Fiscal Fitness: How States Cope

States develop behavioral health innovations to relieve stressed budgets, increase efficiency

Researchers from DMA Health Strategies, funded by the Commonwealth Fund, have identified 17 practices related to purchasing and quality improvement being implemented by states in behavioral health care.

Sylvia Perlman and Richard Dougherty say many of the state projects result from increasing demands being placed on state agencies to meet needs with reduced budgets, leaving them little choice but to increase efficiency and effectiveness.

To help identify promising innovative projects, the authors interviewed 21 experts in the field and surveyed the mental health and substance abuse directors in all 50 states. They sought practices that were reported to increase cost-effectiveness, improve access, lead to improved clinical outcomes, enhance patient-centeredness, reduce disparities, or reduce fragmentation of care. Their suggestions led to the 17 projects covered in the report.

Ms. Perlman and Mr. Dougherty were able to divide the 17 practices into six categories:

1. Enhancing community-centered care. Generally, individuals with mental illness receive care in a location, modality, and amount dictated by professionals. In consumer-centered care, services are more explicitly tailored to meet individuals' needs, delivered in a way that is sensitive to their needs and allowing for greater control, in terms of the type of services received, location, and provider.

2. Criminal justice/mental health collaboration. Programs using criminal justice diversion and re-entry strategies help avoid unnecessary criminalization and extended incarceration of nonviolent adults and juvenile offenders with mental illness.

3. System integration. Some states have started projects providing for a coordinated system of care and a blended funding arrangement. Integrating service systems, however, is a massive undertaking, the researchers said, involving multiple players, agencies, legislative mandates, providers, structures, and funding sources.

4. Using performance incentives. States have begun developing ways of using performance incentives rather than contracting methods that either reimburse costs or set fixed prices.

5. Quality improvement. While all the innovations are intended to improve quality, projects in this category are explicitly intended to improve ways in which particular state agencies perform their own functions or encourage their contracted providers to perform. The ultimate goal is to improve the care clients receive, as well as their clinical and financial outcomes.

6. Other significant projects. Four innovations stood alone in their areas of concern, the researchers said, but seemed worthy of mention because of their apparently successful approaches to issues that challenge nearly all mental health and substance abuse agencies.

Explore and innovate

Ms. Perlman and Mr. Dougherty tell State Health Watch it's important that states learn about what other states are doing. No two states face the same problems in the same ways, they say, and are free to organize their health care and behavioral health systems in unique ways. Mr. Dougherty says the premise for their survey and paper is that states are taking an increasingly diverse approach to health care and it's important that they be able to explore and innovate.

For a variety of reasons, they wrote, factors affecting adoption of innovations are far more complex in government than in business. Public policy-makers answer to myriad stakeholders, they said. And the process of change often is driven by elected officials who may pick up some issues or ideas, but not others. Choices may depend on personal interests or on what officials or staff members believe may attract voter attention.

Advocacy organizations, foundations, and think tanks also may disseminate innovative ideas. And those activities can lead to a broad range of recommendations, sometimes competing from both sides of the aisle. Also, each state's unique financing characteristics and organization have a major impact on the types of innovation adopted and how well they work.

"Because the influences on each state are unique, based on its particular structure and funding, each of the states highlighted in this report has fit its innovation into its own structure, resulting in programs that may be difficult to replicate exactly," Ms. Perlman and Mr. Dougherty said.

The report focused on practices in state behavioral health purchasing and quality improvement that leading experts identified as exemplary and innovative, but it acknowledges that such practices also are being adopted at the county and provider levels, within tribal organizations, and in managed care organizations. "Best practices from all these areas merit ongoing attention," they said. "Disseminating innovations will help each state's behavioral health system become a high-performing one."

The researchers said some of the innovations already have strong track records, while others must be classified as "promising." Some are fairly controversial, such as Oregon's required implementation of best practices, while others have been widely applauded and imitated, such as Georgia's certified peer specialist program. Some reflect almost exclusively the work of one government agency (Kentucky's performance-based contracting), while others involve extensive interagency collaboration (system integration efforts in New Jersey and New Mexico).

