Community Support

Regulating Managed Mental Health Care
A Policy Analysis and Discussion
of the Role of Evaluation

A Framework of Analysis

The managed care initiatives being taken up by lawmaking bodies around the country represent actions meant to influence the operation of a private industry via strategic use of public authority. For every regulatory remedy enacted or proposed, certain options for the exercise of governmental power are selected, others forgone. These policy changes, in turn, intervene in an organizational environment already busy with regulatory presences, public and private both. Clarifying this matrix of policy choice and field of action is a first step in analyzing the political, administrative, and programmatic issues surrounding the future impact of managed mental health care regulations.

Policy Instruments
Need for a systematic view of the gamut of tools held by government has led to the concept of "policy instruments" in political science. As Woodside (1986) explains, "The central idea behind this literature refers to the capacity of government to act through the use of different instruments—taxation, regulation, expenditures, public ownership, and moral suasion—to achieve a particular goal" (p. 775). It has been observed that "The variety of instruments available to policymakers to address a policy problem is limited only by their imagination" (Howlett and Ramesh, 1995, p. 80), and a substantial degree of "substitutability" exists among means toward a given end. The extent of possible substitution is often narrower in practice than in theory, but officials typically do not give full consideration to even the limited range of feasible alternative instruments.

There is no single accepted scheme for classifying all types of policy instruments. Rather, a number of competing classifications have emerged based on the distribution of policy benefits, types of outcomes sought, and nature of the decisionmaking process. A core dimension in several taxonomies, however, is the amount of coercion used by government to achieve its objective. Related to this approach, one can also array policy actions based on the level of governmental involvement in providing goods and services within the specified sector (Howlett and Mishra, 1995). According to this latter method, as governmental control rises, the various instruments of public policy range from "voluntary," to "mixed," to "compulsory."

Many factors influence the selection of instrument to deal with a policy problem. A general hypothesis is that public officials will first respond to a new issue with the least coercive method possible, then work progressively toward more forceful techniques if results prove unsatisfactory (Woodside, 1986). However, in some cases officials will opt initially for a hard-line stance involving considerable coercion, if political and strategic considerations support such a choice (Howlett and Ramesh, 1995, p. 160). Resource constraints, ideology, available information and technology all enter into this decision. In addition, there is evidence that authorities making the choice of instrument may be inclined toward a habitual "policy style" reflecting the history and values of their national polity (Howlett, 1991). By extension, state political culture, also highly variable in our pluralistic federal system, is a factor conditioning subnational policy preferences.

Regulation as a policy instrument may be defined as "a process or activity in which government requires or proscribes certain activities or behaviors on the part of individuals or institutions, mostly private but sometimes public, and does so through specially designated regulatory agencies" (quoted in Howlett and Ramesh, 1995, p. 87). More simply, regulation features two elements: a transfer of private discretion to public authorities, and the threat of sanctions to dissuade unwelcome conduct (Congressional Quarterly, Inc., 1982, p. 7). Among policy instruments, regulation lies near the compulsory end of the spectrum. Regulation is a frequent policy response to private market failure and issues of consumer protection, among other problems, and it carries distinctive advantages and disadvantages. For example, regulatory solutions are more straightforward, efficicient, and definitive than many other tools of government. At the same time, regulation may create unwarranted market distortion and inefficiency, producing unintended consequences through inflexibility (Howlett and Ramesh, 1996).

Regulation is not a single activity. Instead, the sphere of regulatory action contains its own spectrum of instruments that may be arrayed from less to more coercive, as presented in Exhibit 5. The challenge for policy analysis, then, is to take into view the continua of instrumental alternatives that exist both outside and inside of the regulatory category when reviewing remedies for a public problem.

Exhibit 5
The Spectrum of Regulatory Policy Instruments

Type of Instrument	Relative Coercion Potential
Positive Economic Incentives	Low
Information Disclosure
Registration
Certification
Licensing
Compliance Standards
Prohibition of Activity	High
*Based on:* Congressional Quarterly, Inc., Regulation: Process and Politics (Congressional Quarterly, Inc., 1982).

