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Center for Substance Abuse Treatment. Substance Abuse: Administrative Issues in Outpatient Treatment. Rockville (MD): Substance Abuse and Mental Health Services Administration (US); 2006. (Treatment Improvement Protocol (TIP) Series, No. 46.)

Cover of Substance Abuse: Administrative Issues in Outpatient Treatment

Substance Abuse: Administrative Issues in Outpatient Treatment.

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Chapter 5. Outpatient Treatment Financing Options and Strategies

Planning and Developing a Program

Developing an outpatient treatment (OT) program is a major financial challenge, whether the program is entirely new or is part of an existing treatment entity. The process of program development requires careful planning and extensive work to ensure adequate financial support. The decision to develop a program should be based on a well-developed strategic planning process (see chapter 2) and a clear understanding of what an OT program entails. Because a new program incurs extensive costs for office space, furniture, staff, computers, and other equipment before it provides services to clients and can receive payments, significant amounts of upfront capital are needed.

Once the administrator or planner identifies a need for treatment services, potential financial support and other resources should be identified and secured to provide for both implementation and initial operating costs. Strategic partners may provide resources, work with the program planner, provide office space, or help obtain funding. Community organizations that see a need for establishing treatment services are likely partners. Locally based foundations and businesses also may be approached for assistance in developing a program. Potential funders are more likely to contribute startup money if they are convinced that the program can cover costs once it is operating.

Documented assurance is necessary from major referral and payment sources that they will provide information on potential payment sources for clients they refer. Signed contracts with expected payers ensure adequate cashflow and establish a budget for the new program's fee structure.

Identification and recruitment of these strategic partners are important steps in the program development process. Before and during the program development process, administrators and planners should work closely with potential referral and payment sources to determine their needs and whether the program will fit those needs. Programs also need to learn whether referral sources will consider new partners, the types of contracts they use, their timeframes for reimbursement, and the process for negotiating contracts. Holding focus groups and strategy meetings with individuals from potential referral sources allows these groups to suggest services they need and for which reimbursement is available. Potential referral sources are more invested in a program if they are involved throughout the planning process. All potential stakeholders should be informed regularly of the development plans and milestones achieved.

Program planners should follow up all potential leads for both funding and referral sources to build and maintain relationships with these sources. Potential sources of funding and referrals include the contacts made during a focus group process, public-sector payers and planners, private insurance plans, contracting agents for private insurance (e.g., managed care organizations [MCOs]), and local employers that have employee assistance programs (EAPs) or managed behavioral health plans and that offer substance abuse treatment coverage. Direct contact with EAPs or managed behavioral health plans may be necessary to ensure both private-sector demand and appropriate reimbursement for services.

Strategic alliances with other treatment providers and with social service agencies can be both important sources for referrals and resources for clients with needs in addition to substance abuse treatment. Alliances with providers to which an OT clinic can refer clients for step-up and stepdown care are vital. Chapter 3, of TIP 47, Substance Abuse: Clinical Issues in Intensive Outpatient Treatment (CSAT 2006b ), provides a discussion of continuum of care. An alliance with a larger organization can strengthen a program's negotiating position with an MCO.

Funding Streams and Other Resources in the Substance Abuse Treatment Environment

Substance abuse treatment in the United States is financed through a diverse mix of public and private sources, with most funding coming from the public sector. Public sources account for 64 percent of all substance abuse treatment spending, a much higher percentage than public expenditures for the rest of health care (Coffey et al. 2001). The existence of diverse funding streams in substance abuse treatment funding presents both opportunities for and challenges to program independence and stability. However, a program with only one major funding source is financially vulnerable if its funder's budget or priorities change; dependence on one source should be avoided. Diversification of funding sources should be a major goal.

Each funding stream usually has its own approval and reporting requirements. Therefore, substance abuse treatment programs require a fairly sophisticated management and accounting system to meet the reporting and performance needs of each purchaser, to provide information that fulfills all funders' requirements, and to generate the appropriate invoices. OT administrators must be knowledgeable about efficient business practices, the use of data-based performance measures, accounting, budgeting, financing, and financial and clinical reporting.

Other potential sources of support are foundations, OT program board members, and local or national corporate donation programs that reduce costs, increase revenue, or improve productivity and effectiveness. Searching for support does not end with ensuring initial funding; planners must continue to secure cash and in-kind donations that can supplement the funding sources discussed below.

Benefits paid to individuals covered by public and private insurers often vary according to whether the services are facility based. Readers should note that the terminology referring to facility-based services may vary by State, especially in public programs. Facility-based services often are eligible for higher payment rates than office-based services because of their greater overhead and capital costs. Sometimes, client copayments or coinsurance rates may be lower for facility-based services than for office-based services. This situation is true for Medicare and other health insurance plans. An OT program that is part of a hospital, affiliated with a hospital, or considered a licensed facility may be eligible for higher rates of reimbursement than one considered to be an outpatient program with no facility license. However, often barriers to obtaining a facility license exist, and a program that is part of or affiliated with a hospital is restricted by cost allocations from the hospital and by oversight from hospital administrators who may not know or care much about substance abuse treatment.

Some health insurance plans may exclude coverage for facility-based OT programs, and others may subject admissions to such programs to more intensive review than admissions to non-facility-based programs. Program planners should consider carefully all alternatives; decisions concerning affiliation with a hospital or pursuit of a facility license should be made with as much information as possible.

The following sections provide discussions about the key funding streams and resources that are available for OT programs providing substance abuse treatment.

Substance Abuse Prevention and Treatment Block Grant

The Substance Abuse Prevention and Treatment (SAPT) Block Grant program is the cornerstone of Federal funding for substance abuse treatment programs. These funds are sent to Single State Agencies (SSAs) to distribute to counties, municipalities, and designated programs. Some funds are set aside for special populations. A program should determine whether the clients it intends to serve are eligible for block grant funding, either from set-asides or from other funds. Each State maintains criteria for eligibility, and these criteria and definitions vary greatly among States. Multistate providers need to check eligibility in each State in which they operate.

The Substance Abuse and Mental Health Services Administration (SAMHSA) provides funding for substance abuse prevention and treatment through these State block grants as well as through a variety of other mechanisms, including both discretionary grants and contracts. A portion of the SAMHSA Web site (www.samhsa.gov/funding/funding.html) is devoted to various funding opportunities.

