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House | March 4, 2015 | Chamber | House and Human Services

Full MP3 Audio File

Ladies and gentlemen, please take your seats and we will get our subcommittee meeting started. Now would be a good time to check your electronic devices and make sure that they are turned to vibrate or off so your ringing won’t disturb the committee. This is a joint committee on appropriations for the Department of Health and Human Services. I’d like to introduce our House sergeant in arms, Young Bae, Bill Morris, Jim Moran. Senate sergeant in arms, Canton Lewis and Steve Wilson. Appreciate the work that these gentlemen do to keep us on track and to be so helpful to us as we go through these hearings. We have two pages who are from the, sponsored by members of the House with us today, if you’ll raise your hand when I call your name. Jordan Trivet from Bladen County, sponsored by Representative William Brisson. Jordan, stand up so we can get a look at you. Glad to have you with us today. And Nickie Vermule Apoly. Sorry about that. Vickie, we’re glad to have you with us. She’s from Cabarrus County, sponsored by Representative Pittman. Glad to have these young folks with us and we hope that your stay in Raleigh will be productive and informative for you. Understand we have a Senate page. Okay, I have found it. Daria Thomas is from Kinston. Daria is sponsored by Senator Don Davis. I apologize, the, could not find your name there for a moment. I should have known it. The agenda has been published and we will stick to the agenda for today, and we appreciate everybody being here during this roller coaster weather we’re having outside. First item on the agenda is a presentation from Jeff Grimes from the program evaluation division. After Mr. Grimes’ presentation is complete, Joyce Jones from the legislative drafting division will also offer comments. So we’re gonna invite Mr. Grimes in. Mr. Grimes, I believe you have some other members from PED with you and if you’d like to introduce them or have their comments as you go along, that would be fine. You are recognized for your comments. [SPEAKER CHANGES] Thank you, mister chair. We also have Carol Shaw, Brent Lucas, and Shawn Hamel from the program evaluation division team here today. My name is Jeff Grimes. I’m a senior evaluator with the program evaluation division. Today I’ll present the findings and recommendations from the report entitled, the Department of Health and Human Services should integrate state substance abuse treatment facilities into the community based system and improve performance management. This project is a result of the appropriations act of 2013 which directed the study. To start out, there are two primary components to the state system for public substance abuse treatment. The first that I’ll discuss is the alcohol and drug abuse treatment center, or ADATCs. There are three ADATCs in North Carolina, Julian F. Keith in Black Mountain, RJ Blackley in Butner, and Walter B. Jones in Greenville. The ADATCs provide 24/7 inpatient treatment for those with a substance use disorder. Services include psychiatric stabilization, detoxification, substance abuse treatment and education, and medical care. In fiscal year 2013-14, the three ADATCs combined operated 196 beds, admitted 3,875 individuals for treatment, and spent over $46 million providing that treatment. The ADATCs rely heavily on state general fund dollars to cover operating expenses. In fiscal year 13-14, state appropriations covered 90% of all expenses while the other 10% of expenses were covered through receipts. The federal program Medicare is the largest source of receipts at almost 8% of the total. As you can see, the ADATCs receive very little revenue from individuals paying out of pocket, from private insurance, or from the state’s Medicaid program. The second component

Component of North Carolina’s system for public substance abuse treatment is the community based system, which is made up of nine local management entities/manage care organizations, or LME/MCOs. The LME/MCOs are overseen by the division of mental health, developmental disabilities, and substance abuse services and receive state appropriations to contract for substance abuse treatment in the community based system. LME/MCOs establish networks of providers that purchase substance abuse treatment services from those providers. LME/MCOs also have the responsibility for implementing a 24 hour a day screening, triage, and referral process, provider monitoring, utilization management, utilization review, and determination of the appropriate level and intensity of services for individuals, care coordination, and financial management and accountability for the use of state funds. Before discussing each finding, I want to refer you to side one of the handout, which is the American Society of Addiction Medicine continuum of care for adult substance abuse treatment. This continuum of care is a framework created by the American Society of Addiction Medicine or ASAM, and has been adopted by DHHS for use in placing individuals at the appropriate level of care for treatment. These levels of care are important throughout the rest of this presentation. On the left are the least intensive levels of care, such as early intervention or outpatient services, and each level of care is associated with a number. On the far right are the most intensive levels of care, with medically managed intensive inpatient services being the highest. These are services typically delivered in a community hospital, a psychiatric hospital, and at the ADATCs in North Carolina. One thing to emphasize is that the ASAM continuum is about the kind of setting for treatment. It does not dictate the type of treatment modalities are used. So a treatment modality is a specific type of treatment or approach to treatment delivered by a provider. The idea behind the ASAM continuum is that you can improve clinical outcomes and cost effectiveness by matching treatment setting to the needs of the individual, preventing under treatment and costly over treatment. Our first finding is the three alcohol and drug abuse treatment centers operate with a high degree of autonomy, resulting in operational and treatment differences. Now, we expected going into the project to see consistency across the three ADATCs that would ensure uniform treatment across the state regardless of which facility provides that treatment. However, that wasn’t the case and we did find several differences. In this slide you can see some of the differences in operation and treatment at the three ADATCs. One difference is that the Julian F. Keith facility has roughly 40 more budgeted positions than the other two facilities. Even though the ADATCs are all state facilities and provide the same level of care, Julian F. Keith has a very different number of positions as compared to the other two. As a result, the other two facilities are, rely more heavily on contractors to make up for the difference in state personnel. Next, you’ll see that RJ Blackley had about $900,000 more in expenses than the other two facilities. One final difference is that the cost per stay at Walter B. Jones of $10,998 is about 1,500 less than the other two facilities. The primary reason is that Walter B. Jones keeps patients for less time than the other two facilities. While we’re talking about differences in facilities and autonomy, it’s also important to mention that one potential result is over expenditures. In the 2013 session, the general assembly reduced ADATC appropriations by $4.9 million for fiscal year 13-14. However, the ADATCs actually overspent by $5.2 million which means that even without the cuts, the ADATCs would have overspent. The way they attempted to meet the cuts was by eliminating a combined 44 beds from operation at the facilities, and eliminating vacant positions. Ultimately, the over expenditures at the ADATCs were covered by unused state appropriations at the O’berry Neuro Medical Treatment Center and the Murdoch Developmental Center, which are also operated by the division of state operated healthcare facilities. Finding two, separation of the alcohol and drug treatment centers from the community based system creates operational silos which provide challenges to utilization management, continuity of care

