Mental health costs and outcomes under alternative capitation systems in Colorado: early results

BACKGROUND: This study presents preliminary findings for the first nine months of the State of Colorado USA Medicaid capitation Pilot Project. Two different models of capitation (model I and model II) are compared with fee for service (FFS) in providing services to severely and persistently mentally ill adults. In model I the state's mental health authority contracts with community mental health centers (CMHCs) who both manage the care and deliver mental health services, while in model II the state contracted with a joint venture between a for-profit managed care firm who manage the care with either a single CMHC or an alliance of CMHCs who deliver the mental health services. AIMS: Our objective is to examine utilization, cost and outcomes of inpatient and outpatient (including community based) services before and after the implementation of a capitated payment system for Colorado's Medicaid mental health services compared to services that remained under FFS reimbursement. METHODS: The stratified, random sample includes 513 consumers (188 for model I, 179 for model II, and 146 for FFS). Consumer outcomes were collected by trained interviewers and include 17 measures of symptoms, health status, functioning, quality of life and consumer satisfaction. Utilization and cost of services are from the Medicaid claims data and a shadow billing data system (post-capitation) designed by Colorado. The first step of the two-step regression procedure adjusts for the presence of individuals with use or no service use during the specified time while the second step, ordinary least-squares regression, is applied to the sample who utilized services. RESULTS: These preliminary findings indicate consistent reductions in inpatient user costs and probability of outpatient use under capitation. Combining all services, there are consistent reductions in the probability of use in both models: model I had significantly higher initial probability of use for any service. Only model II showed a statistically significant decrease in post-capitation overall user costs, but they were initially higher than model I or FFS. Estimated total cost per person for model I suggests virtually no change from the pre- to post-capitation period. Model II had the highest pre-capitation and the lowest post-capitation estimated cost per person. Examination of pre measures of outcomes across capitated areas suggest that samples drawn from the FFS, model I and model II areas were comparable in severity of psychiatric symptoms, functioning, health status and quality of life. No changes were found in outcomes. DISCUSSION: These early findings are consistent with the limited literature on capitation. Both studies of capitation integrated with medical care and those specific to mental health settings did not find adverse changes in outcomes compared to FFS. Limitations include the short follow-up period, lack of detail and possible under-reporting of outpatient services provided by the shadow billing data system. CONCLUSIONS: For the short term, it is concluded that capitation can reduce service cost per person without significant change in clinical status. IMPLICATIONS FOR HEALTH CARE PROVISION AND USE: Implications are unclear until we can determine whether (i) reductions in the numbers receiving service indicates favorable consumer outcomes or reductions in access and (ii) lack of change in consumer outcomes is due to the benefits of capitation or the lack of sensitivity of the outcome measures. IMPLICATIONS FOR HEALTH CARE POLICY FORMULATION: Implications are premature for these early findings. IMPLICATIONS FOR FUTURE RESEARCH: Future research should include longer follow-up as well as analysis of long-term consequences for both cost savings and clinical outcomes.