The most recent data available indicate that in 2001 the SAPT Block Grant accounted for approximately 40 percent of public funds expended nationally for substance abuse prevention and treatment (U.S. Department of Health and Human Services n.d.). Sixteen States reported that more than 50 percent of their total funding for substance abuse prevention and treatment programs came from the Federal block grant, either from the SSA or channeled through regional or county intermediary agencies (U.S. Department of Health and Human Services n.d.). Services may be paid through grants, contracts, fee-for-service, or managed care arrangements. The Children's Health Act of 2000 mandates a transition for the SAPT Block Grants to require the implementation of performance measures identified as the National Outcome Measures (NOMs). Providers should track this transition through their SSA; likely effects include

  • Changes in reimbursement. Managed care arrangements and utilization review are increasingly common.
  • Performance outcome data. NOMs require reporting of outcomes and other performance data; payors such as CSAT and the States are beginning to utilize such performance measures in their evaluation and planning of service activities.

Medicaid

Medicaid, administered by the Centers for Medicare and Medicaid Services (CMS) in conjunction with the States, provides financial assistance to States to pay for medical care of eligible persons: low-income children, pregnant women, the elderly, and people who are disabled, including those who are blind. Medicaid has been used by many States as a vehicle for expanding medical coverage for the uninsured through the use of different types of public-sector managed care. About 2 percent of total Medicaid expenditures nationally are for substance abuse treatment services (Mark et al. 2003), but this represents about 20 percent of national expenditures for such services (Coffey et al. 2001). The level of expenditure varies greatly by State. Some programs may want to target the Medicaid population; if the State's coverage and payment rates are minimal, however, other funders may pay a larger share.

State Medicaid expenditures and coverage vary substantially because substance abuse treatment and rehabilitation are optional benefits under Medicaid, left to the discretion of the States. Recent State budget problems have resulted in discontinuation of Medicaid benefits in some States. In many States, managed care arrangements provide some or all substance abuse treatment benefits for Medicaid enrollees, usually administered by private vendors. In 2002, 58 percent of the Medicaid population was enrolled in managed care arrangements (Centers for Medicare and Medicaid Services n.d.). State Medicaid offices or the CMS Web site (www.cms.gov/medicaid) can provide more information.

Medicaid may pay for substance abuse treatment either directly through fee-for-service arrangements or through a managed behavioral health care organization (MBHO) or other MCO with which it contracts. More than one type of arrangement may exist in a State, which can mean that rates of payment vary in the State. Rates of payment are determined by each State. The services provided under managed care may differ from those under fee-for-service arrangements. Even if a State decides to include benefits for substance abuse treatment in its Medicaid program, it may choose the precise services and levels of care it reimburses. Therefore, a State Medicaid program may not cover OT program services.

Even if some types of substance abuse treatment are covered, OT, as a relatively new form of treatment, may not be covered or may not be covered in the setting in which a program plans to provide services. Some States have included OT services successfully under the Medicaid Rehabilitation Optional services.

Medicaid excludes coverage for services provided in an institution for mental disease (IMD), defined as a facility with more than 16 beds that treats mental disorders, including substance use disorders, for individuals between ages 21 and 64 (Rosenbaum et al. 2002). Although services furnished by partial hospitalization and day treatment programs are not excluded, OT providers should be aware of the IMD exclusion in their program planning process.

The Medicaid Early Periodic Screening, Detection, and Treatment (EPSDT) mandate requires States to screen all Medicaid children and adolescents for physical and behavioral health disorders. Furthermore, EPSDT requires that any needed medical treatment be provided to children, even if the treatment is not in the State's Medicaid plan. Although the procedures and screening tools vary by State, and only slightly more than half the States perform any screening (Bazelon Center for Mental Health Law 2003), the EPSDT program is an important entrance to substance abuse treatment for children and adolescents.

When available, Medicaid offers the following advantages to substance abuse treatment programs:

  • It can provide significant treatment funding for certain high-risk groups, such as low-income mothers and adolescents.
  • Client copays traditionally have not been required so the program receives the entire negotiated fee without having to collect funds from clients. However, some States have changed this provision recently because of budget crises.
  • A Medicaid contract can provide a useful lower limit for rate negotiations with commercial payers by essentially prohibiting acceptance of a contract with another purchaser at rates lower than those established for Medicaid.
  • Certification as a Medicaid provider can position a program to receive clients from other public-sector referral sources, making it possible to obtain clients from sources such as indigent care funds, social service agencies, and criminal justice systems.
  • Criminal and juvenile justice systems and drug court administrators typically favor providers that are eligible for Medicaid reimbursement because some States permit treatment of offenders to be billed to Medicaid.

Medicaid Link to Supplemental Security Income

Supplemental Security Income (SSI) is a program financed through general tax revenues. SSI recipients automatically qualify for Medicaid coverage, but provisions vary by State. SSI disability benefits are payable to adults or children who are disabled or blind, who have limited income and resources, who meet the living arrangement requirements, and who are otherwise eligible. A primary substance use disorder diagnosis has been excluded by Congress as a qualifying disability under the Social Security Administration's programs. But if another primary disability qualifies a person for SSI, a secondary substance use disorder diagnosis is acceptable. Many SSI recipients with a mental disorder diagnosis have a co-occurring substance use disorder diagnosis.

Medicare

Medicare provides coverage to individuals ages 65 and older, people younger than 65 who have certified disabilities, and people with end-stage renal disease. Medicare supports about 8 percent of national expenditures for substance abuse treatment services. Medicare may provide Part A coverage to clients in OT programs that are in hospitals certified by Medicare. However, OT that consists solely of psychosocial programs and provides only a structured environment, socialization, or vocational rehabilitation is not covered by Medicare. Medicare imposes strict review requirements for OT programs in hospitals and those considered partial hospitalization programs, as well as for their clients. Alternatively, Medicare may provide Part B coverage to clients in OT programs with Medicare-certified medical practitioners; however, clients whose services are reimbursed under Part B must pay 50 percent of Medicare-approved charges. Medicare recipients are eligible for a prescription drug benefit that covers medically necessary medications used for substance abuse treatment in an outpatient setting. This new benefit for Medicare recipients is called Medicare Part D. This is a new program as of January 2006. More information about how this Medicare benefit could impact clients in substance abuse treatment is available at the CMS Web site (www.cms.gov/medicare). Additional information is also available from the Social Security Administration, the Medicare provider enrollment department, or State Medicare services.

Medicare Link to Social Security Disability Insurance

The Social Security Administration provides Social Security Disability Insurance (SSDI) to individuals and certain members of their families if they have worked long enough and paid Social Security taxes. SSDI is a program financed with Social Security taxes paid by workers, employers, and self-employed persons. To be eligible for a Social Security benefit, a worker must earn sufficient credits based on taxable work. Recipients of SSDI benefits are covered by Medicare following a 2-year waiting period. Disability benefits are payable to disabled workers, widows and widowers of disabled workers, or adults disabled since childhood. A substance use disorder diagnosis was excluded by Congress as a qualifying disability under SSDI, but if a person qualifies under another diagnosis, secondary substance use disorder diagnoses are acceptable. Often a qualifying primary mental disorder diagnosis co-occurs with a secondary substance use disorder diagnosis.

