Tap 16 — TAPs <<<Documents<<<Home

Purchasing Managed Care Services for Alcohol and Other Drug Treatment:

Essential Elements and Policy Issues

Technical Assistance Publication Series

16

Financing Subseries, Volume III

Jeffrey N. Kushner
Development Panel Chair

Stephen Moss, Ph.D.

Consultant and Writer

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
Public Health Service
Substance Abuse and Mental Health Services Administration
Center for Substance Abuse Treatment

Rockwall II, 5600 Fishers Lane
Rockville, MD 20857

This publication is part of the Substance Abuse and Mental Health Services Block Grant technical assistance program. All material appearing in this volume except quoted passages from copyrighted sources is in the public domain and may be reproduced or copied without permission from the Center for Substance Abuse Treatment (CSAT) or the authors. Citation of the source is appreciated.

This publication was prepared under contract number 270-93-0004 from the Substance Abuse and Mental Health Services Administration (SAMHSA). Gayle J. Saunders, of CSAT, served as the Government project officer.

Appendix C of this publication was written by James B. Bixler, M.S., under contract 270-91-0007 from CSAT. Sandra M. Clunies, M.S., of CST, served as the Government project officer.

The opinions expressed herein are the views of the authors and do not necessarily reflect the official position of CSAT or any other part of the U.S. Department of Health and Human Services.

Foreword of TAP 16: Purchasing Managed Care Services for Alcohol and Other Drug Treatment: Essential Issues and Policy Issues

Foreword

Today, the U.S. health care system is undergoing a period of rapid change that will profoundly affect how alcohol and other drug (AOD) treatment is funded and delivered. Our AOD treatment systems are changing fast, as substance abuse treatment is increasingly being provided through managed care arrangements. More than 30 States are actively involved in health care reform plans, many of which include efforts to treat publicly funded AOD clients through managed care initiatives. This move to managed care creates tremendous challenges for both State substance abuse agencies and for local treatment providers, who all need to be ready to function well in this new, more competitive environment.

Managed care promises many positive benefits, from cost savings to increased focus on outcomes and on providing appropriate treatment that is targeted to each individual's need. But the change to managed care also carries very significant risks for our clients in the publicly funded system—people who are often poor, have little political clout, and have serious needs and problems not typically covered in private managed care plans.

Managed care is essentially a system for providing acute care, while substance abuse is a complex, chronic, and recurring condition. The length and intensity of treatment are both important for successful recovery of those with AOD problems. Many managed care organizations have little experience with AOD treatment among populations like ours, with their challenging and comprehensive long-term needs.

Another serious risk is that managed care plans could exclude current AOD treatment providers, who are experienced with these difficult populations but may lack the infrastructure and the resources required by managed care organizations (MCOs). These providers, who have worked long and hard to provide services to poor and uninsured clients with multiple needs, deserve the opportunity to continue their services in this competitive new environment.

Nothing is more important at this particular time than the specific contract stipulations that will be made between the States and MCOs regarding AOD services. Personnel in State agencies will need to work through a wide range of issues as they prepare to purchase, manage, monitor, evaluate, and develop MCO standards for providing managed care services to those with AOD problems. Managed care initiatives need to be well designed, carefully developed, closely monitored, and strongly enforced.

States can do much to establish workable, positive contracts with managed care providers that will be comprehensive and equitable for all. Carefully developed contracts can benefit AOD clients now being served in the publicly funded system, as well as supporting our existing AOD treatment providers as they move into the new system. Such contracts can also provide for our particular concerns regarding these clients, including their need for ready access to care, for outreach, for adequate, long-term benefits, and for the special services needed by pregnant women, parolees and probationers, adolescents, and ethnic or cultural groups.

This document is intended to provide guidance to those in State AOD and Medicaid agencies who will be undertaking essential roles as planners and managers of managed care contracts. To address critical issues in this emerging area, the Center for Substance Abuse Treatment (CSAT) sought the advice and direction of a publication development panel made up of experts from States that are already well advanced in developing State managed care plans for AOD clients. The guidelines and recommendations presented in this document are the result of their efforts.

On behalf of CSAT, I wish to express my grateful appreciation to the publication development panel and its chair, Jeffrey N. Kushner, and to Stephen Moss, Ph.D., the consultant and writer. I also wish to extend special thanks to the many dedicated individuals who reviewed this document and provided their comments and expert advice.

The expertise of all of us working together will be neede das we learn to operate successfully in this new managed care environment and seek to preserve the right of publicly funded AOD clients to receive adequate, appropriate, and effective treatment. Within this context, CSAT is pleased to publish this document as part of our mission, in partnership with State and local governments and community-based programs, to imporve the access and effectiveness of addiction treatment and recovery services on a nationwide scale.

We hope this manual will encourage and guide State agencies and treatment providers as they take an active and influential role in shaping and managing our evolving health care system.

Susan L. Becker
Associate Director for State Programs
Center for Substance Abuse Treatment

Introduction

State alcohol and other drug (AOD) authorities find themselves in the midst of revolutionary changes now occurring in the health care and AOD treatment fields. Regardless of the eventual outcome of national health care reform efforts, States are continuing to enact legislation that is rapidly transforming the service delivery landscape. More than 30 States are in the process of legislating some form of health care reform, and most of these reform efforts include the delivery of AOD treatment services with some form of managed care at their core.

Because many managed care organizations (MCOs) have little experience with AOD treatment among noncommercial populations, the State AOD directors must assume a primary role during this turbulent time. State directors must advocate aggressively for the needs of uninsured and publicly insured populations.

Directors can best achieve this role by maintaining their access to the expertise of today's publicly funded treatment providers. These treatment providers, after years of providing services to these challenging and disempowered populations, have developed a wealth of knowledge and experience about how to reach out to and treat these groups.

Managed care consists of a set of health care management tools that have the capacity both to increase the overall quality of a treatment system dramatically and to wreak havoc. Managed care initiatives must be well-conceptualized, carefully developed, closely monitored, and strongly enforced. A strong managed care contract must be developed to deal with a set of particular components. Such a contract must:

• Specifically address all key treatment issues

• Specify expectations

• Identify means to monitor compliance

• Offer strategies to enforce both the spirit and the letter of the contract

Public AOD treatment systems have been largely exempt from the impact of the managed care movement that has swept through the rest of the health care industry. This exemption is quickly evaporating. In this new environment, the AOD field must seize the opportunity to frame the debate. State AOD authorities and others involved in the field need to ensure that they play an active and knowledgeable role as new AOD treatment paradigms are being created.

Chapter 1–Managed Care Overview

Substantial confusion about the meaning of the term "managed care" exists among both the general public and alcohol and other drug (AOD) treatment professionals. For purposes of this document, managed care can be described as "an organized system of care which attempts to balance access, quality, and cost effectively by using utilization management, intensive case management, provider selection, and cost-containment methodologies." Tension naturally exists between the fiscal objective of conserving funds and the clinical goal of providing appropriate, quality services in a timely manner to all those who need them.

Managed Care Models

Since its inception, the managed care industry has moved–and is moving–through several "generations." A basic understanding of the generations of managed care can be helpful in understanding managed care behavior and the maturity of systems (Center for Substance Abuse Treatment 1994; Waxman 1994).

1. The first generation of managed care focused on reducing costs by restricting access to services through such means as overly rigid utilization review, limited benefits, and large copayments.
2. The second-generation managed care organizations (MCOs) manage benefits. They focus on the development of provider networks, selective contracting, increased treatment planning, and a less rigid utilization review process.
3. Third-generation MCOs focus on managing the care of enrollees by emphasizing treatment planning and carrying out more active management of clients through the course of their treatment(s). This involves enhancing the breadth and "seamlessness" of the continuum of care and actively using the least restrictive treatment settings that are clinically appropriate. The MCO may provide highly individualized clinical management for individuals who are at high risk for multiple readmissions or who are particularly challenging to treat.
4. A fourth generation–now being aspired to–is for MCOs to manage by outcomes. This model seeks to focus primarily on the outcomes of treatment and allows great provider autonomy regarding how these outcomes are achieved. To the extent that the field moves toward this "outcomes management" model, research and clinical findings will be fed back to treatment programs, which will in turn provide new data for further analysis. This will create a self-correcting treatment system.

Numerous variations of managed care are rapidly evolving across the country. However, States are most likely to consider only the handful of managed care models that best meet their needs at this time. The most probable models of managed care include health maintenance organizations (HMOs), the managed behavioral healthcare organizations (MBHCOs), and regional integrated service networks (RISNs). Since most State development will be built upon these models, or variations of these models, State AOD directors need a basic understanding of their strengths and weaknesses.

