In a last-ditch effort to save Montana’s hemorrhaging managed mental health program, more than 30 nonprofit providers have agreed to give for-profit Magellan Health Services the authority to cut the rates it pays them.
The decision was a major concession by the Care Coalition, which represents the nonprofits and voiced strong opposition to Atlanta-based Magellan’s proposal to cut payments to psychiatrists and other care providers by 8.5% in an effort to save $310,000 a month.
Montana Community Partners (MCP), the partnership between Magel lan and the Care Coalition established to oversee the program, previously had voted to oppose the cuts. Magellan, which responded to the earlier vote by announcing plans to cancel its five-year, $400 million contract with the state, released audited financial statements this summer showing a loss of $15.7 million for the year ended March 30, 1998.
In exchange for the concession on rates, the Care Coalition was guaranteed a voice in policy, while the board of Montana Community Partners will have authority to set goals and directions for the managed care program. Such partnerships between nonprofit human service providers and for-profits have been tried elsewhere with varying degrees of success, but Montana’s attempt to introduce managed care to a rural state with little managed care experience has been plagued with difficulties since its April 1, 1997, inception.
The provider coalition initially partnered with CMG Health, which has been widely criticized for lacking the public-sector experience needed to run the program. CMG subsequently was purchased by Merit Behavioral Care, which, in turn, was purchased by Magellan in February 1998.
Shortly after purchasing Merit, Magellan decided to scrap the CMG computer information system and to switch the Montana program to Magellan’s system, based in St. Louis. Top Magellan officials promised the move would bring dramatic improvements in both speed of reimbursement and quality of services. Six weeks after completing the computer conversion, "The information processing ability has improved beyond what it was in the first 15 months," said Steve Niemi, senior vice president in Magellan’s Public Sector Division. "We now have a claims processing system that is stable."
But many providers question the level of improvement, noting that there is still a substantial amount of claims outstanding for more than 30 days. Meanwhile, the huge losses sustained over the past year hang over the program. The audit note from the Arthur Andersen accounting firm accompanying the bleak earnings report in July was ominous: MCP "has suffered a significant net loss and has net equity and working capital deficiencies that raise substantial doubt about its ability to continue as a going concern."
Before announcement of the compromise, Magellan’s Public Sector Division chief C. Richard Orndoff stressed in a letter to the state that the company was "anxious to continue working with the state to make the program successful, but, frankly, we agree with the independent auditors and are deeply concerned about the fiscal viability of the program."
Prompted by Magellan’s attempt to cut rates paid providers, Montana’s medical, psychiatric, and hospital associations had lobbied Gov. Marc Racicot to cancel the contract with MCP. "The underlying problem is patient care," said Don Harr, MD, a member of the Montana Psychi atric Association. "There is also the frustration of individuals and institutions having to continue care without remuneration or at least with delay in remuneration."
Some Montanans involved with mental health care have begun public discussions of possible alternatives to the MCP contract, such as setting up regional networks to be run by Montana organizations. The discussions included members of the program oversight committee who had been appointed by the state to make recommendations on MCP’s work.
Regardless of MCP’s future viability, key players say they have learned from the experience. Bob Ross, executive director for one of four regional mental health centers in Montana, said the partnership of providers and a corporate manager hasn’t been anything like what Montana providers envisioned when they agreed to partner with CMG in the bidding for Montana’s contract.
"We bought into individuals who really understood mental health care, what we proposed, and what they promised. Then the accountants came out to run the contract," said Mr. Ross.
Royal Johnson, a Montana legislator who served on the advisory committee that reviewed all four bids and ranked CMG’s proposal as the best of the bunch, said the reasons for wanting to change Montana’s mental health system are still valid. In the early 1990’s, Montana saw state spending on mental health care increase 20% a year for three consecutive years. "Everybody could see that couldn’t last," he noted. Implementing the contract four months from the bid award was too ambitious, as well. "If the state had stayed in the business, we could have integrated them by degrees, starting with hospital care," Mr. Johnson said.
Randy Poulsen, head of the state Managed Care Bureau, offered this advice for states: Choose carefully, do site visits and check references. And he suggested state staff need to monitor the contractor vigilantly from day one. "The tendency is to start out with a degree of faith in the company you have chosen. Set that aside. Let them know you have to watch them. Establish from the outset a zero tolerance for mistakes," Mr. Poulsen said.
"Maybe we should have done more micromanagement," he added, noting that the state had been prepared to look at outcomes and overall program structure. "Instead, we had to deal with the minutiae of claims and poor communication." Montana’s rural character presented additional challenges for managed care. Before the mental health contract started, managed care was rare in both private and public health programs in Montana. Additionally, there are no psychiatrists practicing in the eastern third of the state. Even in population centers, psychiatrists are in short supply and patients depend on primary care professionals to write prescriptions and check medications. Yet primary care professionals were left out of plans for the provider network.
"CMG didn’t understand what it meant that Montana is a frontier state," Mr. Poulsen said. Bill Emmet, chief operating officer for the National Alliance for the Mentally Ill, sees in Montana some difficulties other states have experienced. "To look at managed care coming into a state as the solution to rising costs alone sets up unrealistic expectations," he observed. "The rush to managed care a few years ago almost universally failed to take local conditions into account," as experiences in Tennes see and Iowa proved, he said.
Contact Mr. Emmet at (703) 516-7970; Mr. Ross at (406) 252-5658; Mr. Olsen at (406) 442-1911; and Mr. Poulsen at (406) 444-2706. n
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