Quantitative Research

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Virtually every state in the Unit-ed States now uses managedcare techniques to control be- havioral health costs for Medicaid re- cipients. Implementation of these strategies has proceeded in the ab- sence of substantial information on the resulting quality of care and ef- fectiveness of services (1). Advocates for persons who have severe mental

illness have raised concerns about the application of cost-cutting techniques developed in the private sector for employed persons with acute illness- es to persons in Medicaid and other public-sector programs who have persistent serious mental illness (2). We wanted to compare the service use patterns of Medicaid recipients with serious mental illness in a full-

risk (capitated) and a no-risk (fee-for- service) system of care and to deter- mine whether the type of financial risk arrangement affected patients’ health status.

Many state Medicaid agencies use capitation—the prepayment of an es- tablished fee per person for a defined benefit over a set period—to keep their costs predictable and limited. In some instances a single capitated pay- ment is made to a managed care or- ganization (MCO). In these ostensi- bly integrated plans, behavioral health care can be provided directly by MCO providers, by behavioral health professionals who are paid on a discounted fee-for-service basis, or even by a behavioral health MCO or another agency through a subcon- tract. In other cases, the state Medic- aid agency can carve out the behav- ioral health benefit by making capi- tated payments directly to a behav- ioral health MCO.

Managed care programs that use capitated payments to transfer finan- cial risk to for-profit entities that are responsible for the care of vulnerable populations are of particular concern. Specifically, the incentives of capita- tion to lower costs and limit service use may lead to worse outcomes for persons with severe mental illness, who often have multiple and inten- sive service needs.

State Medicaid agencies that pay for mental health care on a fee-for- service basis also use cost-control measures. Often an administrative services organization that is not con-

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Dr. Morrissey, Dr. Stroup, and Mr. Ellis are affiliated with the Cecil G. Sheps Center for Health Services Research of the University of North Carolina at Chapel Hill, 275 Air- port Road, Chapel Hill, North Carolina 27599-7590 (e-mail, [email protected]). Dr. Merwin is with the Southeastern Rural Mental Health Research Center of the Uni- versity of Virginia in Charlottesville.

Objective: The service use patterns and health status outcomes of Med- icaid recipients with severe mental illness in a system that assigned full financial risk to managed care organizations through capitation and a system that paid for mental health care on a no-risk fee-for-service ba- sis were compared. Methods: With use of a quasi-experimental design, initial interviews (time 1) and follow-up interviews six months later (time 2) were conducted among 92 clients in the full-risk group and 112 clients in the no-risk group. Regression models were used to compare self-reported service use and health status between the two groups. Re- sults: Service use patterns differed between the two groups. When symptom severity at time 1 was controlled for, clients in the full-risk group were more likely to have received case management but less like- ly to report contact with a psychiatrist or to have received counseling than clients in the no-risk group. When health status at time 1 was con- trolled for, clients in the full-risk group reported poorer mental health at time 2 than clients in the no-risk group. When physical health status at time 1 was controlled for, clients in the full-risk group reported poor- er physical health at time 2 than clients in the no-risk group. Conclu- sions: Capitation was associated with lower use of costly services. Clients with serious mental illness in the full-risk managed care system had poorer mental and physical health outcomes than those in the no-risk system. (Psychiatric Services 53:293–298, 2002)

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tractually at financial risk provides utilization management, including prior authorization and concurrent review. Because the pressures to re- duce service use are less severe in no- risk situations than under capitated contracts, utilization management alone is not likely to lead to serious adverse consequences for clients, al- though this area needs further study.

Several studies have shown that various managed care arrangements affect the use of Medicaid behavioral health services and Medicaid costs (3–10). One of the most consistent findings is that capitation lowers Medicaid costs by decreasing the use of expensive services, such as hospi- talization, while promoting less ex- pensive outpatient treatment. Rela- tively little is known about how the resulting patterns of service use affect patient outcomes. Some researchers who have compared the outcomes of persons with severe mental illness in capitated and fee-for-service systems have found no evidence that individu- als have been harmed by prepaid care (10,11). However, in Utah research- ers found a slightly lower rate of im- provement in mental health status among persons with schizophrenia in a capitated plan than among those in a fee-for-service plan (12).

