California Moves to Transform the Behavioral Health Delivery System – are Payers and Providers Ready?

This is the first article in a series addressing key changes to the California health care marketplace, focused on changes to California’s behavioral health delivery systems. Forthcoming articles in the series will address other California initiatives, including new tools to provide whole person care and address the social determinants of health, and new efforts to contain health care costs.

The State of California has announced major new initiatives that will significantly alter the California health care market and legal landscape for patients, payers, providers, and other stakeholders. This article addresses some of the expansive new behavioral health initiatives available for Californians, which include new options for receiving both mental health services and treatment for substance use disorders. 

The state’s focus on behavioral health has multiple goals. Like other states and health care payers, California is aiming to slow the growth in the cost of health care, and has connected the effective and timely provision of behavioral health services as part of its strategy to reduce long-term health care expenses. California has also identified a significant increase in the need for behavioral health services as a result of the COVID-19 pandemic. The expansion of behavioral health services are also an important component of the state’s response to the homelessness crisis. 

New mandated coverage of school-based behavioral health services

Through a new Children and Youth Behavioral Health Initiative (CYBHI), California aims to enhance and redesign behavioral services for children and youth. A central component of the initiative is an expansion of behavioral health services accessible through schools, which may impact existing provider networks and delivery systems. 

California law, AB 133 (2021), directs the state Department of Health Care Services (DHCS) to develop a novel statewide minimum fee schedule for “school-linked” outpatient mental health or substance use disorder treatment services for students age 25 or younger. DHCS intends to use this statewide minimum fee schedule to create a sustainable funding source for school-linked behavioral health services, regardless of payer. 

Under AB 133, each health plan regulated by the state of California (including Medicaid plans, Knox-Keene plans, and disability insurance policies) will be required to reimburse providers of school-linked behavioral health services at least the minimum fee schedule amount, regardless of whether the provider has a contract with the plan. DHCS is directed to “develop and maintain” the network of eligible providers of these school-based services, but reimbursement will come from payers based on their terms of coverage.

New opportunities for virtual behavioral health care for children and youth

Also as part of the CYBHI, and potentially in connection with school-based services described above, DHCS will convene stakeholders to develop and select evidenced-based interventions and “promising practices” to improve outcomes for children and youth with or at high risk for behavioral health conditions, and will provide grants and incentive payments to spur investments in these areas. 

DHCS will also procure a vendor to establish and maintain a behavioral health services and supports virtual platform. Once deployed, this virtual platform will expand access to telebehavioral health services available to millions of children and youth in California 25 years of age and younger, regardless of payer.

Implementation of new CARE courts

Under a controversial new law, SB 1338, seven of California’s counties (San Francisco, San Diego, Orange, Riverside, Stanislaus, Tuolumne, and Glenn) will be required to establish new Community Assistance, Recovery, and Empowerment (CARE) courts specifically to address the needs of people with untreated severe mental illness by October 1, 2023. The remaining 51 California counties are to follow by December 1, 2024. Once established, individuals (including family, friends, hospital directors, first responders, and behavioral health workers) will be able to petition the CARE courts on behalf of an individual to show that they qualify for support. To qualify, an individual must be experiencing a severe mental illness, may not be clinically stabilized or undergoing voluntary treatment, and must meet other requirements. 

The CARE courts are empowered to order a clinical evaluation of the individual and develop a CARE plan that can include medication and treatment, social services, housing resources, and general assistance. SB 1338 provides for some additional funding to counties to help administer the CARE courts. It also requires health plans in California (including Knox-Keene plans and insurance policies) to cover evaluations and health care services required or recommended pursuant to a CARE plan, regardless of whether they are provided in-network or out-of-network or have received prior authorization. 

Clarification and changes to the fragmented Medi-Cal behavioral health delivery system

California operates two separate managed behavioral health delivery systems for its Medicaid beneficiaries. Consistent with their historical mission to serve local indigent populations, California’s counties operate and contract with behavioral health providers for individuals with severe mental health disorders and/or substance use disorders. In addition, as a result of recent expansions within the Medi-Cal program, California’s Medi-Cal managed care health plans cover “mild to moderate” behavioral health services as well as primary care services. Individuals may be concurrently enrolled in both plans.

As part of its broader California Advancing and Innovating Medi-Cal (CalAIM) initiative, the state is required to develop new, standardized screening tools for referrals to the county behavioral health systems. In addition, the state has introduced a “no wrong door” policy that, effective July 1, 2022, allows providers to bill both counties and Medi-Cal managed care health plans for services rendered during an assessment period or prior to the determination of a diagnosis. These changes offer new flexibilities for providers when seeking reimbursement for mental health services, and are intended to help ensure that beneficiaries can maintain treatment relationships with providers until an appropriate referral can be made.

Lastly, the state is undertaking a redesign of the way counties are reimbursed for Medi-Cal behavioral health services provided through their networks. Under behavioral health payment reform, counties will no longer be limited to reimbursement based on costs, and will no longer be required to submit burdensome cost reports. These changes have the potential to impact how counties negotiate their contracts with network providers for Medi-Cal behavioral health, and counties will be encouraged to emphasize value-based components to reimbursement. 

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