Health Maintenance Organizations

Health maintenance organizations are healthcare organizations that provide and/or ensure the delivery of an agreed-upon set of health maintenance and treatment services to a group of persons for a prepaid amount of money.

The most common form of an HMO is a staff model in which treatment professionals are salaried employees. Other models include:

• A "group model" (contracts for services of treatment professionals in a group practice)

• A "group network" (treatment professionals in a group practice who also accept other patients)

• An "individual practice association" (in an IPA, the management organization administers the plan and contracts with independent treatment professionals who are generally paid a fixed sum of money per person)

• A "preferred provider organization" (in a PPO, the payer directly contracts with individual providers at reduced fees and a guaranteed volume)

For AOD treatment, a theoretical advantage of the HMO model is that AOD treatment is integrated with physical medicine and thus is more in the mainstream of general health care. Many believe that this strengthens AOD treatment services by increasing the understanding of how medical costs are related to AOD-related problems, thus highlighting the high medical costs associated with these problems. In reality, however, HMOs have often provided a very narrow range of mental health and AOD services. The primary care physician–usually the gatekeeper–is often insufficiently trained in screening for, or diagnosing, AOD disorders.

In HMO settings, mental health and AOD treatment services (i.e., behavioral health services) are often overwhelmed by the physical medicine departments. Behavioral health services are often also undervalued, because these disorders are not well understood by health care administrators. Behavioral health services account for only a small percentage (e.g., 3 percent) of the total HMO expenditures, with AOD treatment services accounting for as little as 1 percent. Since AOD treatment services represent such a small part of the total services, they are often relegated to the background and sometimes are not even tracked. As a result, more than half of all HMOs now contract with specialized firms to enrich their behavioral health treatment services and to remain competitive (Levin et al. 1984; Levin 1993; Frank and Salkever 1991).

Managed Behavioral Healthcare Organizations

This general shortcoming in the HMOs led to widespread criticism and to the rise of MBHCOs. These firms provided all, or specified components of, AOD and mental health care to an enrolled population for a prepaid capitated payment. They offered a range of "products" dedicated to managing mental health and AOD treatment needs. This MBHCO industry rapidly expanded from the last half of the 1980s until about 1992. This dramatic growth created a highly competitive environment that resulted in the active involvement of venture capitalists, frequent acquisitions and mergers, and general instability in the industry. During this growth period, financial concerns often took precedence over the quality of care provided to individuals.

The early 1990s brought a period of consolidation that resulted in the domination of about a dozen major MBHCOs. These organizations aggressively established–and continue to establish–contracts with corporations, governments, and HMOs around the country. These companies now collectively cover approximately 80 million lives (Oss 1993).

In an MBHCO, AOD and mental health treatment needs are not overshadowed–as can happen in an HMO–by the dominance of medical needs. However, these services are not naturally integrated with the medical care system. This lack of a natural bridge for linking individuals with necessary medical services can create incentives to shift costs to the medical sector (Christianson 1989). In addition, AOD treatment can be overshadowed by the mental health sector.

Regional Integrated Service Networks

Regional integrated service networks (RISNs) are a group of mental health and/or AOD providers who have formally organized into a functional entity to provide, manage, and/or oversee the delivery of specified behavioral health care to a defined population. The creation of these networks is a fairly recent phenomenon, but is gaining momentum as increasing numbers of providers and provider organizations attempt to respond to the growth of managed care.

These networks–variations of provider-based PPOs–can vary dramatically in terms of their comprehensiveness, sophistication, and marketability. While RISNs may collectively include a full range of needed services, they may lack the capital, technical expertise, and/or experience to participate successfully in the competitive managed care industry. To compensate for this, networks have the option of purchasing administrative services only (ASO) from an appropriate partner to strengthen the network.

In developing the network, State AOD authorities and other policymakers need to make a decision regarding whether or not to join with mental health providers and form a comprehensive behavioral health network tailored to the unique needs of the State. The advantage of doing so is that combined AOD and mental health services are the norm in existing managed behavioral health companies. The majority of the purchasing market is therefore looking for an integrated product. A disadvantage for AOD treatment providers in such networks is that AOD services are usually the smaller component both in terms of programs and in management. The particular circumstances in a given State should dictate whether an RISN should be formed and what its ideal composition should be.

Public Sector and Managed Care

Virtually all Federal and State health care reform initiatives envision the integration of public and private behavioral healthcare systems. Public behavioral healthcare funding streams–from Medicaid, Medicare, the Department of Veterans Affairs, CHAMPUS, State organizations, and other public payers–are now being redirected to purchase privatized behavioral healthcare services. MCOs are increasingly entering this new market niche. These public-private integration efforts will most likely result in rapid growth of privatized service capacity for publicly funded populations.

Until recently, public purchasers and private sector MCOs have been fairly cautious in terms of forming any kind of working alliance. The MCOs were generally focused on surviving in the highly competitive private sector. They often believed that employed enrollees and their families are generally more stable, more predictable, and easier to treat effectively as compared to public program beneficiaries, who were seen as less stable, more difficult to treat, and more expensive to cover (Christianson 1989). Public purchasers were not sure that the models and expertise developed by those serving private-sector clients would easily generalize to more vulnerable and impaired populations.

However, in examining the experience of MCOs in the private sector, government policy-makers have become increasingly interested in experimenting with alternative healthcare delivery systems. The hope is that these alternatives will help contain costs and improve quality of care. As a result, more than 30 States are now in various stages of developing health care reform measures. These almost always incorporate managed care concepts or the direct purchase of managed care services.

Despite this movement, community-based, public-sector providers are often skeptical about the ability and incentives of private-sector MCOs to provide appropriate services for vulnerable populations. They believe that most MCOs are not highly experienced in treating publicly insured clients and lack well-established links with key community-based agencies. Such MCOs would therefore be less effective in successfully serving this difficult treatment population.

Most MCOs, on the other hand, believe that their systems of care can be adapted to meet the needs of these populations effectively. They anticipate the integration of public and private health care systems. Eager to enter this evolving market, they are showing dramatically increased interest in serving publicly insured populations.

The strong interest of MCOs in providing services for public program beneficiaries, combined with the strong interest of public payers in using MCOs to help achieve cost-containment and system development goals, will soon result in greater blending of the "private" and "public" systems of care. The collective challenge to overall health care reform is:

1. To integrate the best of what the community-based public sector treatment systems and the managed care industry have to offer, and
2. To build collaboratively the system of care that will take AOD treatment into the next century.

Current Managed Care/Medicaid Initiatives

Currently, State Medicaid agencies all over the country are developing innovative managed care systems. The Medicaid system now has about 12 percent of its 30 million benefi-ciaries currently covered in some form of managed care, and these numbers are expanding rapidly. These systems are directly affecting, or will be affecting, the delivery of AOD treatment services. State AOD agencies are in a key position to engage actively with State Medicaid systems and become collaborators in developments occurring now and in the foreseeable future.

Two Federal Government Medicaid waivers–allowing States to experiment with new models of care–continue to create opportunities for States to pilot innovative managed care models. The "1115" waiver, the most comprehensive, is used to establish pilot or demonstration projects, usually through a Request for Proposal (RFP) process. The "1915(b)" waiver allows the State to "lock in" Medicaid beneficiaries to certain provider classes and to create central intake systems.

The Medicaid projects–designed to provide more carefully managed, clinically appropriate, and cost-effective care to lower income and more clinically challenging populations–are at the cutting edge of the State healthcare reform movement. The manner by which the government and managed care entities decide and implement the delivery, management, payment, and measurement of care for Medicaid populations is the crucial question. The answer will broadly impact both the direction of healthcare reform and the publicly insured clients themselves.

Massachusetts, Minnesota, Oregon, and Tennessee are some of the most well-known examples of States that are implementing major managed care programs. State programs are described below.

Massachusetts

Massachusetts has one of the most extensive managed care initiatives in the country. In 1992, the State Medicaid agency contracted with a national MBHCO that specializes in servicing the public sector. This MBHCO would manage mental health and AOD treatment services for about 400,000 recipients in Massachusetts. An active collaborative relationship has evolved between the MBHCO, Medicaid, and the State AOD authority.