State Children's Health Insurance Program

The State Children's Health Insurance Program (SCHIP) provides funds for substance abuse treatment of children and adolescents in many States. This program provides low-cost health insurance for children of low-income families who are not eligible for Medicaid. States may provide SCHIP benefits under their existing Medicaid programs or design a separate children's health insurance program. If the program is part of Medicaid, the substance abuse treatment benefits mirror those under Medicaid. If the State designs a program, CMS has promulgated a set of rules to ensure that coverage meets minimum standards. More information is available from CMS (www.cms.gov/schip) or SCHIP offices. State alcohol and drug abuse agencies may be able to provide information on resources available for treatment of transition-age youth (often defined as youth between ages 14 and 21) who have exceeded the maximum age for SCHIP.

TRICARE

TRICARE is a regionally managed health care program for active duty and retired members of the uniformed services and their families and survivors. TRICARE supplements the health care resources of the Army, Navy, and Air Force with a network of civilian health care professionals. It consists of TRICARE Prime (in which military treatment facilities are the principal source of health care), TRICARE Extra (a preferred-provider option), and TRICARE Standard (a fee-for-service option that replaced the program formerly known as CHAMPUS). TRICARE Extra and Standard benefits include treatment for substance use disorders, subject to preauthorization requirements. TRICARE is run by managed care contractors, each of whom may have different authorization procedures. More information is available at www.tricare.osd.mil.

Indian Health Service

The Indian Health Service (IHS) is an agency in the U.S. Department of Health and Human Services that operates a comprehensive health service delivery system for approximately 1.6 million of the Nation's estimated 2.6 million American Indians and Alaska Natives. Most IHS funds are appropriated for American Indians who live on or near reservations. Congress also has authorized programs that provide some access to care for Indians in urban areas. IHS services are provided directly and through tribally contracted and operated health programs. Health services also include health care purchased from more than 9,000 private providers. The IHS behavioral health program supports substance use disorder prevention, treatment, and rehabilitation services for individuals and their families. More information is available at www.ihs.gov/MedicalPrograms/Alcohol/index.asp.

U.S. Department of Veterans Affairs

The U.S. Department of Veterans Affairs provides the Civilian Health and Medical Program of the U.S. Department of Veterans Affairs to eligible beneficiaries. Medically necessary substance abuse treatment is a covered benefit; beneficiaries are entitled to benefits for three substance use disorder treatment periods in their lives. More information is available at www.va.gov/hac/forbeneficiaries/champva/champva.asp.

Social Services

Funding for substance abuse treatment also may be available through arrangements with agencies funded by the U.S. Departments of Labor (DOL), Housing and Urban Development (HUD), and Education (ED). Some Federal sources for substance abuse treatment funding under these programs may prohibit use of funds for medical services. However, services performed by those not in the medical profession—such as counselors, technicians, social workers, and psychologists—and services not provided in a hospital or clinic—including 24-hour care programs—may be considered nonmedical. What constitutes medical treatment under some Federal programs may be determined by each State, so administrators need to check with State authorities to determine which services are funded through these sources. If needed services are not funded through these programs, providers can link clients to services that enable them to initiate and complete treatment successfully. Opportunities include the following:

  • TANF. Under the Temporary Assistance to Needy Families (TANF) programs, each State receives a Federal block grant to fund treatment for eligible unemployed persons and their children, primarily women with dependent children. Services that overcome barriers to employment (e.g., substance abuse treatment) are eligible for formula grants, with one-quarter of the money allocated to local communities through a competitive grant process. The funding channels vary by State. Funds may be directed through Private Industry Councils, Workforce Investment Boards, Workforce Development Boards, and similar bodies at the State and community levels. TANF funds cannot be used for medical services, but States have considerable latitude in determining which services are deemed medical and have used TANF funds to support the following substance abuse treatment services: screening and assessment, detoxification, OT, nonhospital residential treatment, case management, education and prevention, housing, employment services, and monitoring (Rubenstein 2002). Even if TANF funds are unavailable for substance abuse treatment, clients may be able to access assistance for employment training, child care, and other support. More information on TANF is available at www.acf.hhs.gov/programs/ofa.
  • Welfare-to-Work Initiatives. DOL funds nonmedical substance abuse treatment services through the Welfare-to-Work program. More information is available at www.doleta.gov.
  • Social Services Block Grant. Under Title XX of the Social Security Act, the Administration for Children and Families provides a block grant to each State to supply social services. Funds may not be used for medical services (except initial detoxification). In 2001, the block grants provided $16 million for substance abuse treatment in 12 States (Administration for Children and Families 2001). More information is available at www.acf.hhs.gov/programs/ocs/ssbg.
  • Public housing. HUD funds substance abuse treatment for public housing residents under the Public Housing Drug Elimination Program. HUD awards grants to public housing authorities, tribes, or tribally designated housing entities to fund treatment. Funds are channeled to local public housing authorities, which contract with service providers. In addition, special housing programs are available for people who are homeless and have substance use disorders. More information is available at www.hud.gov/grants/index.cfm.
  • Vocational rehabilitation. ED funds support services that help people with disabilities participate in the workforce. Treatment of substance use disorders is eligible for funding. Funds are channeled to the State agencies responsible for vocational rehabilitation. More information is available at www.ed.gov.
  • Children's protective services. Title IV of the Social Security Act provides funding for foster care and services to prevent child abuse and neglect. Eligible services include substance abuse treatment for parents who are ordered by a court to obtain treatment and are at risk of losing custody of their children. Furthermore, children in foster care must receive Medicaid coverage. More information is available at www.acf.hhs.gov/programs/cb/index.htm.
  • HIV/AIDS resources. The Federal Ryan White Comprehensive AIDS Resources Emergency (CARE) Act, enacted in 1990, provides health care for people with HIV disease who lack health insurance and financial resources. Under Title I of the Ryan White CARE Act, which provides emergency assistance to Eligible Metropolitan Areas that are most severely affected by the HIV/AIDS epidemic, funds are available for substance abuse treatment. More than 500,000 people are served through this program each year. More information is available at www.hab.hrsa.gov/programs.htm.

Criminal and Juvenile Justice Systems

Both State and local criminal and juvenile justice systems purchase substance abuse treatment services. The manner in which these systems work varies across locales. The following are common aspects of these systems:

  • State corrections system. This system may provide funds for treatment of offenders who are returning to the community through parole, halfway houses, or residential correctional facilities.
  • Community corrections. Community corrections provides a system of presentence diversion or parole services, including drug courts, that may mandate substance abuse treatment in lieu of incarceration.
  • Community drug court. Drug courts may send low-risk, nonviolent offenders to substance abuse treatment in lieu of incarceration. Programs can be under contract to provide this treatment.
  • Correctional residential facility. These facilities serve offenders returning from a State correctional system; programs may enter into contracts for substance abuse treatment to prevent relapse of treated offenders.
  • Juvenile court system. Treatment programs with expertise in treating adolescents can obtain contracts to provide treatment in a juvenile correctional facility or for juveniles in the justice system.

