Unhealthy Partnership

Fourteen years old and sullen, he came to the hospital on a Sunday afternoon for evaluation of long-standing abdominal pain. As a first-year pediatric intern, I thought of incredible diagnoses: An intermittent twisting of the bowel? A rare parasite? When the preliminary tests came back negative, I told my patient the good news. He just cried, looked away, and held his stomach.

The next morning, a senior pediatrician remarked that abdominal pain is often the only obvious manifestation of depression in children. Returning to the patient's room, I elicited a story of loneliness, anger at his siblings, and unwillingness to confide in his parents. Then I drew in a slow breath and ventured that some people do not find life to be worth living. Doctor, he replied, at night I stand in the kitchen with a knife to my neck and pray for the courage to kill myself.

The next couple of hours passed quickly. I consulted with the primary care pediatrician and explained the situation to my patient's family. After a quick phone call from the psychiatry service to the insurance company, the patient was approved for treatment in a psychiatric hospital.

While I've changed some identifying details of the story for confidentiality, this part can't be altered: It was the closest I came to saving a life in my first year of training. I imagined that referring troubled children to the mental health care system for timely and effective treatment would continue to be an important part of my job as a pediatrician.

But it was not to be. Over the next three years, I observed from a front-row seat as mental health services for children in Massachusetts deteriorated. During my first night shifts in the emergency department, I often heard psychiatrists argue with managed care reviewers over approval for inpatient stays. Over time the next step--finding an available bed in a psychiatric hospital in New England--became the bigger hurdle. Late one night, I watched a frustrated social worker give up after several hours of calling area hospitals and ask a troubled adolescent's mother whether she could just take him home. The mother reluctantly agreed, but when they woke up the boy, he bolted. A melee ensued; after the child was restrained, another round of dialing began.

Eventually my experiences with suicidal or out-of-control children led me through the looking glass: I wasn't sending patients to the mental health system for care; the mental health system was sending children with acute psychiatric emergencies to me. About once a day, pediatric residents admitted a child to "board" on the pediatric unit of the hospital until a bed in a psychiatric facility became available.

Some boarders waited hours, others days. Nearly all were kept company by a "sitter" or security guard; some patients had to be sedated or physically restrained for their own safety. Psychiatrists would generally come by once a day to assess the boarders' mental status briefly and then continue with the bed search. Early one morning, I described three boarders admitted overnight to the inpatient team of residents. "Not more psych kids," they moaned.

I fantasized that somewhere in Massachusetts, corrupt officials had absconded with money intended for troubled children. But what I discovered is far more shocking: The Massachusetts Behavioral Health Partnership--the state's largest mental health insurance company and the outfit responsible for managing mental health care benefits for tens of thousands of children on Medicaid--has, in fact, met all of its contractual obligations. What's more, the state pays the plan, known as "the Partnership," millions of dollars each year in performance bonuses. Policy experts and state officials have called it a national model. And in June 2000, the largest HMO in the state, the not-for-profit Harvard Pilgrim Health Care, made plans to contract with the Partnership to provide mental health benefits, yielding the for-profit company approximately 70 percent of the market for children's services.

In New Mexico, Medicaid officials recently pulled the plug on a for-profit managed care experiment after audits showed that 83 percent of patients in one plan were inappropriately treated. In Tennessee and Arizona, the latest studies indicate that half of all children with serious mental illness did not receive any services in the previous six months. In these and several other states, thousands of children have suffered as private managed care plans have reaped profits by denying care.

The Massachusetts experience has led some observers to give for-profit managed mental health care a second chance. But how can a mental health plan be highly regarded even as the service system for children crumbles around it? The answer becomes obvious only with the realization that the plan's purpose was never to ensure access to care for children in need. Indeed, its true function has been to maintain the appearance of success. The company has earned every penny of its more than $200-million-plus Medicaid contract by contributing to the illusion that the system is reasonably intact, thereby allowing the state to dodge pressure for more difficult but necessary reform.

The Partnership illustrates what's really missing in public policy for children with mental illness: not more crafty language for managed care contracts, but a political commitment to guaranteeing basic access to care.