This article reports the results of a prospective cohort study undertaken as part of the Tidewater managed care study, which compared two or- ganization and financing strategies for Virginia Medicaid recipients with se- rious mental illness. A managed care program in the Tidewater region that assigned full financial risk to MCOs through capitation was compared with a program in the Richmond re- gion that paid for mental health care on a no-risk fee-for-service basis (13).

In the Richmond region (no-risk condition), a Medicaid primary care case management program was in op- eration at the time of this study. In this model of managed care, mental health services were carved out of the program and were provided on a fee- for-service basis. The primary care providers were not gatekeepers for access to mental health services. The state Medicaid agency contracted with an administrative services organ- ization to provide utilization manage-

ment, including prior authorization and concurrent review, for mental health services. The administrative services organization was not at finan- cial risk.

In the Tidewater region (full-risk condition), Medicaid recipients were mandated to enroll in one of four health maintenance organizations (HMOs). The medical-psychiatric component of the Medicaid mental health benefit was prepaid with use of capitated contracts with the HMOs. The covered mental health services were inpatient hospitalization, psy- chiatric evaluation, medication man- agement, and psychotherapy. We ex-

amined the HMO in the Tidewater region that had the largest market share—about 60 percent. This HMO developed a subcontract with a sub- sidiary behavioral health MCO to manage the covered mental health benefits.

The behavioral health MCO sub- contracted with five local community mental health centers—known in Vir- ginia as community service boards— to provide outpatient mental health services and paid these boards on a capitated basis. Community service boards serve essentially the same function as public community mental

health centers—they represent the primary locus of nonhospital care for persons with serious mental illness. A network of local hospitals provided inpatient services. The behavioral health MCO paid these hospitals on a capitated basis, placing them at risk for the costs of inpatient treatment. By withholding a portion of the capi- tated payments if utilization goals were not met, the behavioral health MCO shared financial risk for inpa- tient services with the community service boards and the hospitals.

Under both the no-risk and the full-risk condition, case management and rehabilitation services for persons with serious mental illness were pro- vided by community service boards on a no-risk fee-for-service basis un- der Virginia’s Medicaid state plan op- tion. Under state law, only communi- ty service boards were eligible for Medicaid payments for state plan op- tion services. Substance abuse servic- es were not covered under the Vir- ginia Medicaid program; these servic- es were supported by block grant funding from the Virginia Depart- ment of Mental Health to the com- munity service boards.

Methods This prospective cohort study used a quasi-experimental design. Whether a subject received the intervention (full-risk Medicaid managed care) was determined by place of residence rather than random assignment. Time 1 data collection began in August 1997, 19 months after the mandatory HMO program began. Time 2 data were col- lected six months after the initial in- terview with each participant, with the final interviews taking place in early 1999.

The analyses were conducted with data collected from Medicaid recipi- ents with serious mental illness who were recruited as outpatients at a Tidewater area community service board and a Richmond area commu- nity service board. Trained interview- ers who had clinical experience with clients who have serious mental illness conducted initial structured research interviews with 243 outpatients—123 (51 percent) in the Tidewater area and 120 (49 percent) in the Richmond area.

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One

of the most

consistent findings

is that capitation lowers

Medicaid costs by decreasing

the use of expensive services,

such as hospitalization,

while promoting less

expensive outpatient

treatment.

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Access to study subjects was through personnel of the community service boards, who generated a list of clients and asked those who were eligible to speak with a researcher about partici- pating in a research interview. Re- search personnel then contacted those who agreed and explained the study in detail and obtained written informed consent. The consent form and other research procedures were approved by the Committee on the Protection of Human Subjects at the University of Carolina at Chapel Hill.

As part of a Substance Abuse and Mental Health Services Administra- tion initiative to examine managed behavioral health care in the public sector, the Tidewater managed care study used a survey instrument devel- oped with investigators at other sites. The instrument covered several do- mains, including demographic infor- mation, quality of life, clinical history, health status, mental health symp- toms, substance use, satisfaction, and service use.

We focused on service use, symp- toms, and health status and created

dichotomous variables for each. Infor- mation about service use was obtained by asking clients whether they had used specific mental health and sub- stance abuse services in the previous three months. Physical and mental health status were measured with the physical component summary (PCS- 12) and mental component summary (MCS-12), respectively, of the Med- ical Outcomes Study 12-Item Short- Form Health Survey (SF-12) (14). Sev- erity of symptoms was measured with the global severity index of the Brief Symptom Inventory (BSI) (15).