Providers need to understand the culture, values, and needs of the criminal and juvenile justice systems to develop responsive services for this special needs population. TIP 44, Substance Abuse Treatment for Adults in the Criminal Justice System (CSAT 2005); TIP 21, Combining Alcohol and Other Drug Abuse Treatment With Diversion for Juveniles in the Justice System (CSAT 1995); and TIP 30, Continuity of Offender Treatment for Substance Use Disorders From Institution to Community (CSAT 1998c ), provide more information.

Byrne Formula Grant Program

The Byrne Formula Grant Program awards grants to States to improve the functioning of the criminal justice system. Grants may be used to rehabilitate offenders who violate State and local laws. One of the 29 Byrne Formula Grant purposes is to provide programs that identify and meet the treatment needs of adult and juvenile offenders who are drug or alcohol dependent. However, the availability of Byrne Formula Grant funds depends on annual congressional appropriations, for which decreases have been proposed in recent years. More information is available at www.ojp.usdoj.gov/BJA/grant/byrne.html.

County and Local Governments

County and local governments in States with strong county systems, such as California, New York, and Washington, often contract for the delivery of substance abuse treatment services using locally available funds. The annual availability of these funds depends in part on State fiscal conditions.

Schools and Colleges

Local public schools may be a funding source for assessments; however, they rarely pay for ongoing treatment. Some services may be reimbursable under the special entitlements for children who are disabled. Outpatient treatment programs have been successful at locating counseling services in schools rent free.

Private Payers

Private sources of revenue include large MCOs and self-insured national or local employers. Most health plans offered by large employers operate under managed care arrangements. Sometimes a health plan may cover substance abuse treatment under its mental health benefit portion; in others, treatment may be provided through the medical coverage component. In many cases, substance abuse treatment benefits, when offered, are provided through MBHOs (see “Working in Today's Managed Care Environment” below for a discussion of managed care arrangements). Because substance abuse treatment coverage is a minor cost to employers, accounting for about 0.4 percent of the cost of health insurance overall (Schoenbaum et al. 1998), it may be overlooked despite the high profile that substance use disorders sometimes present. In general, four broad categories of private funding can be distinguished:

  • Contracts with health plans, MCOs, and MBHOs.
  • Direct service contracts with local employers. Local employers may contract directly with providers of substance abuse treatment services if their health plans offer inadequate benefits.
  • Contracts with EAPs. Some employers have EAPs that provide direct service contracts for a particular OT program.
  • Clients with indemnity or out-of-network coverage. Clients with indemnity or out-of-network coverage may submit claims for services provided to their insurance company and receive reimbursement according to their benefit plan. Although there is no requirement for a contract with the health plan for clients to be reimbursed under such an arrangement, the services provided must be eligible for reimbursement under the provisions of the benefit plan.

Contributions

By improving relationships with people in the community, an administrator can develop sources for support. Even if a source is reluctant to provide funds to support treatment services directly, other aspects of program development, organizational growth, and operations or equipment may be eligible for support. Available support from sources in the community may range from financial support to donations of time, expertise, used or low-cost furniture and equipment, and space for activities. Potential sources include

  • Fundraisers. People who raise funds can help the program develop a campaign. Many States and the District of Columbia require charitable organizations to register and report to a governmental authority before they solicit contributions. A list of State regulating authorities is available at www.labyrinthinc.com/index.asp.
  • Foundations and local charities. A program may qualify as a recipient of funds for capital, operations, or other types of support such as board development from foundations, the Community Chest, United Way (www.unitedway.org), or other charities. More information is available at www.fdncenter.org.
  • Alumni. Graduates from a program may donate money to the program or provide support for clients.
  • Internships. Local colleges and universities may need internship slots for students planning careers in human services.
  • Volunteers. Some programs use volunteers in various capacities. Sources include local retirement organizations and faith-based agencies.
  • Community groups. Faith-based agencies and community centers may let the program use rooms for meetings, alumni groups, recovery support groups, or classes. Community groups can contribute reading materials, clothes, toys for clients' children, furniture, or computers.
  • Local businesses and vendors. Local businesses may contribute useful items, such as snacks, office supplies, or computers.

Research Funding

In addition to their other roles, such as providing technical assistance, helping communities use research findings to implement effective treatment programs, and funding prevention and treatment, SAMHSA and the Institutes of the National Institutes of Health conduct research on best practices in substance abuse treatment. The Research Assistant (www.theresearchassistant.com) provides information and tips. Information on current funding opportunities is available at SAMHSA's Web site (www.samhsa.gov), the National Institute on Drug Abuse's Web site (www.nida.nih.gov), and the National Institute on Alcohol Abuse and Alcoholism's Web site (www.niaaa.nih.gov).

Grants

Government agencies and private foundations offer funding through competitive grants. Grant money usually is designated for discrete projects, such as creating a videotape on family issues, providing childcare services in a women's program, training staff members on cultural competence, or providing treatment to underserved populations.

Writing grant applications requires special skills. A program can hire a consultant to write the application if it does not have its own planning or research staff. It is essential to involve program staff members in developing a grant application so that proposed activities are aligned with agency capabilities. Successful grant applications address areas of need, propose worthy ideas, express these ideas well, and explicitly follow the requirements of the request for application or proposal. To design a fundable project, the program may need to establish links with other resources. SAMHSA offers resources to assist community-based organizations and others in completing successful grant applications.

Information about SAMHSA grants can be found at www.samhsa.gov/grants/index.html. Information on grants throughout the Federal Government is available at www.grants.gov. The Web site www.cybergrants.com provides information about corporate foundations. The Substance Abuse Funding News: Semimonthly Report on Alcohol, Drugs and Tobacco, Prevention, Treatment and Grants focuses on public and private funding opportunities for substance abuse prevention and treatment programs. It is available by subscription in print or on the Web (www.cdpublications.com). Useful publications on grant-seeking and grant-writing can be ordered from www.grantsandfunding.com. The Grantsmanship Center at www.tgci.com offers useful information.

Self-Pay Clients

Some clients pay for some or all of a course of treatment without seeking reimbursement from a third-party payer. These clients may have no coverage or inadequate third-party coverage for substance abuse treatment and are ineligible for public sources of payment. Some clients who have coverage may prefer to pay out of their own pockets because of concerns about the confidentiality of their information with their employer or others if they seek third-party reimbursement. To maximize revenues, some organizations may wish to introduce so-called sliding-scale fee arrangements, under which the fees for self-pay clients are established according to their willingness and ability to pay.

