Note: This Document is a summary the work of the Design Team established by the Divison in early 1999 and prior to release of the PCG report.   The focus of mental health reform now  rests mainly in the Legislative Oversight Committee.  

Redesigning the Future: An Overview

For most people in North Carolina with mental illness, substance abuse, and developmental disabilities, the public mental health and substance abuse (MH/SA) system is the only place they can receive the care they need. These individuals have exceeded the limits of their insurance, been excluded from benefits because of their chronic condition, or, because they are unable to work, do not have access to private insurance. They also may require specialized support services not available through the private sector (e.g. Clubhouse programs, PACT teams, and residential treatment services). The public MH/SA system is the "safety net" for these individuals. Yet from its beginning, the system has been plagued with problems, including:

• insufficient funding
• uneven availability of services
• uneven quality of services
• poor mechanisms to ensure fiscal or clinical accountability
• limited involvement of families and consumers
• changing and conflicting state policy
• multiple and confusing funding streams

In 1994 North Carolina, like many states around the country, began an attempt to reform the MH/SA system by using a Medicaid "waiver" to implement a managed care system. The pilot program was called Carolina Alternatives and was implemented for Medicaid eligible children in 10 Area Programs. Carolina Alternatives resulted in many successes, especially increasing the number of children served and the services available to them. It also succeeded in pushing Area Programs to provide services more efficiently and effectively. In the end, however, Carolina Alternatives was never able to show that it "saved" money, a requirement of the Medicaid waivers. In the spring of 1999 the decision was made by the state and federal government to end Carolina Alternatives.

The problems facing the system, however, had not ended and in fact had intensified. Changes in Medicaid billing policy and rate structures, the failure of some Area Programs to successfully handle the increased fiscal and administrative burden of Medicaid requirements, and changes in State policy created several highly publicized fiscal crises in a number of area programs and renewed scrutiny of the services, capacity, and accountability of the state psychiatric hospital and community mental health system. The General Assembly required that the State Auditor initiates and coordinates a study of the mental health system. The Division of Mental Health, Developmental Disabilities, and Substance Abuse Services (DMH/DD/SAS) responded by establishing a "Redesign Process" to explore new ways of doing business. The two efforts are separate but complementary. Unlike the previous reform effort, the current efforts are focusing on the entire public system; not just Medicaid funded services.

A Design Team was established by the Division in February 1999 to make recommendations to the Division Director and ultimately to the Secretary of the Department of Health and Human Services (DHHS) and the General Assembly. The Design Team contained representatives from the Division, Area Programs, and advocacy groups. The charge was to take a broad look at the system, make far-reaching recommendations to address the problems, and to hold nothing "sacred".

What follows is a summary of the first Draft of the Design Document, which was released, in early June 1999. This summary generally follows the chapters of the document. Copies of the document are available from the Division and on its web site (listed at the end of this document). This first draft presents options, ideas, and possibilities for public response. It is critical that families and consumers respond with their ideas and opinions at this early point in the process. A second draft will be completed in the fall.

What Are We Trying to Accomplish (Chapter 1)

Because there are a limited amount of resources available to provide care for the nearly 1 million North Carolinians with mental health, substance abuse, and developmental disabilities, it is critical that the Division move from being a passive funder to a proactive purchaser of services. On behalf of the state of North Carolina, the Division must determine what services it will buy, for what populations of people, and at what level. As a purchaser, the Division also must communicate to those who will provide services, exactly what it expects of them. It must define standards for access to services, for quality of services, and for the involvement of consumers and families. The Division must then develop mechanisms to monitor whether or not its requirements are being followed.

The Goals of the Redesign Plan are to:

• Ensure person and family-centered care
• Strengthen clinical and financial accountability
• Develop and manage performance contracts
• Develop consistency in quality, availability, and access of services across the state
• Use competition to promote consumer choice and improve quality
• Implement utilization management mechanisms throughout the system
• To develop a framework to address expansion and unmet needs

Providing for those in Need and Maintaining the Safety Net (Chapter 2)

Issue: The MH/DD/SA system is extremely and chronically under funded. Tens of thousands of adults and youth are either unserved or under served. The deficit of services exceeds $400 million. The level of funding needed to provide for all of these needs will never be available.

Proposal: The state can no longer try to provide everything for everybody. It must establish priority populations of people and target resources to provide services for these individuals. At the same time the state must provide basic core services to all that need them, for example crisis services, assessment, early intervention and prevention.

The Design Team has recommended the following as Priority Populations:

• Medicaid Recipients- Medicaid is an entitlement program. Federal law requires that Medicaid recipients receive services that are medically necessary.

