The Provision of Mental Health Services in Managed Care Organizations

Products and Contracting

Consumers' experiences in receiving mental health care are influenced by key characteristics of how care is organized, such as the type of insurance product and whether their mental health care is managed through an external contract. The main types of products offered by MCOs include HMOs, POS products, and preferred PPOs. For each product, the MCO must choose whether to deliver mental health services within the MCO (internal arrangements) or to contract with an outside organization, such as an MBHO. Understanding these two basic concepts - product type and contracting arrangement - will be key to understanding the findings from this study and to appreciating the often unseen forces that affect consumers' experiences with seeking and receiving mental health treatment.

"Product" Definitions

Within the broad spectrum of managed care, three general "product" types are most commonly discussed: HMO, POS, and PPO products. The Brandeis survey employed the same definitions used by the Community Tracking Study (Kemper et al., 1996):

HMO: A product in which enrolled individuals are provided health care services by a network of affiliated providers. Services provided to enrollees outside the network are generally not covered, other than for some specialized services or in emergencies.
POS: A product in which enrollees may select in-network or out-of-network physicians at the "point of service," usually with significant differences in coinsurance or deductibles.
PPO: A product in which enrollees are given a financial incentive to use a "preferred" network of providers, usually through differences in coinsurance or deductibles.

The differences between HMO, POS, and PPO products have become blurred over time, but often they are described as points on a continuum ranging from more managed to less managed according to a series of dimensions (Grembowski et al., 2000; Horgan & Merrick, 2001). HMOs generally are seen as exerting a greater degree of control by restricting enrollees to a particular list (often called a network) of participating providers, requiring assignment to primary care gatekeepers, or using preauthorization for specific services. POS products fall in the middle of the continuum, with enrollees similarly restricted to a provider network but with the option to seek care from out-of-plan providers for an additional cost. PPO products generally manage care by creating incentives for enrollees to use in-network providers but typically do not use primary care gatekeepers or manage referrals to specialists (Greenberg, 2001). The issue of product definitions is made more complex by the fact that differences also exist within each product type. For example, HMOs can operate using a salaried staff, can contract with a single large provider group, or can use a network of providers. Previous research has shown that most MCOs offer more than one type of product, although they may use the same provider networks to service the various products (Gold & Hurley, 1997).

In sum, the type of product an individual enrolls in can affect choice of providers, level of copayment and coinsurance rates, steps needed to access care, and degree to which entry into and continuation in treatment are managed.

This report focuses on HMO, POS, and PPO products, since they are the three predominant managed care products. MCOs were asked about only their commercial products - that is, products serving Medicare and Medicaid populations were excluded. (See Chapter II.) Figure III.1 shows the distribution of commercial managed care product types across MCOs. HMOs are the most commonly offered product (39%), followed by PPOs (37%) and POS products (24%). Most MCOs offer multiple types of products, with 28% offering PPO only, 17% offering HMO only, and only 0.2% offering a POS product alone (Figure III.2). Almost a quarter of MCOs (24%) offer all three product types.

MCOs' Choice to Either "Make" or "Buy" Mental Health Services

The contractual arrangements MCOs use also can influence the access to, delivery of, and quality of mental health services. MCO decisions regarding contractual arrangements can involve all covered services or be limited to certain types of specialty care. This section examines elements within contractual arrangements that can affect consumer experiences in seeking and receiving specialty mental health care.

Both employers and MCOs have the option of contracting with specialty MBHOs for the management of mental health services (generally along with substance abuse services), as illustrated in Figure II.1. This study focuses on MCOs, so the relevant decision is depicted on the right-hand side of the figure: whether to provide mental health services internally or to contract externally for these services. When MCOs contract with another external organization for behavioral health, this may be part of a wider contract for all medical services called a "comprehensive" contract, or it may be a contract with a specialty MBHO, which is often called a carve-out of behavioral health services. The prevalence of the different contracting arrangements that MCO products use in the provision of behavioral health services was assessed by applying these concepts and using the following three categories:

Specialty contracting arrangements, in which MCOs carve out mental health services to a vendor, such as an MBHO, that specializes in the delivery and management of behavioral health services
Comprehensive contracting arrangements, in which MCOs contract with a single vendor or network for both behavioral health and general medical services
Internal arrangements, in which MCOs provide behavioral health services and medical services within the organization, either through salaried providers or through a network managed by the MCO

Note that an MCO may have contracts with individual facilities, an arrangement still classified as an internal arrangement, since the MCO retains the overall management of mental health.

