The shift from the fee-for-service payment structure to fee-for-value payment models is no easy feat. But the transition is proving to be an even more monumental task for behavioral health. Payers tend to view mental health as distinct from physical health and often “carve out” mental health treatment from provider contracts, despite the frequent overlap between mental and physical illnesses. A lack of quality measures and standards for behavioral health treatment presents additional obstacles.

Yet despite the inherent challenges of moving to an outcomes-based reimbursement model for behavioral health, the opportunities for such a shift are abundant. About one in five adults in the U.S. are burdened by mental illness, giving healthcare players who embrace value-based reimbursement for behavioral health services plenty of space to improve overall outcomes and reduce spending on total medical costs. The Centers for Medicare and Medicaid Services recognizes this, as well as the challenges providers face in making the shift to value, and has launched a number of programs and initiatives targeting behavioral health. Private payers are moving toward outcome-based reimbursement models for mental health at a much slower pace, but adoption of the trend is gaining traction, and those who can wrap their arms around it early will have a competitive edge in the emerging value-based world.

In the public sector, the Department of Health and Human Services has set a goal of tying 50 percent of payments for traditional Medicare services to value-based payment models by 2018. Value-based reimbursement currently exists for behavioral healthcare services through the Medicare and Medicaid Prospective Payment System for Federal Qualified Health Centers (FQHCs) and Rural Health Centers (RHCs). While FQHCs provide behavioral health services under this bundled-payment approach, RHCs are not required to--although some do--deliver mental health and substance abuse services.

In 2014, Congress passed a plan to create pilot programs for the behavioral health equivalent of FQHCs, but progress has been slow to get started. The Excellence in Metal Health Act calls for the establishment of Certified Community Behavioral Health Clinics (CCBHCs) in eight states to serve individuals with serious mental illnesses and substance use disorders. The pilot programs will launch at CCBHCs to test daily or monthly bundled payments for behavioral health services, similar to the prospective payment system already in place for FQHCs. Eight participating states will be announced in early to mid-2017. To date, 24 states have received one-year planning grants for the program. The demonstration is one of the largest investments in community behavioral health in recent years, and could move the needle on payment reform for behavioral healthcare.

In the commercial sector,  Cigna, has partnered with the American Society of Addiction Medicine to test and validate a set of quality measures that could inform an evidence-based approach to substance abuse treatment. The move coincides with a nationwide opioid epidemic that is driving up costs for public and private insurers. A long-term goal of the project is for the measures to serve as benchmarks for clinicians who treat addiction and substance use disorders. Quality metrics and standards, which are still in their infancy for behavioral health, are essential components of value-based arrangements, and providers who have proven and reliable tools to measure the effectiveness of behavioral health treatments are poised to negotiate value-based contracts from a position of strength.

In Kansas City, New Directions Behavioral Health, which provides behavioral health utilization management services, has signed pay-for-performance contracts with some of the area’s highest-volume behavioral healthcare facilities. Under the agreement, New Directions will work with the facilities to reach quality of care goals, including reducing 30-day readmission rates and ensuring patients keep their 7-day post-discharge appointments. If the pay-for-performance arrangement is successful, it could serve as a model for value-based reimbursement for behavioral health in the commercial sector.

The programs and partnerships that public and private payers are forming with behavioral health care organizations are creating the path to an outcome-based approach to mental health treatment and will be ones to watch as the U.S. healthcare market continues to turn the proverbial ship from fee-for-service to fee-for-value. With so many Americans suffering from mental illness and substance use disorders, healthcare players who can deliver value-based behavioral healthcare have tremendous opportunities to rein in spending and improve patient outcomes.


Nicole Witowski is an associate analyst at DRG and a behavioral health expert. Follow her on Twitter at @NicoleWitDRG.

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