Non-Medicaid recipients also will receive services to the degree that state and local funds are available. Priority populations include:

• Individuals most severely impaired, e.g. Severe and Persistent Mentally Ill, Emotionally disturbed children, IV drug users, and pregnant substance abusers.
• Those for whom allocation of resources represents a sound state investment, i.e., treatment and support will likely result in significant cost savings, community safety, or higher functioning. This includes spending resources for less costly long-term supports and services for persons who might otherwise require periodic costly acute care such as hospitalization or crisis response.
• Those whose needs have significant impact on other state services, e.g. criminal justice, juvenile courts, DSS.
• Medically Indigent- people who lack any other means to obtain needed mental/ behavioral health or developmental disability services.
• Those with identifiable risk factors, e.g. dual diagnosis, pregnancy
• People with Dual/Multiple Diagnoses at risk for inappropriate institutionalization- People who cross disability lines often "fall through the cracks" of the system and subsequently are at risk for inappropriate institutionalization

What does this mean: All consumers of services would be enrolled into the system. Populations to be served, and not served, would be defined in operational terms. The system would focus primarily on the most needy populations in terms of treatment needs and resources. Others would be referred elsewhere for services.

Some Unanswered Questions/Issues Needing Input: It is not clear how many state resources will be left after the federal requirements for Medicaid recipients are met. Will this accelerate a shift toward a Medicaid only public system?

If people in non-priority populations are to be referred outside of the public system, where will they be referred to?

Many Area Programs have tried to provide everything to everybody. If we move toward serving priority populations, what will happen to those who have been receiving services from the public sector but now find they are not considered to be in a priority population? This issue is termed "Abandonment".

If priority populations are defined, how much service should these individuals receive? Should they receive the best of everything or good necessary services? This is the Cadillac vs. Good Chevy dilemma. The Cadillac approaches risks bankrupting the system.

To implement a priority population approach, a system must be developed using clinical, functional, and financial systems to ensure that the state's resources are consistently directed to the priority populations. Clearly, consumers of services do not always fit into precise categorical boxes and professional judgement will often be necessary. The state will need to provide clinical training, financial incentives, and a comprehensive utilization management system. None of these elements are currently in place.

What Services (Chapter 3)

Issue: In the late 1980's the General Assembly endorsed comprehensive long-range plans which created a blueprint of a continuum of services for each of the disability populations. Funding to develop the continuum of services was never provided and its implementation across the state has been haphazard. Further, the quality of the services provided has varied dramatically across the state.

Proposal: The array of services will be conceptually based on the long-range disability plans endorsed by the General Assembly. Through contracts and financial incentives the full continuum of services would be developed with much greater consistency and standardization statewide. Compliance with clinical pathways and standards, which represent leading or consensus ways to provide treatment or support, would be required. A new feature of the redesign plan is that while there will be an array of services, which services and at what level they are received by the individual will be dependent on a benefit package much like a private insurance plan. In order to monitor compliance with requirements, assure accountability, and monitor benefits, a system of utilization management (see below) would be put in place.

What does this mean: This proposal would create a much more standardized system of care. Services provided in one area of the state would also be provided in the others. How care is provided also will be much more standardized. Monitoring from the state, as purchaser of the services, will be substantially more than is currently the case. The state may contract with someone to do the actual monitoring but will be looking at reports and other data to ensure it is "getting what it paid for".

Some Unanswered Questions/Issues Needing Input: While the draft spends a great deal of time defining various services that could/should be on a continuum, the recommendations do not contain a list of services that would be provided. Input is needed on exactly what the continuum of services should look like and how services should be defined.

Very little is said about how the "benefit package" notion would actually work. Medicaid individuals have a clear "package" based on the services Medicaid has defined. It is far less clear for others who rely on state and local funding. What exactly would their benefit package look like?

Making Sure the People get the Right Services (Chapter 4)

Issue: This chapter looks at the issue of something called "utilization management". Utilization management is a system involving clinicians, service providers, technology, and reviewers. This system of people and technology makes sure that individuals are getting the services they need-- but no more and no less. It is a way of ensuring accountability of how resources are spent and on whom. If utilization management works the way is should it can ensure that people get services they are entitled to, that they are getting care appropriate to their needs, hold providers accountable, and help to standardize care practices. Many who have experienced private managed care, however, also know that utilization management has the potential to limit access to care. Certain utilization management functions are better done at the local level while others functions are more effective if centralized at a state or regional level.