And information management. An important concept to discuss is the existence of structural incentives that promote an over-reliance on ??. North Carolina funds ?? through an appropriation, while also giving LME/MCOs separate funds to develop networks of providers to treat individuals. When a patient is referred to an ADATC, the ADATCs are outside of the LME/MCO system and the LME/MCOs bear no cost for treatment at the ADATCs. In fact, when the LME/MCO refers a patient to an ADATC, the LME/MCO can avoid having to pay for treatment elsewhere. ADATCs rely on state appropriations and have limited incentive to restrict utilization of services to only those individuals who need a high level of care, because most of the cost of operations is already covered every year through state appropriations. Finally, LME/MNCOs don't have much incentive to invest in community-based services that would be a substitute for ADATC services because the LME/MCO would then have to pay for community services whereas they don't have to pay for ADATC services now, because the state is paying for those services directly. In fact an LME/MCO has just the opposite incentive to use as much ADATC services as possible because those services are essentially free to the LME/MCO and if a given LME/MCO doesn't use much ADATC services, other LME/MCOs will be able to use even more. Because state appropriations primarily fund ADATCs and LME/MCOs do not pay for those services, there is no payer who may question the need for an ADATC service or limit over-utilization. One result is that you can find cases of prolonged lengths of stay at ADATCs. The longest case we identified was an individual who stayed at an ADATC for 335 days straight. In total, we identified 113 individuals with prolonged lengths of stay. Those extra treatment days for those prolonged lengths of stay cost the state more than 1.5 million during the nearly two year time period we examined. Another way in which the separation between the ADATCs and the community based system causing problems is insuring continuity of care. As discussed, the ADATCs and community based system are separate components and with that comes challenges insuring continuing care because it requires effective communication, information sharing, and planning. Because substance use disorder is a chronic condition, after leaving an ADATC, an individual is likely to need further treatment at a lower level of care in order to promote long term recovery. For example, someone might leave an ADATC and continue treatment at a residential or outpatient facility. The Division of Mental Health set a goal that at least 40% of persons discharged from an ADATC receive community based follow-up treatment within seven days of discharge from an ADATC. This measure of follow-up treatment within seven days is shown in the graph by ADATC, by quarter. The reason this goal is in place is that we know from the literature that individuals benefit from continuing care in terms of improving long-term treatment outcomes. As you can see from the graph, performance on this measure has been declining since fiscal year 11-12, and the most recent data shows that coordination between the ADATCs and LME/MCOs falls well below the performance target. Finding three: separation of the alcohol and drug abuse treatment centers from the community based system limits North Carolina's ability to address service gaps and managed cost. When North Carolina transitioned to a managed care model for community based behavioral health, some of the expected benefits were a decrease in inappropriate use of inpatient care and an expansion of the array of services provided at the community level. These expectations were not unreasonable. Managed care typically results in decreased utilization of expensive inpatient settings as some services are shifted to less costly residential or outpatient settings. In North Carolina, ADATC utilization remains outside of the LME/MCO system, which has hindered the state's ability to fully realize the benefits of managed care. In fiscal year 11-12, the ADATCs made up 49% of non-Medicaid general fund dollars expended on substance abuse treatment, which means that many of the state's dollars for substance abuse treatment are outside of the managed care system. The closest thing that we have in North Carolina to a more fully developed community based managed care model is something called the Piedmont Demonstration Project.

Which shows that changing the incentive structure and expanding community-based services results in reduced ADAC utilization. Piedmont Behavioral Health was the pilot LMEMCO and served Cabarras, Davidson, Stanley, Roanne and Union Counties. PBH has since merged with other entities to form Cardinal Innovations Healthcare Solutions and is one of the nine LMEMCOs in the state. In 2003, PBH entered into a memorandum of understanding to begin receiving a per-capita share of state institution funds. PBH began receiving $10.7 million based on its share of state psychiatric hospital and ADAC funding. PBH then had to pay for the use of the ADACs and state psychiatric hospitals when someone from one of the five counties went there, and the rate for the ADACs was $260 a day. This arrangement remains in effect for just those five PBH counties in North Carolina and as you’ll see in a moment has had a dramatic impact on utilization of the ADACs. This graph shows admissions to the ADACs per 100,000 North Carolinians. The statewide average is in red compared with the average for PBH counties in blue. At the time of the PBH demonstration project in 2003, PBH utilization of the ADACs was slightly below the state average with 36 individuals per 100,000 being admitted to an ADAC compared to the state average of 42. By fiscal year 2012-13, PBH utilization was down to 2.6 individuals per 100,000 while the state average was still 42. Staff at PBH which is not Cardinal Innovations Healthcare Solutions, noted that one reason ADAC admissions are lower in PBH counties is due to the use of facility based crisis services which serve a need for local detoxification capacity and keep individuals from needing to go to an ADAC for detoxification. Cardinal contracts for the operation of two 16 bed crisis/detoxification facilties that serve the PBH counties. In addition, Cardinal reported to us having seven hospital detoxification providers that serve the counties and also paying for 300 individuals to receive treatment at a medically monitored community residential treatment facility in fiscal year 2012-13, which is level 3.7 on the handout of the American Society of Addiction Medicine Continuum of Care. In the report we tried to provide examples of alternative ways to serve individuals that an LMEMCO might use. Now, there’s no one size fits all alternative to serving everyone currently treated at an ADAC but I want to talk about an example of an individual who is in need of an ASAM 3.7 level of service, which is medically monitored intensive inpatient services. This is one level lower than ASAM 4.0, which is medically managed intensive inpatient services. ADACs admit and treat individuals at both the 3.7 and 4.0 levels. If an individual requires the 3.7 level, it would cost far less to treat that individual in the community-based system. So let’s start by looking at the average length of stay at an ADAC which is 16 days. Based on the cost per day in the last fiscal year of $771 a day, that stay at an ADAC would cost $12,336 for the 16 days. Alternatively, here is how that same level of care, 3.7, can be served in the community. First, the individual would receive facility based crisis services for detoxification. Facility based crisis is a 24 hour residential facility that provides detoxification and stabilization services. The average length of stay is five days for a cost of $1,500. The individual can then receive medically monitored community residential treatment services for the remainder of the time period at the cost of $3,003. This is a residential setting where there’s a medical or nursing monitoring and professionally directed treatment. In total the cost of the community-based services would be just over $4,500 compared to over $12,000 at an ADAC. Again, this example wouldn’t work for everyone served by an ADAC, but only in those in need of a 3.7 level. One final issue related to having the ADACs and community-based

