The Centers for Medicare & Medicaid Services have announced plans to explore a new payment or service delivery model targeting behavioral health to improve healthcare quality and access for beneficiaries with mental health and substance use disorders. The initiative, announced last month, would be established under the CMS Innovation Center and could impact healthcare organizations and stakeholders in diverse ways.

About one in five Medicaid beneficiaries has a behavioral health diagnosis. But they account for nearly half of total Medicaid expenditures, including spending for physical, behavioral, and other Medicaid-covered services. And spending for individuals with a behavioral health diagnosis is nearly four times higher than for those without. Given the link between physical health and mental health, investing in behavioral health infrastructure would go a long way toward lowering overall cost while improving health for the affected population.

The announcement comes at a time when CMS is planning to scale back a mandatory joint replacement bundled payments initiative and cancel cardiac bundled payments. The agency has reiterated its commitment to value-based delivery models, though, saying it intends to develop more voluntary alternative payment programs moving forward.

Potential components of the new behavioral health payment model could include participation by other payers or enhancing provider participation in telemedicine services. A multipayer initiative would spread cost among different payers and provide a shared incentive to improve quality, encouraging collaboration among stakeholders. And leveraging telehealth to expand access to treatment would benefit enrollees living in mental healthcare provider shortage areas, such as rural areas, tapping a new vein for pharma. The benefit for pharma would primarily be in volume, as the initiative’s emphasis on cost-containment would encourage the use of low-cost, generic drugs.

The model could also qualify as an advanced payment model as outlined by the Medicare Access and CHIP Reauthorization Act, which allows practices to take on risk and receive rewards based on patient outcomes. While value-based payment models permeate, pay-for-performance approaches for the delivery of mental health and substance use disorders have lagged behind. But as reimbursement for mental health and substance abuse services is increasingly tied to outcomes, behavioral healthcare providers must re-examine their approach to care.

One challenge to implementing VBP is the lack of quality measurements. There are fewer nationally recognized quality measures for behavioral health, compared with physical health, and even fewer outcome measures. But there is recent progress being made to expand measures around substance abuse, fueled in part by the opioid epidemic. For instance, CMS is currently developing and testing a new measure that adapts the American Society of Addiction Medicine’s measure for the use of drug therapy for individuals with opioid use disorder for the Medicaid population. A new payment model targeting behavioral health could accelerate the development of process and outcome measures for mental health and substance use disorders. And behavioral healthcare leaders and stakeholders have the opportunity to weigh in on their design.

As the focus on value intensifies across the entire healthcare spectrum, behavioral health will continue to emerge as a key area to successful healthcare reform. CMS’ latest move to explore a new model to address behavioral health payment and service delivery reaffirms the power of behavioral health to drive value in healthcare and could spur transformation in the behavioral health market.


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

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