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A Shaky Model

This story began on July 1, 1996, when the Partnership started to manage mental health benefits for nearly 400,000 Massachusetts Medicaid recipients. Although its name suggests a special relationship between the company and the state, this "partnership" was a joint venture of two of the nation's largest for-profit behavioral health care firms, Connecticut-based Value Behavioral Health and FHC of Virginia. It was the second attempt under the Medicaid program in Massachusetts to carve out mental health benefits. From 1992 to 1996, after obtaining the nation's first waiver for managed mental health care, Massachusetts officials watched helplessly as Mental Health Management of America enraged hospitals and providers by bungling their payments.

Across the country, many other state officials learned the same unfortunate lesson. Hiring the managed care companies that had successfully tamed costs under employer-based coverage in the late 1980s and early 1990s was not a recipe for success in the public sector. These companies had conquered the private insurance market in no small part by leaving vulnerable patients on the tab of state governments. But now that they were working for state governments, the plans could deny care only at the cost of leaving patients totally abandoned. When a for-profit contractor nearly destroyed emergency crisis services across the state, furious state legislators in Montana canceled a five-year contract after just the second year. Arkansas lawmakers waited only six weeks to back out. Connecticut sued its for-profit contractor for what the state's attorney general described as a "purposeful and systematic" scheme to deny necessary care and eventually settled for $4 million.

By 1996 Massachusetts officials were eager for the Partnership to prove that for-profit managed mental health care could actually work. A successful carve-out would demonstrate an easy option for other state governments that were straining to serve increasing numbers of troubled children. The setting seemed right for a breakthrough. "The people in Massachusetts have better resources and better external consultation to deal with managed care," says David Fassler, a child psychiatrist at the University of Vermont who is an expert on Medicaid managed care. "They had the experience with [the first contract], so when they did the [Partnership] negotiations, they weren't coming in blind. They have more resources in Massachusetts--treatment resources--than in a lot of other states."

But skeptics saw danger in the state's desire to declare the new venture a success: "If either the state or the Partnership says it's not working, they both look bad," observes Susan Villani, former medical director of the Gaebler Children's Center. (The last public psychiatric hospital for children in Massachusetts, the center closed in 1995.) "So there's a lot of investment [in looking] good."

Massachusetts officials took pride in the state's model contract with the Partnership. Under the terms of the Partnership contract, Massachusetts paid the company a fixed fee per child and then limited to $2 million the amount of profit it could make by underspending the budget for services. The contract also allowed for $4 million in bonuses for meeting administrative targets and performance standards. Harvard Medical School psychiatrist and managed care expert James Sabin and Tufts University ethicist Norman Daniels raved in the journal Psychiatric Services that Massachusetts and the Partnership "may have developed a win-win approach" and noted, "A visitor to the offices of the Partnership sees the performance targets posted on virtually every wall."

The company's initial incentives largely centered on the nuts and bolts of administrative efficiency. For example, the plan processed 99.5 percent of claims within 30 days, besting the contract's requirement of 95 percent. And the Partnership submitted 100 percent of certain agreed-upon reports by 5:00 p.m. on the due date. During the first year of the contract, the Partnership earned the maximum of $4 million in bonuses.

In subsequent years, the performance incentives were expanded, mostly to encourage the company to offer training for providers and state officials and funding for patient surveys and other support services. The Partnership continued to excel at hitting the targets, earning $5 million in bonuses out of a possible $6.7 million in fiscal year 1998.

Yet something important was missing. Nothing in the contract held the Partnership accountable for providing basic access to mental health care for all enrolled children. It is true that Medicaid rewarded the Partnership for showing that its network included hospitals "within 60 minutes or 45 miles" of the homes of 85 percent of children enrolled. But such a guarantee provided no consolation to parents when all the beds at these nearby inpatient facilities were filled.

While the Partnership kept processing claims on time--86 percent were filed electronically in fiscal year 1998--the demand for inpatient hospitalization was steadily rising, with emergency departments seeing more and more acute referrals. Several area inpatient psychiatric units for children folded. Most significant, openings for troubled adolescents in residential settings such as halfway houses overseen by the state's Department of Social Services disappeared, leaving dozens of children in state custody stranded inside psychiatric hospitals, ready for discharge but with no place to go. From July 1998 to June 1999, according to records I obtained under the state's freedom-of-information law, these children spent a collective total of 8,194 unnecessary days in locked wards.