Chi square tests and t tests were used to compare the two groups in de- mographic, social, clinical, and service use variables at time 1. The analyses then focused on two research ques- tions. First, if symptom severity at time 1 is controlled for, how do the service use patterns of persons with serious mental illness compare be- tween the full-risk and no-risk condi- tions? Second, if health status at time 1 and service use are controlled for, does the type of managed care ar- rangement affect health status six

months later? The SAS statistical pac- kage was used for all analyses.

To address the first question, a list of key psychiatric and medical servic- es was adapted from the recommen- dations of the Schizophrenia Patient Outcomes Research Team (PORT) (16). Chi square tests were used to compare the crude proportions of the two groups that reported use of each key service during the three months before the time 2 interview. Logistic regression was then used to estimate an adjusted odds ratio for each key psychiatric and medical service, con- trolling for symptom severity and physical health status at time 1.

The second question was addressed with use of regression models. Linear regression was used to predict scores on the SF-12 mental and physical component summaries at time 2. Backward stepwise selection was used, with a p value below .05 as the deletion criterion. The initial predic- tors in the models included the man- aged care condition, four dichoto- mous variables that indicated use of each key outpatient psychiatric serv-

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TTaabbllee 11

Characteristics of clients with serious mental illness under no-risk and full-risk managed care arrangements at time 1

Overall (N=204) No risk (N=112) Full risk (N=92)

Domain and variable N or mean±SD % N or mean±SD % N or mean±SD % p

Demographic characteristics Male sex 92 45 53 47 39 42 ns African-American race 153 76 84 76 69 76 ns Currently married 15 7 8 7 7 8 ns High school education 88 43 50 45 38 42 ns Mean age (years) 43±9.8 44±9.7 43±10.1

Social variables Board-and-care home resident 53 26 42 38 11 12 <.001 Homeless in the previous three months 18 9 5 4 13 14 <.05 Weekly family contact 106 52 51 46 55 60 <.05

Clinical history and health status Drug or alcohol problems in the previous

30 days 28 14 18 16 10 11 ns Physical illness 114 56 62 55 52 57 ns Physical disability 55 28 32 29 23 26 ns Global severity indexa .97±.8 .81±.73 1.17±.86 <.01 MCS-12b 42.7±12.1 44.3±12.6 40.8±11.2 <.05 PCS-12c 44.1±10.1 45.5±10.2 42.5±9.8 <.05

Service use in the previous three months Case management contact 123 60 55 49 68 74 <.001 Primary care contact 105 52 49 44 56 61 <.05

a Global severity index of the Brief Symptom Inventory. Possible scores range from 0 to 4, with higher scores indicating worse symptoms. b Mental component summary of the 12-Item Short-Form Health Survey. Norm-based standardized scores have means of 50 and standard deviations of

10 in the general U.S. population, with higher scores indicating better functioning. c Physical component summary of the 12-Item Short-Form Health Survey. Norm-based standardized scores have means of 50 and standard deviations

of 10, with higher scores indicating better health.

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ice—case management, contact with a psychiatrist, counseling, and voca- tional training—and a dichotomous variable that indicated the use of any key medical service—primary care, specialty care, or admission—during the three months before the time 2 visit. The interaction of risk condition and case management was also in- cluded, because the nature of case management services may differ be- tween sites. In each initial model, the time 1 score for the dependent vari- able was included as a covariate.

Results Participants in the full-risk and no-risk groups who completed both the time 1 and time 2 assessments were similar demographically, as can be seen from Table 1. At time 1, the no-risk group (Richmond area) had a higher propor-

tion of board-and-care home resi- dents, a lower proportion who report- ed homelessness in the previous three months, and a lower proportion re- porting weekly family contact than the full-risk group (Tidewater area). The no-risk group also reported better mental health, as indicated by lower scores on the global severity index of the BSI, and less use of case manage- ment and primary care than the full- risk group. Clients in the no-risk group reported better mental and physical health status, as indicated by higher MCS-12 and PCS-12 scores, than clients in the full-risk group.

Six-month follow-up rates were 92 (75 percent) of 123 in the full-risk group and 112 (93 percent) of 120 in the no-risk group. In both groups, clients who were lost to follow-up had less housing stability, less disability,

and fewer symptoms than those who were retained. In the full-risk group, clients who were lost to follow-up re- ported better mental health at time 1 than those who were retained.