Speaker changes : system separate is that this structure ?? levels because the unavailability gap in treatment service we found GPS in level of care in some base system some LMCO did not contract for any different level of residential Treatment if the LMCO didn't have any sort of residential treatment it needs it the next ?? higher level of care and the polices dictates that this individual gets at the higher level of care so having gaps in community ?? and aid gps who wouldn't otherwise require that level of care this ?? is inefficient because it would cost community a lower level if those service were visible ?? doesn't have access to the dollar resource ?? don't have the ability locate the ?? to receive treatment form the individual from the higher level of access finding for north Carolina locks performance management system ?? we found this exiting performance management system implies the techniques of process ?? outputs than outcomes,outcomes date would be useful in such as using the effective information of providers ?? in order for the division of mental ?? which plays integrated performance receiving which was the previous claim system as of mental health ?? claim denied which is normal than the denial in the past even when reliable income data was reliable existing performance emphasized management system process outputs rather than outcomes ?? because they can guidelines for internal improvements ?? treatment measure are all process in output measures but they don't actually tell you whether ?? for result of treatment ?? gives Carolina better way to use in case of public subversive treatment these outcomes use for ?? improvements in personal health overtimes ?? in example of an important indicator ?? either obtain mention employment post treatment for bus performance management systems will ?? to see the best outcome overtime ?? in types of providers that are most effective and now our recommendations this report has two recommendations our first recommendation is that ?? into the alcohol treatment centers into immunity base substance bused treatment system open of the things that we have discussed in the report is that ?? in recommend the state of recommendation ?? recommendations room the id ?? then in 2001 in report of join legislative ?? committee needs development ?? and house ?? services ?? they recommend state facilities by seeds supportive so in many ways these recommendations is existed for many yes but is not been ?? upon but if you locate the hand off has the exhibit describing tax indication process that we recommended the aid axe will be integrated into the

Community-based system by transitioning ADAC appropriations to the community-based system and requiring LME/MCOs to pay for ADAC services when they contract with ADACs. Because an immediate switch of all funding could negatively affect the availability of treatment services, we recommend a multi-year process, which would start with one year of planning in order to allow LME/MCOs to develop plans for how they would spend reallocated ADAC funding and to allow ADACs time to plan to move to a receipt-supported business model. After the planning year, ADACs would have their appropriations reduced in 25-percent increments over a three-year period and, by the fourth year, would receive no appropriations. At the same time, LME/MCOs would start to receive reallocated ADAC funding in increasing increments of 25% and would receive the full amount of reallocated ADAC funds in the fourth year. LME/MCOs would also begin to have to pay a portion of the cost of ADAC treatment and, by the fourth year, would have to pay the full cost when they contract with ADACs. LME/MCOs would be able to determine how they spend the reallocated ADAC funding, but they would have to spend it on substance abuse treatment, either from community providers or from the ADACs. Having this flexibility would allow LME/MCOs to determine how much inpatient-level services they need to purchase relative to other levels of care and would allow them to contract with providers that best fit their needs. ADACs would have to adjust their operations based on contracts with LME/MCOs as well as other receipts, such as Medicare, self-pay, or private insurance. In order to ensure proper planning and oversight of the transition process, we recommended the following timeline: By February 1, 2016, LME/MCOs would need to submit plans to the Division of Mental Health on how they plan to use reallocated ADAC funding. Two months later, DHHS should submit its own business plan for the ADACs to the Joint Legislative Oversight Committee on Health and Human Services, outlining its estimate for the demand for ADAC services from LME/MCOs, procedures for making operational adjustments based upon projected demand, and the method for establishing rates for ADAC services. DHHS would also report annually to the Joint Legislative Committee on Health and Human Services and the Joint Legislative Program Evaluation Oversight Committee on October 1 from 2016 through 2020 on the integration of the ADACs into the community-based system and the use of reallocated funds by LME/MCOs. The second recommendation is that the General Assembly should direct the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services to strengthen its performance management system for substance abuse treatment by improving data collection and tracking long-term outcomes. In order to ensure that North Carolina has effective substance abuse treatment services, the General Assembly should direct the Division of Mental Health to develop a plan to improve performance management of the publicly funded substance abuse treatment system. The plan should identify specific long-term outcome measures that the Division of Mental Health will begin tracking, challenges with NC tracks that limit the ability of the division to implement performance management and proposed remedies, data elements that would allow the Division of Mental Health to improve the process for analyzing gaps in the community-based system, steps for how the division can use long-term outcomes in an order to improve performance management and timelines for all steps required to begin tracking long-term outcomes. The Division of Mental Health should consult with LME/MCOs and other state agencies and divisions of DHHS in order to plan to integrate other administrative data into a performance management system. The division should submit this plan to the Joint Legislative Oversight Committee on Health and Human Services by January 15, 2016. In summary, separation of the ADACs from the community-based system has created several problems, and these limit the ability of North Carolina to address substance abuse treatment service gaps, provide a seamless continuum of care, and manage cost. DHHS should integrate the ADACs into the community-based system and improve its performance management system by tracking long-term outcomes. This concludes my presentation for today. The full report is available online and includes a response from DHHS. I’d be happy to answer any

