2. pbH: From idea to reform

2. pbH: From idea to reform
Groundbreaking for pbH Corporate Office, 2010.

The headquarters for the public agency largely responsible for the statewide Medicaid reforms 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 pbH, the regional agency that manages publicly funded mental health services for 15 counties near Charlotte, N.C.

The imposing structure suggests pbH’s leadership role in the 2011 law that requires major changes in the business model of all 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 are called Local Management Entities, or LMEs, and they must now adopt the policies and procedures that pbH developed for six years.

Yet, the reform that pbH ushered in took root in the mind of a single individual more than a decade ago.

In early 2000, pbH, then called Piedmont Behavioral Health, hired Dan Coughlin to oversee its work in five counties near Charlotte: Cabarrus, Davidson, Rowan, Stanly and Union.

Dan Coughlin
Former pbH CEO, Dan Coughlin

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 a consultant gave the General Assembly a 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.”

But 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 the country’s largest private mental health insurance company, ValueOptions.

In New York, he learned that states could ask the federal government for permission to 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.

All 50 states use the waivers, and most states use them to act as managed care organizations, or small insurance companies that can limit the number of providers consumers can see in order to save administrative costs. The waivers also give states the right to pay for additional services Medicaid wouldn’t authorize.

Coughlin tried in New York to implement the Medicaid waivers but he said the attempt failed for political reasons. “They basically ran me out of the state.”

Learn more: What is the pbH model?

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 2000 report, scrambled to fix a broken system. At the time, the state’s rate of putting people in psychiatric hospitals was the fifth highest in the nation.

Representative Verla Insko (D-Chapel Hill)
Representative Verla Insko

So, Coughlin started shaking hands. “I got some access to [then-director of the N.C. Department of Health and Human Services, Secretary Carmen Hooker Odum] 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 for 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-56.

Coughlin said Secretary Odum loved the idea of Piedmont Behavioral Health piloting Medicaid waivers in North Carolina.

By 2002, Piedmont Behavioral Health 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. 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 providers.

Piedmont Behavioral Health made efforts to reach out to the community and explain what was going on and why, said president of the North Carolina chapter of the National Alliance for the Mentally Ill, David Bullins.

“One thing that has 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. 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.

“You took counselors and told them to suddenly become a business person,” said Banther. “I got real smart and went to the community college to take small business training.”

Banther said the most successful providers are those who chose to work together with the LME-MCO. They formed a provider council, which still meets at the pbH 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 Bullins of the consumer advocacy group, NAMI.

“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, a group home for adults with developmental disabilities, Rowan Homes, sued when Piedmont Behavioral Health exercised its right under the waiver not to extend Rowan Homes’ contract. The group home lost its case.

Coughlin issued a statement about the situation in 2007, saying the court’s decision affirmed Piedmont Behavioral Health’s right “to set rates and to contract with qualified providers based upon our network requirements and consumer needs.”

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’

A graph showing money saved by pbH.
Click the graphic to see a larger version.

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 others exposed in 2008 by the News & Observer. The Raleigh newspaper found more than $400 million wasted statewide on so-called “Community Support Services,” which were overbilled and unmonitored.

See the Sources: Read the 2008 series from the N&O

“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. All LMEs must become LME-MCOs successfully by January 1, 2013, or be taken over by an 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 the board retreat also show the board expressed need for “start up money…” to “take on new business.”

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, ECBH 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 a $8,356 a month. The salaries of staff to maintain that software cost another $13,817 a month, said CEO Arthur Carder, Jr.

pbH does not have or plan to have contracts with other LMEs, said Director of Communications, Rachel Porter, saying it “does not aspire to be a software vendor.”

pbH Corporate Office in Kannapolis, NC
pbH Corporate Office, 2012.

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 House Bill 916’s 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 LMEs 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 of 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.”

<– Chapter 1 – ‘To save money, improve health’

Chapter 3 – ‘Who is in charge?’ –>