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ACA & MHPAEA: DRUG MEDI-CAL CADPAAC May 30, 2013 Patrick Gauthier, Director.

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Presentation on theme: "ACA & MHPAEA: DRUG MEDI-CAL CADPAAC May 30, 2013 Patrick Gauthier, Director."— Presentation transcript:

1 ACA & MHPAEA: DRUG MEDI-CAL CADPAAC May 30, 2013 Patrick Gauthier, Director

2 CMS ON MHPAEA IN MEDICAID 2009

3 Center for Medicaid and State Operations: Letter to State Directors SHO CHIPRA #9 November 4, 2009 Dear State Health Official: The purpose of this letter is to provide general guidance on implementation of section 502 of the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA), Public Law , which imposes mental health and substance use disorder parity requirements on all Children’s Health Insurance Program (CHIP) State plans under title XXI of the Social Security Act (the Act). This letter also provides preliminary guidance to the extent that mental health and substance use disorder parity requirements apply to State Medicaid programs under title XIX of the Act.

4 Center for Medicaid and State Operations: Letter to State Directors MHPAEA expanded the application of the existing mental health parity requirements in section 2705 to substance use disorder benefits, and added new requirements such as: Financial requirements (e.g., co-payments) that are applied to mental health or substance use disorder benefits must be no more restrictive than the predominant financial requirements that are applied to substantially all medical/surgical benefits. Treatment limitations (e.g., numbers of visits or days of coverage) that are applied to mental health or substance use disorder benefits must be no more restrictive than the predominant treatment limitations that are applied to substantially all medical/surgical benefits. No separate financial requirements or treatment limitations can apply only to mental health or substance use disorder benefits. When out-of-network coverage is available for medical/surgical benefits, it also must be available for mental health or substance use disorder benefits.

5 Center for Medicaid and State Operations: Letter to State Directors Application to Medicaid The MHPAEA requirements apply to Medicaid only insofar as a State’s Medicaid agency contracts with one or more managed care organizations (MCOs) or Prepaid Inpatient Health Plans (PIHPs), to provide medical/surgical benefits as well as mental health or substance use disorder benefits. In this case, those MCOs or PIHPs must meet the parity requirements of MHPAEA, as incorporated by reference in title XIX of the Act, for contract years beginning after October 3, MHPAEA parity requirements do not apply to the Medicaid State plan if a State does not use MCOs or PIHPs to provide these benefits.

6 Center for Medicaid and State Operations: Letter to State Directors Additional policy guidance will be provided on this issue after the MHPAEA regulation is published. However, in the meantime, we encourage all States to begin a dialogue with their Centers for Medicare & Medicaid Services regional office concerning their timeline for complying with these parity requirements. If you have any questions on the information provided in this letter, please send an to or contact Ms. Maria Reed, Deputy Director, Family and Children’s Health Programs Group, at Sincerely, /s/ Cindy Mann Director

7 CMS ON MHPAEA 2013

8 CMS on MHPAEA: 2013 Letter January 16, 2013 RE: Application of the Mental Health Parity and Addiction Equity Act to Medicaid MCOs, CHIP, and Alternative Benefit (Benchmark) Plans Dear State Health Official: Dear State Medicaid Director: This letter provides guidance on the applicability of the requirements under the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA, Pub.L )1, 2 to Medicaid non-managed care benchmark and benchmark-equivalent plans (referred to in this letter as Medicaid Alternative Benefit plans) as described in section 1937 of the Social Security Act (the Act), the Children’s Health Insurance Programs (CHIP) under title XXI of the Act, and Medicaid managed care programs as described in section 1932 of the Act. The Centers for Medicare & Medicaid Services (CMS) previously issued a State Health Official (SHO) letter on November 4, 2009, concerning section 502 of the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA, Pub.L )3. This letter issues new guidance on the application of MHPAEA in Medicaid and expands upon the guidance for CHIP.