Any questions now with the direction of the chair. [SPEAKER CHANGES] Thank you, Mr. Grimes. Ms. Jones from bill drafting is here to respond with a draft bill and we will hear her comments and then we will open up for questions at that time. Ms. Jones? [SPEAKER CHANGES] Good morning, Mr. Chair and members of the committee. You have in your package house bill 119 as well as a bill summary, and the bill implements the recommendations that Mr Grimes just discussed. I'm gonna go through the bill analysis for you. Section one sets forth the definitions that apply throughout the bill. I will just call to you attention that one page one of the bill on line 29, there is a definition of a transition period, and this is the period of time during which all of this transitioning of funds is to occur. It's a three year period that begins July 1, 2016 and it ends on June 30, 2019. And during that time period the ADATCs are to be fully integrated into the array of publicly funded substance abuse services that are managed by the LME/MCOs. Sections two through six of the bill implement recommendation one of the report. In particular, section two directs DHHS to prepare by April 1, 2016 a three year transition business plan for integrating the ADATCs into the array of publicly funded substance abuse services managed by the LME/MCOs. It lists five mandatory components of the plan, and those are the LME/MCO's projected demand for ADATC's services, both during the transition period and during the first three fiscal years following full integration, the projected availability of ADATC services during this time period, procedures for making operational adjustments at the ADATCs, a methodology for establishing and updating the rates to be paid by LME/MCOs for ADATC services, a uniform process for LME/MCOs to give prior authorization for ADATCs to admit and treat individuals for whom LME/MCOs will be financially responsible. Section three provides for the termination of all direct state appropriations for ADATCs effective July 1, 2019 and isntead reallocates these funds to the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services for community services in order to allow the LME/MCOs to assume full responsibility for managing these public funds, including those delivered through the ADATCs. To help the LME/MCOs do some advance planning for assuming this enhanced management responsibility, the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services is directed to provide each LME/MCO with its estimated share of these fund allocations by August 1, 2015 and to condition each LME/MCOs receipt of these funds on submission of a transition plan explaining how the LME/MCO will use these reallocated funds to increase capacity for providing the full continuum of substance abuse services. Section four imposes various requirements on the LME/MCOs to help them plan for and manage utilization and payment for ADATC services, namely it requires them to submit written transition plans to the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services by February 1, 2016, and those plans are to describe how the funds will be used. They need to share with the Division of State Operated Healthcare Facilities by February 1 of each year their projected demand for ADATC services in the upcoming fiscal year. They must enter into a contract with the Division of State Operated Healthcare Facilities by April 1 of each year for ADATC services they intend to use in the next fiscal year, and implement and enforce the prior authorization process established by the department. To help the ADATCs become fully receipt supported, section five requires the ADATCs to annually evaluate and adjust their operations to reflect the projected demand for services, and the availability of funding to meet the demand of services from direct state appropriations and

And weighted receipts from Medicare, Medicaid, insurance, self-pay and the LMEMCOs. Section 6 directs the Division of Mental Health, Developmental Disabilities and Substance Abuse Services to monitor important aspects of the integration process during the transition period so as not to jeopardize federal block grant funding and to ensure that under this new model the state will be able to offer all levels of substance abuse services. Section six also requires the department to report each October 1st from 2016 through 2020 on the status of fully integrating the ADACs into the array of publicly funded substance abuse services managed by the LMEMCOs and also it requires a breakdown of how direct state appropriations reallocated from the ADACs to the LMEMCOs have been used to purchase substance abuse services. In accordance with recommendation two of the report, Section 7 directs the Division of Mental Health, Developmental Disabilities and Substance Abuse Services in consultation with the LMEMCOs and as needed other DHHS divisions, the North Carolina court system and other state departments to develop and submit by January 15, 2016 a plan for a stronger performance management system that tracks long term outcome measures for publicly funded substance abuse services and the bill becomes effective when it becomes law. That concludes my comments, Mr. Chair. [SPEAKER CHANGES] Thank you, Miss Jones. Now we will open the floor for questions from members of the committee. Representative Brissom, Co-Chair. [SPEAKER CHANGES] Thank you, Mr. Chair. Mr. Grimes on, I guess it’s exhibit 19, the, I don’t know of anybody that don’t like the looks of the numbers, the cost, but I was just, and I may have missed it, you may have told us, the ratio of the patients coming from the ADAC treatments and the community-based treatments, do you have any kind of numbers on ratio of, you know, actually what the if we’re taking the people out of the circulation or how many of them is still staying in the circulation. I mean, if you’re coming back to the community-based treatments, if we’re not, they’re not getting the correct treatment and they’re right back and they’re constantly rotating through that, then, you know, it’s, I’m not sure that we’re getting the bang for our buck. So I wanna, in the drug, alcohol and drug, it seems to be that that’s what we’re doing with a lot of our patients. We bring them in, dry them out a couple days and they’re right back in the circle. We’re dealing a lot with the same patients, particularly in the local hospitals. [SPEAKER CHANGES] Sure. This example in exhibit 19 is really, it wouldn’t be so much leaving the ADAC and going to this, it’s how you could alternatively serve some of those 3.7 level individuals in the community rather than at an ADAC, and what we said is because ADACs are serving the 3.7 and 4.0 levels of care, we think that at least with those 3.7 there is a way to more efficiently treat them in a community-based setting when that is appropriate and when you do that you can save a lot of expense by sending them to a facility-based crisis service and then a more residential treatment service. As far as numbers on re-receiving treatment I don’t have any exact numbers. What the literature says is you want to see individuals going down that continuum of treatment over time, so they may be treated in ADAC. If they then get out of the ADAC and continue into treatment at, say, an outpatient setting, that’s considered a success. What is less successful is if you have someone who, say, was treated at an outpatient setting and their conditions worsens and has to go to an ADAC. We’re trying to move people down that continuum.