Depending on how seamless the process is for accessing mental health care, consumers may never be aware that their services are being managed and provided by an organization other than their health plan. Contractual arrangements, however, can affect consumers' experiences, and each approach has its potential advantages. For example, specialty contracts, because of their focus on behavioral health, may offer the opportunity to improve the quality of mental health services. This could occur if the MBHO has established specialty provider networks, offers experience in matching clients with providers and at the appropriate treatment levels, and uses practice guidelines to support providers' decisions (Mihalik & Scherer, 1998). Alternatively, because they do not focus exclusively on behavioral health, comprehensive contracts and internal arrangements offer the potential for greater coordination of general medical and mental health services, although sharing a similar network of providers or administrative entity does not necessarily guarantee integration of these services (Jeffrey & Riley, 2000).

Contracting Arrangements for the Delivery of Mental Health Services

Figure III.3 shows the frequency of different contracting arrangements across all products. Specialty contracts (60%) are the most commonly reported arrangements, followed by internal arrangements (25%) and comprehensive contracts (15%). The contracting approach chosen differs markedly by type of product (Figure III.4). HMOs are the most likely to report using specialty arrangements (82% of HMO products), while PPOs are the only product type that makes extensive use of comprehensive contracting arrangements (28% of PPO products).

Functions Delegated in Contracting Arrangements

Even within a particular contracting approach, MCOs often vary in terms of which administrative and clinical functions to delegate, how much financial risk to hold or to transfer, and which, if any, performance standards to include. MCOs may choose to delegate the following functions to external organizations:

Formation and Maintenance of Provider Networks. This function can entail identifying mental health and substance abuse providers who will be available to enrollees, negotiating payment arrangements, checking provider credentials, profiling patterns of care, and maintaining up-to-date information for enrollees about how to access their providers.
Processing of Enrollees' Claims for Payment. This administrative function involves payment for services rendered.
Utilization and Case Management. Utilization management is an approval process for patients' entry into treatment, amount of treatment, and mode of treatment. Case management provides a more intensive clinical review of care and tends to focus on high users of care.
Operation of Quality Improvement Programs. These programs, which vary widely, may include external accreditation by organizations such as the National Committee for Quality Assurance, in-house monitoring of adherence to clinical guidelines and best practices, and periodic review of outcomes.

Almost all products with specialty contracts delegate all of the functions described above to MBHOs, while products with comprehensive contracts almost always delegate the formation and maintenance of provider networks (97%). Under comprehensive contracts, delegation of claims processing, utilization management, quality improvement, and case management services is far less frequent than under specialty contracts (Figure III.5).

Risk Sharing

Risk sharing in mental health contracts refers to the degree of the vendor's responsibility for cost overruns or cost savings (Frank et al., 1996). The sharing of financial risk in carve-out contracts can be classified both by the amount of risk shared and by whether claims costs are included. Contracts often are referred to as "risk based" when some degree of risk for the costs of claims above a target is transferred from the MCO to the MBHO. When claims costs exceed targeted amounts, the contract may require the MBHO to bear all or none of the cost overruns, or they may opt to share risk, based on the MBHO's performance and the extent of losses incurred. Similarly, when costs of care fall below annual targets, MCOs may opt to allow MBHOs to keep all, none, or a portion of any savings. For example, a partial risk contract might stipulate that for every dollar spent above the target, the MBHO must bear 50 cents. Even under administrative services only (ASO) contracts, the MBHO also may bear some risk if claims costs exceed the target. Moreover, some portion of MBHOs' payments may be tied to meeting specific performance standards.

Contracts involving risk may also place a limit on the MBHO's liability for costs over a specified amount. With respect to savings and profits, contracts may specify that an MBHO will be allowed to keep all savings without a cap, all savings with a cap, or some or none of the savings (Garnick et al., 2001). A "full risk with limits" contract might specify that if total spending exceeds the target by $1 per member per month, the MBHO must bear that cost, but if it exceeds the target by more than $3, the MBHO bears only the first $3.