Suicidal and violent children who needed treatment in inpatient psychiatric facilities were put on indefinite hold. Some became boarders in pediatric hospitals; others languished for days in community emergency departments; a few waited in jail. Martha Grace, chief justice of the Massachusetts Juvenile Court, told The Boston Globe that judges occasionally had to send troubled children into locked detention simply to protect them while they awaited psychiatric hospitalization. "To put a mentally ill child in a delinquent or criminal population is not good for either population," Grace said. "Now they're being punished for being ill."

In the absence of performance standards requiring access to care during mental health crises, the Partnership did not immediately provide funding for such patients. In a study of 10 boarders covered by Medicaid from January to May 1999, I found that after subtracting the cost of salaries for people to watch the children and psychiatric staff to evaluate them on nights and weekends, my hospital received about $60 per day for nursing services, physician fees, food, medications, and other expenses. At the time, the Partnership did not, as a policy, accept financial responsibility for care. Meanwhile, for the children stuck inside psychiatric facilities, ready for discharge but awaiting community placements, the Partnership paid just $140 per day rather than the usual fee of more than $500. At least through the first half of 1999, the company stood to profit from the shortage of inpatient psychiatric beds.

The Partnership's unwillingness to expand available inpatient treatment might have been more understandable if the company had created a network of community providers to prevent at-risk children from reaching a crisis in the first place. But no performance incentives held the Partnership accountable for significant problems involving access to outpatient care--a bad omen for a business that posts its goals on every wall.

Years of pounding from managed care had left many Massachusetts communities lacking in child psychiatrists, day treatment programs, and other resources. Nationally, from 1988 to 1997, employer spending on mental health services fell by 54 percent in constant dollars. The impact of these cuts on children's services--which often lack strict professional standards on length of treatment--was disproportionately high. As private managed care plans reduced their benefits, families increasingly turned to the state government for assistance. But state spending in Massachusetts and elsewhere did not match the need. For example, the number of patients on waiting lists for case managers from the Department of Mental Health stretched past 2,000--leaving a multitude of families unable to obtain key assistance in finding mental health services, coordinating with local school systems, and accessing other state programs.

Under these dire circumstances, the Partnership did not rise to the challenge of expanding services to meet community needs. Clinicians complain that credentialing with the plan can take months. The Partnership also pays lower rates to many therapists than other insurers do, and clinicians report difficulty in obtaining reimbursement for time spent apart from therapy sessions. (Because children's misbehavior often occurs at home or in school and may have consequences for the criminal justice system, therapists must often work for free making contact with parents, teachers, and school and court officials.)

Until very recently, the Partnership did not even track outpatient waiting times across its system. The net result: In many parts of the state, families covered by the Partnership have waited upwards of five months for a first appointment. "In five or six months, a lot of these kids become much more in crisis," says Lisa Lambert, assistant director of the Parent-Professional Advocacy League, which surveys its members on waits for care. "Their behaviors escalate, and [then] they are looking to access acute services." In March 1999, two state agencies asked Christina Crowe of the Judge Baker Children's Center in Boston to examine why parents were reporting such dissatisfaction with mental health services in northeastern Massachusetts. Her report described a decimated system in which "access to adequate and effective treatment is deficient at every level."

These findings, however, had no implications for the Partnership's stellar record of meeting its performance targets. Within another few months, the company stood to earn another $400,000 bonus by holding two optional training workshops on child and adolescent issues for Partnership providers and state employees. Even in July 2000, as the mental health care system's collapse hit the front page of The Boston Globe, an internal Partnership memo boasted in boldface: "All FY 2000 Performance Standards on track for success."

No Accountability

Why can't Massachusetts just hold the Partnership responsible for basic access to care? Partnership CEO Richard Sheola says that such a step would be patently unfair. His reasoning: The Partnership has no control over what's really broken with the mental health care system for children.