The crude and adjusted odds ratios for the full-risk group relative to the no-risk group for the three-month pe- riod preceding the time 2 interview are shown for each key psychiatric and medical service in Table 2. After ad- justment for time 1 symptoms, clients in the full-risk group were more likely to have received case management but less likely to report contact with a psychiatrist or receipt of individual, group, or family counseling than clients in the no-risk group. The re- sults for vocational training and psy- chiatric admission were not significant but suggested that clients in the full- risk group were less likely to have re- ceived these services. For key medical services, there was a nonsignificant pattern of more service use for clients in the full-risk group.

At time 2, clients in the full-risk group continued to report worse mental and physical health than clients in the no-risk group. Respec- tive scores were 41.4 and 48.1 on the MCS-12 (t=4.15, df=190, p<.001) and 41.3 and 46.4 on the PCS-12 (t=3.30, df=190, p<.001). To control for the differences in health status at time 1, we included the time 1 scores for the dependent variables in the lin- ear regression models.

After backward stepwise regression, the only significant predictors in the fi- nal model of the MCS-12 score at time 2 were the score at time 1 and the man- aged care condition (Table 3). When MCS-12 score at time 1 was controlled for, the full-risk managed care condi- tion was a predictor of poorer mental health. The difference of 4.1 points in the MCS-12 score that was associated with capitation in our model is of only modest clinical significance. In the study in which the validity of the SF-12 was established (14), people with seri- ous mental and physical illness scored 9.3 points lower than people with seri- ous physical illness alone, while people with mental illness alone scored 16.8 points lower than people with only a minor medical illness.

In the final linear regression model for the PCS-12 score at time 2, the

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TTaabbllee 22

Service use by clients with serious mental illness under no-risk and full-risk man- aged care arrangements during the three months before six-month follow-up

No risk Full risk (N=112) (N=92) Crude Adjusted

odds ratio odds ratio Type of service N % N % for full risk for full riska

Key psychiatric services Contact with psychiatrist 97 87 65 71 .37∗∗ .36∗∗ Case management 57 51 59 64 1.73 2.05∗ Counseling 45 40 23 25 .50∗ .48∗ Vocational training 37 33 24 26 .72 .68 Psychiatric admission 15 13 4 4 .30∗ .22

Key medical services Primary care 56 50 52 57 1.31 1.23 Medical prescription 48 43 44 48 1.23 1.18 Medical specialist 9 8 11 12 1.55 .97 Medical admission 6 5 9 10 1.92 1.63

a Adjusted for global severity index scores for key psychiatric services and for physical component summary scores for key medical services ∗ p<.05

∗∗ p<.01 ∗∗∗ p<.001

TTaabbllee 33

Final linear regression model predicting mental component summary (MCS-12) score at time 2

Raw Standard regression regression

Variable coefficient coefficient SE p

Capitation –4.145 –.180 1.50 .006 MCS-12 score at time 1 .479 .490 .06 <.001 Intercept 25.548 3.03 <.001

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managed care condition, contact with a psychiatrist in the previous three months, use of any physical health service in the previous three months, and PCS-12 score at time 1 were sig- nificant predictors, as shown in Table 4. Contact with a psychiatrist and the use of any physical health service were associated with poorer physical health status. The full-risk managed care condition was associated with poorer physical health status. Again, the 3.9-point difference in PCS-12 score that was associated with capita- tion in our model is of moderate clin- ical significance. In the study in which the validity of the SF-12 was established, people with serious men- tal and physical illness scored 2.4 points lower than people with serious physical illness alone, while people with mental illness alone scored 1.9 points higher than people with only a minor medical illness (14).

Discussion and conclusions We found differences between the service use patterns of persons with serious mental illness in a full-risk Medicaid HMO and those in a no-risk Medicaid plan. Services covered by a capitated fee, including outpatient services provided by a psychiatrist and individual, group, and family counseling, were used significantly less by the enrollees in the full-risk HMO than by those in the no-risk Medicaid program. Use of inpatient services, also covered by a capitated fee, showed a similar trend. Case man- agement, a service paid for through separate funds on a fee-for-service basis under both arrangements, was more commonly reported by clients in the full-risk group than by those in the no-risk group.

