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Gaining perspective on Secretary Burwell’s 'value purchasing' initiative

November 5, 2015
by Ron Manderscheid, PhD
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Early this year, U.S. Department of Health and Human Services Secretary Sylvia Mathews Burwell announced a value purchasing (VP) initiative. This was the first step in a planned effort to move away from today’s encounter-based payment system toward case rates adjusted for level of performance.

The secretary also set very aggressive goals for the initiative: conversion of 50% of federal Medicare funding to VP by the end of 2016, and 90% by the end of 2018. Although she did not specifically address Federal Medicaid funding, her intent likely would by a similar conversion of federal Medicaid funding to VP, in collaboration with the states.

If one reasonably assumes that such changes actually will occur as the secretary envisions, then we must explore the very significant implications that these developments will have for the behavioral healthcare field.

Initially, we need to describe a few key concepts. A case rate is a per person payment for a specified period of time for the care to be received by a defined population of service recipients, e.g., $1,000/person for a 12 month period for 5,000 service recipients. This case rate payment usually is made prospectively before care is delivered. It may be a blended rate, e.g., $500/person for 2,500 service recipients requiring less intense services plus $1,500/person for 2,500 service recipients requiring more intense services. Performance adjustment means increasing or decreasing the case rate by some predetermined amount contingent upon actual performance reflected through performance measures.

Although also of potential relevance here, the concepts of risk corridors and reinsurance are beyond the scope of the current discussion.

The case rate for behavioral healthcare may be carved in or integrated, that is, one case rate for all behavioral and physical healthcare provided. Alternatively, the behavioral healthcare case rate may be carved out, that is, a separate case rate for behavioral healthcare and another for physical healthcare. Current national developments under the Affordable Care Act clearly suggest a federal effort to move toward carved in or integrated case rates for behavioral healthcare and away from carved out case rates. Appropriate performance measures will be an important tool to protect behavioral healthcare as these changes occur.

The following represent some of the guideposts we will need to follow as behavioral healthcare prepares for payment through case rates:

Essential Financial Infrastructure. Development of a case rate requires good financial data on fixed costs, e.g., mortgage payments for a building, and variable costs, e.g., staff hours, as well as measures of typical per person utilization of care and availability of appropriate technology for conversion of these data into case rates.



Ron Manderscheid

Exec. Dir., NACBHDD and NARMH

Ron Manderscheid


Ron Manderscheid, Ph.D., serves as the Executive Director of the National Association of County...

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