The first step in deciding whether the individual can receive services is determining if the individual meets the definition of medical necessity-- is the service being requested "medically necessary" to address the condition of the individual. Often people with long-term and chronic conditions are denied care because medical necessity definitions are based on acute (short-term) conditions. It is essential that in this redesign effort the definition of medical necessity account for the long-term needs of the individuals in our system of care. Without such a definition, long-term support services (e.g. psychosocial rehabilitation, supported employment, and residential services) will not be available. How medical necessity is implemented and interpreted will also need to be monitored by the Division to ensure that it is not used to inappropriately deny care.

• The state should apply a utilization management system for all state-funded MH/DD/SA services, including those delivered in the state institutions.
• The Division should determine philosophy, policies, and operational objectives and then develop a "Request for Proposal" to contract with an organization(s) to implement a system of utilization management. Any Request for Proposal or contract must contain strong and clear language to address:

• Nationally recognized utilization management principles should be incorporated to address the long-term and short-term needs of the specified priority populations.
• All service providers at the local level should establish internal utilization management systems to work within the larger utilization management structure. Strong local
• programs should establish their own individualized treatment plans to allow for community-based variability and creativity.

What does this mean: There will be much more review of services being provided to determine if services are appropriate to the individual's need. Services will be targeted to priority populations. It is likely that some individuals will see a reduction in some types of services or in the frequency of services provided. On the other hand, some individuals will have services made available to them that have not been previously available. There will be more standardization across the state in how care is provided.

Some Unanswered Questions/Issues Needing Input: Setting up this type of system will require significant costs. At what point does the cost of monitoring exceed the benefit? Establishing criteria for medical necessity and service definitions is critical. What should they include?

How to Get Services to People (Chapter 5)

Issue: At the present time there are 40 Area Programs. They range dramatically in number of counties served numbers of people covered, level of funding, and the relationship with and support from the local counties. The Area Programs have exclusive contracts with the state to provide services within their specified areas. While there are strengths in the current structure, there are also a number of problems that the redesign plan should address. These include:

• better integration of hospital and community services
• stronger management and fiscal practices
• more efficient administrative practices

Proposal: Among the areas of consensus are the following:

• Management and financing of institution/inpatient services will be more unified and integrated with community based services
• Some sort of regional structure will be necessary to facilitate responsive management and enhance sensitivity to local issues
• The current structure of 40 Area Programs is not efficient. A significantly smaller number of regions would be more efficient, manageable and effective, (e.g. 8-15 regions)
• Regions should have a sufficient population base (e.g. 500,000) to provide financing to allow for the development of a comprehensive continuum of care. (Rural areas may require a smaller minimum population to ensure reasonable regional lines). Regions should be constructed from contiguous counties.
• The development of new regional lines would likely not be drawn by the state but developed through some sort of bid-based process to allow counties, communities, and Local entities to determine the most appropriate partnerships to meet state-determined requirements.
• Steps must be taken to ensure that regions are sensitive to local needs and variations and capable of coordinating the provision and purchase of MH/SA, and DD services with other community services and agencies.
• The system structure will form the base for providing services to all disabilities but different disability groups may sometimes use and interact with this system in different ways.

From these consensus areas the following four models are proposed for consideration (please see Chapter 5, p13-15 for detailed pros and cons of each model):

"Enhanced Area Program Model"

This model would maintain the fundamental Area Board and Area Program structure but create a substantially smaller number. The Area Program would provide core services and provide or purchase other services. It would establish a minimum purchase of services from private or non-profit sources to guarantee consumer choice. These new Area Programs would enter into performance based contracts with the Division and could contract with other external organizations (e.g. Administrative Services Organization) to provide administrative and management support (e.g. billing) to reduce redundancy of operations shared across the area programs (e.g. credentialing of providers).

"The Competition Model"

After receiving competitive bids, the state would contract with several (e.g. 8-15) regional entities to purchase, manage, and perhaps in some cases, provide services within their region. The Division has the option to limit bidders (e.g. only non-profits or with in-state experience) or protect "essential community providers". Either the Division would determine the regions or the bidders could recommend regional lines in their bids, which the Division would approve or revise. The Division would provide funding to the regional entities on a per capita basis, adjusted as needed based on the Medicaid-eligible population.

"Division as Direct Purchaser"

The Division would purchase services directly, without any intermediary Area Program or regional entity. Some sort of internal regional management system would likely be needed for responsive management and to enhance sensitivity to local issues. The Division would have the ability to purchase a wide variety of services with a great deal of flexibility to respond to special needs in particular areas of the state.