9 MHPAEA extended the MHPA requirements to substance use disorder benefits in addition to mental health benefits. MHPAEA also added new requirements regarding financial requirements and treatment limitations in addition to the limitations on aggregate annual and lifetime dollar limits. The Affordable Care Act (Pub.L ) expanded the application of MHPAEA to benefits in Medicaid non- managed care benchmark and benchmark-equivalent state plan benefits pursuant to section 1937 of the Act (referred to in this letter as Medicaid Alternative Benefit plans) (see section 2001(c)(3) of the Affordable Care Act, adding section 1937(b)(6)). The application of MHPAEA to Medicaid non- managed care Alternative Benefit plan benefits was effective on March 23, Also effective as of that date, Medicaid Alternative Benefit plans that are benchmark- equivalent plans must include mental health and substance abuse services as a basic service (see section 2001(c) of the Affordable Care Act).

10 Application of Mental Health/Substance Use Disorder Parity Requirements to Medicaid Alternative Benefit Plans All Medicaid Alternative Benefit plans (including benchmark equivalent and Secretary–approved benchmark plans) are required to meet the provisions within MHPAEA, regardless of whether services are delivered in managed care or non-managed care arrangements. This includes Alternative Benefit plans for individuals in the new low-income Medicaid expansion group, effective January 1, Specifically: Section 1932(b)(8) of the Act applies parity requirements to MCOs. Section 1937(b)(6) of the Act, as added by the Affordable Care Act, directs that approved section 1937 Medicaid non- managed care Alternative Benefit plans that provide both medical/surgical benefits and mental health or substance use disorder benefits comply with MHPAEA.

11 Application of Mental Health/Substance Use Disorder Parity Requirements to Managed Care Organizations The CMS noted in its November 2009 SHO letter that mental health and substance use disorder parity requirements apply to MCOs (defined in section 1903(m) of the Act) that contract with the state to provide both medical/ surgical and mental health or substance use disorder benefits. In light of Medicaid regulations that direct states to reimburse MCOs based only on state plan services, CMS will not find MCOs out of compliance with MHPAEA to the extent that the benefits offered by the MCO reflect the financial limitations, quantitative treatment limitations, non-quantitative treatment limitations, and disclosure requirements set forth in the Medicaid state plan and as specified in CMS approved contracts. However, this does not preclude state use of current Medicaid flexibilities to amend their Medicaid state plans or demonstrations/waiver projects to address financial limitations, quantitative treatment limitations, non-quantitative treatment limitations, and disclosure requirements in ways that promote parity.

12 In addition to MCOs, which are statutorily-defined, CMS has, by regulation, recognized entities known as Prepaid Inpatient Hospital Plans (PIHPs) and Prepaid Ambulatory Health Plans (PAHPs). These entities provide a more limited set of state plan services (in some instances through a carve-out arrangement). CMS urges states with these arrangements to apply the principles of parity across the whole Medicaid managed care delivery system when mental health and substance use disorders services are offered through a carve-out arrangement. CMS intends to issue additional guidance that will address this issue and will continue to consider additional regulatory changes that may be necessary to properly implement MHPAEA. MCOs that are not in compliance with the parity requirements described above should take steps to come into compliance with those requirements. States should assess their contracts with all MCOs which offer medical and surgical benefits and mental health or substance use disorder benefits to assure that plans comply with the provisions of MHPAEA. CMS will offer technical assistance to states regarding strategies for PIHPs and PAHPs to implement MHPAEA.

13 CMS ON ALTERNATIVE BENEFIT PLANS November 2012

14 CMS on Alternative Benefit Plans SMDL # ACA # 21 RE: Essential Health Benefits in the Medicaid Program November 20, 2012 Dear State Medicaid Director: The purpose of this letter is to provide guidance to states on Medicaid benchmark benefit coverage options (hereafter referred to as “Alternative Benefit Plans”) under section 1937 of the Social Security Act. Under the Affordable Care Act, states will rely on the benefit options available under section 1937 as they expand eligibility to low-income adults beginning January 1, This letter provides guidance on the use of Alternative Benefit Plans for the new eligibility group for low-income adults; the relationship between Alternative Benefit Plans and Essential Health Benefits (EHBs); and the relationship of section 1937 with other Title XIX provisions.