These patterns of service use sug- gest that the financial incentives asso- ciated with the full-risk arrangement had an impact in the expected direc- tion. The community service board in the full-risk setting had a strong in- centive to use case management, be- cause doing so provided income in addition to the capitated payment re- ceived from the behavioral health MCO. The incentive to provide case management and bill for it was less strong in the no-risk setting, because all services could be billed on a fee-

for-service basis. The full-risk managed care model

we studied in the Tidewater region had unique characteristics. Although the state Medicaid agency paid HMOs a single capitated fee to cover both mental and physical health serv- ices, the HMO in this study provided mental health services through a cap- itated subcontract with a subsidiary behavioral health MCO. By contract- ing with the existing public mental health centers to provide outpatient services, the behavioral health MCO ensured that persons with serious mental illness had access to providers who had appropriate experience. By allowing these mental health centers to continue to bill for case manage- ment outside the capitated contract, the state Medicaid agency limited some of the financial risk of the com- munity service boards.

At time 1, study participants in the full-risk group reported poorer men- tal and physical health than partici- pants in the no-risk group. Possible explanations for the differences at time 1 include sampling bias—that is, nonrepresentativeness of the sam- ples—and real population differ- ences. Because staff of the communi- ty service boards approached every eligible client who could be located, the clients enrolled in this study can be considered a representative sam- ple of all community service board clients who have severe mental ill- ness. Other possible reasons for these differences are that the community service boards and HMOs targeted services for sicker clients in the full- risk setting or that the program re- sulted in poorer outcomes that were already apparent at the time of the

time 1 interviews. Future research may be able to avoid the time 1 dif- ferences by focusing on new Medic- aid enrollees.

We found that adults with severe mental illness in the full-risk man- aged care setting had poorer out- comes, consistent with our hypothe- ses. When scores at time 1 were con- trolled for, the full-risk condition was associated with poorer mental and physical health at time 2.

The results of this study support earlier findings that the service use patterns of adults with severe mental illness are affected by risk-based managed care contracts. Previous studies have not shown a consistent effect of service use patterns on client outcomes under capitation (10–12). Because ours was a quasi-experimen- tal study, we cannot draw definite conclusions. We found that the full- risk managed care model we studied may have had an adverse effect on the mental and physical health of persons with serious mental illness.

Virginia’s mandatory HMO pro- gram, although limited in geographic scope, saved the state Medicaid agency at least $16 million during its first two years of operation (17). The program expanded to the Richmond area in 1999, providing indirect evi- dence that the program is acceptable for MCOs and the state Medicaid agency. Whether this is sound public policy can be determined only by con- tinued evaluation and public debate.

Although this observational study provided no definitive evidence on capitated mental health services for adults with serious mental illness, it did provide evidence that full-risk capitation for this population may

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Final linear regression model predicting physical component summary (PCS-12) score at time 2

Raw Standard regression regression Standard

Variable coefficient coefficient error p

Contact with psychiatrist –3.905 –.05 1.58 .015 Use of a key medical service –2.718 –.13 1.24 .030 Capitation –3.781 –.18 1.26 .003 PCS-12 score at time 1 .573 .56 .06 <.001 Intercept 25.739 3.50 <.001

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have adverse consequences. Although the clinical effects of capitation in our study were modest, they were found over a relatively short period. Six months is not a long follow-up period for persons who have serious mental illness. However, our findings parallel those from Utah, where adverse ef- fects became apparent only after about three years of follow-up (12).

Longer-term follow-up studies would help determine whether the negative effects we found in Virginia persist or intensify. In the absence of longer-term data, caution in the use of risk-based contracts for services for persons with serious mental illness is warranted. ♦

Acknowledgment

This study was supported by cooperative agreement UR-7-TI11272 with the Sub- stance Abuse and Mental Health Services Administration.

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RReevviieewweerrss NNeeeeddeedd

Psychiatric Services seeks expert reviewers in the following areas:

♦ Water intoxication ♦ Cognitive-behavioral therapy ♦ Outpatient commitment ♦ Work with the police ♦ Psychiatry in other countries ♦ Experiences of patients and former patients ♦ Telemedicine and telecommunications ♦ Outcome and clinical measurement scales

Reviewers should be familiar with the literature in their areas of expertise, should have published in peer-reviewed journals, and should be familiar with the content and focus of Psychiatric Services.

Prospective reviewers should send a curriculum vitae, specifying areas of interest, to John A. Talbott, M.D., Editor, Psychiatric Services, American Psychiatric Associ- ation, 1400 K Street, N.W., Washington, D.C. 20005 (e-mail, [email protected]).

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