Other Resources

A variety of other resources is available to help substance abuse treatment organizations succeed in today's environment. These resources include

Working in Today's Managed Care Environment

All health care providers, including those who provide substance abuse treatment services, increasingly operate in a world in which care is managed in all sectors, public and private. Among individuals covered by employer-sponsored benefits in 2003, 95 percent were covered under managed care arrangements (Kaiser Family Foundation and Health Research and Educational Trust 2003). The incursion of managed care into employer-sponsored health plans is relatively new; as recently as 1993, 46 percent of employees were covered by indemnity plans. It is estimated that more than 160 million Americans have their behavioral health care (treatment for substance use and mental disorders) covered by an MBHO (Oss and Clary 1999). Although managed care penetration has less of a presence in public programs than in employer-sponsored programs, it is still significant; in 2002, 58 percent of the Medicaid population was enrolled in managed care (Centers for Medicare and Medicaid Services n.d.). Many States also operate managed care programs not connected with Medicaid for provision of substance abuse treatment services.

Behavioral health care carve-outs, so named because management of substance use and mental disorder treatment benefits are separated (carved out) from the provision and management of other health care services, are now the dominant approach to managed care for mental disorder treatment. However, this is not the case for substance use disorders; many behavioral health care carve-outs retain substance use disorder coverage in a medical MCO. The carve-in approach, which theoretically integrates traditional medical services with mental and substance use disorder treatment services, is reemerging but currently is still rare. Even when health plans carve in substance abuse treatment services, they often use a subcontracted specialty vendor or a separate internal division with specialty expertise to manage the carve-in benefits.

MCOs are becoming more prevalent in the public sector. In 2002, 51 percent of all substance abuse treatment facilities had contracts with MCOs, and 39 percent of facilities owned by State and local governments had such contracts (Office of Applied Studies 2003a ). By 1998, all but four States had implemented some form of managed behavioral health care in their public-sector treatment programs (News and Notes 1999). However, wide variation exists among States and large counties in the extent and form of reliance on managed care and in the vendors who operate such programs on behalf of government or private entities.

A distinct terminology has evolved in the managed care industry—terms such as “capitation,” “network,” and “staff-model,” not to mention a host of acronyms. A useful set of managed care definitions can be found on SAMHSA's Web site (mentalhealth.samhsa.gov/publications/allpubs/MC98-70/default.asp).

Contracts Are Primary Tools in Managed Care

All program administrators should be familiar with four fundamental aspects of managed care arrangements:

  • A managed care contract specifies the obligations of each party. One key aspect of any managed care contract is the financial arrangement between the parties, including the basis for payment and the amount of risk, if any, assumed by each party. Some managed care contracts are not risk based. Small community providers may have little or no negotiating leverage in the contracting process; their only decision may be whether to accept what is offered, including the rate of payment and all other contract provisions. Someone with expertise and experience in managed care contracts and financing should examine a proposed contract to make certain that the financial components of the arrangement are well understood by the program staff members who have financial responsibilities.
  • By negotiating and signing a managed care contract, an OT program or its parent agency becomes a member of an MCO's managed care network. MCOs generally have a network of contracted and credentialed providers who provide services at a negotiated rate to members who are enrolled in the plans. Each organizational member of the network must satisfy the MCO's minimum requirements for licensure of staff, programs, and facilities to be eligible for a managed care contract.
  • Performance must be measured and reported. MCOs apply standard performance measures to their contracted providers and may have financial or referral incentives or disincentives associated with measured performance.
  • MCO staff determines which services are medically necessary and therefore eligible for health plan reimbursements. Utilization management and case management generally are performed by MCO staff members, typically nurses or social workers, with supervision from doctoral-level clinicians or physicians. Utilization management compares a provider's proposed treatment plan with similar or expected plans for individuals with similar conditions and diagnoses. The utilization management approach may vary not just by MCO but also by MCO customer, with some customers preferring that utilization be highly scrutinized and meet the test of medical necessity and others preferring that the MCO not manage utilization as aggressively. If a treatment plan from an OT program does not meet criteria for medical necessity, it is likely to be denied and referred to a higher level clinician for review, delaying approval and payment. An OT program should obtain each MCO's protocols, as well as any specific arrangements and benefit plans for customers whose employees or enrollees are in its client population.
    Private-sector case management programs are often utilization review programs rather than the clinical case management programs typical of the public sector. Moreover, the process of case management in the private sector often differs from that in traditional public-sector mental health or substance abuse treatment agencies, representing primarily telephone contact, usually with a nurse, in high-risk or high-cost cases. Case management usually is not performed on site or in person in an MCO, unless it is under contract to a public agency that requires this. If a client has a public-sector and a managed care case manager, the program must interact with both to obtain initial and continuing approvals of treatment.

In general, providers are required to obtain utilization management approval or case management approval for any proposed treatment plan before they can bill an MCO. Providers bear the cost of appealing denials and requesting exceptions. The more program staff members develop relationships with the MCO's utilization management and case management staff members, the more they learn about the internal criteria and protocols that drive approval or denial decisions and the more latitude a program has in requesting special arrangements for a particular client. Most MCOs and MBHOs have Web sites with provider portals. Once an OT program identifies the name of the managed care plan from which payment is to be requested, the program should check the MCO's or MBHO's Web site. Some managed care plans offer electronic data interchange with network providers to facilitate claims submission.

Elements of Financial Risk in Managed Care Contracts

Managed care contracts vary principally by

  • The method of payment and the corresponding type of risk assumed by the provider
  • The amount of payment

Three major types of financial arrangements or methods of payment in managed care contracts exist; each is associated with financial risks (see exhibit 5-1). Risk, of course, is a continuous variable, and no arrangement is devoid of any risk whatsoever. Program administrators need to understand the differences among these types of arrangements so that they can manage financial risk. Technical Assistance Publication 16, Purchasing Managed Care Services for Alcohol and Other Drug Treatment (Kushner and Moss 1995), provides additional information about purchasing and negotiating managed care.

