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Behavioral health homes: A better way to pay for services

December 23, 2010
by Dale Klatzker
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Behavioral health medical homes control costs, reward quality and efficiency

Untreated behavioral health (mental health and substance use) problems have a profound impact on our nation’s economy, healthcare system, and state and federal budgets. The federal government estimates that untreated mental health problems cost the country $171 billion a year. Almost 25 percent of hospital stays in the U.S. are for patients with a mental health or substance use-related disorder, and states estimate that more than 90 percent of prison inmates have a substance use problem.

In Rhode Island, we have the highest rate of illicit substance use in the country and the highest rate of people needing substance use treatment but not receiving it. We have the second-highest percentage of people with major depression and the fifth-highest percentage of people with serious psychiatric distress. These statistics not only remind us of the profound impact that untreated behavioral health problems have on Rhode Island’s economy, healthcare system, and state budget, but also on our neighbors, friends, and family members unable to access the treatment they need.
By providing cost-effective treatment and supportive services, we not only help our patients and our community but also help the state manage its way through increasing budget difficulties. I realize that current budget constraints will hamper the state’s ability to pay for services, but not addressing the treatment needs of Rhode Islanders will have an even greater long-term impact on the state’s budget.
While a greater investment in behavioral health at both the national and state levels is necessary, our industry has a responsibility to more effectively manage the resources we are given. The adoption of an evidence-based, patient-centered medical home model can put Rhode Island on the path to creating a behavioral healthcare system that is affordable and continues to provide the highest quality services. The patient-centered medical home model emphasizes what community behavioral health services do best: provide individuals and families with high-quality, cost-effective treatment that promotes the right care, at the right place, and at the right time. This model has begun to receive increased attention across America as a way to control healthcare costs while ensuring that access to appropriate treatment is preserved. The model is under consideration in Massachusetts as “Capitation 2.0.” In the Bay State it is emerging as a popular option for controlling the long-term cost of that state’s health-reform initiative. In Minnesota, the legislature recently announced a state-county partnership project authorizing the establishment of a behavioral health medical home pilot program. The patient-centered medical home model controls costs by removing the perverse incentives of our current fee-for-service payment system. Under this system, providers are paid based on the number of services they provide and are paid more for certain services. There is little or no incentive for achieving quality-based outcomes or coordinating care, and the provision of lower cost services is not incentivized.
A patient-centered model of care would facilitate the creation of a system that rewards outcomes, efficiency and quality, while holding behavioral healthcare providers accountable from both cost and treatment-outcomes perspectives. Under my proposed system, community behavioral healthcare providers would receive a per-patient, per-month rate for each state-funded client they serve. This case rate, to be determined by an actuarial analysis, would cover the costs of all behavioral healthcare services to the individual during that time. The costs associated with high-acuity patients would be offset by lower-acuity patients, removing the incentive to provide excess care for those who need fewer services. At the same time, the community behavioral healthcare delivery system would work with the state to establish a series of outcomes by which all providers would be measured. Possible outcomes could include decreased hospitalization rates, success in transitioning patients to less intensive systems of care, decreased recidivism, and increased employment. Providers would be held accountable for meeting the outcome objectives, and those that failed to meet the objectives would have their case rate adjusted accordingly.
The adoption of a case-rate payment system, coupled with new outcomes measures, would ensure that providers are incentivized to manage their patient care within a commonly accepted cost structure, while ensuring that patient care and outcomes remain the top priorities. By working with partner agencies and state governments, we will create a system that provides patients with the care they need while saving money. The survival of the behavioral healthcare system—as well as the clients we serve—depends on it.

Dale Klatzker is president and chief executive officer of The Providence Center.