The project is widely viewed as being both fiscally and clinically successful. Since its inception, the MBHCO has halved AOD treatment costs–largely through eliminating unnecessary hospitalizations, improving overall access, developing useful profiles of program performance, adding new levels of care, and expanding methadone treatment services. It has currently implemented intensive office-based and community-based case management services for the most challenging clients–the addicted, dually diagnosed individuals and/or pregnant women with AOD problems. An independent evaluation detailing the strengths and weaknesses of this project, mandated by the Health Care Financing Administration, is now available (Callahan et al. 1994).

Minnesota

Minnesota has the longest experience in handling the interface of managed care with AOD treatment. Two initiatives–the Consolidated Fund and the Chemical Dependency Treatment Accountability Plan–are now up and running.

The Fund consolidates a variety of AOD treatment funds into a single consolidated fund. The Plan collects data on patient demographics, severity of illness, and treatment placement. It then looks at outcomes by measuring abstinence, utilization of health care services, encounters with the law, on-the-job productivity, and family impact. In an attempt to optimize cost-efficiency and quality outcomes, it will provide better parameters for improving client match to the appropriate setting, treatment modality, and clinical intensity.

Tennessee

In January 1994, by Executive Order, Tennessee implemented a Medicaid waiver that totally replaced its Medicaid system with Tenncare. Under this system, the State minimized its healthcare management responsibility and reduced its costs by contracting on a capitated basis with competing MCOs.

The cost savings have allowed the State to provide total health care with no tax increase to all Medicaid-eligible individuals (about 800,000), plus another 350,000 people who were formerly uninsured or uninsurable.

To be eligible to contract with Tenncare and compete for subscribers, each MCO had to establish a comprehensive healthcare provider network, including AOD services. Some MCOs chose to manage AOD services themselves, while others subcontracted behavioral health (mental health and AOD) to an MBHCO that, in turn, established a provider network.

The minimum AOD benefit package which Tenncare requires MCOs to provide includes two episodes of treatment per lifetime. This minimum has, in reality, become a maximum for most MCOs. Discussions are ongoing about whether to increase or remove this benefit limit, since many people have already exhausted it.

This system will also examine the cost offsets of providing comprehensive AOD coverage. Monitoring, evaluation, and data-reporting to the State by the MCOs is just beginning and reliable data are not yet available. Anecdotal data on AOD treatment show a shift occurring in primary treatment modalities– from inpatient hospital treatment under Medicaid to precertified outpatient services under Tenncare.

Oregon

In 1993, the Oregon legislature enacted a bill that includes AOD treatment in the Oregon Health Plan, a plan designed to provide health care to the uninsured and poor. Oregon's vision was to integrate AOD treatment services fully into a comprehensive set of services that are managed and coordinated via primary care and case management.

These comprehensive services would include medical, surgical, and AOD/mental health services, so that the needs of the whole person can be met. The stated goal was to include AOD treatment services in the plan to reduce the inappropriate use and cost of medical and surgical services.

It was understood by all parties involved with this legislation that AOD treatment services, if provided appropriately, would reduce the other health and social costs that inevitably occur when AOD problems are left untreated. The Oregon Department of Human Resources is the buyer and sets standards, capitation rates, and other requirements for the management of the Plan. The Oregon Office of Alcohol and Drug Abuse Programs (SSA) is charged with implementation of the AOD budget, including development of contract standards, placement/discharge criteria, and screening instruments.

MCOs, mostly HMOs, are the managers of the Oregon Health Plan operating within defined geographic boundaries across the State. These MCOs determine the procedures, amounts and methods of payments, and providers to be used in their geographic area. The State has required that the MCOs must initially plan to refer at least 50 percent of their plan members who need AOD treatment to identified "essential community providers." This is intended to ensure that public safety, welfare, and other public costs are protected during the transition into and implementation of managed care. Essential community providers are programs that previously received funds from the Single State Agency (SSA).

Concerns About Managed Care

Implementing a managed care system is extremely threatening to the status quo. Concerns about managed care abound because of past performance and perceived structural shortcomings. Many fear the potential of an MCO for causing harm to the AOD treatment system and to the vulnerable populations that system serves.

It is important to understand the breadth of concerns that have been raised about managed care. These concerns serve as a collective example of what can happen if a managed care initiative is poorly executed (see table 1). This understanding can be critical to State AOD authorities as they attempt to develop stipulations in their managed care contracts that will effectively guard against such abuses.

In assessing the implementation of managed care, it is essential to understand that MCOs are vendors of a service who have negotiated service contracts with a government agency, private company, or other entity. These service contracts are designed to achieve specified financial, administrative, system development, and clinical goals. Consequently, both the contracting agency and the MCO share the successes and failures of a particular initiative.

The Potential of Managed Care

Managed care, having demonstrated the capacity to contain costs in the private sector, is increasingly being proposed as a possible solution to the many challenges that face public sector purchasers of behavioral health care. It is seen as having the capacity to:

• Develop incentives that increase accountability

• Build an integrated continuum of treatment services

• Contain costs

• Improve outcomes

• Introduce much-needed innovation

Managed care techniques–when properly applied–offer many new opportunities to State AOD systems. Managed care's powerful tools and methodologies can be applied to develop new systems, reallocate finite resources, expand access, improve quality of care, and/or to "jump-start" a treatment system to help it keep pace with the rapidly evolving healthcare system. Any enlightened, systemwide reform should proceed based on an appreciation of how managed care strengths can be used to achieve reform goals and to reform service delivery systems.

Each State and region differs in its specific financial, political, and systems development reform needs. Nevertheless, quality AOD treatment has basic components that cut across these individual circumstances. These components are described below.

Managed Care Needs Assessment

Many State AOD authorities need to decide which path to pursue regarding their relationship with managed care. The AOD authority must first consider carefully the current strengths and weaknesses of the AOD treatment network, the current status of managed care for publicly funded beneficiaries within the State, and the future desired design of the service delivery system. State situations vary widely on many important dimensions. These include:

• Treatment needs

• Client needs

• Stage of managed care development

• Staff and financial resources

• Political support for AOD treatment services

• Relationship with the State Medicaid agency

• Extent of sparsely populated areas

• Affiliation with other State agencies

Conducting an Inventory of the Current System

To achieve maximum benefit, the AOD authority should perform a careful and critical inventory of the current system. It should minimally include:

1. An examination of the resources available to the State
2. Unmet treatment needs
3. Regional and statewide gaps in a full continuum of care
4. Cultural and ethnic capacities
5. Sufficiency of linkages to housing, social, educational, health care, and other services
6. Adequacy of fiscal oversight and accountability
7. Effectiveness of outreach efforts
8. The quality of screening, assessment, and placement processes
9. Maturity and utilization of quality improvement methodologies
10. Breadth and sophistication of the management information system
11. Status of followup data on treatment outcomes

Establishing Priorities

Establishing priorities for system development is a key step when considering a managed care initiative. Questions that can be asked include:

• Is there a preference for uniformity or diversity in services for a specified modality of treatment?

• Is there a preference for a larger number of smaller programs which are joined into a network of services, or for a smaller number of larger programs that have multiple levels of care and services?

• What are the priorities for program expansion or reduction?

• Is rapid development or slower, more measured development more appropriate?

• What services are currently provided at public cost? Which agencies fund these services and is there a consensus in goals?

• Are there currently achievable savings in the AOD treatment system?

• Can medical/surgical costs be substantively reduced by increased access to AOD treatment?

• To what degree are payers, legislators, and the citizens of the State supportive of addiction treatment?

• Who are the key policymakers and what relationships exist? What commitments will they make to AOD services?

The ramifications of the answers to these questions should be carefully assessed to facilitate achievement of desired goals.

Choosing the Optimal Approach

The AOD authority must decide between two options. &nbsp;One is whether to support the development of a comprehensive, "one-stop shopping" approach to service–where a client can receive a variety of medical, educational, and social services onsite along with AOD treatment.

The second option is to support the development of more free-standing, specialty AOD treatment programs–where a client is referred to other community resources for medical care and for educational, social, and other services. The unique set of circumstances in each State should strongly guide the decisionmaking about these options.

To the extent possible, the State should consider whether its long-term goals for the treatment network are consistent with any proposed managed care plan. If the managed care plan does not promote the treatment goals of the State, the State should seek to modify the managed care plan instead of the treatment goals.

