Editor’s note: This story, which originally appeared here, is republished on Carolina Public Press with the permission of the Raleigh Public Record. Western Highlands Network, the Asheville-based agency that connects mental health, substance abuse and developmental disability care providers with the WNC community in Buncombe, Henderson, Madison, Mitchell, Polk, Rutherford, Transylvania and Yancey counties, was the second expansion site in the state for the implementation of the Medicaid waiver.

By Rose Hoban, Raleigh Public Record

North Carolina is changing the way the state Medicaid program will pay for mental health services in a move some are calling a second round of major mental health reform. But no one can give a clear answer of how that will affect mental health consumers statewide and their ability to get needed services.

In June, state lawmakers enacted a new law requiring all mental health management agencies in the state to apply for Medicaid waivers in order to reorganize the way they get paid for care.  The changes also mean Wake County Mental Health Services will be dramatically reorganized and merged into an organization based in Durham County.

Lawmakers say the new system will contain the rising costs of mental health care while continuing to provide services for people who really need them. Opponents say the changes are all about cost containment, and don’t guarantee high-quality care to the hundreds of thousands of North Carolinians who need mental health services annually.

“It’s a complete transformation in the mindset and developing more skill sets and being able to live below the means… so that we’re living with a tight budget,” said Ramon Rojano, head of Wake County Mental Health Services.

By the new law, the state requires mental health agencies to adhere to a model piloted by Piedmont Behavioral Health, a Salisbury-based agency that provides care for mental health consumers in Cabarrus, Davidson, Rowan, Stanly and Union counties. In 2005, PBH received a Medicaid waiver to reorganize itself to act more like an HMO in the way it allocated and paid for mental health care in those five counties.

Instead of simply referring patients to a doctor or a therapist who then bills Medicaid (a system called fee-for-service), PBH gets a lump sum for each patient approved for care. The agency then pools all the money it receives for all the clients and agency officials. Then they determine just the right amount of social services, doctor visits and therapy sessions for each client, all while not exceeding their total monthly income — a system called prospective payment.

Some months, some patients need less care, while others need more. Under a prospective payment system, the idea is to find the right balance of services delivered so everyone gets what they need.

Basically HMOs

Essentially, the state’s mental health agencies will become more like HMOs.

In passing the new law, legislators cited PBH’s pilot model, calling it “a proven system for the operation of all public resources for mental health, developmental disabilities, and substance abuse services.”

Now, all mental health management agencies in the state must apply for a waiver to convert to the PBH model by January 2013, or be taken over by an agency that has.

“The state is telling LMEs (mental health local management entities) to become insurance companies,” said Dave Richard, head of the ARC, a statewide organization that cares and advocates for people with developmental disabilities.

Richard said his organization has heard from families in the PBH area who have had services cut, and haven’t been happy with the results when they appealed.

“The people who are dissatisfied say it’s cut and dry and harsh, and looks more like an insurance company, complete with the denials of service,” Richard said.

Richard said his organization, and others, watched the PBH pilot unfold during the past five years.  In the last legislative session, lawmakers made room for two more LMEs — Mecklenberg and Western Highlands — to adopt the PBH model and get more data on how well it works before scaling up to the entire state.

But when the new, Republican-led legislature came into power, legislators pushed through the new law, requiring all of the state’s LMEs to switch by early 2013.

“The logic of expanding statewide without doing this study and reviewing it doesn’t seem to make sense. When the previous legislature was talking about this, the Secretary [of Health and Human Services] said, ‘let’s go slow.’  And now, going slow is thrown out the window,” Richard said.

Richard said his read of the data doesn’t show the PBH approach actually saved money for people with developmental disabilities, who often need extensive care for their entire lives.

“The outcomes in PBH for people with intellectual disabilities are the same as the average for the rest of the state,” Richard said. “And the cost? They claim it’s less, but the cost in the developmental disability part of the waiver was higher in PBH, was higher than in the rest of the state.  So the idea that it was less costly and provided better services, we don’t see the evidence.  They’re not bad, but they’re no better than the rest of the state.”

State officials defend PBH’s results

“I think when you have these kinds of transitions, the folks you hear from are those who feel like they’re  not getting the same services,” said Beth Melcher, DHHS assistant secretary for Health and Human Services for Mental Health, Developmental Disabilities and Substance Abuse Services. “But as you transition, there are people who get more services… that doesn’t often get into the paper.”

Melcher admits many LMEs will have a period of trial and error, trying to find the best mix of service providers, economic incentives and network size.

“This model is a model that has met the outcomes that it was set out to meet,” she said. “To manage more effectively, to have more predictable costs, especially Medicaid, to meet expectations about access and quality. So, with respect to that and the outcomes they’ve gotten, it has been successful.”

Melcher says mental health consumers should not see many changes, especially during the first year, when all of the people providing care will have their contracts extended. But during the second year, provider networks will become smaller, and some people will find their providers are out of the network. She said it’s a concept familiar to people who are privately insured.

“I think the balance you have to find is that people are required to have a choice of providers and they need to have an adequate choice. But the flip side doesn’t mean unlimited kinds of choices of any kind of provider, anywhere that you want it to be,” Melcher said. “It’s a limited choice option. There will be balances in monitoring and review to make sure that those choices are adequate and of quality that people are happy with the choices they have.  But it does not mean limitless choices.”

In the courts

Advocates for people with mental health disabilities say mental health clients will be adversely affected and that clients served by Piedmont Behavioral Health already are suffering. Disability Rights North Carolina head Vicki Smith said her organization has filed two federal class-action lawsuits against PBH.

“The lawsuits are specific to PBH’s operations on the Medicaid waiver,” Smith said.

Smith said one suit alleges PBH’s way of allocating care denies people what they are entitled to under the Americans with Disabilities Act. The other suit alleges PBH denies mental health patients and their families due process to appeal when they are denied services. Both cases are making their way through the court system.

Smith said an HMO-like model can work for patients with physical health problems who get better and need fewer services as time goes on. But it can be a problem for mental health consumers, who often have chronic conditions that require a lot of care over a long time, if not a lifetime. Those patients can be expensive, Smith said, but providing that intensive care is cheaper than having them end up in a state psychiatric hospital.

“Our concern is that [PBH] has reduced support to consumers to the point that the individuals are destabilized,” Smith said. “The reduction of services has caused people to become unstable when they were doing fine before. Two or three of our clients have had to go to psychiatric hospitals as a result.

Advocates also say that creating smaller provider networks contradicts one of the primary goals of the reform effort started a decade ago, which was to give mental health clients choice in who provided them with care.

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