Exhibit 5-1. Financial Arrangements With Providers

Method of Financial ReimbursementCautions/Risks for Programs
Fee-for-service agreement. Fee-for-service programs are the least risky to providers. They generally require precertification and utilization management for some or all procedures or services. The maximum amount of services that may be approved is restricted by the limits stated in the client's benefit plan document or in the public payer's contract. In a fee-for-service contract, a rate is received for the services provided, typically, a standard program session with specific services bundled in; this is referred to as an all-inclusive rate.When negotiating a fee-for-service contract, an administrator needs to ensure that the rate is sufficient to cover the actual costs to a program of providing the specified services. During negotiations, the MCO has the option of saying that it will not pay for some of the bundled services. All services should be costed out before negotiation so that actual costs of treatment components are known and can be compared with what are offered. Even if a fee-for-service contract is negotiated successfully, referrals may not follow.
Some common bundled services are urine drug screens and group, family, and individual counseling. The payment rate for one visit may include a 50-minute group counseling session and a urine drug screen; the rate for a day of treatment could include, for example, one-fifth of a 25-minute psychologist visit, one-half of a urine drug screen, one-half of a vocational training session, and two sessions of group counseling. The assumption is that these services occur at a specified frequency during the course of the client's treatment. Psychiatric services can be incorporated into the bundled services, but usually they are negotiated separately and treated as an addition.
Capitation agreement. A managed care company may establish a stipulated dollar amount to cover treatment costs for a group of people, using one per person rate for everyone, which is the MCO's capitation rate. The MCO may then subcapitate a stipulated dollar amount to a treatment provider or organization, and the MCO and the treatment provider negotiate an agreement in which the provider is paid a fixed amount per subscriber per month, rather than billed on a fee-for-service basis. Usually only large service providers have the assets and volume of services to engage in capitated agreements. The provider agrees to provide all or some treatment services for an expected number of managed care “covered lives” (e.g., for 100,000 subscribers). In one example, an OT provider received $70,000 per month for providing all OT and intensive OT services to 200,000 plan members.The two critical elements are the per member/per month rate and the utilization rate. If many more people than are predicted require treatment, the provider may be unable to cover service delivery costs, much less make a profit or surplus. The key is to have reliable information on the historical use rates of a managed care plan's enrollees. A capitation agreement carries the risks of both overutilization (when compared with the assumed utilization rate) and a greater intensity of treatment than the capitation rate can cover. Programs may accept a speculative capitation rate to join a panel and then renegotiate that rate after they have collected data that show a higher rate is needed to cover costs. It is crucial to compare actual dollars with the budget in real time to avoid unexpected deficits.
Case rate agreement. The case rate is a fixed, per client rate paid for delivery of specific services to specified types of consumers. For this fee, a provider covers all the services that a client requires for a specific period. In essence, the MCO is saying, “You provide the client what he or she needs from this set of services and I will pay you this set amount.” What usually distinguishes case rate from capitation is that all the case rate clients are anticipated to receive some service (i.e., at least case management). Often those receiving services under capitation are a small minority of those covered. The case rate may be risk adjusted to compensate for the higher costs of serving clients who predictably need more services than average.A case rate removes some of the utilization risk from the provider of services. However, the risk remains that clients will need services more frequently or at higher levels than the case rate covers. It is essential to track costs by specific client to assess the adequacy of a proposed case rate. However, it is a mistake to consider a case rate as a cap for any specific client; the goal is to ensure that the average cost per case is lower than the negotiated case rate, not that the cost for each case is less than the negotiated rate. Once again, it is crucial to compare actual average dollars per case with the contracted case rate in real time to avoid unexpected deficits.

Administrators may think that the contract itself is the goal. However, the contract is no guarantee of a referral; it only enables referrals that are medically necessary. The closer the relationship program staff members can develop with a given MCO, the easier it will be for them to understand the MCO's clinical criteria, to obtain more than intermittent referrals, and to negotiate a financial arrangement that is reasonable and fair.

Cost of Services

To assess and negotiate a managed care contract and to monitor performance under that contract, an OT program must know the program's cost to provide each unit of service. The cost of services includes staff time spent with clients, administrative time spent on meetings and paperwork, and capital and operating expenses. Only when the actual cost of delivering a unit of a service is known can an agency negotiate a reasonable rate for specific services. The following are cost methodologies developed specifically for substance abuse treatment services:

  • The first systematic cost data collection method, the Drug Abuse Treatment Cost Analysis Program (DATCAP) (French et al. 1992), was developed in the early 1990s by economists at Research Triangle Institute (French et al. 1997). The Treatment Services Review used with DATCAP provides unit service costs (French et al. 2000).
  • The Uniform System of Accounting and Cost Reporting for Substance Abuse Treatment Providers (the Uniform System or the System or the Substance Abuse Treatment Cost Allocation and Analysis Template—SATCAAT) is a cost estimation method also developed in the early 1990s (Harwood et al. 2001).
  • Yates (1996, 1999) has developed another estimation approach, the Cost-Procedure-Process-Outcome Analysis.
  • Anderson and colleagues (1998) have developed a cost of service methodology.
  • An emerging treatment services cost estimation method is called the Substance Abuse Services Cost Analysis Program (Zarkin et al. 2004).
  • Several treatment studies have applied variants of these methods (Flynn et al. 2002; Koenig et al. 1999; Mojtabai and Zivin 2003).

Exhibit 5-2 provides several resources on the topic of costs of services.