Achieving Maximum Benefits

Managed care systems offer a set of specific clinical technologies that can, in the right circumstances and with careful planning, reshape treatment systems to achieve specified goals (see table 2). Managed care is a flexible and powerful tool–with clear strengths and weaknesses– that can be adapted to a variety of circumstances and used to transform systems in desired directions. Misused, poorly managed, or poorly implemented managed care programs can cause great damage. State AOD authorities and other purchasers of AOD treatment services will benefit from doing a thorough needs assessment and then &nbsp;carefully considering the degree and manner in which managed care would be the most appropriate vehicle to implement reform initiatives (H. Bartlett, New York State Office of Mental Health and Substance Abuse Services, personal communication, 1994).

Much of the current expansion of publicly funded AOD treatment across the country results from the expansion of Medicaid AOD treatment services. However, it is important to understand that managed care is only one of the tools available to effect desired changes in the treatment network. There are many ways to change the quantity, quality, and mix of treatment types available in any State. This can be done through regulations, legislation, licensing, oversight, monitoring, and a variety of direct funding and contract schemes. To best achieve the prevention and treatment goals established by the State, it is important to ensure that these efforts work in concert with a managed care plan.

Using Contracts To Achieve Goals

Given the impact that managed care can have, it is imperative that, once a decision is made to use managed care, a strong and well-thought-out contract be carefully developed, closely monitored, and strongly enforced. The contract must specifically address all key areas, clearly specify expectations, outline valid and efficient means to monitor compliance, and have strategies to enforce this compliance. The MCO should submit a written description of how it intends to comply with contract specifications. A well-designed contract will maximize the chance that a given managed care initiative will achieve its desired goals.

For publicly funded treatment, Single State Agencies for AOD abuse treatment are probably in the best position to monitor stipulations of the AOD abuse contract. SSAs should approach State financing agencies and insist on developing and monitoring AOD contract stipulations with MCOs. It is the SSAs' responsibility to manage the MCO vendors effectively, so they ensure compliance with both the letter and the spirit of the contract.

The managing team overseeing the contract must be strong, and any gaps in their knowledge, experience, or skills must be filled through collaboration with others or through consultation services, which are widely available. There should be no confusion whatsoever about the fact that the MCO will be held accountable for achieving specified goals.

The remainder of the MCO contract should focus on key issues relating to AOD treatment and managed care. These include:

• Access to treatment

• Comprehensiveness of care

• Financial considerations

• Consumer protections

The following four chapters in this book discuss how these arenas should be addressed by managed care providers. Three of these chapters contain sample contract language.

Chapter 2–Access to Treatment

Maintaining and improving overall "access" to the treatment system is arguably the most important issue to monitor when first implementing managed care into public treatment systems. Access generally refers to the capacity of a treatment system to facilitate entry into the appropriate treatment, as well as the continuance of that treatment, for all individuals who need it.

The extent of access to appropriate treatment in a managed care system depends on the amount of resources devoted to alcohol and other drug (AOD) treatment services. To understand how much access can be implemented for AOD clients, a key variable will be the resources that are made available.

Most treatment systems have access problems that influence whether or not an individual can obtain and continue to utilize treatment services. Uninsured and publicly insured individuals often lack the resources and the knowledge to negotiate their way through overly bureaucratic systems. Every effort must be made to facilitate their entry into the treatment system. Potential barriers to treatment must be carefully analyzed and steps taken to lessen or eliminate these barriers.

In a managed care environment, access to treatment can be hindered in a variety of overt and covert ways. It is imperative that key measures of access be closely monitored to ensure that access is not intentionally or inadvertently restricted.

Factors Affecting Access

Access in AOD treatment refers to a variety of diverse factors. Some of the most important factors include:

• Understanding of AOD problems by gatekeepers

• Structured outreach activities

• Timeliness of the first face-to-face meeting after an initial contact

• Geographic proximity to appropriate services

• User-friendliness of the intake and referral systems

• Absence of financial barriers

• Cultural, ethnic, and gender-sensitive treatment

• Adequacy of AOD treatment funding and resources

Understanding of AOD Problems by Gatekeepers

All too often, gatekeepers into treatment are not sufficiently trained or experienced to assess needs effectively and to triage individuals into appropriate AOD treatment. It is crucial that such gatekeepers (e.g., clinicians, primary care physicians) be well-trained, sensitive to the bio-psychological aspects of addiction, and monitored regularly.

Structured Outreach Activities

Structured outreach activities maximize access to a treatment system by providing systematic efforts to identify individuals in need of AOD treatment. Such outreach activities might be directed to pregnant addicted women, homeless AOD abusers, injection drug users, or others whose impact on society is high and who are less likely to seek out treatment on their own.

Timeliness of Treatment

Immediate and convenient initial access to qualified providers is a hallmark of any quality treatment system. A key component of high-quality treatment is how efficiently a person in need can obtain appropriate AOD treatment. The motivation to address AOD problems is often fleeting, and a delay in access can easily result in a crucial missed opportunity to initiate treatment. Contracts with managed care organizations (MCOs) should ensure rapid access to all levels of treatment.

Detoxification should be understood as an emergency care service. Individuals should have very easy access (i.e., same day or the next morning) to detoxification evaluation and treatment services 7 days a week.

While screening can occur over the telephone, evaluations should be face to face. Standards should assure 24-hour telephone intake, immediate referral capacity, and rapid access to appropriate treatment. Noncrisis treatment should generally be available in 1 to 3 days (Zwick and Berman 1992). It may be decided that some subpopulations (e.g., pregnant women, injection drug users) should receive higher priority or more immediate access within the system.

Geographic Proximity

Appropriate treatment services must be within reasonable distance for the population served. The maximum distance in time or miles should be determined for each level of care. Since most publicly insured recipients do not have reliable transportation, services should be accessible via public transportation whenever possible. Special plans may be required in rural areas, including the use of volunteers or members of self-help groups to provide transportation. Any outpatient services should be especially easy to access.

"User-Friendliness" of Systems

The "user-friendliness" of a system describes the overall ease with which an individual can negotiate the various steps of a treatment system. To assure access, when policies and procedures are being developed for an MCO plan, it is essential that ease of use should assume the highest priority. Those who utilize the services offered are in an excellent position to rate their access to that service. For example, information regarding the time to first appointment, ease of telephone access, ease of understanding how to use the system, clarity of written materials, and staff attributes can easily be incorporated into standardized client satisfaction surveys, program/MCO records, and ongoing focus groups.

Absence of Financial Barriers

Uninsured and publicly insured individuals are overwhelmingly poor and disenfranchised. Any financial barriers (e.g., copayments) can be a barrier to access and should be avoided.

Cultural/Ethnic/Gender Sensitivities

Treatment that does not meet the cultural, ethnic, and gender needs of clients is poor treatment and will result in poor outcomes. Such non-responsive treatment restricts the access of those with cultural, ethnic, and gender needs.

Adequacy of AOD Treatment Funding and Resources

Quality AOD treatment requires a comprehensive continuum of treatment services. Many State systems do not support such a continuum, because they lack the resources, commitment, and/or understanding of the value of AOD treatment within such a framework. Any managed care initiative should include an analysis of the AOD treatment continuum and the costs associated with needed expansion. Such information is vital to inform the planning process.

Avoiding Obstacles and Promoting Access

Numerous factors can influence– both directly and indirectly– whether or not an individual obtains and continues to utilize necessary AOD treatment services (see table 3). When poorly implemented, managed care can dramatically reduce access to services. When well implemented, it can substantially increase access to care.

Depending on the structure of the contract, MCOs may have strong financial incentives to create obstacles or to otherwise restrict care. All too often, MCOs receive set amounts of dollars which are insufficient to maintain the array of services needed for supporting stability of the patient. When developing contracts with MCOs, it is essential (1) to guard against incentives to undertreat these vulnerable populations, and (2) to build strong incentives to promote access (Frank 1994; Christianson 1989).

Managed Care in Rural Areas

Implementing managed care programs in rural or frontier communities requires careful planning. Such planning needs to address the unique clinical challenges of rural America.

The Challenges

In rural America, mental health and AOD treatment services have been rationed for decades because of poor accessibility and the lack of human and fiscal resources. Access to quality treatment in rural communities and regions is often limited by a range of challenges. These include:

• Geographic distance

• Concerns about confidentiality

• Community prejudice

• Lack of properly trained providers

• Inadequate support services

• Limited benefits

• A conservative values orientation

Often, the public mental health system is the only provider in rural communities.

Several factors contribute to the difficulty of developing an effective managed care system in rural and frontier States. Poverty and unemployment rates are generally higher. Public transportation is lacking. A disproportionate number of populations are at risk for behavioral health disorders.