Blending funding streams

One of the report's case studies looks at efforts in Washington State to take a comprehensive approach that blends funds for behavioral health, primary care, and long-term care services in a county-based system. The 5,000 adult Medicaid enrollees in Snohomish County have access to care coordinators, primary care providers, specialty care, and drug and alcohol services. By bringing all the services under one roof, project planners hoped to provide a medical home for clients where they will be cared for by a stable team of professionals they know and trust.

The head of the Washington Department of Social and Health Services disease management programs, Alice Lind, tells State Health Watch the integration project was started because state officials believed it would be a better approach for clients who use services from different areas in the agency.

"We started with the medical and drug treatment areas and then eight months later added mental health and another year later added long-term care," she says. The project is being carried out by a managed care organization whose only experience had been with medical care, so there was a learning curve in working with people with disabilities.

She says the most important hurdle they have faced in implementation has been failing to get complete community buy-in. "We had to justify what we were doing and explain what was going to happen," Ms. Lind says. "Many people in the community didn't agree with our approach but we still were able to engage them in developing communication materials."

Now that the changes have been operational, Ms. Lind says some people are willing to say they can see benefits in the changes, but many others still don't like what has happened.

The second major hurdle that was faced, she says, was developing a provider network and working with clients on the nature of the choices they were given in the voluntary program. While the program was offered to clients the staff believed could benefit from it most, they have found that the high-risk, high-cost clients have been opting out.

Although some people in the community have been suspicious about what will happen with funding for needed services as they are moved from county control to managed care, Ms. Lind says expenditures have improved in some areas or remained stable. "There's no area in which we've seen services withheld from clients," she says.

Key success factors

Ms. Lind says key success factors to be considered by states wanting to replicate what Washington is doing include:

  • holding many public forums where clients can talk one-on-one with state agency and managed care organization staff to alleviate their fears and receive enrollment counseling;
  • ensuring a lot of "stakeholdering" on enrollment materials to develop information that is understandable and useable;
  • having a program that is voluntary for clients, even though it is more challenging for the state agency.

One problem the researchers found in the case studies is that there is little real evidence on how successful the innovations are. "The dearth of practice-based evidence — studies or data addressing the successes and challenges of many of these state innovations — is striking," Ms. Perlman and Mr. Dougherty said. "Too often, evaluations of policy innovations are funded insufficiently or not at all. The time required to plan and implement a study, collect and analyze process and outcome data, and publish results is likely to be three or more years, and the cost can be significant. Often, key program features have changed by the time evaluations are complete and available to the public. And state administrators are more focused on implementing programs and fixing problems, believing they do not have time for evaluations. Yet, in the absence of competent studies, state policy-makers cannot be sure which innovations are worthy of consideration. New models of evaluation are needed — ones that can document change, report in a set of standard and comparable measures across sites, and that are accessible, and ultimately valuable, to management."

Ms. Perlman and Mr. Dougherty said methods must be developed for states to share knowledge, with a wide audience and with minimal bureaucratic hurdles, about what each initiative has accomplished. Ms. Perlman tells us they found that many state policy-makers are unaware that there are other ways to organize health care and behavioral health systems.

It helps for states to realize, they say, that a number of states are looking at implementing some form of performance incentive system. Also, the notion of changing the way the behavioral health system is financed is critical to capturing the attention of people in the system. They say having many different funding streams for behavioral health programs is a "huge problem, and effort is being made to braid some of the funding streams, particularly when working with children. But a lot can still be done even in the absence of fund braiding, they say.

"A lot of states could start on quality improvement initiatives now without a dramatic redesign of their system," they say. "Management changes are designed to focus on outcomes and changes to processes are needed to create improvement."

Download "State Behavioral Health Innovations: Disseminating Promising Practices" from the Commonwealth Fund at Contact Ms. Perlman and Mr. Dougherty at (781) 863-8003 or e-mail