Exhibit 5-2. Resources on Costs of Services

Anderson, D.W.; Bowland, B.J.; Cartwright, W.S.; and Bassin, G. Service-level costing of drug abuse treatment.Journal of Substance Abuse Treatment 15(3):201–211, 1998.
Capital Consulting Corporation. Uniform System of Accounting and Cost Reporting for Substance Abuse Treatment Providers. Rockville, MD: Substance Abuse and Mental Health Services Administration, 1993. www​.icpsr.umich.edu/SAMHDA​/SATCAAT/system-accounting.pdf [accessed January 26, 2004].
Capital Consulting Corporation. Summary Report on Assessment and Measurement of Treatment Costs. Rockville, MD: Substance Abuse and Mental Health Services Administration, 2000. www​.icpsr.umich.edu/SAMHDA​/SATCAAT/summaryreport.pdf [accessed January 26, 2004].
Dunlap, L.J., and French, M.T. A comparison of two methods for estimating the costs of drug abuse treatment. Journal of Maintenance in the Addictions 1(3):29–44, 1998.
Flynn, P.M.; Porto, J.V.; Rounds-Bryant, J.L.; and Kristiansen, P.L. Costs and benefits of methadone treatment in DATOS—Part 1: Discharged versus continuing patients. Journal of Maintenance in the Addictions 2(1–2):129–150, 2002.
French, M.T.; Bradley, C.J.; and Zarkin, G.A. Drug Abuse Treatment Cost Analysis Program (DATCAP): Cost interview guide for provider sites. Drug Abuse Treatment Module, Version 1. Research Triangle Park, NC: Research Triangle Institute, 1992.
French, M.T.; Dunlap, L.J.; Zarkin, G.A.; and Karuntzos, G.T. The costs of an enhanced employee assistance program (EAP) intervention. Evaluation and Program Planning 21(2): 227–236, 1998.
French, M.T.; Dunlap, L.J.; Zarkin, G.A.; McGeary, M.A.; and McLellan, A.T. A structured instrument for estimating the economic cost of drug abuse treatment: The Drug Abuse Treatment Cost Analysis Program (DATCAP). Journal of Substance Abuse Treatment 14(4):1–11, 1997.
French, M.T.; McCollister, K.E.; Sacks, S.; McKendrick, K.; and De Leon, G. Benefit-cost analysis of a modified therapeutic community for mentally ill chemical abusers. Evaluation and Program Planning 25(2):137–148, 2002.
French, M.T.; Roebuck, M.C.; McLellan, A.T.; and Sindelar, J.L. Can the Treatment Services Review be used to estimate the costs of addiction and ancillary services? Journal of Substance Abuse 12(4):341–361, 2000.
French, M.T.; Salome, H.J.; and Carney, M. Using the DATCAP and ASI to estimate the costs and benefits of residential addiction treatment in the State of Washington. Social Science and Medicine 55(12):2267–2282, 2002.
Harwood, H.J.; Kallinis, S.; and Liu, C. The Cost and Components of Substance Abuse Treatment. Rockville, MD: Center for Substance Abuse Treatment, 2001. www​.lewin.com/Lewin_Publications​/Behavioral_Health​/NEDSCostsSATreatment.htm [accessed February 20, 2004].
Yates, B.T. Analyzing Costs, Procedures, Processes, and Outcomes in Human Services: An Introduction. Thousand Oaks, CA: Sage Publications, 1996.
Yates, B.T. Measuring and Improving Cost, Cost-Effectiveness, and Cost-Benefit for Substance Abuse Treatment Programs. NIH Publication No. 99-4518. Bethesda, MD: National Institute on Drug Abuse, 1999.
Zarkin, G.A., and Dunlap, L.J. Implications of managed care for methadone treatment: Findings from five case studies in New York State. Journal of Substance Abuse Treatment 17(1–2):25–36, 1999.
Zarkin, G.A.; Dunlap, L.J.; and Homsi, G. The Substance Abuse Services Cost Analysis Program (SASCAP): A new method for estimating drug treatment services costs. Evaluation and Program Planning 27(1):35–43, 2004.

Networks, Accreditation, and Credentialing

For an OT program to join an MCO's network of providers and negotiate a contract, the program must meet minimum standards for staff credentials and program accreditation. In 2002, 51 percent of substance abuse treatment facilities had managed care contracts (Office of Applied Studies 2003a ). Each MCO has its own criteria for the credentials of network providers, and these generally are not negotiable because they are based on the MCO's accreditation requirements. The provider-credentialing requirements vary by MCO and by customers in the MCO but often include primary verification of specific academic degrees or specific levels of licensure for staff and verified minimum levels of malpractice insurance. Some MCOs use what are called independent credentialing verification organizations (CVOs) for verification. These CVOs verify the credentials of providers on behalf of MCOs to ensure, for example, that their licenses are up to date and valid.

MCOs are sometimes unfamiliar with substance abuse treatment. Because MCOs credential individual providers, not organizations, MCOs often are more willing to contract with organizations that have a facility license from the State (usually providers that are licensed in psychology, nursing, medicine, and social work) than with individual substance abuse treatment providers who may not possess credentials that meet licensure criteria. MCOs explain that this has to do with malpractice insurance issues. This practice has a disproportionate effect on substance abuse treatment providers who do not have as many staff members with degrees and credentials as do mental health programs. Substance abuse treatment providers often must help MCOs understand the substance abuse treatment environment, the types of providers who deliver services, and the qualifications and standards they must meet so that the MCO can modify its policies appropriately.

In addition to having its staff members credentialed, the program may have to be accredited by one of the major national health care accrediting organizations, for example, the Commission on Accreditation of Rehabilitation Facilities (www.carf.org), the National Committee for Quality Assurance (NCQA) (www.ncqa.org), or the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) (www.jcaho.org).

Organizational Performance Management

Performance measurement is an increasingly important component of managed and fee-for-service care in both the public and private sectors. SAMHSA's SAPT Block Grants increasingly demand that programs measure program performance and outcomes. MCOs have performance measures established by their accreditation agencies, such as NCQA and JCAHO. Their customers, employers, or public purchasers may use performance adequacy on these measures in their decisions to acquire or retain their plans for their employees. NCQA recently established a set of measures specifically for substance use and mental disorder treatment services for all MCOs that it accredits, including new measures of the identification of enrollees with substance use disorder diagnoses, the rate of treatment initiation, and a measure of treatment engagement. Measuring these indicators and reporting them to the MCO are conditions of most contracts. Good performance may earn an OT program an additional fee from the MCO.

MCOs evaluate the performance of the members in their network of providers. Each MCO has measures and procedures for implementation, some of which are prescribed by the organizations that accredit them. Not all MCOs are diligent about this provider evaluation process. Only a few MCOs have implemented sophisticated measurement systems; some methods used today are rudimentary. The results of external performance measures implemented by MCOs can be extremely important to the OT program's financial and organizational success, affecting its ability to remain a viable, respected network provider. Some performance management systems implemented by MCOs also use financial incentives or disincentives keyed to measures of performance.

Regardless of the specific measures implemented by MCOs, well-managed organizations develop and use their internal performance measures and constantly strive to improve their performance. MCOs should measure both processes and outcomes, such as the following:

  • Percentage of clients who complete a defined treatment regimen that meets their individual needs
  • Percentage of clients who drop out of treatment in the first 7 days following treatment initiation
  • Percentage of clients who remain in documented but less intensive treatment 30 days after discharge from the program
  • Percentage of clients who are employed or attending school 6 months after discharge from the program

When using measures of performance, it is important to account for differences among clients that may affect measured results, such as medical conditions or clients' previous history of abuse.

A primary independent entity involved in the construction of national performance measures for substance abuse treatment is the Washington Circle Group (WCG) (www.washingtoncircle.org). NCQA's new substance abuse treatment performance measures on identification and initiation of treatment and treatment engagement were developed by WCG over a 4-year period. WCG has identified four major domains for substance abuse treatment measures:

  1. Prevention or education
  2. Recognition or identification of substance abuse
  3. Treatment
    • Initiation of alcohol and other plan services
    • Linkage of detoxification and drug and alcohol plan services
    • Treatment engagement
    • Use of interventions for family members and significant others
  4. Maintenance of treatment effects

These and other substance abuse performance measures now are used in NCQA's MCO accreditation process. WCG and others have defined a variety of such measures. Administrators should consider these measures as ways to improve their program's performance, essential elements in the reporting system, and a means for documenting success to their customers and other stakeholders. Chapter 6 provides more information on performance and outcomes measurement.