15 CMS on Alternative Benefit Plans The Affordable Care Act made a number of changes related to section 1937 that are effective on January 1, These changes include: Any Alternative Benefit Plan must cover EHBs as described in section 1302(b) of the Affordable Care Act and applicable regulations; o EHBs include the following ten benefit categories, recognizing that some of the benefit categories include more than one type of benefit: (1) ambulatory patient services, (2) emergency services, (3) hospitalization, (4) maternity and newborn care, (5) mental health and substance use disorder services, including behavioral health treatment, (6) prescription drugs, (7) rehabilitative and habilitative services and devices, (8) laboratory services, (9) preventive and wellness services and chronic disease management, and (10) pediatric services, including oral and vision care. The Mental Health Parity and Addiction Equity Act (MHPAEA) applies to Alternative Benefit.

16 DHCS DRUG MEDI-CAL

17 CA DHCS on Medi-Cal MH and SA Drug Medi-Cal Today Counties provide or contract with providers to deliver the Drug Medi-Cal benefit to Medi-Cal beneficiaries. In cases where counties have decided not to provide all or part of the benefit, the Department of Health Care Services (DHCS) instead contracts directly with providers in the county, and is reimbursed by the county for the non-federal share. Any medication treatments for alcohol or drug dependence not provided through the Drug Medi-Cal formulary are provided through Medi-Cal fee-for-service. Counties use 2011 Realignment funds to fund the non-federal share. The current Drug Medi-Cal program has five benefits; however, the general adult population is limited to three benefits, which are generally exclusive: methadone maintenance, naltrexone for opioid dependence, and outpatient drug- free services. Counties will use their existing resources to continue providing Drug Medi-Cal services to the currently eligible Medi-Cal population. Drug Medi-Cal will continue to operate with the current benefit and delivery system for the expansion population. The estimated costs associated with providing the current benefit to the expansion population are $42 million by 2020, of which the 10 percent non-federal share will be $4.2 million.

18 CA DHCS on Medi-Cal MH and SA Enhanced Substance Use Disorder Benefit Counties could opt-in to provide a standard enhanced substance use disorder benefit package through the Drug Medi-Cal program for both the currently eligible and expansion populations. If the counties opt-in, they would agree to pay for the non-federal share of these benefits. Specific funding would be made available to counties as an incentive to opt-in and the estimated cost would vary based on the specific benefits included in the enhanced Drug Medi-Cal benefit package.

19 CA DHCS on Medi-Cal MH and SA Based on the previously received recommendations for enhanced benefits from the counties and substance use disorder treatment providers, DHCS is specifically considering these potential enhanced benefits: Intensive Outpatient Treatment: Currently a Drug Medi- Cal benefit, but limited to pregnant and postpartum women and children and youth under the age of 21. Historically referred to as “Day Care Rehabilitation.” This could be opened up for the general adult population.

20 CA DHCS on Medi-Cal MH and SA Residential Substance Use Disorder Services: Currently a Drug Medi-Cal benefit, but limited to pregnant and postpartum women. This could be opened up for the general adult population. Recovery Supports: These are a broad set of longer term care management services to support the ongoing sobriety of the client and prevent relapse, with a flexible service intensity level depending upon the needs of the client. Services may include engagement, self- management supports, and counseling. Recovery support has been added to four state Medicaid plans (AZ, NM, PA, IA) as of 2010 through the Rehabilitation Option. Currently, Medi-Cal provides the Rehabilitation Option for eligible mental health clients through Medi-Cal specialty mental health. Opioid Detoxification: Currently a Medi-Cal benefit through fee-for-service, outside of Drug Medi-Cal, but with a time limitation of 21 days. This could be allowed, in addition, through Drug Medi-Cal for a longer time period of up to 6 months, which is the maximum allowed by federal regulation. Alcohol Detoxification: This could be made available as an elective benefit in outpatient settings.

21 CA DHCS on Medi-Cal MH and SA Drug Medi-Cal Delivery System Waiver With a greater population of beneficiaries because of the expansion population and additional service options through an enhanced benefit, an organized delivery system could better help direct beneficiaries to the most appropriate Drug Medi-Cal benefits. Counties need the tools to effectively manage the Drug Medi-Cal program. Counties should manage these programs through an organized delivery system under a waiver of federal Medicaid law, in place within three years.

