Three firms vie for high-stakes health contract - East Valley Tribune: News

Three firms vie for high-stakes health contract

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Posted: Sunday, May 20, 2007 6:06 am | Updated: 6:30 pm, Fri Oct 7, 2011.

Three companies are vying for what one lawmaker calls the “holy grail” of mental health contracts — a three-year deal worth $1.4 billion to administer Maricopa County’s embattled system.

After eight years, a raft of lawsuits, state fines and enough audits to fill a library, ValueOptions still wants more.

Two other private national firms, Cenpatico Behavioral Health and Magellan Health Services, also have their eyes on the prize, which the state Department of Health Services is to award later this month.

At stake are the lives of the county’s 70,000 poor and mentally ill, a lot of taxpayer cash and two class action lawsuits.

The new contract requires significant changes in how services are delivered and paid for, with a turnaround time of just three months, giving rise to worries that the transition will be a mess no matter who wins the lucrative deal.

“There could be a whole lot of problems in a very short period of time,” said David Miller, executive director of the Arizona Council of Human Service Providers. “History would say it’s going to be tough.”

Many provisions in the revamped contract respond to years of complaints from patients, their families and mental health care providers.

Currently ValueOptions is the largest provider of services in the system it oversees, operating 24 clinics throughout the county with about 1,800 staff members.

That goes away with the new contract, which will give clients a choice between two provider plans and requires two more urgent care facilities, most likely one in the East Valley.

While choice may be a good thing, some observers also see it as another layer of bureaucracy between people and their care.

The county’s mental health care system has been riddled with problems, from a 25-year-old class action lawsuit to the bankruptcy of former administrator ComCare.

Since ValueOptions took over management from the state in 1998, state and courtordered audits have revealed declines in treatment, budget cuts and funding transfers that beef up some services at the expense of others.

The company has been sued by its clients and fined $200,000 by the state in connection with two suicides. Its administrative costs in 2004-05 included more than $4 million in medical malpractice and legal fees. Penalties that year totaled $678,000, according to the state Auditor General’s Office.

“Is anybody else going to do a better job?” said Sherri Walton, executive director of the Arizona Mental Health Association. “I don’t think anybody else can do a worse job. It’s worth the gamble to give somebody else a shot at it.”

Some providers blame the state health department for ValueOptions’ shortcomings, saying it has not offered enough oversight. They say the problems plaguing the company are endemic to running a big behavioral health system, and suggest splitting the county into two separate entities.

Others argue that awarding the contract to a new company would be disruptive to clients and unfair to ValueOptions, which is putting in place recovery and rehabilitation programs that clients have been clamoring for.

“In comparison to when I first started seeing them in 2000, there have been a lot of improvements,” said client Katherine Schindewolf, who’s been diagnosed with depression and post-traumatic stress disorder.

“But it’s a big fat mess of a system,” she said. “Whomever gets the contract, we as consumers expect the money to keep going toward the wellness programs.”

ValueOptions officials say they look forward to ending their role as a service provider.

“A healthier system is to have the managed care company manage the care and the providers provide services,” said Dr. Don Fowls, adviser to CEO Ed Irby.

Fowls said ValueOptions staff will find jobs with new and expanded agencies under the new contract, but he declined to discuss details of the transition plan while the bidding process is open.

“People are understandably anxious,” he said. “The reality remains that someone has to provide the care and the services. I think the people doing it today will be just fine.”

Magellan spokeswoman Erin Somers also deferred questions about her company’s proposal until after the contract is awarded.

But Cenpatico CEO Terry Stevens, in an interview earlier this year, said she was already talking with agencies and staff about how a switch to her company would work. She said waiting until the state makes a decision is too late.

A new behavioral health authority would take over leases from ValueOptions clinics and install new providers, she said, not a simple task but certainly doable without disrupting care.

“In the first year, your biggest job is not to shake up the system, it’s to transition it,” she said.

Cenpatico has been criticized for taking too long to reimburse providers. Claims and billing processing is considered a strong suit of ValueOptions.

ValueOptions has been stung by a series of critical audits, required under settlement terms of a class action lawsuit against the state and county, as well as a state review requested by the Legislature.

The most recent audit by court monitor Nancy Diggs, released in January, showed treatment of the county’s seriously mentally ill continued to decline in some areas, including housing and recovery plans.