Of care. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Follow up, go ahead sir. [SPEAKER CHANGES] I understand that, but I was just looking at the prorated on the 16 day treatment, I’m just, I know if I was an MCO, I would certainly look at the bottom to begin with. I look at the dollars and it’s tightest dollars have been lately or, particularly but, I’m not sure how that this chart actually gives us a good idea of cost because community based, the standard ADATC time, is that 16 day treatment, is that standard with those? [SPEAKER CHANGES] Yes, sir. The average length of stay across the three facilities is 16 days. [SPEAKER CHANGES] Follow up? [SPEAKER CHANGES] But, but some people stay a lot longer, sorry. [SPEAKER CHANGES] So you’re saying that the community based treatment would be on a 16 day period too, right? [SPEAKER CHANGES] This was for purposes of illustration of someone, how you could treat them in the same time frame. The LME/MCO may treat them over say a 14 day period. They may feel that a 30 day period is, is more appropriate. It, it, it really is gonna depend on, on what they feel are the needs of that particular individual. One, one point to make is that this sort of scenario isn’t something an LME/MCO is probably going to consider right now, because if the LME/MCO pays for the scenario, goes for the scenario at the bottom, they have to pay that full cost. If they send the person to an ADATC, they’re essentially paying nothing right now. So what we’re saying is the, the current system incentivizes the LME/MCOs to send folks to the ADATCs, and we think the incentives that are in place, made much higher utilization of the ADATCs then you would see if you bring the ADATCs into the manage care system. [SPEAKER CHANGES] Thank you. Cochair, cochair Avila? [SPEAKER CHANGES] Thank you mister chairman. I have somewhat the same issue of using exhibit 19 and basically to clarify, your statement was that the chart shows the setting, and not the modality of treatment. So what we’re comparing here is the same treatment, but different settings. In other words, at the end of 16 days, that person would have gotten the same type of treatment regardless of either setting, because that as what was predicated by their condition. Am I correct? [SPEAKER CHANGES] Yeah, these, these are essentially the ADATC setting versus the 3.7 community setting. So that’s, that’s the difference. It’s the same number of treatment days, yes. [SPEAKER CHANGES] Follow up. That really wasn’t my question. I’m not concerned about the number of days they’re there. I’m concerned with the condition they will be in at the end of 16 days. And my question is, would it be equivalent regardless of the setting? [SPEAKER CHANGES] So the, the way our system is, is, is set up is it’s, it’s levels of care. You could actually receive the exact same treatment modality at an outpatient, at a residential, at inpatient. So for example, you’ve got, a modality would be something like motivational interviewing. That’s a type of modality. And what really drives the cost is not the modality, it’s the setting. So in the ADATCs setting you’ve got psychiatrists, you’ve got doctors, nurses. In a more residential setting, you’ve got physician monitoring and that’s what, that’s what leads to the different costs. The actual modalities delivered is gonna be dependent upon the provider. [SPEAKER CHANGES] I’m not through yet. I guess that’s what’s confusing me. The question is if they’re getting the same modality of treatment, why don’t we just have the same setting for everybody, rather than have a setting where they have physician supervision and one where the staff is psychiatrists and everything. I’m, what I’m trying

Speaker changes: ?? where is the determination made for particular person who comes in with medical condition due to substance of use who determines what they need in terms of ?? so the way it works out in our system is that ?? is gonna make that assessment using American magazine of addiction criteria and place them on that ?? of care and that's the assessment could be done by the LMNECO it is also done by the provider and also ?? it depends that person presence in that system Speaker changes:follow up it does depend upon setting in what type of need they have i think i wanted to her what you say Speaker changes:clarify what depends ?? and that goes from .5 to .4 and you pick point from there and that is setting the point on which ?? where they are be treated i was understanding you ?? in fact the setting does matter determine ?? because we don't have ?? need more so we don't have to need any ?? we needed to built continue of care where people would be serve Speaker changes:so the setting matters in terms of in terms of the intensity of the need of that individual so they are gonna get speed on i think 6 different criteria and if that seem that determines if that person needs 4.11 percent of care that were i dictates it would be beside the ?? would say come out that 3.1 and they come out at 3.7 from that assessment where they gonna get ?? so one of the issue that you can find out at pour system ?? they my get pumped up to the ?? Speaker changes:i just want to understand follow up the questions seem to the be the send the charge ?? in terms of the treatment to the patient ?? one final question comes ?? what does anything else is i don't get the side of what we are doing we are treating whose coming in whose going do we have mankind of side similar to what we are doing in medical side ?? emergency room medically do we know that we got certain population that make note whole problem and we are recycling in because probably from these problem ?? data collection and analytic is Mr. ?? trying to figure out what we are doing and how all we are spending money Speaker changes:i would differ to the division of mental health on i think we re certainly re folks who receiving treatment and again coming back for treatment but in terms of that percentage i don't have that data i don't know what the department does Speaker changes:moving to chair if anybody number we are happy to her t Speaker changes:??with our division of stte helth cre hospitl fcilities Speaker changes:good morning jeeny we re tem leder for upcomg ?? our redmission ret mong ll three generlly bout three percent or less generly mny or more ??