22 CALIFORNIA MENTAL HEALTH AND SUBSTANCE USE NEEDS ASSESSMENT Submitted to The California Department of Health Care Services Prepared by TAC/HSRI, 2012

23 California Mental Health and Substance Use Needs Assessment (Page 291) 2. Needs and gaps in the current system The California behavioral health system has many strengths, and these strengths form a solid foundation for implementing system enhancements and improvements in the future. As has been described throughout this report, there are also a number of gaps and issues with regard to the system that need addressing. It must be noted that California’s behavioral health system has experienced serious budget cuts and service restrictions over the past few years. These occurred in the context of a behavioral health system that was already stretched for resources. In addition, the realignment policy had placed additional responsibilities at the county level, and it is not clear that the amount of funds available to be “realigned” is sufficient to meet these responsibilities. As with most states, the substance use services system in California is the most severely underfunded, even when compared to mental health services. The very low penetrations rates for substance use services in both Medi-Cal and DADP services is testament to this fact.

24 OPPORTUNITIES

25 Issues  Reducing ED admissions and re-admissions  Medicaid managed care  Managed care business operations and infrastructure  Competition  Prescription drug abuse  Financial risk  Licensure and credentialing

26 Issues  “Diabesity” epidemic  Whole health, person-centered care  Medication assisted treatment  Integration (vertical) and Consolidation (horizontal)  Carve-in  Retail healthcare  Health Coaches  Continued de-institutionalization  eHealth / mHealth

27 International Comparison of Spending on Health, 1980–2010 Average spending on health per capita ($US PPP) Total health expenditures as percent of GDP Notes: PPP = purchasing power parity; GDP = gross domestic product. Source: Commonwealth Fund, based on OECD Health Data

28 Health Care Costs Concentrated in Sick Few— Sickest 10 Percent Account for 65 Percent of Expenses Source: Agency for Healthcare Research and Quality analysis of 2009 Medical Expenditure Panel Survey. Distribution of health expenditures for the U.S. population, by magnitude of expenditure, % 5% 10% 50% 65% 22% 50% 97% $90,061 $40,682 $26,767 $7,978 Annual mean expenditure

29 Problem: Causes of Premature Death in the General Population N Engl J Med Sep 20;357(12):

30 HEALTH CARE REFORM Brief Impact Statement 30

31 Reform 1. Coverage expansion 2. New models a) ACOs and integrated delivery systems b) Health Care (Medical) Homes & Dual Eligibles Initiatives 3. New administrative structure a) Essential Health Benefits (benchmark plans) b) Health Insurance Exchanges 4. New risk-based financing mechanisms Medicaid managed care and capitation 31

32 Below 133% FPL ($29,500 family) Medicaid Expansion To Childless Adults Coverage for essential MH/SA at parity for benchmark plan Feds pay 100% for 3 years, then down 90% Simplified enrollment, express apps: web too Integrated data with State exchanges: one application Foster kids up to age – 400% FPL ($88,000 family) State Exchanges Coverage for essential MH/SA at parity & no co-pays Helps individuals and small employers with purchasing health insurance Assist by voucher to pay premiums or cost sharing Develops consumer friendly tools & plain language on insurance One application to both exchanges or Medicaid; can do on the web Coverage Expansions

33 California by the Numbers 33

34 California 34

35 California FQHCs 118 Federally-Qualified Health Centers Statewide 1,039 FQHC Service Sites 35

36 Prevalence of Substance Use Disorders Among Adults Ages 18 – 64 by Current Medicaid Status and Eligibility for Medicaid Expansion or Health Insurance Exchanges: California, US 36

37 SUD in CA Medicaid Expansion and Health Insurance Marketplace Most common characteristics of persons with SUD in Medicaid expansion population in California is: Male years old Non-Hispanic White or Hispanic Less than High School Education 37 Sources: 2008 – 2010 National Survey on Drug Use and Health (Revised March 2012) 2010 American Community Survey

