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Medicaid On Schedule to Bring Managed Care to Behavioral Services

Some Medicaid providers worry that transition could lead to clients being shortchanged of needed services.

New Jersey's ongoing Medicaid reform -- which seeks to save money while improving quality of care -- will reach its next critical deadline July 1, 2013. That's when more than 60,000 adults with psychiatric illnesses, addictions, and other behavioral health problems will be enrolled in a managed care program.

Like virtually all Medicaid decisions, this one is both financial and medical.

Medicaid will contract with an outside managed care firm to oversee the services its patients get from behavioral health providers, such as psychological counseling and drug rehab. At the same time, the state will change how it pays for these services: instead of awarding a lump-sum contract to providers so they can hire staff and treat patients, the providers will bill the state on a fee-for-service basis. The new fee schedule won't be established until sometime next year, but providers are already worried that changes on the horizon will disrupt the fiscal health of the state's network of community health agencies.

To prepare for the shift to managed care, the state Department of Human Services, which runs the $10 billion state and federal Medicaid program, began meeting in January with representatives of mental health and addiction service providers. One of the goals of these meeting is to allay fears that the managed care contractor that the state will hire -- known as an "administrative services organization" or ASO -- will interfere in clinical decisions and try to deny expensive types of care, such as inpatient services, which might be in the patient's best interest.

That anxiety can be seen in the comments of Thomas Ruben, assistant executive director of Jewish Family Services of Atlantic and Cape May Counties.

"We're concerned about how these changes may impact the consumers we serve, and I think it's also our sense that it may drive the mental health system to using larger behavioral health providers," Ruben said. Whether consolidation "is a good thing or not I really can't say."

JFS has 80 employees and revenue of about $6 million a year.

"Most of our work is outreach work -- directed toward hard-to-reach mental health consumers," including the homeless living under the boardwalk in Atlantic City. As the state changes the way it pays for mental health services, it is unclear how agencies like JFS will be compensated for the outreach they now provide to those among the poor and homeless who aren't enrolled in Medicaid.

In some instances, however, anxiety is tempered by a sense of opportunity.

"Change always leads to opportunity, and what we need to do is embrace it and try to find ways to not only make it work but to find new opportunities," said William J Sette, a former president of the New Jersey Association of Mental Health and Addiction Agencies and CEO of Preferred Behavioral Health in Lakewood.

That sense of optimism does not appear to be groundless.

The state is expected to increase compensation to behavioral health clinicians, potentially encouraging more providers to take Medicaid patients. And shifting to fee-for-service will enable the state to get federal matching dollars for services that the state now pays for on its own.

For example, right now it can be easier for New Jersey to get federal matching funds for institutional care than for community-based care. Rebalancing the Medicaid system to provide more community-based care and less in-patient care, when clinically appropriate, is a major goal of the state's Medicaid reform. And providers applaud New Jersey's plan to expand innovative pilots like "behavioral health homes," where the individual's physical health and mental health is addressed by a single team of professionals.

Shifting behavioral health to managed care is among dozens of Medicaid changes New Jersey is seeking via the comprehensive Medicaid waiver DHS submitted in September to the federal Centers for Medicare and Medicaid Services. The state is awaiting a decision from CMS. Assuming that federal agency green lights the waiver, the state plans to solicit proposals for an ASO by July 1. There will be just one ASO chosen, and it will coordinate behavioral health for adult Medicaid patients. (There is already an ASO overseeing children's behavioral health; currently that contract is held by PerformCare.)

The state expects to select the winning adult behavioral health ASO early next year, and to have this new contractor on the job by the start of the next fiscal year, July 1, 2013. Initially, the ASO will just provide administrative oversight and care coordination; but eventually, perhaps in a year or so, plans are to shift from an ASO to a full "managed behavioral health organization" that receives a predetermined amount of money from Medicaid to arrange care for particular patient populations. Some in the behavioral health community are concerned that managed care will have an inherent financial incentive to discourage more expensive types of care, such as in-patient services.

James Cooney is chief executive of Ocean Mental Health Services of Bayville and a past president of the NJAMHAA, many of whose 170 member agencies serve Medicaid patients. Cooney said community mental health centers are concerned over how managed care will compensate them for what they do beyond delivering clinical services to individuals. Cooney said services like case management, which strive to reduce waiting time and get patients into the right kind of care, have been successful at keeping patients out of hospital emergency rooms and in a consistent program of behavioral health care. Ocean Medical has an annual revenue of about $18 million, provides about 500,000 units of service annually, and employs 300 people.

DHS Commissioner Jennifer Velez is well aware of the angst in the state's behavioral health community. In January she asked providers to serve on four committees charged with alerting the DHS to potential trouble spots in four key areas: clinical, fiscal, access to care, and patient outcomes.

"We have been working these committee members pretty hard: there are a lot of issues to bring home to closure and make decisions," Velez said. A whitepaper of the recommendations of these stakeholder committees is being drafted and is expected to be made public by DHS in May.

Velez said behavioral health providers need not fear the transition to the fee-for-service system. "It is a change in the delivery system: rather than contracts, it will be a fee-for-service," Velez said. "It's going to be a transition . . . they want to be sure that they are not going to lose the money that they need in making that transition."

Velez believes the transition looms largest in providers' concerns. "I think if you asked any one of them, they would say 'I'm okay with my contract, I'm okay with fee for service: I just don't want to lose in the transition.'"

An ASO model has been in place for children's behavioral health since 2002 and is working well, according to Velez. New Jersey's annual Medicaid behavioral health cost-per-child declined from about $30,000 in 2002 to about $15,000 in 2009. And in the view of some mental health experts, the ASO is working well for children when it comes to determining how to best utilize the services available.

But there are those in the state's behavioral health community who argue that New Jersey already has an effective clinical network in place -- and the state is fixing something that's not broken. To the issue of whether managed care will lower spending to the detriment of patient care, Velez said, "I know that is the criticism," but insisted care decisions will be dictated by the needs of the patient. "I think the best thing we can do is have active conversations about what [managed care] really means."

Debra L. Wentz, chief executive of NJ AMHAA, is among the stakeholders advising the DHS on the transition to managed care. She said the behavioral health providers in New Jersey have considerable experience and expertise "and we know the populations we treat on the ground. We want to make sure that there are no gaps in access to services, and that there are better outcomes for the individual."

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