we have teams in the ADATC's, that when these high fliers are identified from the ED's or they keep circling back in, we have teams that bring LME/MCO providers in and say what can we do different so that this person has a more successful discharge and they're not readmitted later. So, better than the national average at 30 days of less than 3% readmissions. [SPEAKER CHANGES] Follow-up, if I may. [SPEAKER CHANGES] One last follow-up. [SPEAKER CHANGES] Yeah. Do we have that same kind of measurement for all the different points of continue of care in terms of if they get a treatment and show up again? [SPEAKER CHANGES] I would respond to say one of the things that we are, I think we're in agreement with a lot of the conceptual part of this PED study, one of the things we know that we want to do better is this tracking of individuals and that outcome data. So what happens for people, when they leave an ADATC and they go into community, do we follow folks along? And so that's part of what we are working on and, again, we agree. But I think that that's what we'll get to once we have those kinds of tracking measures and outcome data available. [SPEAKER CHANGES] Co-Chairman Dobson. [SPEAKER CHANGES] Thank you, Mr. Chairman, two quick questions if I may, and either to Mr. Richard or Mr. Grimes. It seems that, well the first question is it seems that the recommendation is to move in a direction more in line with Piedmont Behavioral Health, that would be fair to say? [SPEAKER CHANGES] Yeah, it's not exactly the same model as Piedmont Behavioral Health but it is definitely more in line with that. [SPEAKER CHANGES] Okay, do we have, and I know we have a lack of data and you just talked about that but since 2003, do we have anything, empirical or otherwise, that tells us that the care is at least as good at PBH as those not at PBH? [SPEAKER CHANGES] I'm happy to respond, and I think what we can tell you is that- [SPEAKER CHANGES] Mr. Richard, go ahead with that answer. [SPEAKER CHANGES] I'm sorry, sir. I've forgotten the protocol. What we have is, certainly information as Mr. Grimes presented in terms of the cost avoidance. What we can't tell you is that we know that we have, in the five, and it's really those five counties that were the original PBH counties, that we have better outcomes for all people who many have a substance abuse issue. I think that's, again, that's the real issue about us trying to follow that data in a much greater way, to make sure that we're looking at the outcomes across the system. I think we all recognize it's been a flaw in the way that we have done this is that we haven't had a continuum in terms of the way that we reviewed the information and outcomes and we're committed to make that happen. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] It would seem to me that we do need to be careful, then, to make sure that the outcomes are at least as good under this new model as they would be under the current model that we had before we move in that direction, before we even know that it's the right way to go. So. I think we need to be careful about that. And second, would there even be, would there be a roll for ADATC at all under this new model. It seems to me that there's no question that it would be a more limited role, but would ADATC even be able to be operational under this new model long-term? [SPEAKER CHANGES] Mr. Grimes. [SPEAKER CHANGES] There is certainly a role for that level of care. That level of care is definitely needed in our system. And then, under this new model, the role of ADATC's themselves is going to be dependent on what the LME/MCO feels they need within their catchment area. [SPEAKER CHANGES] Thank you, Mr. Chairman. [SPEAKER CHANGES] Co-Chairman Hise. [SPEAKER CHANGES] Thank you, Mr. Chairman. I think, in concept, I think this is an incredible idea. I think most research I've read indicates that community based settings have higher levels of outcomes and better services to individuals and less recidivism than you have in these institutional settings. Where I have a concern in trying to get the thought process of how this was developed, I know you're not a bill sponsor or those type of things, or an advocate for the positions but I'll start with this, this four year transition is what I see as very problematic, where I start seeing problems. And when PBH went to it they didn't phase it in over four year, they picked the time that their starting and moving forward. And it starts with, on slide number seven, when you reduce the department, the funding for the ADATC

By 25%. This reduction here, if I’m not mistaken, was a 12% reduction, which was 4.9, and they still spent 5.2 million over their budget. So from a state we, if we cut them by 25, how do we know they don’t just spend that amount anyway, transfer it from some other area and we’re stuck, and now we’re spending 25% more in the overall system. The other problem I have is for the LME/MCOs. Year one, year two you still have the same incentive system. They’re still sitting there and saying, if I can transfer this to the ADATC, then I’m not going to have the full cost, but now for the community based services, I’m only getting paid 25% of the cost, and so they can put 75% of the cost onto the ADATC. So as you transition in it, you keep the incentive to move individuals to the ADATC that’s coming in. You may lessen it a little bit, but it’s not until you actually transfer the funding completely that they have the actual incentive to say, let’s treat everybody in the most cost appropriate setting. Now that they’ve done, that’s what we do with LME/MCOs across the board. So could have been addressing that, this four year transition that’s coming over. Why not just make them receipt supported if that amount of funds are coming in to the state and it’s appropriate to be in the ADATCs? Why not make those adjustments in a single year? [SPEAKER CHANGES] So I guess I can try to walk you through our thinking on the, on the longer transition period. One, one is that the, the department felt like they needed more time to begin to move toward that different business model which is, which is receipt supported, which is a very different way to operate I think than, than they have been funded in the past. In, I, I think you’re right. In year one, you’re only looking at 25%, and part of the, the rationale for that is just getting the LME/MCOs and, and the ADATCs adjusted to, to billing to, to this idea of them being the payer. Getting those systems set up. They’re certainly gonna have, still have an incentive to send folks to the ADATCs because they’re paying 25% of the, of the true cost as opposed to 100. But it’s, it’s beginning to make that transition in the system. What we also heard from LME/MCOs when we talked to them was that they felt they needed some time to build up that capacity in the community. So they’ve got to go out and develop, find providers, develop contracts, the providers may have to build or renovate facilities, and they felt that that would take time and so they wanted some time and certainty in, in this sort of transition. So that’s, that’s how we ended up at, at, at the four year period. Obviously there’s other ways you can do it though. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] And when you get to the four year period in which these are completely receipt supported, what was the rationale for continuing to be a state institution when it is a service provider that’s fully supported outside of state funds versus allowing the LME/MCOs to own or run the facilities or to have a private entity on to run these facilities? [SPEAKER CHANGES] I guess my response would be that that’s certainly an option. The reason why we didn’t discuss that option was we found the problem, really, to be that these ADATCs are outside the community based system and so our recommendation was to integrate them. Obviously who runs them or how that works is another consideration but it wasn’t part of, part of our recommendation. [SPEAKER CHANGES] Mister chair? [SPEAKER CHANGES] Let’s ask Mr. Turcotte to make some comments. [SPEAKER CHANGES] Thank you mister chairman. I’m John Turcotte, director of the program evaluation division. Logically, Senator Hise if you get to that point where it is a receipt based system, then you could compare their cost per patient day to other alternatives. Now, in this state we do, we do not have a process of doing the appropriate analytics and planning for outsource