38 ORGANIZED AND INTEGRATED SYSTEMS OF CARE ACOs and Medical/Health Homes

39 Organized Systems of Care Integrated MH and SUD Integrated Behavioral Health and Primary Care Integration with FQHCs Accountable Care Organizations Medicaid Health Home Models Patient Centered Medical Home Models

40 ACO Promote evidence-based medicine and engagement in care Report quality measures to CMS Invest continually in the workforce and in team-based care Publicly report 33 measures of performance and quality Link quality and financial performance and set a high bar on delivering coordinated and patient-centered care, and emphasize the Triple Aim Enhance patient experience of care Improve health of populations Reduce or control the per capita cost of care

41 Triple Aim 1. Improve the health of the population Increase the number of people served Address health disparities for individuals with mental illness and/or substance use disorders 2. Enhance the patient experience of care Move to community-based services Reduce unnecessary stays in hospitals and licensed residential settings Increase access to primary care services 3. Reduce, or control, the per capita cost of care Use existing resources more effectively Promote recovery and resiliency Decrease emergency department utilization Focus on early assessment, intervention and supports

42 Core Capabilities Clinical pathways Care coordinators and navigators Medical Home model Preference for certified EHR, certified Meaningful Use capabilities, and health information exchange (HIE)

43 ACO Population Health Home Structure, Governance and Shared Savings IT Infrastructure and Data Management Public Health Home Care & Hospice Rx & Lab Primary Care Mental Health Substance Use Disorder Surgical & Specialty Hospital & Rehab Long-Term Care

44 California & ACOs CMS has approved 400+ ACOs nationwide. Include a range of providers and sizes; about half are physician-led organizations that serve fewer than 10,000 beneficiaries. One-fifth include rural health centers, community health centers, and critical access hospitals, which serve rural and low-income communities. Nearly 30 ACOs in CA 44

45 Sampling of Golden State ACOs 1. Brown & Toland Physicians, based in San Francisco; 2. HealthCare Partners Medical Group, which serves Los Angeles and Orange counties; 3. Heritage California ACO, which serves southern, central and coastal California; 4. Monarch HealthCare, based in Orange County; 5. PrimeCare Medical Network, which serves Riverside and San Bernardino counties; 6. Sharp HealthCare System, based in San Diego 7. ApolloMed Accountable Care Organization in Glendale; 8. Golden Life Healthcare in Sacramento; 9. John Muir Physician Network in Walnut Creek; 10. Meridian Holdings in Hawthorne; 11. North Coast Medical ACO in Oceanside; and 12. Torrance Memorial Integrated Physicians 13. UCLA ACO 14. Cedars Sinai ACO 15. Hill Physicians/Dignity Health, serving Sacramento 16. Palo Alto Medical Foundation 17. Santa Clara County IPA 18. St. Joseph Health 45

46 Golden State ACOs 46

47 Golden State ACOs 47

48 Golden State ACOs 48

49 ACOs must develop a process for identifying patients who have complex needs (multiple chronic conditions) or are at high risk of developing such needs and provide them with wellness and prevention programs, disease management, and complex case management, as indicated ACOs make available or support providers’ use of electronic prescribing, electronic health records systems, registries, and self-management tools Population Health Management

50 Integration Informing & Educating (patient and family education) Measuring and Monitoring (testing, records, etc) Assuring Access to Services (continuum of care, hotline, transport) Prevention Risk Factors Screening Monitoring Prevention Risk Factors Screening Monitoring Assess- ment Diagnosis History Testing Consult Assess- ment Diagnosis History Testing Consult Preparing Counseling Interviews Teaming Preparing Counseling Interviews Teaming Intervening Orders Procedures Counseling Therapy Intervening Orders Procedures Counseling Therapy Recovery & Rehab Fine tuning Discharge planning Recovery & Rehab Fine tuning Discharge planning Monitoring & Managing Compliance Lifestyle Monitoring & Managing Compliance Lifestyle Feedback Loops Managing Knowledge (training, process improvement, etc) Provider Margins made here Patient Value defined here (health/cost) Source: M. Porter and E. Olmstead Teisberg

