By Lydia Wilson
The headquarters for Piedmont Behavioral Health stands at the newly paved corner of Solutions Street and Milestone Avenue, a few turns from Interstate 85, near Concord, N.C.
Walls of windows stream sunlight into the $14.7 million, 79,000-square-foot corporate office of the regional agency that manages publicly funded mental health services for 15 counties near Charlotte.
The imposing structure suggests the leadership role of Piedmont Behavioral Health, now rebranded as PBH, in the state’s Medicaid mental health reform. A law passed last summer requires major changes in the business models of the state’s regional agencies that oversee services for people with mental health or substance abuse disorders,or intellectual or developmental disabilities.
Those agencies, called Local Management Entities, or LMEs, must now adopt the policies and procedures that PBH has piloted for six years.
According to the new law, the new model must be implemented with “fidelity to the Piedmont Behavioral Health (PBH) demonstration model, a proven system.”
Yet, questions linger as to how “proven” the PBH system really is.
A long-germinating seed
The reform that PBH ushered in took root in the mind of a single individual more than a decade ago. In early 2000, Piedmont Behavioral Health hired Dan Coughlin to oversee its work in five counties near Charlotte: Cabarrus, Davidson, Rowan, Stanly and Union.
Coughlin, now retired, said he came from New York during a tumultuous time in North Carolina’s efforts to provide services while managing skyrocketing costs.
He started the job at Piedmont Behavioral Health in July 2000, just three months after the state auditor’s office gave the General Assembly a blistering 430-page report recommending significant changes to the publicly funded mental health system.
“It called for increased choice, increased access to care, evidence-based practices, consumer-driven, consumer empowerment,” said Coughlin of the report. He said the recommendations were “all state-of-the-art rhetoric and idealized public policy. It was received in North Carolina as some catastrophic, chaotic set of notions.”
Coughlin said he felt that tools existed for meeting the report’s goals. He had worked previously for the state of New York in publicly funded health care, as well as for ValueOptions, self-stated on its website as the country’s largest private mental health insurance company.
In New York, Coughlin learned that states could ask the federal government for permission to experiment with ways to save money by applying to be exempt from some Medicaid rules. The exemptions are called “1915 (b)” and “1915 (c)” waivers, named for those portions of the Medicaid law.
All 50 states use the waivers in one form or another. Most states use them in targeted areas, acting as small managed care organizations for discrete purposes, like child psychiatry. The waivers also give states the ability to pay for additional services Medicaid would not authorize otherwise.
Coughlin tried in New York to implement the Medicaid waivers in New York, but he said the attempt failed for political reasons. “They basically ran me out of the state.”
At the right place, at the right time.
In July 2000, Coughlin was in charge of Piedmont Behavioral Health and had new ground in which to plant his long-germinating ideas about Medicaid reform.
Meanwhile, the North Carolina legislature, as a result of the auditor’s report, scrambled to fix a broken system. At the time, advocates pointed to the state’s rate of putting people in psychiatric hospitals – the fifth highest in the nation – as a measure of how broken the system was.
Coughlin started shaking powerful hands. “I got some access to [then-director of the N.C. Department of Health and Human Services, Secretary Carmen Hooker Odom] and said I can do this thing,” said Coughlin. “Let me write you a little paper and say how to do this.”
Coughlin’s vision to use the Medicaid waivers to form a managed care organization was consistent with the state’s plans, said one legislator active in the reforms.
“The goal of the 2000 reform was to separate the management of the money from the delivery of services,” said state Rep. Verla Insko, (D-Chapel Hill).
Coughlin said Secretary Odom loved the idea of Piedmont Behavioral Health piloting Medicaid waivers in North Carolina and, by 2002, the agency was testing the waters of change.
“It was difficult at first,” recalled Insko. “For the first year or two, we wondered if it was going to work.”
Legislators like Insko weren’t the only ones sweating the model’s feasibility.
“We came hours from failure at different times,” said Coughlin. At one point, the software a company built to handle provider claims and track statistics wouldn’t work. Coughlin said he called the vendor’s president and said he was taking the product and rigging it to meet Piedmont Behavioral Health’s needs.
“If [the vendor] had said, ‘I’m not giving you that source code, I don’t give a [expletive] what you say,’ we’d have died that day,” Coughlin recalled. But, the vendor didn’t put up a fight and PBH still uses and licenses the software to other agencies today.
That struggle is just one reason that Coughlin said he thinks so few other states have used the Medicaid waivers well. “It really is rocket science. It is so complex and demanding and such a culture change for everybody.”
‘A lot of responsibility’
If the sweeping changes were hard for Piedmont Behavioral Health to handle, it was also hard for people outside the agency whose lives were affected, including consumers, families, and service providers.
Piedmont Behavioral Health made efforts to reach out to the community and explain what was going on and why, said David Bullins, president of the North Carolina chapter of the National Alliance for the Mentally Ill, or NAMI.
