Specific Recommendations Recommendation 3

Fund the purchase of comprehensive, statewide, centralized Utilization Management Services.

The General Assembly/DHHS should fund the purchase of state-of-the-art, centralized, statewide UM services, defined by contract, to manage utilization for both Medicaid

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clients and non-Medicaid clients. This UM would be applied, with appropriate degrees of focus and intensity, to all publicly funded services, including those provided in area/county programs, contracted community agencies, and state-operated facilities. This UM system should, ideally, involve a competitively won contract with a single company that is deemed capable of meeting the challenges of this comprehensive model and able to be an effective partner with the state in helping to reform the system. Given the comprehensive nature of the model, the inclusion of multiple funding streams, and the management of both community and state-operated services, it is likely that the chosen UM models will be implemented in stages over several years. A phased-in approach will allow time to develop the most effective and efficient strategies for managing such a wide range of services.

We recognize that making this bold, but necessary, recommendation is sure to meet resistance unless those impacted by the change:

! are fully committed to reform;

! understand the absolute need for a comprehensive model;

! understand how UM services can be flexibly and innovatively applied in cost and time efficient ways; and

! believe the cost of purchasing this service will be more than offset several times over due to increased efficiency.

We believe this comprehensive approach will be of substantial benefit to the reform effort, will result in the potential savings of millions of dollars, and be excellent vehicle for efficiently and effectively building needed consistency across the diverse and fragmented North Carolina landscape.

DHHS should monitor the implementation of medical necessity in a UM system using key indicators such as:

! number of appeals at each level;

! percentage of overturn at each level;

! under/overutilization statistics;

! number of adverse incidents;

! number of complaints about denial of care;

! satisfaction rate of consumers; and

! audit of care management documentation.

DHHS would determine the philosophy, policies, and operational objectives that should guide the development of such a utilization management system and incorporate these into contract management activities. These UM services should be closely coordinated with LME/area/county program care coordination efforts and be efficiently applied to selected services, flexible in terms of types of UM used, and thoughtfully developed and managed in a way to best support and facilitate targeted reform-related activities. Well- conceptualized and well-implemented, a single, accountable, external, and objective UM entity is best positioned to establish statewide consistency. The UM entity could also help the state to successfully:

Overall System-Level Recommendations

! target services to priority populations identified in the State Plan;

! establish statewide consistency in terms of managing both Medicaid and non-Medicaid clients within the framework of available funding;

! establish mechanisms to monitor and improve continuous

management of clients across community and state facility settings; and

! identify and report service gaps in the different parts of the state as they are experienced in day-to-day UM activities.

Recommendation 3.2

If a more limited statewide UM model is chosen, DHHS should consider systematic broadening of UM to include non-Medicaid clients.

North Carolinians whose services are funded “bounce” on and off the Medicaid rolls, making effective monitoring and managing of care very difficult. DHHS should consider broadening the provision of UM services to selected subpopulations of individuals who are known to come on and off the Medicaid rolls. Similarly, DHHS should consider the merits of identifying a finite but constantly updated number of clients for which more intensive utilization management (and possibility care management) services are provided.

Recommendation 3.3

Selectively devolve UM responsibilities to LMEs/area/county programs at a later stage of system development.

Utilization management responsibilities could begin to be devolved to LMEs:

! if financial incentives were properly aligned;

! if the number of LMEs were relatively small to achieve reasonable economies of scale; and

! if it were consistent with the evolution of system reform over the next several years.

This potential devolution of UM authority must be preceded by the granting of full clinical and financial accountability (both in the community and in state facilities) for the treatment of clients to the LMEs. If the transfer of client accountability does not or cannot occur, UM functions should remain centralized at the state level.

The earliest the implementation of recommendations could occur would probably be in Phase III (FY 2007) of our plan (see Chapters 4.0 and 5.0). It would likely be later than FY 2007 to provide time for a small number of LMEs to be created and build (or purchase) the infrastructure needed to perform such functions. Additionally, the state should promote developing LME/area/county program-based internal UM systems and

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decides to implement our recommendation, the amount of authority delegated to LMEs should be gradually increased to prepare LMEs for assuming full financial risk for those they serve. This devolution would not have to be done all at once, but could be applied selectively and sequentially to those LMEs perceived to be best positioned to assume this responsibility.

In considering this model, the General Assembly and DHHS should recognize the additional administrative costs associated with maintaining a high number of UM and MIS systems when compared to a small number or a single system. According to the recent Lewin Group report, many area/county programs use the same external UM vendor, with each area/county program paying multiple times for the same system upgrade.

