Smart Buyer Problem in Managed Care Mental Health

The Smart Buyer Problem in Managed Care Mental Health

Investigator: Robert T. Nakamura. Ph.D.

PROJECT GOALS

This project is studying the implementation of a system to serve persons with mental illness through managed care. The goals of this project are to:

identify factors that can be incorporated into a "best practices" model in providing a managed care system for persons with mental illness;
determine strategies for "smart buying" in the contracting phase;
increase accountability through monitoring and evaluation techniques;
provide a means to modify systems when problems are identified.

The literature on implementation of managed care systems in mental health point to a number of potential problems: First, there is the tension between cost reduction, increased efficiency and quality. Second, there are principal-agent problems, as the cooperation of agents with different and sometimes conflicting goals is required. Third, potential smart-buyers are faced with the difficult task of devising strategies for figuring out what they want, how much to pay, and from whom to buy, and for determining the quality/adequacy of the delivered product. Fourth, monitoring progress and assessing feedback can be both time consuming and difficult.

This research is examining how the transition to a managed care system for both physical and mental health services was made in Westchester County, NY. This county was selected for study as it has more extensive experience in contracting systems for managed care, than do other counties in New York State where the process is just in beginning phases.

The purpose of this research is to identify sets of practices that are workable and the conditions under which they work, as well as their limitations. .

RESEARCH ACTIVITIES AND RESULTS

This project is studying the history and present functioning of Westchester County's managed care system from the perspective of how well it meets the needs of persons with mental illness. Methodologies used include interviews with county-level participants, providers and interest group representatives; reviews of documents; and participant-observation of the implementation process. Westchester County officials have been helpful in providing the researchers with access to providers, interest groups and others involved in the process.

Interviews with mental health officials, Department of Social Service officials, HMO executives and other providers indicate a considerable amount of ingenuity and time have gone into the implementation of Westchester’s managed care system. We have examined the process of how Westchester County selected providers, how these providers responded to county requirements, how provider operations have been monitored, and the overall operations of the system. Finally, we are examining the roles played by advocate groups and others.

An extensive review of relevant literature has been conducted, especially in the areas of implementation, privatization/contracting out, principal-agent problems, the smart buyer problem, accountability and the hollow state.

SIGNIFICANCE OF FINDINGS/POLICY IMPLICATIONS

This study will provide a base of experience upon which to produce a more comprehensive study of the implementation process in defining, procuring, and monitoring large-scale services from external providers. Examination of the process will provide a test of whether the devices and approaches identified have been effective. Ameliorative strategies used to fix the inevitable problems of contract formulation will also be identified.

We assume that the logic of the managed care system, like all market-oriented problems, dictates that the smartest buyers cut the best deals. The interests of persons with mental illness will best be served if public authorities can structure incentives for managed care organizations to provide the best combination of price and quality.

By helping government agencies become smarter buyers, we hope to improve the quality of services for persons with mental illness. The significance of this study will be in its applicability to other settings, by identifying the "best practices" of contract formulation and testing expectations with the contractual conditions created.

PLANS

The researchers plan to develop a proposal to study the implementation process in other settings. Such a comparative case study approach is a particularly useful way to try to improve outcomes in areas where theory and data are scarce.

Presentations:

Preliminary findings were presented as a paper at the Association for Public Policy Analysis and Management Research Conference, New York City, 1999.

Entered: 3/19/1999
Edited: 09/23/02

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