Government purchasers see value in managed care - San Diego County; Massachusetts Department of Mental Health

Business & Health, July, 1993 by Jeannie Mandelker

The county of San Diego and the Massachusetts Department of Mental Health are providing access to the indigent-and cutting their costs through managed care programs.

Managed care has established a beach-head in one of the last bastions of fee-for-service medical coverage--local and state governments. States and local communities must pay the health bills of the working poor who carry no health insurance and the unemployed who are not eligible for Medicaid.

In these tough economic times, local governments have fewer dollars to cover increasing numbers of people in this category. They are also concerned about increasing the quality of care, particularly in expanding access to primary care to avoid larger health care bills later. Managed care is designed to combat deficiencies that plague the poorest of patients--inadequate access to care, overuse of emergency rooms, lack of preventive care, and the inability of payers to measure quality.

The national health reform plan that emerges from Congress may create a new tableau on which state and county agencies must draw their plans. But one thing is for certain: agencies today want to be intelligent shoppers, not simply bill-payers.

The County of San Diego has been using managed care for 10 years; the Massachusetts Department of Mental Health introduced managed care in 1991. Here's how both organizations manage their health care programs.

An award-winning program

The public-private partnership between San Diego County and Medicus Systems Corp., a medical contract management, software, and consulting firm based in Evanston, Ill., is one of the oldest in the country. The program uses social and medical case workers to manage the social and health needs of San Diego's indigent population-28,000 people were treated in 1992.

The County of San Diego hired Medicus to run its indigent care program in 1982 when the state government shifted responsibility for coverage to the counties. Paul Simms, the county's deputy director of the department of physical health services and the architect of the program, says the county had no medical facilities and, therefore, felt it needed to go outside for expertise.

Since 1982, Medicus' role has evolved as the county has redefined its needs, particularly as the budget has tightened. Today, Medicus manages all participating providers in the county, gathers extensive data, negotiates fees and distributes payment to providers, and provides social and health case management.

Both county and Medicus staffers believe that providing social as well as medical case management is a key to the program, which recently was awarded the 1993 Merck/National Managed Health Care Congress Partnership Award because it has treated more patients each year and kept its costs below that of other California programs for the indigent. In fact, the San Diego County-Medicus partnership has saved more than $160 million in health care costs over the 10 years of the partnership, county officials say. The savings are based on the perpatient cost of care versus the perpatient cost of care for Medi-Cal patients. (Medi-Cal is California's Medicaid program.)

Providing care to these patients can be a challenge. "A lot of what is wrong with these patients is not clinical," explains Sandra Lichty, vice president, managed care division of Medicus. "Patients are non-complaint, don't show up for appointments, or use substances that interfere with treatment." Case workers work with patients to increase compliance and help them access resources, such as Supplemental Security Income, Medi-Cal, and outpatient drug treatment programs, if needed.

Employers can learn from the county's reimbursement arrangement with providers. A 10% budget cutback this year forced CMS to negotiate below-cost payments to hospitals. But the county is not cutting back on its primary care funds. Medicus persuaded the hospitals that by supporting primary care, they would see a reduction in emergency room visits, says Richard Strauss, Medicus' project manager in San Diego. To make the deal more palatable, Medicus pays hospitals upfront each month in anticipation of use, and the money is adjusted throughout the year as actual use occurs. "That helps the hospitals' cash flow," says Strauss. "We don't pay much, but we pay early."

To protect itself from risk and fix certain costs, Medicus has established three risk pools (using county funds), says Strauss. The first pool covers the county's 18 primary care clinics that handle primary care exclusively and receive $43 per clinic visit. The pool also pays for prescriptions and specialty consultations. At the end of the year, any leftover pool money is distributed to clinics based on the number of CMS users. The second pool covers specialists and ancillary services. A third risk pool pays for inpatient hospital care. The objective of the risk pools is to fix costs for the county at the beginning of the contract period and hold providers at risk for providing services at the set amount. The county's administrative fee is less than 10% of the county's $35 million health care budget in 1992.