And so if the system were there, if the state had that system and it was built in, there would be a way to easily decide who should be the provider, a private sector for-profit provider, a non-profit provider or some alternative to a state agency. The Federal government has this, they call it the A76 process where when you get to the point where you have a receipt-based system that is mechanically an output process and what you do is you get the, an analysis called a most efficient organization and then you get the government entity to propose can they do that or you get alternatives from other providers, but right now the state doesn’t do that. Everything is done ad hoc when you get there and outsourcing decisions aren’t always made rationally. So you are correct logically, but until the state of North Carolina gets that developed, it’s going to be very difficult for any state agency to undergo that kind of transition. [SPEAKER CHANGES] Mr. Richard. [SPEAKER CHANGES] Thank you, Senator Pate, and Senator Hise, I appreciate your conversation on that. I think part of the reason why we wanted the longer period of time for transition and, again, the idea of creating the right financial incentives are things that I think conceptually we all agree with is that as a state agency and running this safety net program, remember it is that for so many citizens across the state, we operate in a different environment. We operate in an environment, you know, in state employees that are, it’s a difficult system. We can’t move in and out of the number of people that are available in terms of state employees to provide those services. We have to have that workforce ready. We don’t have the same business tools that a private organization would have, but there are ways that we can run more efficiently and respond to the market changes. That’s part of the reason why we want this time, is because I think we can make a reasonably good business case about how we manage it that way as an organization. Now, obviously the future is up to the governor and you guys in terms of how we go forward, but to try to do something in year one that begins to take that money out that quickly, it is very difficult for a state facility to respond that rapidly in terms of making those changes that we need to make to address that, and that really is our view of how we have to make this transition. Again, we’re committed to whatever comes out of this process that we’re gonna make work, but there are some difficulties in managing a receipt-based system this way, and just one comment about the PBH issue is that the one difference in the way the PBH worked is that that was a very small amount of money in terms of system wide, so when you’re talking about the entire, almost the entire receipts for those ADAC, it’s a little bit more difficult to manage it that way. [SPEAKER CHANGES] Members, I’d like to interject at this time. We have to be out of this room, we have to adjourn in ten minutes’ time so I’ve asked Mr. Richard if he will make his presentation, we’ll reschedule that for another time. We still have five members who have questions and I will go ahead and take those questions, but at ten minutes of we’re going to have to gavel ourselves out of here. [SPEAKER CHANGES] Mr. Chair, choice. [SPEAKER CHANGES] Miss Jones. [SPEAKER CHANGES] I did just wanna point out that the bill does not include the specific amount of the percentage reductions to the ADACs or the reallocations to the LMEMCOs for each year of the transition period as was recommended in the PED report. [SPEAKER CHANGES] Co-Chairman Tucker. [SPEAKER CHANGES] Thank you, Mr. Chair. Yeah, I don’t know if time’s gonna be adequate. First of all, question, Mr. Richards, did I understand you to say that we did not have the tracking measures required as far as evidence-based outcomes. I know we have, the young lady next to you said as managing she talks about a 3% but we don’t have tracking measures for long term outcomes for these people who go to the ADACs currently? [SPEAKER CHANGES] Senator Tucker, what I would say is that what we have is that we have systems that are two separate systems essentially. They use a similar platform, but in the ADACs we have one system and our community system’s different and what we haven’t been able to do well yet, now there are some cases where we do do that follow along, but it is not consistent across everybody that goes to ADAC to where we know exactly what happens long term when folks are in the community or frankly what has

Staff and the people as they get to the ?? in those communities settings. So, if somebody's been engaged with a LAMCO and providing a substance to those services to begin with and they show up in an ??, we're not able to necessarily find out what happens, long term once they leave that ?? and they're in that continued services. So, it is absolutely a flaw on our system. We're going to fix that, that's what we have to make correct. [SPEAKER CHANGE] Mr. Chair, a couple follow ups. [SPEAKER CHANGE] Okay, sir. Please make them timely. [SPEAKER CHANGE] I'll do my best. You're saying we're making a $46 million dollar a year expenditure into ??, and we really don't know long term how effective they are? Is that what you're saying? [SPEAKER CHANGE] I don't think I would say it that way, Senator. I think that we know that the ?? has been effective. I think we recognize that treatment. I think we have some individuals that we do follow longer. We have some projects we've done . . . What I would say to you is what we don't have is data for everybody that's going through those ?? and what's happened to them once they're in a community. That's what we have to get to. [SPEAKER CHANGE] Okay. Follow up. To get there on this, you know, its obvious that we issues in efficiency, $3,500 or $4,000 versus $10,000 to $12,000 a patient, if that's what I saw here. In much like the LMCO's when we started out in 2011 there can be an evolution. I concur with Senator Heist that we ought to put in year two that LME's have . . . The LMCO's have skin in the game with cost, and they'll begin to work together to make this evolve and to do what needs to be done. If we do community based treatment more so, which works in my area. Mr. Grimes, would there be a consideration for a closure of ?? because there would not be a requirement for those beds because community based outcomes are as good or better? [SPEAKER CHANGE] In creating the incentive for the LMCO's to find the necessary level of care for their individuals we expect there to be less demand for that highest level of care, because right now all the incentives are to send people to that highest level because its already paid for through the ??. I think we expect less demand for that highest level that's what you've seen in other states that have gone towards that fully managed care integrated model. We don't know how much less demand you'll see over time and what the impact would be on those facilities. The way we try to address it, at least in the recommendation that we made is that, I think its every February the LMCO's have to report to the department, how much they anticipate using from that ?? in upcoming fiscal year. We would expect then the department to plan on how to best allocate those resource which could include consolidating facilities, for example to meet that demand. We're trying to help the LMCO's over time better establish what they think the demand are for the various levels of care. Communicate that to the department, then give the department some time, hopefully to then manage that reduction in demand. [SPEAKER CHANGE] Mr.-- [SPEAKER CHANGE] Thank you, sir. [SPEAKER CHANGE] Thank you, Senator Tucker. Vice Chairman Pendleton. [SPEAKER CHANGE] Mr. Chairman, I just want to make a comment, is that okay, sir? [SPEAKER CHANGE] If you do it hurriedly, sir. [SPEAKER CHANGE] I am very concerned about this. The general assembly since 1974 has reeked havoc upon our mental health programs and our citizens, what I'm mainly talking about is closing so many inpatient site beds. Look at the growth of our population and what the beds are. With the mentality that so many people believe that just about everybody can be treated in a community setting, but you have to stabilize those people first. I served on the Wake med board for a long time, they are totally clogged with people with psychiatric problems, they can't get them into psych hospitals. So, what I'm worried about is, hope to God that you don't close any of these 196 beds, that's the last thing we need is to close anything to do with these beds. That's an average of two per county.