To add to the complexity of the task, any one policy instrument also "can be used in a wide range of ways that involve differing degrees of coercion" (Woodside, 1986, p. 788). This significantly broadens the possibilities of governmental action. By adjusting the procedural requirements, penalties, supervisory structures, and other components of a policy, the actual character of the intervention is shaped, as well as its possible effects. As Brennan and Berwick (1996) note in their study of health care regulation, "The dominant philosophy of regulators, the degree of their adversarial commitment, and their view of the true intentions of the regulated entities may all be more influential in determining the impact of their rules than are the forms of the rules themselves" (p. 21).

Results of public policy change depend, then, on the suitability of the instrument chosen and the way it is implemented—plus the reactions of private groups and organizations whose behavior is meant to be altered (Howlett and Ramesh, 1995). The process involves many uncertainties, although it is possible to outline probabilities based on past public policy scenarios.

Quality Assurance
The common element of a large proportion of the concerns surrounding managed mental health practices is quality of care, broadly considered. As Shusterman (1994) writes, "High quality in behavioral health care encompasses more than the therapeutic relationship between a clinician and a patient. Real quality is systemic, matrix quality—the ability of a health care system to make appropriate care consistently affordable, available, and accessible, producing positive clinical outcomes and high levels of satisfaction" (p. 19, italics in original). In this way, quality of care is no less than the health system's global objective, and the reason why consumers seek to eliminate barriers to receiving services. From a planning perspective, it is the hoped-for product of a complex of interacting human, organizational, and financial resources, yet with much ambiguity about the contribution of individual elements.

Over recent years, a number of private and public interests have begun exerting pressure for quality safeguards in health care equal to or exceeding regulatory efforts by legislators. Too, managed care organizations have in place their own procedures and structures meant to satisfy internally-imposed quality aims. If it is true that coordination is "critical to the success of prescriptive rules" (Brennan and Berwick, 1996, p. 18), then we must factor into this regulatory policy analysis the varied activities falling under the contemporary umbrella concept of quality assurance. To relate this to our discussion of policy instruments, quality assurance can be both a form of voluntary self-regulation or, when imposed by government or other external body, an aspect of compliance standards subject to monitoring.

The major private organization regulating managed care is the National Committee for Quality Assurance (NCQA). NCQA was formed in 1975 by the Group Health Association and the American Managed Care Review Association in 1979 (Brennan and Berwick, 1996). The intent was to develop a self-regulatory framework for the managed care industry similar to the Joint Commission on the Accreditation of Healthcare Organizations (JCAHO) which accredits hospitals. An accepted substitute for public licensing or certification in several states, NCQA accreditation considers MCOs that perform their own utilization review, as well as those that delegate these activities to a specialty utilization review entity. NCQA accreditation relies heavily on criteria collected in the Health Plan and Employer Data and Information Set, or HEDIS (Brennan and Berwick, 1996). HEDIS includes an extensive list of performance measures chosen, in part, to satisfy the interests of employers as purchasers of care. Among the areas examined by HEDIS are preventive medicine, prenatal care, acute and chronic disease, and mental health and substance abuse. The appeal of HEDIS is its generation of standardized comparative information founded on both an organizational and epidemiological basis.

In April, 1996, NCQA released a set of draft Accreditation Standards for Managed Behavioral Healthcare Organizations. This initiative reflects the tremendous growth of specialty mental health organizations in managed care, coupled with what NCQA describes as rising demands for "a mechanism with which to assess and differentiate the quality of managed behavioral health care services available in the market today" (NCQA, 1996, p. 1). The draft Behavioral Health Standards address the following seven categories:

Quality Management and Improvement
Accessibility, Availability, Referral, and Triage
Utilization Management
Credentialing and Recredentialing of Practitioners
Members' Rights and Responsibilities
Preventive Behavioral Health Care Services
Clinical Evaluation and Treatment Records

