Paying for Value in Behavioral Health

Prepared for the California Health Care Foundation

In recent years, state Medicaid programs and the U.S. healthcare system as a whole have shifted from traditional fee-for-service payment methodologies toward value-based purchasing (VBP) models. To date, most VBP efforts have focused on physical health. Given the significant share of Medicaid dollars spent on enrollees with serious mental illness and substance use disorders, however, state Medicaid programs have increasing interest in exploring ways to expand VBP to behavioral health providers and services.

In a new report for the California Health Care Foundation, Manatt Health examines three state Medicaid programs that have adopted different types of behavioral health VBP models:

  • Vermont. The state’s hub-and-spoke model has increased access to addiction treatment, while the more recent Mental Health Payment Reform Residential Substance Use Disorder Case Rate and Applied Behavioral Analysis Case Rate methodologies are attempting to expand behavioral health VBP to new types of services.
  • New York. The Behavioral Health VBP Readiness Program has invested considerable resources to assist behavioral health providers with forming networks that can participate in total cost of care and other VBP arrangements.
  • Tennessee. The state’s Home Health Program—Tennessee Health Link—has improved the ability of community mental health centers to serve high-need members, while the Episodes of Care program has demonstrated a promising new approach to VBP for discrete behavioral health conditions.

The report synthesizes key lessons learned from these states, including their challenges, successes, failures and adjustments. It also provides California-specific recommendations for implementing VBP for behavioral healthcare.

Click here to read the full report.

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