About 69% of the 75.1 million people enrolled in Medicaid across the United States are enrolled in managed care (see What Is The Dominant Delivery System For Medicaid Services In 2016?). But Medicaid is just one part of the landscape. For military health plans, about 68% of the population is enrolled in managed care, and for Medicare, about 30% of the population is enrolled in a managed care plan (see The (Inescapable) New Value Equation In Health & Human Services: Why It Will Determine Who Succeeds).
My home state of California serves as an interesting examples of this development – and the related challenges in this massive system change for provider organizations. Currently, close to 80% of the state’s 13 million Medicaid beneficiaries are enrolled in managed care (see California Behavioral Health System State Profile Report). There are two important things to keep in mind when it comes to understanding the California Medicaid (or Medi-Cal as it is referred to in California) system: One, in January 2014, California expanded Medi-Cal eligibility under health care reform – this expansion brought about one million new beneficiaries into the Medi-Cal managed care system. Two, last year, the state extended a carve-out of specialty mental health services to county mental health plans (MHP). MHPs are reimbursed for all services by the state and are not at-risk for services provided. However, Medicaid beneficiaries with mild to moderate mental health issues are served through managed care organizations, which have capitated contracts with the state and operate on a regional basis (see California’s Mental Health Carve-Out Preserved For Five Years, But With New Performance Transparency Requirements).
With about 17% of the nation’s total Medicaid population in California, the challenges of handling a large managed care population are magnified. As health plans are learning, the growing Medi-Cal population has complex support needs that differentiate them from the commercial populations that some health plans are used to managing. Social determinants have a bigger effect on their health, they need more care coordination to keep them out of the emergency room (ER), and they require more health education and greater consumer engagement efforts. These consumers lack transportation and housing and adequate employment; they don’t know how to use a pharmacy or get in touch with their doctor for an appointment; they don’t know what to do if they are experiencing a health crisis – all this adds up to high rates of hospitalization, high utilization of emergency rooms, and high readmission rates.
So what is the solution? Health plans and provider organizations are starting to develop more collaborative and interdependent relationships to address this growing need (see Thinking Of A Merger Or Acquisition? Five Key Questions and When ‘Being Acquired’ Is The Best Financial Move). In California and across the country, health plans are looking to contract with provider organization partners who can offer innovative, collaborative solutions. Unfortunately, here in California, many non-profit specialty provider organizations — in mental health, in addiction treatment, in disability supports, in children’s services — are stuck. For many reasons, they don’t have the administrative capabilities needed to create the necessary infrastructure to work with managed care (for more see Three Competencies For Risk-Based Contracting: Advice From An Executive Who Is There and Four Essential Organizational Competencies For The Future) – and they don’t have the capital to acquire that infrastructure. This makes the transition to the new market difficult, but not impossible.
Like all change, capital is required for new staff, technology, expertise, and more. For many organizations, access to capital is a constraint. What to do? It may mean starting small by approaching a health plan with a pilot program designed to help improve performance, and using that small pilot to build infrastructure. It may mean starting a new program with grant funding while you work out a way to make it sustainable through health plan payments. It may mean developing new, profitable service lines that can help fund needed infrastructure changes within your organization. Or setting up a for-profit subsidiary and seeking outside investments. Or creating a separately financed collaborative organization with other provider partners. Or merging into an organization with the infrastructure or capital you need. The choices are significant, and a challenge for future strategy. (For more on sources of capital, see Need Financing For Your Next Big Service? and Income Statement Vs. Balance Sheet? The CFO Dilemma.)
For more on how to reinvent your organization’s strategy in a collaborative market, join me next month in San Diego for The 2016 OPEN MINDS California Management Best Practices Institute. I’m excited to lead several essential panel discussions about the new market opportunities in California, with a cadre of impressive speakers – including the session “Expanded Coverage For Addiction Treatment: Finding The Opportunities With The Drug Medi-Cal Organized Delivery System,” featuring Sandra Naylor Goodwin, Ph.D., MSW, President & CEO , California Institute for Behavioral Health Solutions (CIBHS); Michael Hutchinson, MFT, Director, Quality Improvement and Data Support, Substance Use Treatment System Division, Santa Clara County Health and Hospital System; and David Lisonbee, President & CEO, Twin Town Treatment Centers.