Another private group working to develop quality benchmarks for managed mental health care is the American Managed Behavioral Health Association (AMBHA), which announced a standardized report card in September, 1995. AMBHA is a new trade group representing many of the leading managed behavioral health care organizations in the nation whose collective enrollment totals more than 80 million (AMBHA, 1995). Its proposed instrument delves into the three areas of access to care, consumer satisfaction, and quality, with several numerical indicators under each heading. This parallels the kind of rating process undertaken by major HMOs in conjunction with large employers (Freudenheim, August 8, 1993; Quinn, 1994), but with a focus on mental-health utilization, service delivery, and outcome statistics. State and federal governments are giving renewed attention today to their oversight activities in managed mental health care due to the Medicaid waiver movement (AMBHA and NASMHPD, 1995). In the state arena, Medicaid reform requires a creative collaboration between mental health and Medicaid authorities in designing carve-out systems, developing contracts with private providers, and setting performance objectives for assessing quality of care. The scope of these new responsibilites is such that it has begun to exert immense pressure for a reorientation of leadership, roles, and mission within and across these state departments.

Meanwhile, on a higher level, federal bureaucrats hold the ultimate authority to approve or reject the state Medicaid waiver proposals (considering both the rights of states to fashion their own preferred mental health service systems and the rights of Medicaid recipients to a mimimum level of mental health care having basic quality). Officials of the the Centers for Medicare and Medicaid Services describe a basic transformation of their agency from "claims processing and payment" to facing the new "responsibilities and opportunities [attendant on being] the largest purchaser of managed care in the country" (Fried, 1996). Federal mental health and substance abuse authorities have also begun consulting extensively with state administrators and private researchers to determine their optimum role in monitoring managed care. A main conclusion to date has been the need for the federal government to guide (and help fund) a stepped-up program of managed mental health care evaluation that possesses a degree of interstate consistency in methods and measurements.

The courts provide a venue for quality protection in health care through malpractice laws that allow aggrieved patients to sue for medical negligence. Certain recent cases have shifted the burden of malpractice liability from individual providers to the organizations in which services are delivered. In this way, "[t]ort litigation can be transformed into rational regulatory incentives when the frame of reference is deficiencies in repetitive processes of care" (Brennan and Berwick, 1996, p. 191). Decisions pertaining specifically to managed care remain inconsistent and no clear standards of judgment have yet emerged; however, there are instances of successful litigation against negligent utilization review. One of the latest legal avenues for seeking access to treatment that has been denied—and an approach potentially having special relevance for persons with severe mental illness—is filing suit under the civil rights protections of the Americans with Disabilities Act (ADA) (Ehrenfeld, 1994; American Association of Health Plans, 1996).

Last but not least, it is necessary to note the internal changes for assuring quality of care that are being implemented by MCOs as part of managerial initiative. Of special significance has been the "quality improvement" movement, an application to health care of Total Quality Management (TQM) methods used widely in the industrial sector. The spread of TQM and related techniques inside health care organizations has been extremely rapid over the past decade. According to one estimate, by the 1990s "[h]undreds, if not thousands, of American hospitals and health maintenance organizations were setting up quality management functions internally" (Brennan and Berwick, 1996, p. 136). Quality improvement is a well-delineated process entailing such steps as formation of top-level leadership groups, staff retraining, problem identification, establishing new standards for service delivery, data collection, remedial action, and monitoring and follow-up (Brennan and Berwick, 1996; Savitz, 1992; Schyve and Prevost, 1990; Fauman, 1990). Whether or not quality improvement warrants description in the near-revolutionary terms sometimes applied, it is plain that a far-reaching transformation of in-house quality regulation is underway in health care organizations today.

This survey of trends has been brief and selective, making little mention of the formidable implementation problems attending latest QA efforts or the unique issues surrounding mental health care quality (see, e.g., Elliott, 1994). Nonetheless, three noteworthy themes stand out to inform our policy analysis: (1) an exceptional growth in the amount of quality regulation over time; (2) a growing diversification of public and private regulatory sources; and (3) a broadening from structural, or input, indicators of quality to process and outcome measures.

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