This claim enables a for-profit company to escape responsibility for children in distress. But it is also true. Massachusetts state agencies, by leaving dozens of children inappropriately stuck in psychiatric hospitals, are largely responsible for the bed crunch that has forced children to languish in pediatric units, community emergency departments, and jails. The most recent data indicate that children in the care of state agencies spent 20,811 unnecessary days in psychiatric hospitals from July 1999 to June 2000--the equivalent of 57 years of wasted time. Similarly, while the Partnership has not particularly improved community mental health services, the state's support of key elements of the outpatient system has been sorely lacking. At last count, 2,497 children were waiting for case managers from the Department of Mental Health.

It's a catch-22. The state cannot fairly hold the Partnership responsible for basic access to care without first doing a better job itself. But that's exactly what the state government wants to avoid. A real commitment to the mental health needs of children would involve guaranteeing community placements and case management services for all troubled children who need them, backing support teams for families with troubled children, and dedicating additional spending for recruitment and training of new mental health providers. Pilot programs such as the Mental Health Services Program for Youth have reduced foster care rates and improved care for even the most vulnerable children by combining resources from the mental health, education, and criminal justice budgets and creating accountable community-based treatment teams [see sidebar].

But such an investment statewide would be costly up front. Led by tax-cut-obsessed Republican Governor Paul Cellucci, Massachusetts politicians are unlikely to target significant new resources to help such a politically unempowered group. Beyond funding, the political obstacles to reforming the mental health care system are daunting. These would include battles to create new residential treatment centers across the state and to break down the walls between several entrenched bureaucracies. Massachusetts is not alone in failing to tackle these problems: Advocates have recently sued New York and Maine on behalf of emotionally disturbed children who do not receive adequate care, and more than a dozen states have recently reported crises in access to children's mental health services.

Massachusetts, however, has uniquely been able to minimize political embarrassment by hiring a managed care plan, holding it responsible for a limited array of "performance standards," and declaring it a success. Even patient advocates on the national level have been somewhat fooled. In testimony to the New Mexico state legislature, an official of the Bazelon Center for Mental Health Law in Washington, D.C., advised that state to consider a carve-out arrangement for mental health services, citing Massachusetts as a model. The center's policy director, Chris Koyanagi, says approvingly, "People have seen that Massachusetts is monitoring [the Partnership] closely with many performance standards."

"If something is happening in a social system over time, it's been designed in," says managed care expert James Sabin, who early on had high hopes for the Partnership. One could conclude, he adds, that the Massachusetts mental health care system "appears to be designed to keep spending level, ... at the cost of not doing anything for kids."

Last February the health plan moved to dispel the image that it was profiting at the expense of stranded children. According to Partnership Vice President Angelo McClain, "to address any perceptions that [it] stood to gain financially every time a child was 'boarded' in a pediatric unit," the Partnership (in consultation with Medicaid) authorized $502 in daily payments to pediatric hospitals. The plan even increased its reimbursement to psychiatric hospitals for children stranded waiting for community placements.

At times of crisis, the Partnership has stepped in to take some of the heat off the state. In April 1999, The Boston Globe reported on its front page: "Suicidal and violent youngsters are languishing in hospital emergency rooms for hours and in pediatric beds for days--and are sometimes simply sent home with panic-stricken parents--because Massachusetts psychiatric hospitals have no room for them." The story made clear that a major cause of the problem was the gridlock generated by children in psychiatric hospitals waiting for community placements from state agencies. In response, the Partnership agreed to pay psychiatric hospitals to open more inpatient beds for children, tacitly accepting responsibility and taking pressure off the state.

At first glance, these actions may seem surprising. But they make perfect sense given how the Partnership really earns its money: not by directly shortchanging children, but by fostering the illusion that the system works and earning rewards from the state. Despite a few small steps, the basic dynamic at work in Massachusetts has yet to change. The state government remains unwilling to invest in a comprehensive system of outpatient care that includes residential placements for children who need them. This leaves the Partnership officials on the hook for the bed crisis, a responsibility they do not fully accept. It's a situation that virtually guarantees worsening care.