"Integrated Health Model"

This model blends the purchase and management of mental health and substance abuse services with general health care services. A health care plan would be provided which included mental health and substance abuse services instead of the usual practice of "carving out" these services. Consumers would be provided with an opportunity to enroll in HMOs and other integrated health care delivery systems.

This model is designed especially for healthier Medicaid recipients, those with significant co-occurring medical disorders, and consumers who want the choice of an integrated health plan. This model would most likely be an alternative model to whatever "carve out" model is adopted.

What does this mean: The emerging consensus is that the structure of the current system is not suited to respond to the current demands of the health care environment. Each of the proposed models will require significant changes. The models vary on a number of dimensions, including:

• the degree of exclusivity vs. competition
• local vs. centralized control
• flexibility vs. consistency
• entrepreneurial vs. government regulated
• the public system as manager vs. service provider

While there is general consensus as to what a new model should achieve, there is not a consensus on which model would be best to meet those goals. In fact, there is not a "right" answer. It is a matter of determining which model will best address the needs of consumers in North Carolina.

Each of these models has costs and variations associated with it. Ongoing analysis will take place over the summer.

Unanswered Questions/Issues Needing Input: This is an area in which public input will be extremely useful. Review the pros and cons, assess how they differ on the different dimensions, reflect on your personal needs and experience, and offer your opinions on which model, or parts of the models, you think would work best.

Support from counties to the Area Programs has varied significantly. The potential roles of the counties in each of these new models needs to be addressed more fully.

(Chapter 6)

Issue: While is it important to offer a continuum of services that is well managed and efficient, it is equally critical that the services be provided in a consistent, high quality manner across the state. Developing and maintaining high quality services is a function of what is called Quality Assurance (QA) and Quality Improvement (QI) systems. At the present time there is no systematic quality management system within the Division and an uneven system among the Area Programs. There are a number of components used to ensure quality and accountability of services. These include:

• accreditation
• implementation of a Continuous Quality Improvement plan
• the development of clinical practice standards
• establishing peer review processes
• monitoring performance and quality measures
• consumer participation in quality measures and monitoring
• use of incentives/disincentives and report cards

Proposal:

• Establish performance based contracts (Memoranda of Understandings) with all Area Programs beginning July 1, 1999.Establish a single responsible statewide Quality Management body to design, develop, implement, and manage the components of an effective QI/QM system, including establishing quality measures and standards.
• Strengthen accreditation
• Design and implement a performance measurement system by establishing a work group of skilled clinicians and involving consumers, family members, advocates, and service providers, to propose clearly defined performance expectations and measures of quality that will be used in monitoring.
• Implement structural quality measures via management information systems (MIS) developed by Division staff or contracted from another organization. This would provide a system to measure performance, provide information needed to promote quality improvement activities, ensure accountability, and identify potential problems.

What does this mean: This is a way to look at clinical accountability within the service system. If successful, it will ensure that consumers get what they want and need, and that the state is getting value for what it is purchasing. This is an area with opportunities for direct consumer and family involvement, not only in developing measures, but in actually participating in monitoring activities, as was the case in Philadelphia through the Consumer Satisfaction Team (CST).

Some Unanswered Questions/Issues Needing Input: What would be some good measures of quality and performance? What should be reported on "report cards"? What are some ways that consumers and families can be meaningfully involved in this process?

Paying for Services and the System of Care (Chapter 7)

Issue: There is wide variability of funding for services across the state. This variability has resulted in a very fragmented service delivery system. The current funding streams include state allocations, county allocations, Federal Block Grants, funding through other state agencies (e.g. education, criminal justice), research grants, Medicaid, and Temporary Assistance for Need Families (TANF). Funding streams are fragmented due to disability-specific allocations and legislative appropriations for special programs. Some funding streams are entitlements and have specific eligibility and service requirements. Further, funding of the state institutions is separate from other funding mechanisms, creating a barrier to integration of institution and community services. In general, who is being serviced, the types of

services and supports provided (or not), and how the services are delivered are almost completely related to the mandates of the funding streams. This provides a major barrier to the development of individualized and integrated treatment and service plans.

