Unlike the clinical programming for clients returning from state institutions that emphasize "activities of daily living" and development of social skills, the private sector patient is more likely to need problem-solving skill development, coupled with cognitive and family- oriented therapy. Also, evening hours were instituted since some of these patients may be returning to work during the day. Likewise, the partial


hospital program for the substance abuse population had to be strengthened and given higher priority for full development. The facility that was formerly devoted to short-term inpatient care is now emphasizing partial hospital programming for the substance abuse patient, while maintaining the capacity to offer 24-hour residential services.

Since the mix of patients expected to be served under a managed care contract would not have the same levels of severe disability as seen within the public sector, LCI determined that it would have to adjust the balance of resources devoted to different levels of care. Specifically, a greater capacity for outpatient services would be required to serve private sector demand.

Additional staff training was needed in several areas. The clinical staff required additional training in planned brief therapy approaches (Budman & Gurman, 1988) since this capability is essential to maintaining cost-effective services. Unlike traditional outpatient therapy that assumes a more global and long-term solution to personality and behavioral problems, planned brief therapy focuses on a specific problem and uses a treatment contracting approach that works toward problem-resolution within a fixed number of ses- sions, typically 8-12. Planned brief therapy assumes an episodic utilization pattern may occur, with the patient returning at times in the future for additional treatment for new types of problems. And since LCI staff had experienced some difficulties in dealing with utilization review personnel employed by various payors, it was necessary to strengthen this area of client management by providing staff with additional instruction and training in the skills required to work cooperatively with external case management personnel.

LCI required increased resources in the areas of internal utilization review and quality assurance in order to properly oversee client care, provide the information necessary to evaluate services, and to provide the accountability required by the managed care vendors and payors (Broskowski, 1989). We also recognized the need to have staff available at all times to provide client case management and to assure the most appropriate and cost-effective care. One additional staff was added to the management information systems depart- ment. Two additional U R nurses were hired. One nurse is devoted primarily to the U R activities associated with the Center for Personal and Family Development, the outpatient services area that focuses on the bul'k of private sector managed care contracts and services. The second nurse manages all other contracts for managed care, both private and public, that relate to other service units within LCI. Four full time staff are devoted to maintaining the center's current accreditations and undertaking new projects devoted to the process of continuous quality improvement.

Additional investment also had to be made in several administrative areas. LCI's marketing budget had to be increased to maintain and eventually expand LCI's share of the managed care market. A system had to be developed


to improve LCI's ability to demonstrate to payors the effectiveness and efficiency of LCI's services. Treatment results that are meaningful to managed care payors would have to be shown in some easily understandable way.

Goals and Action Plans. Based on the assessment of our strengths and weaknesses, LCI set up a Managed Care Task Force, consisting of LCI's CEO, senior management, key financial and administrative staff, and directors of key clinical programs. The purpose of this group is to monitor existing managed care arrangements, improve current services, address problem issues, and create new and better services. It is also expected that the task force will increase the level of staff ownership in LCI's adoption of managed care systems. This group's initial focus has been on a detailed marketing plan for potential managed care contracts with the public sector as well as a plan to guide LCI's relationships with existing and potential private sector firms.

A major goal is ongoing staff training and development. LCI has made a commitment to educate all levels of staff on principles of managed care. This goal will be achieved through planned consultation to management and clinical staff, training programs for middle and senior management staff, and the distribution of appropriate newsletters, memos, and journal articles for treatment staff.

Continuous improvements in services is another primary goal. Upgrading LCI's managed care delivery system are being addressed in a variety of ways. Quality indicators were developed as well as methods to provide customer satisfaction information to LCI and to payors. Key treatment units reviewed their current services, identified problem areas and implemented ways to solve them. We have started an ongoing evaluation of client flow and treatment integration within LCI's system of care, from the time of the patient's initial contact for help to the time of discharge. Emergency appointments with treatment staffare encouraged in order to stabilize patients in crises and reduce inpatient admissions.

The motivat ions f o r managed care are not exclusively based on economic factors .

LCI's quality assurance and utilization review systems were evaluated to identify areas requiring changes or improvements. A revised Quality Improve- ment Plan will link utilization management, program evaluation, and quality assurance mechanisms. This plan will further integrate program structures, processes, and outcomes monitoring. LCI is considering the establishment of a Managed Care Consumer Advisory Committee consisting of business and community representatives to assist in planning and to provide customer- oriented feedback. Patient coordination is being emphasized among all clinical units within LCI as they strive to improve their work flow from a "customer- oriented" perspective.


An important improvement goal to the system of care is increased staff productivity, efficiency and competency in cost-effective alternatives to inpatient treatment (Goldstein & Horgan, 1988) and greater competency in diagnosis, treatment planning, intervention, and resolution. Emphasis is being placed on outpatient services, planned brief therapy approaches (MacKenzie, 1988), and case management. Productivity goals are being set high. Staff employed to provide outpatient services must be able to generate a minimum of 25 billable hours per week.

The energy and enthusiasm of staff who are involved in making this system work efficiently has had a positive influence on all LCI services. The focus on a user-friendly system of care and on consumer satisfaction is a basic value that transcends "managed care" and is applicable to all LCI services to both private and public sectors.

On the horizon are more major reforms in the national system of financing and delivering health care. While the politicians may differ on how they would finance coverage for uninsured persons and what the extent of health coverage should be, most of the currently viable proposals include various forms of managed care. Though no one knows at this point which political solution will win out, the nature and extent of mental health and substance abuse coverage in a new national health insurance program will have a most important influence on the future of C M H C s . Managed health care has a firm hold in the health care marketplace, and C M H C s must carefully plan their response to this reality in order to have some reasonable degree of control over their future.

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Documents

Community mental health centers in a managed care environment