“One thing that impressed me was the amount of energy and time that they have put into getting stakeholder input,” Bullins said. “If they were thinking about doing something, they would float it out in all five counties.”
There was a lot of input to be given at the beginning, said substance abuse services provider Angie Banther from Winston-Salem. Six years ago, she said, providers were scared about the changes required for them to keep working with Piedmont Behavioral Health. Providers had to have a business plan, for example, and show more documentation for a consumer’s need for services.
Banther said the most successful providers are those who chose to work together with PBH. They formed a provider council, which still meets at the agency’s corporate office and conducts continuing education training for its members.
The Medicaid waiver model also allowed Piedmont Behavioral Health to adjust rates to reward good providers and attract needed ones, said NAMI President Bullins.
“In the beginning, there was a dearth of pediatric psychiatrists,” he recalled. But Piedmont Behavioral Health was allowed to increase rates for those providers. “In a while, they had 14. That’s a telling example of the success of operating this type of system.”
Not all providers were thrilled with the actions of Piedmont Behavioral Health, however. In 2006, Rowan Homes, a group home for adults with developmental disabilities, sued when Piedmont Behavioral Health exercised its right under the waiver not to extend Rowan Homes’ contract. The group home lost its case.
PBH now takes full advantage of that opportunity through the 1915 (b) waiver to limit the number of providers with which it contracts. In 2011, PBH served twice as many publicly funded consumers as another LME in the state, yet it contracted with half the number of providers.
The thought of not being able to see any provider initially scared a lot of consumers, Coughlin acknowledged.
“Go talk to somebody and say ‘What if I told you it is too expensive for you to have as much choice as you want?’” Coughlin said. “They’ll say, ‘Well, I want choice.’ But can you pay for it? Because if you insist you’ve got to have choice but can’t pay for it, how’s that work?”
‘A proven system’
Eventually, the numbers started speaking in PBH’s favor. The managed care model appeared to improve consumers’ health outcomes while reducing costs.
In fiscal year 2010, PBH spent one-third less on services to its consumers than the statewide average. An evaluation of consumers’ outcomes found that PBH performed better than the state average in a range of categories, including timely access to care, consumers’ involvement in the community and PBH’s follow-up after patients were discharged from inpatient psychiatric care.
Those numbers stood in contrast to other numbers exposed in 2008 by the Raleigh News & Observer. The newspaper found more than $400 million wasted statewide on so-called “Community Support Services,” which were overbilled and unmonitored.
“We were able to contain [those costs],” said Coughlin, “so that was the home run.”
Within two years, the state legislature passed a bill requiring all Local Management Entities in the state to implement the PBH model. The wonky title for the newly structured agencies would be “Local Management Entity-Managed Care Organization,” or LME-MCO. All of the state’s LMEs must become LME-MCOs successfully by January 1, 2013, or be taken over by another agency that has.
By April of 2010, the PBH board was dreaming big, discussing the possibility of marketing some of its “capacities,” including selling access to the IT infrastructure it had developed. Minutes from a board retreat also show the board expressed need for “start up money…” to “take on new business.”
Thus far, PBH has a contract with one other LME-MCO in the state, East Carolina Behavioral Health, to allow it to use software that PBH developed. Since May 2011, East Carolina Behavioral Health has paid PBH $35,000 a month for the software license, which includes support services.
In comparison, another LME-MCO, Western Highlands Network, uses different software, for which it pays $22,173 a month, which includes the salaries of staff to maintain that software, said Western Highlands CEO Arthur Carder, Jr.
PBH does not have or plan contracts with other LMEs, said Director of Communications, Rachel Porter, because it “does not aspire to be a software vendor.”
A decade since coming to North Carolina, Coughlin’s vision is becoming a reality. Yet he retired from PBH on July 1, 2011, a week after Gov. Beverly Purdue signed the mandate to implement the Medicaid waiver model statewide. Coughlin’s long-time deputy, Pamela Shipman, took his place as CEO.
“Something like this is a lot of responsibility,” said Coughlin, 67, of the PBH model, “particularly when you talk people into doing it statewide. So I just needed some respite from that.”
Directors of the rest of the state’s newly structured LME-MCOs will find little respite during the next 18 months. The state set an aggressive timeline for the waivers’ implementation in order to meet 2014 deadlines for federal healthcare reform, said Beth Melcher from the N.C. Department of Health and Human Services. She said that the legislature thought it was important to commit to the model and move forward promptly.
“We spend a lot of time talking and planning,” said Melcher, “but ‘doing’ is a hard thing historically for this system.”
Tomorrow: Implementing the new ‘model’ of mental health agencies has brought up a lot of questions about ‘private’ rights and ‘proprietary information’ in a publicly funded system.
The title image is adapted from a portrait of Dorothea Dix, a 19th century crusader for better mental health care, that hangs at the National Portrait Gallery.