51 Common Collaborative Care Models 1. Coordinated model: behavioral services available at a separate clinic/location Access and convenience is low; patients may not show up for referral/follow up care 2. Co-located model: behavioral services available at the same medical center/clinic More convenient for patients and providers 3. Integrated: behavioral services are part of the medical treatment within the clinic Creates a “medical home” for the patient with all services under unified management Facilitates closer communication, patient tracking and follow up Source: Patient Centered Primary Care Collaborative

52 Medicaid Health Homes Defined in Section 2703 of the ACA to expand traditional and existing medical home models to build linkages to community and social supports to enhance coordination of medical, behavioral, & long- term care New Medicaid State Plan Option effective 1/1/2011 a comprehensive system of care coordination for individuals with chronic conditions Health Home providers will coordinate all primary, acute, behavioral health and long term services and supports to treat the “whole-person” Can include dual eligibles 52

53 Health Homes The chronic conditions listed in statute include mental health condition, substance abuse disorder asthma, diabetes, heart disease, and obesity (as evidenced by a BMI of > 25). States may add other chronic conditions for approval by CMS 53

54 Health Homes: Key Features Shared services, goals and risk Central management Community or regional networks Multi-disciplinary community health teams Dedicated care coordinators Integrated primary care/behavioral health services High-performing primary care providers Population management tools Health information technology & data exchange 54

55 Health Homes: BH Rationale People with BH conditions die years earlier by up to years One million people with behavioral health conditions will die from heart attack or stroke in the next 5 years. Behavioral health conditions are implicated in all major chronic diseases, and vice versa Disabled Medicaid beneficiaries with SMI - 29% to 49%. SMIs represented in 3 of the top 5 most prevalent dyads are in the highest-cost 5% of beneficiaries 55

56 Community-Based Strategy for Improving Care of High-Cost Patients Community governance High-cost patients with multiple chronic conditions Payment reformPrimary care Health information technology Medical home care management fee Accountable Care Organizations Bundled payment for acute episodes Partial capitation Shared savings and shared risks Gain-sharing Value-based purchasing Public–private payer harmonization Medical homes Primary care practice teams System of off-hours care Transitions in care Reduced readmissions Care coordination Electronic health records Electronic prescribing Meaningful use Support for self-care Mobile health applications Computerized decision support Regulatory relief, technical assistance Seed funding

57 BEHAVIORAL MEDICINE The Medical Sector responds with a solution of their own

58 Issues of BH in Primary Care The importance of primary care integration PCPs deliver half of BH care PCPs prescribe 70% of psychotropic drugs PCPs have limited BH training; widespread under diagnosis Up to 70% of primary care visits stem from psychosocial issues Problems faced by PCPs PCPs have limited time to treat psychosocial issues BH care inaccessible to PCPs Many referrals do not result in visits/services

59 Behavioral Medicine “the field concerned with the development of behavioral science knowledge and techniques relevant to the understanding of physical health and illness and the application of this knowledge and techniques to prevention, diagnosis, treatment, and rehabilitation” Yale Conference on Behavioral Medicine

60 Behavioral Medicine Targets Cystic Fibrosis Depression Diabetes Eating Disorders HIV/AIDS Obesity Pulmonary Disease Substance Use Disorders including Smoking Cessation Women's Health Adolescent Health Aging Arthritis Asthma Cancer Cardiovascular Disease (heart disease, hypertension, stroke), Children's Health Chronic Pain

61 Behavioral Medicine Strategies  Integrating behavioral medicine strategies into primary care and managed care;  Increasing public awareness of behavioral interventions;  Including effective behavioral interventions in development of clinical practice guidelines;  Increasing use of information technology for behavioral interventions;  Improving integration of research and practice

62 Big Picture Thinking in Behavioral Medicine

63 CONSOLIDATION IN BEHAVIORAL HEALTH The Market Responds with a Business Solution 63

64 M&A Activity 2012 In 2012, dealmakers committed $143.3 billion to finance the year’s activity in the health care merger, acquisition and takeover market. In terms of the number of health care deals announced, 2012 was one of the busiest in the past decade, with 1,063 deals, up 5.9% compared with 2011’s 1,004. Source: Irving Levin Associates, January 2013