Proposal:

• The Division should pursue an integrated funding system which is consolidated with a MIS system that combines outcomes, volume of service, client satisfaction, and other quality indicators. Services and supports should be based on individual consumer needs and not on what is currently being funded.
• Establish funding priorities with required outcomes and quality indicators
• Develop standardized contracts to include financial quality indicators, requirements, procedures, penalties, and incentives.
• Ensure that rates are actuarially sound by contracting with an actuarial firm to analyze current rates. This information should inform any decisions that are made regarding the potential development of case rates and capitation payments for sub-populations. Any remaining fee-for service rates should use the approved cost finding process for Medicaid and state rates.
• Establish uniform financial procedures
• Require contracted agencies to have Memorandum of Agreement with other providers in their area requiring coordination of financial and clinical services between public private, and government agencies for consumers.
• Integrate funding by blending funding streams that finance services provided by the institutions and community based service providers
• Provide financial incentives for the aggressive development of needed community-based services and supports
• Request proposals and establish contracts for fiscal intermediaries that will enable Participant Driven Managed Supports to become a viable option in the delivery of long term supports in North Carolina. "Participant Driven" means that people/families, rather than third parties, exercise choice over how dollars are used, that supports be obtained within a fixed dollar budget, and the person/family caries some amount of risk if the budget is improperly used. This arrangement previously has been discussed with regard to Thomas S. class members. It involves individuals, an intermediary (business agent), a personal advocate, and choice of service suppliers. In short, individuals ultimately control resources and to a great extent are free to exercise their choice of service providers.

What does this mean: This is an attempt to move the system to more flexible funding so that the needs of consumers, not the funding source, are addressed. The proposals also seek to clarify responsibilities and financial arrangements between the state and those it contracts with and to coordinate responsibilities between community agencies.

Some Unanswered Questions/Issues Needing Input: In order to blend funding streams state statute will need to be changed and it is not clear whether there is the political will to do so. It also is not clear to what degree federal requirments will create a barrier to blending funding streams. How does the attempt to place client needs about funding source match with other recommendations to create different benefit packages based on pay source? What will the role of the counties be?

Keeping Track (Chapter 8)

Issue: This deals with the issue of managing information or management information system (MIS). To a large extent, the public system is now expected to operate much like a major insurance company. They must keep track of thousands of "covered lives", respond to the demands of multiple pay sources, and provide reports and information to prove to various pay sources and public constituencies, that they are providing good care and managing funds responsibly. To do this requires advanced technology and a system of gathering and processing information.

Proposal:

• Purchase utilization management MIS through an independent service to mange utilization of all publicly funded mental health/substance abuse services
• Develop a multi-payor system
• Set and maintain MIS standards and develop standard reporting formats
• Develop a system-wide MIS infrastructure with an integrated MIS capacity
• Develop Web-based technology
• Establish linkages with existing MIS in other related public/governmental agencies. Pursue policies to support collective purchase and maintenance of a MIS system across several state divisions.

What does this mean: Many of the proposals in this draft-- Quality Assurance, Utilization Management, fiscal and clinical accountability measures-- will require the support of a sophisticated information system.

Some Unanswered Questions/Issues Needing Input: Is such a system available and how much will it cost? As information is shared more and more easily, how can consumer confidentiality be protected?

Consumer and Family Issues (Chapter 9)

Issue: There is no statutory Bill of Rights for consumers of mental health, developmental disabilities, and substance abuse services, with the exception of those who live in some residential or treatment settings. Grievance and appeals systems in the Area Programs are generally limited and vary significantly across the state.

 Proposal:

• Develop a North Carolina Consumer Bill of Rights
• Promote consumer involvement in treatment planning
• Expand consumer choices and protections
• Promote consumer representation and advocacy
• Develop consumer complaint, grievance, and appeal procedures
• Strengthen confidentiality protections
• Manage involuntary commitment and court-ordered addiction treatment
• Disenrollment protections for consumers
• Establish principles in assisting/obtaining/providing consent for persons with serious disabilities

What does this mean: These proposals recognize the important of consumer rights and protections while also recognizing that the current system to ensure rights and protections is inadequate.

Some Unanswered Questions/Issues Needing Input: While the proposals represent good goals, input is needed to clarify the details. For example, what should the Bill of Rights say? How should consumer involvement and representation be promoted, How should consent issues be addressed?

What Next (Chapter 10)

As noted at the beginning, this is a first draft. Public comment is encouraged, welcome, and critical to the success of this effort. But with the recognition that change must happen, there also is a degree of urgency to get things moving. Comments to this draft should be received by the Division no later than July 15th. You may write or e-mail your comments to:

flo.stein@ncmail.net

Based on the feedback received, a second draft will be available in mid-September. Again, public comment will be sought. A final plan will be completed by the end of November 1999. This plan will be reviewed by the Division Director, the Secretary of DHHS, and no doubt, key legislators.

This is just the beginning of a long but important process to improve the way we support and serve persons with disabilities. This is your chance, get involved.

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