An examination of risk-sharing arrangements in MCO products' contracts with MBHOs shows that a majority of products (52%) place the MBHO at full risk with some limits (Figure III.6). A smaller number of products place the MBHO at full risk with no limits (18%) or at only partial risk (13%). Only rarely (in 2% of products) do MCOs report that their products retain responsibility for all financial risk for mental health care.

Performance Standards

In behavioral health contracts, performance standards identify acceptable levels of performance for various aspects of service delivery, including both administrative and clinical responsibilities. The standards may range from requirements for the scope and timing of reports on utilization to the achievement of specific levels of satisfaction rates in patient surveys. Performance standards serve to formalize purchaser expectations and MBHO accountability. Further, they may be used to monitor and to counter any incentives to limit access or otherwise contain costs that might emerge from the contractual risk-sharing arrangements.

Among products with specialty contracts, 93.7% report at least one standard of any type (Table III.1). The ten standards included in this survey were classified by three broad areas: administrative, quality related, and enrollee focused. Overall, 81.6% had one or more administrative performance standards, with the two most common being administrative reporting (80.5%) and member services phone response (75.6%). Across all administrative performance measures, PPO products were significantly less likely to include performance standards in their contracts with MBHOs, while the percentages of HMO and POS plans were more often similar.

Eighty percent of products had at least one quality-related standard, with patient satisfaction standards most commonly used. Again, PPOs were significantly less likely to report quality-related performance standards. Standards for handling enrollees' complaints and appeals also were very common, being used by 87.4% of products overall, and 94.9% of PPO products.

Discussion

The type of managed care product, and that product's contracting approach, can have important implications for consumers' experiences in obtaining mental health care. This chapter demonstrates that different products are more or less likely to choose certain contracting approaches. These systematic differences can make it challenging to interpret some results in this report. For example, HMOs are the most likely to contract with specialty MBHOs. Thus, the fact that HMOs are more likely than PPO or POS products to require a specific action may be a characteristic of HMOs per se or of specialty MBHOs that those HMOs contract with. In the report, results often are presented separately by product type and by contracting status. The issue of distinguishing these separate effects is revisited in Chapter IX.

MCOs' contracts with MBHOs often contain cost-savings incentives, but these may be tempered by some protections for enrollees. Nationwide, three-quarters of MCO products contract externally for mental health care, mostly with specialty MBHOs. Specialty contracts are particularly common among HMO products. These findings are surprising given the original ideology of HMOs, which stressed integration and internal provision (which is now used by only 25% of MCO products). However, one industry observer explains that HMOs have more to lose when mental health costs go up, because employers usually buy HMO products on a capitated basis. He also notes that if mental health costs go up for PPOs and POS plans, they have less to worry about because they are often paid ASO, which protects them from financial risk.

The rapid growth of specialty contracting may reflect the emergence of specialized techniques for managing mental health care that MCOs do not regard as part of their "core technologies." MCOs also are concerned about their own ability to manage mental health costs (particularly in response to parity laws). One industry expert indicated that state parity laws are driving the trend toward MCO carve-outs: "Requiring unlimited parity is scaring the health plans, makes [sic] them more likely to carve out, because they are worried about increased demand and higher costs."

Most MCOs place the MBHO at full risk for cost overruns, albeit with upper limits on profits and/or losses. If MBHOs respond to profit opportunities by using overly strict review criteria and overmanaging providers, individuals with mental health problems may be undertreated. On the other hand, MCOs with internal provision may face these same incentives if they are themselves capitated by employers. Also, the effect of strong risk incentives may be partially counterbalanced by national accreditation requirements or the retention of final decision-making authority by MCOs in cases of disputes over treatment authorization (Hodgkin et al., 2000; Sturm, 2000).

In addition, the widespread use of performance standards in contracts suggests that MCOs are typically attempting to monitor vendor performance in selected areas, although few of the common standards are closely tied to clinical quality of care. Lower use of performance standards in PPO products may occur because until recently PPOs were not being accredited by the National Committee on Quality Assurance and therefore had less need to monitor their contractors. In the future, however, more attention may be focused on performance measures for mental health in carve-out contracts as more national attention is focused on quality of care in general (Institute of Medicine, 2001) and new consumer survey approaches to monitoring the quality of mental health services are adopted (e. g., ECHO TM , 2002).

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