Capitation of Public Mental Health Services in Colorado: A Five-Year Follow-Up of System-Level Effects

Objective:

Capitated Medicaid mental health programs have reduced costs over the short term by lowering the utilization of high-cost inpatient services. This study examined the five-year effects of capitated financing in community mental health centers (CMHCs) by comparing not-for-profit with for-profit programs.

Methods:

Data were from the Medicaid billing system in Colorado for the precapitation year (1994) and a shadow billing system for the postcapitation years (1995–1999). In a panel design, a random-effect approach estimated the impact of two financing systems on service utilization and cost while adjusting for all the covariates.

Results:

Consistent with predictions, in both the for-profit and the not-for-profit CMHCs, relative to the precapitation year, there were significant reductions in each postcapitation year in high-cost treatments (inpatient treatment) for all but one comparison (not-for-profit CMHCs in 1999). Also consistent with predictions, the for-profit programs realized significant reductions in cost per user for both outpatient services and total services. In the not-for-profit programs, there were no significant changes in cost per user for total services; a significant reduction in cost per user for outpatient services was found only in the first two years, 1995 and 1996).

Conclusions:

The evidence suggests that different strategies were used by the not-for-profit and for-profit programs to control expenditures and utilization and that the for-profit programs were more successful in reducing cost per user. (Psychiatric Services 62:179–185, 2011)