65 Deals in 2012 Sector % Change 2012 Value2011 Value% Change Behavioral Care %$1,006,650,000$304,488, % Home Health & Hospice %$5,718,950,000$289,992, % Hospitals %$1,886,217,010$8,280,060, % Labs, MRI & Dialysis %$2,213,817,500$6,002,543, % Long-Term Care %$9,180,208,579$16,413,994, % Managed Care %$18,815,500,000$7,906,000, % Physician Medical Groups %$4,411,539,350$466,534, % Rehabilitation %$750,243,000$1,337,796, % Other %$12,033,703,400$40,722,978, % Services subtotal %$56,016,828,839$81,724,387, % Source: Irving Levin Associates, January 2013

66 Behavioral Health This sector will see a lot more activity in the future, now that mental health issues have gained national attention and addiction has lost much of its stigma Health care M&A activity will stay strong through 2013 as the sector looks forward to welcoming many more insured patients once the Affordable Care Act fully takes effect on January 1, 2014

67 Behavioral Health M&A activity in behavioral health has surged because in such a fragmented service sector, there is substantial untapped opportunity for consolidators to create critical mass and competitive advantages With acquisition demand across the spectrum of behavioral health and social services greater than supply, valuations have climbed.

68 Behavioral Health

69 Value Add: Behavioral Health Source: Wyatt Matas, 2013

70 Creating Value Many providers will play a vital role in achieving value- based care milestones required by the ACA. Within these markets especially, value-based care requires: 1. Aligned leadership, 2. Strategies, and 3. Operations to align for the realization, building, or maintenance of consistent growth Source: Wyatt Matas, 2013

71 Behavioral Health Value The market now understands the cost impact of patients with behavioral and physical health co-morbidities, leading payers to search, test, and develop new care models to address both behavioral and physical health. While integrating behavioral health and physical medicine, redefinitions of case management promotes need for cross-trained health workers, placing greater emphasis on social and life circumstances.

72 Factors Contributing to Growth National expenditures on mental health and substance abuse treatment are expected to reach $239 billion in 2014, up from $121 billion in 2003, representing a compound annual growth rate of nearly 7%. The demand for behavioral health services has increased in recent years due to earlier and more accurate diagnosis of mental health conditions and the de-stigmatization of seeking treatment.

73 MARKETING BASICS 73 New skills and strategies for Behavioral Health providers

74 Marketing Basics 1. Is there a market for what you have to sell? What specifically is that market? 2. What particular product(s) are in highest demand? 3. What level of competition exists in each space? 4. What regulations and other constraints act on those products and markets? How? 5. What does it cost to produce your product or service? 6. What price is acceptable to each market? 7. Are the margins sufficient to become successful and maintain viability? 8. Is it possible to innovate your product making it more effective, less complex and more convenient for the consumer at a lower cost? 74

75 Market Data Analysis What does market profile data tell you about: a. Competition among payers? b. Competition between key providers? c. Availability of continuum of services? d. Gaps in services, populations served, or holes in service areas? e. Opportunities to innovate? f. Opportunities to provide payers with a real solution to a real problem? g. Opportunities to partner?

76 What Constitutes Market Research for Behavioral Health Providers? Population/Census Data Prevalence and Epidemiological Data Competitive Analysis Health Insurance Market Research Analysis of Medicaid Market Due Diligence into Potential Partners Laws, Rules and Regulations Reimbursement Other?

77 Innovation in the Market  Is the political, legislative and regulatory environment stimulating change in the market (Yes)  Is government supporting the diffusion of innovations (Yes)  Has the economy performed at a level that is impacting consumer behavior and pricing? (Yes)  Are social and cultural dimensions of the market supportive of new approaches? (Yes)  Is technology supporting innovations? (Yes)

78 Fundamentals of Market Positioning Market Research Customer Value Proposition Channels, Alliances and Partnerships Product Development Pricing Brand Message

79 Questions Patrick Gauthier, Director Offices: Palm Desert, CA Sudbury, MA Germantown, MD Albany, NY


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