Additionally, managed care initiatives have primarily happened in more urban centers, which allow a certain economy of scale. The implications of managed care for rural areas are less clear.

Guidelines for Developing Services

It is important to develop and analyze a baseline inventory of practitioners who are providing AOD treatment services. If that inventory identifies shortages, potential MCO providers can be asked to propose strategies to bring in or recruit professionals in a Request for Proposal (RFP) process.

Managed competition models based upon competition among independent provider groups may not be the most effective model for rural areas. It has been suggested by some that a "managed cooperation model might more effectively improve access and quality of care." This model would create a rural "Authority" that would use subsidies and exclusive franchises to achieve goals. The approach would be flexible, fostering cooperation where needed and competition in areas where sufficient diversity exists. Initiatives involving cooperation would facilitate the development of networks. The managed component would improve the interface between urban and rural areas, coordinate access to tertiary care, and assist in recruiting needed professionals.

When managed care is implemented in rural settings, it is likely that the experience of the company and leadership is more urban than rural in its perspective. It is essential that any implementation in rural areas actively utilize local professional and client groups in adapting managed care principles to rural and frontier settings.

Table 3. Factors Influencing Access to Treatment

Obstacles to Access		Factors Promoting Access
Not identifying individuals in need of treatment		Effective screening, assessment, AOD training
Not reaching clients in the locations in which they enter the "system" (i.e., courts, criminal justice system)		Satellite sites, systematic linkage, training
Long waiting periods for appropriate service		Services within 72 hours, depending on severity of clinical need
Multiple steps, places, and people needed to access services		Widely available and simplified intake processes
Arbitrary service limits		Individualized treatment plans
Automatic "fail first" policies (e.g., the client must fail a less intense level of treatment before a more intense level is made available)		Individualized comprehensive assessment used to guide appropriate placement
Geographic inaccessibility		Geographically well distributed sites located on transportation lines
Resource-intensie review and appeal procedures		Highly effecient, publicly known utilization review processes
Excessive and clinically inappropriate exlusionary criteria		Restricted ability to exclude specified types of hours/day of operation
Cultural, gender, and/or ethnic insensitivities		Priority placed on cultural competence development
Restrictive copayments		Elimination of copayments
Unknown, untimely, or non-objective appeals processes		Widely known, timely, objective appeals
Lack of transportation		Transportation available as needed
Patient placement criteria that are nonstandardized, financially driven, and/or subjectively applied		Patient placement criteria that are collaboratively developed, clinically driven, objective, and standardized

Utilization Patterns As Measures of Access

It is imperative that the managed care industry and the AOD treatment field develop standard access measures, so that data and findings can be easily compared. It is impossible to overstate the importance of consistent data and standardized units of analysis for purchasing, monitoring, and improving care. Accurately managing these data is critical to determining the success of any managed care intervention.

The utilization patterns of various treatment services provide a range of quantifiable measures of access within a managed care system. Also influenced by the quality and outcomes of treatment, these utilization data are easily obtained from medical claims encounter data. They allow systematic comparison of different plans and the ongoing monitoring of overall access.

A review of the literature (Shadle and Christianson 1989; Levin 1993; Mercer 1990, pp. 1-13) suggests that certain measures represent the current state of the art and should be standardized across the managed care spectrum. These state-of-the-art measures include the following:

• Potential purchasers should be aware that AOD treatment often cannot be separated from mental health treatment in MCOs.

• Contracts should ensure that AOD treatment can be analyzed as a discrete entity or it will be impossible to accurately measure access, utilization, quality, or other important variables.

• All levels of care should be separately analyzed, with aggregate totals compiled as needed.

• The utilization rates of clinical subpopulations (e.g. pregnant women, ethnic minorities) should be capable of being discretely analyzed as separate entities.

Recommended annual utilization (unduplicated) profile measures (per level of care) are shown in table 4. Exhibit 1 provides sample contract language regarding actions MCOs should take to provide access to treatment.

• Admissions per 1,000 covered lives (unduplicated)

• Total days or units per 1,000 covered lives

• Mean length of stay (LOS) or mean number of treatment units

• Average cost per case

Example: You are a State AOD director and you are comparing the utilization rates of two MCOs that are competing for a contract. In this example, MCO #1 historically has half the admission rate of MCO #2. However, MCO #1 allows its clients to stay in treatment twice as long, resulting in both MCOs averaging the same amount of treatment days per 1,000 clients. MCO #1 pays an average of $125/day, while MCO #2 pays an average of $150/day. Using these data as a starting point, you continue to request outcome data, readmission rates, customer satisfaction results, and continuing care profiles to inform your decisionmaking.

The MCO hall regularly report on specified utilization data for all levels of care, including, but not limited to, the number of enrolled members, unduplicated admissions per 1,000 covered lives, day/units per 1,000 covered lives, mean length of stay/number of treatment units, and mean cost per case.

The MCO shall provide emergency, urgent, and nonurgent care within specified, clinically responsive timeframes. Emergent care should be offered immediately or within 4 to 6 hours, depending on the situation. Urgent care should be available within 24 hours. Noncrisis treatment should generally be available in 1 to 3 days (Zwick and Berman 1992).

The MCO shall develop an outreach plan with specified objectives and regularly report on its success at reaching those goals.

The MCO shall make and report on systematic efforts to identify, or encoruage the identification of, beneficiaries with AOD problems and refer them for evaluation and treatment.

The MCO shall ensure systematic screening for AOD disorders in those settings most likely to deal with individuals at high risk for AOD problems. These may include standard screening tools as part of initial contact with the system, during routine physical exams, at initial prenatal contact, when "trigger conditions" suggest a high possibility of AOD problems, or when there is evidence of serious overutilization of medical, surgical, trauma, or emergency services.

Chapter 3–Comprehensiveness of Treatment

Comprehensiveness in the context of alcohol and other drug (AOD) treatment is a very broad umbrella term that may encompass numerous key aspects of service delivery. For purposes of this discussion, "comprehensiveness" refers to the capacity to:

• Provide a full continuum of AOD treatment services

• Base treatment on ongoing bio-psychosocial assessments

• Utilize standardized patient placement criteria (PPC)

• Facilitate appropriate linkages with medical, psychiatric, and/or social support services

• Meet the cultural, gender, ethnic, and other specialized needs of those served

• Utilize a network of providers experienced in serving the covered population

Full Continuum of AOD Treatment

The managed care organization (MCO) shall ensure that enrollees have access–directly or through functional affiliations–to a full continuum of prevention, treatment, and rehabilitation services. These services include:

• Prevention/pretreatment

• Screening, assessment, diagnosis, intervention, and referral

• Outpatient counseling

• Psychiatric services

• Structured day treatment

• Short- and long-term residential treatment services

• Opioid substitution therapies, such as methadone treatment

• Freestanding and outpatient detoxification

• Hospital-based detoxification

• Case management services

When such services do not exist in the community, the MCO shall create these services.

The need for a full continuum of care is critical. However, continuing care (often called aftercare) needs to be clearly distinguished from acute, or initial, care. This distinction is important. Irrespective of the care received in the initial recovery phases, the extent to which the individual gets periodic services for the first 6 months to a year after treatment is strongly related to the probability that the person will continue recovery.

Continuing care services should be widely available and strongly supported by all MCO systems. Also, there may be value in trying to create a separate entity of the benefit package, ideally 6 months of weekly outpatient visits, that cannot be eroded by other services and are available for relapse prevention on an "as needed" basis (Hoffmann 1993).

Assessment

Standardization of assessment processes is an essential developmental step that is urgently needed in the AOD treatment field. Such standardization will:

• Improve the overall quality of assessments

• Allow less trained staff to perform adequate assessments

• Provide a consistent data base to compare the effectiveness of different treatment protocols upon different types of people with AOD problems

Any transition to managed care should include consideration of more standardized assessments.

The requirement for standardization must be balanced, however, with the requirement for the flexibility to meet the needs of the particular population being served. Assessment instruments may necessarily vary across different types of treatment settings, clinical needs, and geographic situations. However, they all should contain a core set of State and nationally standardized data elements. The policies of the MCO should aggressively facilitate such standardization. In addition, these assessment data should be retrievable for review as agreed upon by the contract with the MCO.

There are difficult tradeoffs when determining the location, type, and number of assessment sites. MCOs use a variety of models to assess and triage individuals into and within the treatment continuum. These may include:

• Assessment and triage capacity at all treatment sites

• Walk-in and call-in access

• 24-hour hotlines

• Central intakes

• Local community-based assessment sites

• Employee assistance program (EAP) triage centers

All models have advantages and disadvantages. In many ways, implementation is more important than the model. It is important to analyze local needs, clients served, previous experience, and current patterns of service delivery. Based on these factors, one can develop the assessment and entry systems that are most likely to achieve desired goals for a given State, region, or system.

