A bill passed during the recently completed legislative session sets up a two-tiered system of paying local hospitals for psychiatric care.

The first of a three-part series on legislation regarding hospital-based psychiatric care.

By Holly West

Five years after North Carolina implemented a system in which the state and hospitals work together to provide beds for psychiatric patients, the General Assembly passed legislation this session intended to make that system more efficient. A provision in the state budget sets up a two-tiered system of paying hospitals for their inpatient psychiatric beds.

That’s because many hospital officials said it’s hard for local facilities to serve mentally ill people who need more serious treatment.

Central Regional Hospital in Butner.
Central Regional Hospital in Butner.

“Some [hospitals] were not taking care of higher acuity cases,” bill co-sponsor Rep. Susan Martin (R-Wilson) said prior to the legislation being passed. “If we paid more money, we might be able to get them to take some of these patients.”

Dr. Ureh Lekwauwa – medical director for the state Department of Health and Human Services’ Division of Mental Health, Developmental Disabilities and Substance Abuse Services – said the new legislation will make hospitals more willing and able to treat those with acute mental illnesses.

“Right now, we have just one [payment] tier,” she said. “That amount does not really cover much, especially when the patient is complicated.”

The current system pays $750 for care in a so-called three-way bed per day. The new system will allow for a higher rate to be paid for patients who require a higher level of care.

What is a three-way bed?

Inpatient psychiatric beds in local hospitals allow people with mental illnesses to be treated in their communities. They are known as three-way beds because they are set up by three-way contracts between local facilities, the state government and local management entities (LMEs).

This system was created in 2008 to prevent people who only need short-term psychiatric care – less than one week – from being sent to state institutions.

“If people get more consistent care in the community, they hopefully will need less hospitalization,” said Corye Dunn, director of public policy for Disability Rights North Carolina.

Right now, people who need longer-term care only have one option: state psychiatric hospitals. There are only three state psychiatric hospitals in North Carolina – in Butner, Morganton and Goldsboro – and they don’t have enough space for everyone who needs treatment.

Lekwauwa said people who can’t get into state psychiatric hospitals often end up waiting in local hospitals’ emergency departments. She said this costs the state – and counties – a lot of money, so it’s worth it to pay an enhanced rate for some three-way beds.

Increased rate, decreased service?

The enhanced rate will be no more than $910, the lowest average cost of a bed day in a state psychiatric hospital.

Rep. Verla Insko (D-Chapel Hill) supported the bill but is concerned that some of the beds could cost as much as state hospital beds.

“The local hospital beds historically have not cost as much,” she said. “We’ve been able to buy more beds.”

Insko said state funds would be better spent on smaller crisis centers scattered around the state; those are local facilities that only serve patients with mental illnesses facing a crisis.

Lekwauwa agreed that increasing the cost of some patient beds may reduce DHHS’s ability to pay for as many beds around the state.

“If you are paying a little bit more for some patients, it’s going to take away from the number of beds,” she said.

Martin said she doesn’t think the number of beds will be reduced because there will be funding for different acuity levels.

The new budget allocates $38.1 million to purchase bed days for the 2013-14 fiscal year and the same amount for FY 2014-15.

To determine the effectiveness of the two-tiered system, the Department of Health and Human Services will be required to create an annual performance report.

Tomorrow: Legislators have proposed building a fourth state-operated psychiatric hospital. Mental health care advocates say a few questions should first be answered.


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Rose Hoban is the founder and editor of NC Health News, as well as being the state government reporter. Hoban has been a registered nurse since 1992, but transitioned to journalism after earning degrees...

3 replies on “New Payment Plan Aims to Save N.C. Money for Psychiatric Care”

  1. Why don’t we try preventing the need for hospitalization? Consistent outpatient treatment and making sure people’s basic needs are met would be a good start.

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