Performance measurement is becoming increasingly important outside managed care contracts as well as inside them. For example, SAMHSA began integrating performance measurement into the SAPT Block Grant in 2004. States expect providers to understand and to be able to measure the required indicators accurately and punctually.

Recordkeeping and Management Information Systems

MCOs also require detailed records of services provided to clients to pay for services received. The program's accounting system needs to track counselors' time spent on the phone, on paperwork, and directly with clients. Clinical records should reflect accurately the claims records submitted to the MCO. Payers and MCOs may audit the clinical records to ensure that the services billed for have been provided. Failure to document clinical services adequately can result in nonpayment and jeopardize a contract. In addition, individuals' private information and identity must be handled confidentially pursuant to the Health Information Portability and Accountability Act and Federal confidentiality requirements for persons with substance use disorders (CSAT 2004). More information is available at www.hhs.gov/ocr/hipaa.

Managing multiple contracts requires a sophisticated management information system (MIS) and constant scrutiny. The need for information is even more crucial in capitation-based arrangements that place risk on the service provider than it is for fee-for-service arrangements. In essence, the OT program's MIS needs to be capable of two-way information transfer between the MCO and the program. Data such as membership, benefits, copays, deductibles, and other financial information must be passed between the program and the insured entity or payer. The MIS also should be able to analyze key performance data for internal and external reports. The MIS must pass useful data to staff members responsible for managing benefits and providing services. Programs must provide data that meet State and payer requirements, while respecting confidentiality.

Managing Payment From Multiple Funding Streams

Especially in the public arena, multiple contracts with and grants from several funding streams and payers may be used to support services for just one client. These contracts specify order of payment. The provider needs to manage the funds carefully and appropriately to be in compliance with contracts and grants. For example, a contract with a drug court may specify that Medicaid be billed as payer #1 and the drug court as payer #2. Any unpaid portion might be billed to the block grant agency as payer of last resort, if the service is eligible under the block grant. Some providers have used successfully the strategy of first drawing on the reimbursement of those payers with the most restrictive array of services; later, the more flexible funds are used to cover the remaining services. A clearly documented strategy for managing payment that is communicated effectively to the accounts payable staff is critical and helps programs succeed in this important area.

Utilization and Case Management

Utilization and case management cannot proceed if a program is not recognized as an eligible network provider. Because OT is a relatively new treatment modality, MCO coverage may not yet include reviewers, and an MCO may not yet have recognized OT programs as eligible providers. Providers need to ensure that they are accepted network providers before participating in the utilization management or case management process.

All MCOs use some methods to manage their members' service utilization to ensure that they are receiving the most appropriate array of services in the most appropriate environment or level of care for the appropriate length of time. Although utilization management focuses on a single type of service and case management focuses on the coordination of an array of services needed by a specific individual, in practice the same professionals may be responsible for both types of management. Utilization and case management staff members at an MCO authorize specific services for payment. Criteria and protocols may be used to determine whether services may be authorized for substance abuse treatment; typically they include the American Society of Addiction Medicine patient placement criteria (Mee-Lee et al. 2001) and other level-of-care or diagnosis-based criteria. Successfully addressing the needs of the MCO utilization and case management staff members who are responsible for authorizing client care is a critical element in a program's relationship with the MCOs and in maintaining clinical and financial viability. Program staff members must understand what their MCO counterparts do, be well trained in conducting professional relationships over the telephone, be familiar with the criteria and protocols employed by the MCOs with which the program has contracts, and have easy access to the clinical and service information required by the MCOs to complete a review and authorize services. Excellent records are essential. Staff members also should be familiar with each MCO's appeal or exceptions process when the outcome of a first-level review is unsatisfactory.

Strengthening the Financial Base and Market Position of a Program

The following strategies may strengthen the market position of an OT program and lead to increases in clients and revenues per client:

  • Achieve recognition for quality and effectiveness of services. If a program has a reputation for providing effective care, managed care enrollees and other potential clients will want to use it. A program can be of value to a client, a purchaser, and an MCO if it can reduce repeated detoxification, repeated treatment, and readmissions and reduce costs and interventions. Prompt, effective substance abuse treatment may reduce medical care and hospitalization costs in the long run. An effective program manages the care of clients who use substance abuse treatment services often. These effective programs provide psychiatric treatment, case management, and housing support and are good candidates for “preferred” or “core” status with one or several MCOs or MBHOs. Of course, the additional costs of these services need to be a component of a program's rate and contract. Having highly reputable, recognized, and efficient providers is a major marketing and regulatory advantage for the health plan, as well as for the OT program. These program characteristics can be marketing advantages. Programs can enhance their reputations by applying to SAMHSA's National Registry of Effective Programs, which identifies evidence-based programs. Information on how to apply for this status is available at modelprograms.samhsa.gov.
  • Serve special populations. Providing low-cost and high-quality treatment to a population no other program serves (e.g., adolescents; clients with HIV/AIDS, co-occurring mental disorders, or disabilities; pregnant women; women with young children; clients from the Deaf community) is a possible marketing advantage. Treating these clients can result in client referrals from a large geographic area and multiple sources. Such clients may bring with them higher reimbursement rates, but this also simply may reflect higher costs to provide care to the special population. Using special capabilities to attract clients is a good idea but not at the cost of inadequate payment for services.
  • Develop economies of scale. Adding clinic sites or increasing the number of branch clinics may allow programs to spread some fixed costs, such as management, information and financial systems, and executive staff, among a larger number of clients, driving down a program's per capita costs. However, large size requires increased administrative coordination, which can be costly.
  • Gain community visibility and support. Including governmental officials, community agency executives, or political leaders (the mayor or council members) as board members, for example, raises the program's profile in the community. Board members who have specific skills and connections can advance the purposes of the OT program.
  • Form alliances with other treatment providers. Setting up coalitions to compete with or work with managed care companies and other purchasers such as Medicaid may be useful. However, consultation with an attorney is advised strongly before developing such a coalition or other collaboration with local treatment providers because the laws regarding antitrust and other matters related to such relationships are complex. For programs serving publicly funded clients, technical assistance is available through CSAT; the SSA can provide details.

Preparing for the Future

Major forces that shape and limit provider financing are unlikely to change substantially in the near future. Careful strategic planning and assurance of funding from reputable and varied referral sources are essential for new and existing programs. As a buffer against shrinking budgets, all programs should consider broadening their funding streams and referral sources, expanding the range of clients they can serve, and promptly referring clients for other services not provided on site. Partnerships can be critical to the financial success of a program. To operate effectively, administrators and staff must understand thoroughly the managed care and community political environment—terminology, contracts, negotiations, payments, appeals, and priority populations. A successful working relationship with an MCO, a health plan, other purchasers, or another agency or group of agencies depends on day-to-day interactions in which staff members serve as informed, professional advocates for their clients and the program.

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