Screening

It has been estimated that 75 to 85 percent of individuals with AOD problems never receive formal AOD treatment. To achieve middle-term savings through early identification and intervention, state-of-the-art models of AOD treatment must provide comprehensive screening for problems throughout the health and human services system. Ideally, systematic screening for AOD problems will be available or done in psychiatric settings, correctional settings, medical settings, and in a broad range of social service settings.

Early intervention and referral to outpatient AOD services should be seen as a hallmark of quality AOD treatment. Infrequent use of the simple, inexpensive screening devices that are available for AOD problems leads to insufficient early case identification. This failure to identify AOD problems early results in missed treatment opportunities, increased AOD treatment costs at a later stage, and increased overall medical costs.

Prevention

As the managed care field matures, increasing attention is being focused on longer term outcomes, demand reduction, and cost savings. A number of technologies are being increasingly used. These include:

• Prevention

• Wellness training

• Early identification

• Pretreatment

• Targeted outreach

• Brief interventions

• Other clinical technologies

Many expect that the focus of managed behavioral health care will substantially move in this direction, especially among systems that are financially "at risk." These systems will be motivated to become proactive in reducing the likelihood that clients will subsequently need more intensive and costly care.

Increasing the capacity of a system to screen for AOD problems is essential in being able to offer targeted prevention efforts and to intervene earlier in the course of an individual's substance use disorder.

The sources of referral for individuals with AOD problems is one key component of any managed care system that needs to be understood. These referral sources should be systematically monitored as closely as possible. Common referral sources for the publicly insured–the courts, child protection agencies, welfare systems–must be borne in mind when developing and monitoring systems.

Although health maintenance organizations (HMOs) and other capitated systems have economic incentives to promote wellness, the results are mixed. In situations where managed care is provided through HMOs, physicians are the source of referral about 40 percent of the time. This is despite the fact that physicians are often ill trained to screen for and diagnose substance use disorders. Therefore, physicians should be thoroughly trained in screening technologies, in conducting brief interventions, and in the use of standard AOD screening tools (Levin 1993).

As one component of continual improvement activities, the physicians should also be systematically monitored for their rate of referrals to AOD caregivers for evaluation and treatment. AOD providers should be monitored for their response to the referrals in a timely, professional, and collaborative manner.

Contracts with MCOs should emphasize the importance of early identification and screening of AOD problems, and purchasers of managed care should closely monitor performance. Many standardized screening tools are available. Brief intervention techniques (mild clinical interventions that can be provided at a variety of settings by trained individuals) hold promise for the less severely impaired. The Center for Substance Abuse Treatment (CSAT) has recently developed a Treatment Improvement Protocol (TIP) on simple screening instruments for alcohol and drug abuse and infectious diseases; this TIP is an excellent resource for States to use when implementing screening systems (CSAT 1994).

Patient Placement Criteria (PPC)

Some believe that the short-term financial incentives to cut and/or contain costs can create a powerful conflict of interest regarding quality care for the purchasers of managed care. They would prefer to see the government–preferably State alcohol and drug authorities–establish criteria on the environment, intensity, and duration of services. Others believe that this approach would be too restrictive, too intrusive, and would undermine the capabilities of the MCO to innovate and improve systems of care. Most would agree that the best case scenario would be that such criteria–and the implementation of these criteria–be created and continually refined through an active collaboration between the MCO, the State financing authority, consumer advocacy groups, and the State alcohol and drug authority.

A standard set of written patient placement criteria for a State is a reasonable goal. In this way, the placement process can be more understandable and acceptable to providers and clients alike. Standardized criteria also help create a level playing field in which competing MCOs will operate. In a collaborative system, the standards can be openly discussed and amended as understanding increases. All gatekeepers should be trained in the use of the PPC adopted and used in the State.

There are many different routes to follow in implementing statewide patient placement criteria. Insurance statutes can be used to govern how MCOs determine AOD benefits. Regulations can be developed to govern eligibility for funds or licenses. Contracts can be written between providers, MCOs, and/or the State.

The Patient Placement Criteria developed by the American Society of Addiction Medicine (ASAM) have stimulated much discussion and action in the field. Many States have adapted these criteria to fit individual State circumstances. CSAT recently sponsored a Treatment Improvement Protocol (TIP) on Patient Placement Criteria, which should be available in 1995. A review of these publications would be helpful for State planners and AOD providers.

Core Set of Wraparound Services

Wraparound services are services provided to individuals and families to enhance, supplement, and support AOD treatment services. They are an essential adjunct to treatment and are often a key to successful outcomes, although they are not usually considered treatment services. They are usually not–but can be–funded under AOD treatment benefits. It is imperative that any MCO managing the care of these beneficiaries ensure effective access to these wraparound services. Successful linkages to primary care, mental health care, and social services are essential to coordinated care and positive outcomes.

Most healthcare reform discussions separate social and public health services from general healthcare services. At the same time, there is a possibility that some of the dollars spent on treatment-related social services will be mixed with healthcare dollars and that certain services, such as housing and transportation, will fall into a financial vacuum. Thus, it may be important to identify and publicly fund certain wraparound services as separate from health care and as an MCO's responsibility.

One can divide wraparound services into (1) those that are essential to access and (2) those that contribute to positive outcomes. At a minimum, essential wraparound services include child care and transportation.

Wraparound services that contribute to positive outcomes include:

• Primary health care

• Screening and referral for HIV disease, tuberculosis (TB), and other infectious diseases

• Mental health services

• Legal aid

• Vocational training

• Education services

• Supportive living arrangements

• Domestic violence services

• Financial assistance

• Liaison services with Immigration and Naturalization services

• Other social services

Often, MCOs rooted in the private sector are not well linked to many of these wraparound services. The contractor should identify the most salient services for its population and determine the most effective way to ensure access. The contractor should also contractually ensure that:

1. The MCO provides and covers certain services that have not been considered traditional healthcare services, such as transportation and child care, or
2. The MCO develops effective linkage mechanisms to these services

Medical Linkage

In the United States, $1 of every $7 spent on health care is related to complications of AOD problems. More than 70 medical conditions and diseases are attributable, in whole or in part, to alcohol abuse. These conditions and diseases include cancer, cardiovascular disease, trauma, birth complications, and acquired immunodeficiency syndrome (AIDS) (Merrill et al. 1993).

It is therefore crucial that medical care be closely integrated with AOD treatment. In behavioral healthcare carveouts, there must be a clearly established and functionally feasible linkage with primary care services (e.g., with adjoining primary care clinics and primary care physicians). In HMOs, there must be close monitoring of the expertise of the gatekeepers and the effectiveness of the internal referral systems. In all cases, the primary care linkage to AOD treatment programs must be considered a priority and must be systematically measured as well as possible.

In Minnesota, AOD system developers wanted to create financial incentives for providing clients with efficacious levels of AOD treatment the first time they enter treatment. The Minnesota system developers found it essential to insert legislative language that directed decision makers and their numbers-crunchers and/or actuaries to look at cost offsets in creating these financial incentives. They incorporated the following language into law as a factor to be considered when developing a universal standard benefit set:

In developing the universal standard benefits set, the commissioner shall take into account factors including, but not limited to, cost savings resulting from the inclusion of healthcare services that will decrease the utilization of other health care services.

Assuming that this would not be fully understood by the actuaries, they followed it up by inserting specific actuarial assumptions into the commissioner's quasi-rulemaking directive to the actuary "for public and private plans." In Oregon, the medical/surgical capitation rate was reduced in anticipation of offsets resulting from AOD treatment.

Special Populations

In any given pool of enrollees, there are "special populations" that require responsive treatment facilities, staff, outreach, and case management. Such populations include, but are not limited to:

• Women–especially pregnant women

• Intravenous drug users

• People exposed to human immunodeficiency virus

• Those with coexisting AOD and psychiatric disorders ("dually diagnosed")

• The criminally involved

• The elderly

• Cultural and ethnic minorities

• Adolescents

• People with multiple disabilities

Underserved populations require targeted outreach efforts to assist them in getting into and staying in care. Contractual financial incentives often discourage such outreach, and many MCOs are not sufficiently community-based to provide this outreach effectively. This type of outreach may be best achieved by a separate party (e.g., the AOD authority). A thoughtful decision must be made regarding who is best positioned to reach out effectively to these populations.