Recommendation 3.4

Integrate all current contracts with external UM companies into one contract. Due to a variety of circumstances, North Carolina now has several Medicaid utilization management contracts operating within the state. Regardless of whether or not the recommendation for a systemwide UM program is implemented, these current UM contracts should be blended into one contract with one vendor in the most efficacious manner possible. If the systemwide UM program is implemented, then these UM contracts should be incorporated into the larger UM initiative in the most efficient way possible. The current initiative by DMA is a step in the right direction, but more limited in scope than we would recommend.

The contract with a UM entity should clarify the preferred techniques, the priority of services, the priority of clients, and what is being purchased.

Recommendation 3.5

Add “Care Management”5 functions to Utilization Management functions to efficiently improve cost-effectiveness and consumer outcomes.

In purchasing centralized UM services, DHHS should consider also purchasing (or later expanding the contract to include) targeted care management (CM) functions to selected populations and situations. UM and CM are closely related and some UM practices lend themselves to relatively easy incorporation of additional care management functions. Such care management can be merged with UM services fairly easily. For instance, in a fully managed system, utilization management and care management function side by side, usually with the same clinician and processes supporting it. As an example, a clinician may be performing phone-based, preadmission utilization review for a hospital level of care (UM), but at the same time informing the provider of key clinical information and treatment and aftercare recommendations (CM) based on analyzing the client's treatment history and treatment notes found in the computer record. Alternatively,

5 _{As MGT uses the term "care management “ it refers to accountable case management in which a specified}

provider (e.g., a community program, an HMO, an individual practitioner) assumes day-to-day responsibility for managing, advocating, informing and/or supporting the care and services that the client needs, and assumes high responsibility for the successes or failures of that client.

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provider profiling might lead to a request from the purchaser/manager to lessen the average length of stays by 15 percent to be closer to the national norm for that level of care. That UM could be merged with the provider, assuming both a secondary UM role (deciding which clients to admit and how long to keep them in care), along with full clinical responsibility for managing a specific client or population group (CM).

Care management performed without being merged with UM is a common phenomenon when various UM methods and strategies are centrally administered in a state. In this case, providers of comprehensive community services or county agencies are responsible (directly by contract or indirectly by ongoing practice) for a particular client’s or group of clients’ care. In the case of North Carolina, utilization review of certain high- level services centrally administered by a DMA vendor is complemented by the ongoing care management functions performed by the area/county program.

Care management is distinguished from case management by the degree of accountability and “clinical ownership.” For instance, an outpatient clinician may provide some ad hoc case management services to coordinate a client’s care across several vendors over time, to advocate for certain services, to provide information, and so forth. But the degree of “clinical ownership” is fleeting, shared with many others involved in meeting the client’s needs, and not inherently leading to a high degree of clinical responsibility for outcomes. Conversely, a traditional ACT team assumes a high degree of clinical ownership for a particular client, is seen as assuming responsibility for client's successes and failures, and the commitment and responsibility is long-term rather than short-term. This example would clearly fall more into care management.

In sum, creatively and flexibly combining UM and CM functions is a very efficient and clinically sound model. Such an addition of capacity should be considered in the context of the evolution of the state UM functions, the evolution of capacities of the LMEs, and identified system needs in the context of other reform-related developments.

Recommendation 3.6

End any remaining preferential UM treatment for area/county programs.

Preferential Medicaid UM policies toward area/county programs impede the viability and further development of a much-needed pool of private nonprofit and for-profit behavioral health providers. DMA should end any remaining preferential practices and make the playing field as even as possible.

2.3.4 Suggested Time Frame

DHHS Report to Oversight Committee March 2002

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2.4 Recommendation 4

Establish a five-year formal evaluation process of reform effort. 2.4.1 Goal

Provide the General Assembly and all interested stakeholders with a solid foundation of baseline and then annual information against which future developments can be measured.

2.4.2 Findings

The Mental Health Reform Bill and the State Plan both call for a range of annual reports, legislative updates, and so forth. Accountability is indeed a key theme that runs through the two initiatives. However, a significant danger is that the variety of reports and updates will:

! not be well coordinated or presented;

! will not include key measures or interpretations that would be most useful for legislative review;

! not be purely objective with no vested interest in the results reported; or

! fail in general to provide a user-friendly, informative, and integrated overview to compare progress in a systematic manner over the course of several years of reform.

The state now has an excellent opportunity to initiate such an evaluation project at the beginning of a systematic reform process and create a formal, comprehensive, and objective process of assessing the real progress of system reform.

2.4.3 Specific Recommendations