Senator McKissick? [SPEAKER CHANGES] I have a, a couple of questions, and they’re for you Mr. Grimes. First of all, this 3.7 level of care which is shown on exhibit 19 of the number of people going to ADATCs at this time, what would you assume is the percentage overall of that population that require that 3.7 level of care? I’m trying to get some sense as to what percentage of that population being served by ADATCs with 60%, 70%, 80%, would then be served by this alternative community based alternative. Because it gets down into the numbers as to what the true savings might amount to. [SPEAKER CHANGES] I wish we could give you an exact percentage. The ADATCs do not track that data, and so we don’t know what percent are 3.1, 3.5, 3.7, 4.0. The data is just not there. It’s not tracked systematically by the ATATCs. If you are to look at the PBH model, you’re seeing a, a very large percentage of those folks served in the community through PBH, but we don’t know if that’s a representative example or not. [SPEAKER CHANGES] Mister chair, if I could? [SPEAKER CHANGES] Quickly, sir. [SPEAKER CHANGES] It would appear to me that it’s a, a flawed, I mean I understand the advantages in continuity of care, I understand the advantages of treating the whole person, and I understand the advantages of community based care, but I think the savings which are projected here may not ever come to fruition if we don’t have some numbers that can be disaggregated about the number of people that are going to ADATCs today that can be served by this new model. I mean, it’s, I won’t call it a fatal flaw, but it’s certainly a material and significant number that needs to be able to be estimated to know if we are gonna get what we hope to achieve, because you’re still saying the ADATCs will continue to exist underneath this scenario that you have put before us today. [SPEAKER CHANGES] I guess one, one point I’ll make is that under the current incentive structure, the ADATCs, they have an incentive to, to fill up the beds regardless of, of the particular level of care. So for example, if they, if they started turning away everyone who had a low need, and those beds went empty, that’s not gonna look good in terms of their capacity. So the incentive structure in place is for them to fill, fill them up. I don’t, I don’t think what we’re saying is there’s, there’s a net savings for this. What we’re saying is if the LME/MCOs choose to treat those individuals in a community rather than sending them to a ADATC, it should be likely more efficient and so then you’re actually going to see more treatment available, perhaps longer or more individuals served. So the, the concern over reduced capacity at the ADATC, you’re actually going to see more capacity in the community, and in fact, the LME/MCOs have to spend that money on substance abuse treatment, so if they’re not spending it at the ADATCs, they’re gonna be spending it in the community. And when they do that we would actually expect them to be able to serve more individuals rather than less. [SPEAKER CHANGES] One last quick question, and it’ll be very quick. [SPEAKER CHANGES] Senator McKissick? I’m sorry, I’ll have to, we have to move on. There are two more questions from other members who have not had a chance to speak yet, if you’ll yield? [SPEAKER CHANGES] I will, mister chair, but I simply ask in the future we try to apportion time in a way that members will have an equal opportunity to ask questions as opposed to simply the cochairs, vice chairs. [SPEAKER CHANGES] Noted. Senator Robinson? [SPEAKER CHANGES] Thank you mister chair, and I’ll make it quick. I first want to say that I believe that this is a broken system, and I’ve had that opinion for a long time in terms of knowing that people in communities are not getting the treatment they need and not having real outcome measures in terms of where the services ought to be, in terms of transitioning people down. My question, real quick, is what do you consider a capacity

In terms of community bays capacity right now if we are, allowed the LME/MCOs to begin to use community bays to provide services for the individuals as we transition down. I guess I’m making an assumption that y’all are gonna support this, but what do you consider current capacity? I know some of those facilities earlier were closed. What is capacity at this point in terms of being able to provide services within community bay services? [SPEAKER CHANGES] I think the capacity is, varies depending on what level of care we’re talking about. One of the things we pointed out in the report is we’re not seeing a lot of capacity at that residential level of treatment, and that’s the next lower level than in ADATCs and again, we think we’re seeing more folks go to the ADATC because of that capacity at the residential level is not adequate in the community. So for example, we pointed out in the report there’s at least a few LME/MCOs that, that don’t have any providers at that 3.7 level. And we don’t think we’re gonna see them develop any of those providers until we change the incentive structure by bringing the ADATCs into the manage care system, because right now, the LME/MCO has a limited pot of resources, and as long as they can send that person to the ADATC, they don’t have to pay for it and they can use that money to treat other people at a lower level. So by bringing all of this under the LME/MCO, we think we’re gonna see them making more integrated decisions on how to build out capacity throughout the levels of care. [SPEAKER CHANGES] Members, it’s time for us to adjourn. I’d like to thank the, all of the presenters. Mr. Richard, thank you very much for agreeing to reschedule your remarks. This meeting is adjourned.