Provider Network

Incorporating managed care into a publicly funded AOD treatment system will have a dramatic impact on the providers in that system. Some will adapt quickly to the new environment and prosper, some will fight to remain viable, and others will not survive the transition. Mergers, new affiliations, and new system developments will radically change the service-delivery landscape. The MCOs may be inclusionary or exclusionary in how they implement systems development. However, the MCOs should only be able to use licensed facilities.

It is therefore crucial that State AOD authorities do their best to support the initial inclusion of these existing licensed programs and assist them in adapting to the new environment. Extensive training may be required to assist some providers. Information regarding managed care should be systematically forwarded to them. Trainings and educational forums can be provided or strongly encouraged. (Note: Appendix C, "Managed Healthcare Organizational Readiness Guide and Checklist," which is a tool to help analyze a provider's capacity to function successfully in a managed care environment, can be used by both programs and State systems to identify their strengths and weaknesses.)

Needed consultative or technical assistance services can be arranged. Strategic planning processes–both at the system and provider levels–can be implemented. Within the limits of resource capabilities, State AOD authorities should provide leadership in designing and implementing strategies that will enable publicly funded AOD providers to participate successfully in the managed care system.

"Any Willing Provider"

Many States are now adopting or considering "any willing provider" legislation in an attempt to lessen the exclusionary power of MCOs. This type of legislation–mandating that all providers who are willing to meet specified standards and accept a given rate will not be excluded from a managed care network–is highly controversial. Fundamentally, the advantage of such legislation is that it can prevent a provider or group of providers from being formally excluded from a managed care network. The disadvantage is that it can substantially restrict the capacity of an MCO to accomplish clinical goals and that de facto exclusion could still probably occur. State AOD authorities must examine the individual circumstances of their particular State to decide whether or not to support such initiatives.

Essential Community Providers

The financial and societal consequences of undetected, untreated, or inadequately treated AOD problems are enormous. During a transition to managed care, it is essential to the public safety, welfare, and economy of a State that the treatment offered to the uninsured or publicly insured populations not be dramatically reduced or made less available. Measures must be implemented to ease the inevitable problems of such a transition and to ensure that the provider systems in place are not abandoned in a wholesale and reckless manner.

Many MCOs are not highly experienced in treating addictions among the type of clientele that is characteristic of publicly funded programs. For this reason, many believe that new systems should encourage the initial inclusion of the local, publicly funded AOD treatment programs that have been serving this population. Traditionally, these publicly funded programs have operated for years with insufficient funding. They are at a distinct disadvantage relative to providers who have been funded in the private sector for treating the commercial population.

However, these publicly funded providers offer major strengths and advantages. These providers have:

• Developed strong community linkages with key supportive services

• Demonstrated sensitivity and commitment to the needs of the publicly insured individual

• Demonstrated that they are capable of being, by necessity, highly cost-efficient in the delivery of clinical services

The loss or functional exclusion of such services in the name of reform would represent a substantial step backwards in attempting to meet the needs of the publicly insured population.

As healthcare delivery systems are transformed, planners need to be creative in combining the community-based strengths of the publicly funded system with the technical and managerial strengths of the managed care industry. One way to facilitate a successful transition to managed care–while still protecting the public good–is to encourage contractually the inclusion of community-based providers as "essential community providers" for a designated transitional period.

Exhibit 2 provides sample contract language relating to the comprehensiveness of treatment.

Chapter 4–Financial Considerations

Fee-for-service reimbursement is a system in which payment is based on actual services rendered. Until recent years, this system has been the mainstay of most reimbursement for privately funded alcohol and other drug (AOD) treatment services. However, fee-for-service reimbursement has inherent incentives–both financial and clinical–to overutilize services and to overtreat clients. Because every additional unit of service generates additional revenue, there is little incentive to monitor treatment more tightly or to lower costs. The result can often be waste and inefficiency.

Most individuals who work in the AOD treatment field want to provide quality care to those whom they treat. To the degree that financial incentives strongly encourage both high quality and cost-efficient treatment, most provider systems will deliver treatment that is good for clients, for taxpayers, and for health care in general. Effective reimbursement systems attempt to tap these good intentions.

Capitation 23

Capitation is a method of reimbursement in which a fixed sum of money is paid per enrollee by the purchaser to the provider. This sum of money is expected to cover specified services for every enrollee for a defined period of time. Capitation agreements attempt to create a system in which those delivering care are financially motivated to deliver the highest quality care and to achieve the best outcomes in the most clinically and cost-efficient way possible.

A shift in the financing of behavioral health care toward capitation models is rapidly evolving. This represents a major policy shift from retrospective to prospective reimbursement systems. Payment is gradually moving away from fee-for-service and toward risk-based payments–either per case fees or capitation payments. Often, these risk-based payments are linked to performance on specified measures (Oss 1992, 1993).

The essential components of a capitation contract include:

• Prepaid care to cover all clinical and administrative costs

• A contracted provider who is at full or partial risk

• Financial incentives to manage care wisely

• Payments tied to a specific risk pool

• Increased emphasis on outcomes rather than on amount or level of treatment

Capitation creates clear financial incentives to minimize hospital use through the development of a comprehensive continuum of treatment services. This continuum of services has the advantage of facilitating the treating and maintenance of enrollees within their community, where they will receive ongoing support for recovery (Christianson 1989). Capitation requires establishing clear performance criteria in such areas as accessibility, treatment appropriateness, customer satisfaction, individual outcomes, and outcomes for the enrolled population as a whole. Capitation thus focuses attention on the achievement of specified results rather than on the mechanisms of process.

Capitation engenders strong emotions for those in the field. Christianson (1989) summarized the polarization around the issue when he wrote, "Proponents of capitated financing foresee cost savings and better integration of a relatively fragmented service delivery system. Skeptics fear that capitated arrangements will lead to access barriers, the channeling of patients to inappropriate providers, and cost-shifting."

Most agree that capitated reimbursement models can, if implemented properly, create increased clinical accountability for individual and aggregate outcomes. This level of clinical accountability cannot easily be duplicated in a fee-for-service environment. Fiscal and clinical incentives encourage the capitated party to consider all available options for meeting client needs in the most efficacious way. These fiscal and clinical incentives can foster innovation by encouraging the use of treatment settings that are not traditionally purchased in fee-for-service financing (Dangerfield and Beitt 1993).

However, depending on the nature of financial incentives built into the contract, capitation can create strong short-term incentives to underprovide care as a cost-cutting measure. Monitors of a capitated system must therefore develop an expanded set of concerns, skills, and systems to maintain the integrity of the treatment system and to ensure appropriate access to treatment (Schaller et al. 1986). In many situations, the State AOD authority is well positioned to be such a monitor.

Risk Management

Risk management refers to a health care organization's desire to minimize the financial risk of delivering services in a capitated system. The financial risk may be borne by the provider, by the managed care organization (MCO), or by the entity that is purchasing the managed care service, or the risk may be shared in agreed-upon ways. Adverse selection–having an unfair and disproportionate number of expensive-to-treat enrollees–is avoided whenever possible. Management of this risk is a key challenge in most managed care systems.

In any pool of enrollees, there will be subgroups who utilize treatment services differently. Some groups will be more expensive to manage and some will be less expensive. It is essential to understand the clinical and treatment characteristics of the populations served. For example, in the behavioral health field, it has been estimated that 40 percent of all mental health/AOD expenditures are made on behalf of just 2 percent of the population (Frank 1994). In most cases, this is related to individuals with severe mental health problems who have AOD problems that exacerbate the condition.

When provider organizations compete to attract enrollees in &nbsp;capitated systems of care, there are strong financial incentives to limit, discourage, or disenroll those individuals who can be expected to incur higher costs. Providers who attract a disproportionate share (i.e., adverse selection) of such persons face serious financial risk unless they are protected by some form of adjustable capitation payment, shared risk, or stop-loss mechanisms. Reinsurance or other "stop loss" provisions are ways to protect against unforeseen costs. Providers under such an arrangement are protected from financial loss beyond a certain predetermined level (Mechanic 1993).

Benefit Package

The benefit description (i.e., what treatment services must be available in the plan) needs to be clearly defined. Any capitation payment must be substantial enough to support delivery of these defined services. If there are services that fall outside of the domain of the MCO, certain requirements will be needed. These include:

• A mechanism must be provided for the client to receive these services.