The improvements, Diggs wrote, were tempered by budget cuts and layoffs.

“Given all these factors, the improvements in compliance may be very fragile and not sustainable over time,” Diggs wrote to Maricopa County Superior Court Judge Karen O’Connor.

ValueOptions argues that the audit, and the process of complying with the settlement agreement, is too heavily focused on paperwork at the expense of measuring actual outcomes.

One of the company’s loudest critics is Rep. Jonathon Paton, R-Tucson, who pushed for the state audit and held hearings last year after two ValueOptions clients committed suicide.

Paton said ValueOptions is making too much money while failing the state’s most vulnerable citizens.

“They are a powerful company with powerful support. They should be delivering powerful results, and I haven’t seen it,” Paton said.

“I don’t think we’re getting the care that we’re paying for.”

An audit committee was reviewing the three proposals this week and will make its recommendation based on point totals in various areas, said department spokesman Michael Murphy. A decision is expected this month.

Senate Health Committee Chairwoman Carolyn Allen, RScottsdale, said she’s received complaints from ValueOptions clients over the years but believes that would be the case no matter who runs the system.

“These are the most fragile citizens that we have,” Allen said. “The family members also suffer so much pain and grief.

“And when things don’t go how they think it should, then they have to find somebody to blame. Sometimes I think it’s probably justified. Sometimes it’s the best that could be done.”

A new emphasis has been placed on recovery and empowering patients to be their own best advocates, according to the revamped contract. Nowhere is that more evident than among the ValueOptions clients who are training their peers under an innovative program to identify strengths and anticipate hurdles.

Katherine Schindewolf is one of them. She believes that, with the right support, people can get better and they can thrive.

“No matter who takes it from here, they absolutely have to be recovery oriented and consumer driven,” Schindewolf said.

“This is what we need. We’d like to have a life,” she said. “We want to get well. We want to stay well.”

The system

The state Department of Health Services provides behavioral health care to adults and children who qualify, based on income and illness. The department’s Division of Behavioral Health Services contracts with organizations, some for-profit and some nonprofit, called Regional Behavioral Health Authorities, to administer managed-care mental health and substance abuse services in specific regions. Four regional authorities oversee services, including therapy, housing, medication and case management, in six areas of the state.

Two lawsuits govern behavioral health care for some of the state’s adults and children.

A settlement agreement in Arnold v. Sarn, a class action suit filed in 1981, directs the state to provide adequate funding for indigent, seriously mentally ill adults in Maricopa County, and includes oversight by a court monitor.

The settlement in J.K. v. Eden, a class action suit filed in 1991 on behalf of poor children, requires the state to abide by 12 principles in delivering behavioral health care to children, including collaborating with the children and their families. Due to expire July 1, a judge has extended terms of the settlement for another three years.


The private Virginia behavioral health services organization oversees 40,000 providers that care for more than 25 million people, but its biggest contract is Maricopa County. Publicly funded programs stretch from New Mexico to metropolitan New York and Puerto Rico, as well as services to military members, retirees and their families through the Department of Defense and TRICARE.

ValueOptions was awarded the county contract in 1998, and it’s been renewed twice. The state declined a two-year renewal option this year and put the contract out for bid. It has weathered a string of controversies, including patient suicides, hefty state fines and critical audits.

Parent company FHC Health Systems, headed by Ronald I. Dozoretz, also provides pharmacy benefits management, claims processing and mail-order prescriptions.

Magellan Health Services

The publicly held for-profit from Connecticut manages health services for government agencies, corporations and insurance companies. Its public sector behavioral health segment has contracts with the Iowa and Nebraska, five counties in Pennsylvania and parts of Florida and Tennessee.

Magellan Behavioral Health filed Chapter 11 bankruptcy in March 2003 and came out in April 2004. At the time, it was the largest provider of employee assistance and mental health services in the U.S., with debts of more than $1 billion.

Cenpatico Behavioral Health

The St. Louis for-profit company, owned by Centene Corp., has been the regional behavioral health authority for Pinal, Gila, Yuma and La Paz counties since 2005.

Centene Corp. manages health plans in Indiana, Georgia, New Jersey, Ohio, Texas and Wisconsin. Speciality companies include vision, pharmacy, long-term care, nursing, disease management and behavioral health care.

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