Massachusetts' unusual relationship with the Partnership could never be sustained if plan officials pushed the state into tackling the bigger issues in children's mental health care. In fact, the Partnership came close to doing just that in the summer of 1998, when the company's leaders decided to cut off payment for children who were waiting beyond a certain number of days for community placements in psychiatric hospitals. After all, they correctly reasoned, Massachusetts was paying the plan to manage medically necessary care, and hospitalization for these children was no longer medically necessary (by anyone's definition).

It didn't take long for hospitals to catch wind of the proposal and start to kick and scream. As pressure mounted, Governor Cellucci's administration faced the choice of finding appropriate placements for the children or simply demanding that the Partnership knuckle under and pay for medically unnecessary care. The knuckling under happened quickly.

Even a trusted not-for-profit health system probably wouldn't risk its own contract by aggressively confronting the state over fundamental problems in the mental health system for children. According to Susan Fendell of the Mental Health Legal Advisers Committee, "One reason [the Partnership] may not be publicly lobbying for more money spent on the public system of residential services is that they want to be players with the administration." The Partnership is now owned by ValueOptions (the company that resulted when FHC bought out Value Behavioral Health); too much controversy would not make the principals happy.

Carving Out Real Care

So what should happen with private managed care for Medicaid mental health services? In round one, companies tried--and failed--to apply private-sector cost-cutting strategies to a complex public system. States are increasingly abandoning these contracts. In round two, the companies cooperated with governments to placate providers with efficient reimbursement and to meet limited performance goals, sidestepping fundamental problems in the system. Children still suffer.

Is round three coming to a state near you? According to Gail Robinson, vice president of the Lewin Group, an international consulting firm with expertise in mental health issues, the next few years will be a "critical time" in terms of the future of for-profit plans in public mental health services. "A number of states are finishing with three- or five-year contracts," she says. "They will need to consider the benefits and the cost [of renewal]." Preferring to contract with public and not-for-profit groups, some states responsible for millions of Medicaid recipients have not yet embraced for-profit managed mental health care. But that may change.

To succeed, state governments will have to do more than tinker with the contract language in their deals with managed care plans. They'll have to treat children's mental health as a continuum that includes insurance for psychiatric services, residential care, school support, social services, and the criminal justice system. They'll have to foot the bill for comprehensive community-based services. And they'll have to demand and monitor basic access to inpatient and outpatient care as well as actual improvement in the lives of troubled children. It's doubtful that for-profit plans can play anything more than a limited role in such a system.

Even the best managed care plan is only as strong as the political commitment to troubled children that supports it. Legislatures must establish measurable goals for the system and hold agencies responsible for meeting them. Through its oversight of the Medicaid program, Congress can do the same. Virtually all state Medicaid plans have federal waivers to allow managed care for mental health services; Congress should pressure the Department of Health and Human Services to require basic data on access to care before approving renewals. The recent denial of a waiver in New Mexico is a good first step.

In light of the public's interest in avoiding school shootings and youth violence, the political prospects of improved services are not dismal. While laws that mandate parity for mental health benefits can be easily circumvented, their passage indicates that legislators are willing to act to improve children's mental health. Rafael Semansky, a policy research analyst at the Bazelon Center, notes one financial incentive that may push the effort along: When a state uses Medicaid funds to intervene in a troubled child's life, the federal government foots about half the bill, but when that child disrupts school or winds up in jail, it's all on the state's dime.

I have yet to assist another patient as I did the depressed 14-year-old during my internship. Instead, I scramble to coordinate outpatient mental health care, school services, and home supports for troubled children in my primary care practice. Sometimes I help to avert a crisis, but often I fail. When I tell any of the current pediatric trainees of my past hope to detect serious mental illness among children and refer them to the mental health system for effective care, they just laugh.

From my vantage point, Massachusetts is hardly a model for the future of public mental health services. Nonetheless, the Partnership and similar companies may make offers that other state governments cannot refuse. ValueOptions now manages mental health benefits for 900 companies as well as 4.8 million individuals in the public. The company, led by the politically connected psychiatrist Ronald I. Dozoretz, recently fired a dozen managers from its Medicaid division. But Massachusetts executives kept their jobs--a sign of confidence in the Partnership's approach.

And why not be confident? Even in the face of public desire to help troubled children, there will always be a promising market in helping governments avoid politically daunting but necessary change. ยค