• Some assurances are needed that there will be timely access to these services.

• Assurances are needed that these services will be coordinated with the MCO.

Capitated health care systems must incorporate effective checks and balances to ensure that short-term incentives to undertreat do not overwhelm the longer term incentives. For positive outcomes, checks and balances are critical because they support longer term goals–to build quality services and improve overall health status. To offset short-term incentives to undertreat, important balances include (1) sufficient funding for the services required, (2) clear performance indicators, and (3) longer contracts (e.g., 2­5 years) that increase the incentive for MCOs to seek longer term positive outcomes.

Before the advent of managed care, financial exposure was limited by such means as placing maximum individual limits on the amount, duration, and/or type of treatment. Such limits are largely unnecessary in a managed care environment. However, use of such limits still prevails, despite the fact that they can result in denials of treatment that are clinically unsound and financially counterproductive.

The contracting agency makes the final determination regarding the benefit package that the MCO must implement. Depending on the situation, the MCO may or may not be able to influence this decision significantly. Thus, service coverage within a managed care system may include a number of benefit limitations that need careful examination. These benefit limitations may include:

• Restrictions on the number of available hospital days or ambulatory visits

• Copayments, deductibles, or other enrollee-paid fees

• Supplemental benefits available only for an additional monthly charge

• Mandatory periods of time (e.g., 90 days) between treatment episodes

• Limitation of sufficient resources (e.g., facilities and/or personnel)

• Annual or lifetime payment limitations

• Arbitrary "fail first" policies

In developing or evaluating the terms of a managed care contract, it is imperative that the benefit package be closely examined. Attempts should be made to minimize or eliminate any arbitrary limits of care that are not well grounded in clinical practice.

Cost-Shifting

Cost-shifting occurs when the care of a particular condition is "shifted" inappropriately to another treatment facility, State agency, or other entity. Cost-shifting is a common problem in any systems development. It is imperative that developers aggressively consider how to minimize incentives for shifting costs. What incentives will there be for the MCO to transfer care (and therefore cost) to other State agencies? How will care and responsibility for individuals be determined between the MCO and other agencies? What kind of interagency agreements should be developed to guide these decisions? How will possible cost shifts between the MCO and medical services be monitored?

With today's healthcare reform of publicly supported clients, many MCOs are now placed in the position of becoming the provider of services to the indigent (i.e., the provider of last resort). There are no other resources or providers to whom MCOs can shift costs. State AOD agencies need to consider contract benefits and responsibilities from this perspective.

Actuarial Analysis

In any capitated situation, it is essential to understand the case mix (i.e., the clinical characteristics) of the pool of enrollees and to determine the likely per-person cost of treating each group. Actuarial companies are companies that specialize in analyzing past utilization data for specified groups and then, using assumptions when necessary, estimating likely future costs for treating each group.

There is considerable "art" in the science of actuarial prediction. Good actuarial work needs to be thoroughly attuned to the real world, so that any assumptions are grounded in logic and represent the field as it is currently practiced. Actuarial analysis is only as good as its sources, and therefore depends on the quality of the historic cost data, the accuracy of the demographic data, and on the validity of its assumptions.

An actuarial analysis is the basic tool used by insurance firms to determine how much to charge for a policy that would pay for a defined benefit package. State agencies need to estimate how much the State should expect to pay for the services it proposes to contract through a managed care firm. States employ actuaries to prepare such analyses. The final analysis combines a variety of estimates, calculations, and assumptions as the basis for computing the cost per covered person per month, the "PMPM" (per member per month).

Whenever possible, actuarial analysts will base estimates on concrete data and, when necessary, will make assumptions to compensate for missing, incomplete, or inaccurate data. During negotiations, actuaries will usually tend to estimate conservatively and err on the side of a high PMPM. In order to stretch limited funds, it is usually in the interest of the State purchaser and the State AOD authority to lower the PMPM to the lowest level that can still support a quality care system.

In working with actuaries, it is thus very important to provide them with appropriate assumptions. To the extent possible, one should try early in the discussion to define what assumptions the actuaries are actually using. Model building for PMPM should accompany or precede actuarial analysis. Such model building will force explication of what the payer wants, in what volume, and for what populations.

The importance of providing assumptions for the actuaries cannot be emphasized enough. Experience in healthcare reform at the State level has shown that battles about benefit packages ultimately end up in actuarial wars between competing sets of numbers. These competing numbers are used by opponents as reasons to reduce benefits for appropriate and cost-effective services.

It is important to understand the actuarial process and to question aggressively the actuaries who establish the capitation rates. The critical question is whether the rates being proposed are sufficient to guard against undertreatment. If the capitation rate is insufficient, undertreatment of substance abuse problems will result.

During the actuarial process, it is important for decision makers and actuaries to be knowledgeable about the many cost offsets related to AOD treatment. This knowledge can be a driving force for creating financial incentives to provide efficacious levels of treatment.

Overall actuarial studies should be tailored to the options that the State is considering for controlling costs (C. Hansen, Washington State Division of Alcohol and Substance Abuse, personal communication, 1994).

Chapter 5–Consumer Protections

The relatively recent emergence of behavioral healthcare companies has resulted in this type of health care being largely unregulated by both States and the Federal government. Although States and the Federal government regulate health maintenance organizations (HMOs), health insurers, and alcohol and other drug (AOD) treatment providers, few such regulations govern the activities of managed care firms. While many firms act in good faith and provide quality services to those served, some do not and thereby damage the overall reputation of the industry.

In the absence of such regulation, several problems have occurred at different times in the implementing of managed care programs. These include:

• Failure to have adequate staff with specific skills and training in AOD diagnosis and referral

• Failure to use acknowledged AOD patient placement criteria

• The use of financial arrangements that create incentives to undertreat

• Inadequate grievance procedures

• Inadequate emergency procedures

• Incomplete coverage for approvals in the evenings and weekends

• Inappropriate shifting of costs to public funding sources

Without consumer protections in place, this combination of factors can potentially lead to inadequate and sometimes dangerous care. In response to this, the Model Managed Care Consumer Protection Act was established to provide reasonable protections to consumers. It sets a standard that allows responsible managed care firms to continue to carry out their functions, but creates much-needed consumer protections for those firms whose policies or fiscal incentives can lead to less than adequate care (President's Commission on Model State Drug Laws 1993, pp. D75-D95; D. Gates, Pennsylvania Health Law Project, personal communication, March 1994).

Focal Points for Consumer Protection

The following are some key consumer protection areas that should be incorporated into a contract with a managed care entity. Exhibit 3 provides sample contract language pertaining to consumer protection.

Openness of Systems

MCOs differ substantially regarding how available, specific, and/or valid their patient placement criteria are to providers and enrollees. Public access and input to these processes can lead to improved quality, accountability, and provider/consumer relations.

Out-of-Plan Services

It is important that enrollees have reasonable access to appropriate treatment services. Systems need to be set in place to ensure this access if providers cannot, at a given time, offer these services within the formal system.

Consumer-Friendly Materials

Written information from MCOs is sometimes difficult to obtain and challenging to read. It is essential that all necessary materials be readily available and be written in clear and simple language(s).

Disenrollment Protections

The extent to which services are covered and the amount of that coverage vary greatly. Limits on coverage can include maximum number of days, number of visits, or dollar amounts.

MCOs often have incentives to disenroll or to encourage disenrollment of individuals perceived as expensive or difficult to treat. Additionally, in highly competitive markets, MCOs sometimes use dubious procedures as they compete for enrollment.

In general, contracts should make disenrollment by the provider or MCO very difficult. This can be done by requiring that the provider or MCO take multiple and monitored steps in disenrollment, while making disenrollment by the consumer a relatively easy, single-step process (Boyer 1993; President's Commission on Model State Drug Laws 1993). All disenrollments should be documented and reviewed by the financing agency and/or the State AOD authority.

Appeals

Legitimate differences of opinion regarding the clinically appropriate level, length, or intensity of care for a given problem are inevitable. Every MCO must have a user-friendly vehicle for handling appeals and grievances.

Staffing and Gatekeeping

The training, experience, qualifications, and overall sensitivity of "gatekeepers" is crucial when addressing the needs of individuals with AOD problems. Gatekeeping is a central component within the managed care environment. MCOs should be required to provide ongoing training of gatekeepers.

The MCO should be able to demonstrate knowledge of all relevant Federal/State laws and governing provisions regarding AOD treatment. Such relevant laws and regulations include the Americans with Disabilities Act and confidentiality regulations.