• Donald S Shepard, Marilyn Daley, Grant A Ritter, Dominic Hodgkin, and Richard H Beinecke.
• Schneider Institute for Health Policy, Heller School for Social Policy and Management, Brandeis University, 415 South Street, Waltham, MA 02454-9110, USA.
• J Ment Health Policy Econ. 2002 Dec 1; 5 (4): 163-74.

BackgroundIn the US, the spiraling costs of substance abuse and mental health treatment caused many state Medicaid agencies to adopt managed behavioral health care (MBHC) plans during the 1990s. Although research suggests that these plans have successfully reduced public sector spending, their impact on the quality of substance abuse treatment has not been established.Aims Of The StudyThe Massachusetts Medicaid program started a risk-sharing contract with MHMA, a private, for-profit specialty managed behavioral health care (MBHC) carve-out vendor on July 1, 1992. This paper evaluates the carve-out s impact on spending per inpatient episode and three proxy measures of quality: (i) access to inpatient treatment (ii) 30-day re-admissions and (iii) continuity of care.MethodsMedicaid claims for inpatient treatment were collapsed into episodes. Clients were tracked across the five-year period and an interrupted time series design was used to compare the three quality outcomes and spending in the year prior to (FY1992) and the four years during MHMA (FY1993-FY1996). Logistic and linear regression models were used to control for race, disability status, age, gender and primary diagnosis.ResultsDespite a 99% reduction in the use of hospital-based settings, access to 24-hour services overall increased by 38%, largely due to an expansion in the use of freestanding detoxification and acute residential services. Continuity improved by 73%. Nevertheless, rates of 7-day (58%) and 30-day (24%) readmission increased significantly, even after controlling for increases in disability status. Per episode spending decreased by 76% ($2,773), characterized by a dramatic spending reduction in FY1993 that was maintained but not augmented in subsequent years.DiscussionThe carve-out had mixed effects on the quality of substance abuse treatment. While one of the three measures (readmission rates) deteriorated, two improved (access and continuity).Implications For Health Care Provision And UseRapid re-admissions were strongly associated with shorter lengths of stay, suggesting that strengthening discharge planning may preserve the benefits of MBHC while avoiding its risks.Implications For Health PoliciesSince reductions in Medicaid spending were impressive but finite, MBHC may not be the permanent solution to inflation in behavioral health care. MBHC firms should implement quality-monitoring programs to ensure that aggressive utilization management strategies do not compromise quality of care.Implications For Further ResearchThe impact of managed behavioral health care should ideally be evaluated in randomized controlled studies. In addition, research is needed to establish that the quality measures employed in this evaluation - improved access, enhanced continuity and fewer rapid re-admissions actually correspond to reductions in drug or alcohol use and other favorable outcomes obtained through client self-report or urinalysis.

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