Psychiatrists in Connecticut are doing an end run around managed care.

A statewide, multidisciplinary behavioral health care practice owned by 30 Connecticut psychiatrists will be signing a five-year, multimillion dollar contract with Blue Cross/Blue Shield of Connecticut to provide mental health and addiction services to more than 140,000 people throughout the state on a capitated basis.

When Psychiatric News went to press, the final details of the contract between Blue Cross/Blue Shield of Connecticut and PsychCare Inc., of Avon, Conn., were still being negotiated.

However, Robert Ostroff, M.D., medical director of PsychCare, told Psychiatric News that the group will begin providing services to enrollees in Blue Cross/Blue Shield on January 1, 1997.

Ostroff said the contract is worth between $25 million and $30 million.

PsychCare is composed of 14 multispecialty group practices around the state including psychologists, social workers, psychiatric nurses, and other mental health providers. The group is owned and operated, however, by the 30 psychiatrists who have put up $5,000 each toward start-up costs, Ostroff said.

The psychiatrist-owned group practice was chosen by the Blues following competitive bidding that included Greenspring and Value Behavioral Health, two of the largest managed behavioral health care companies in the U.S., and several in-state institutions, including the Institute of Living in Hartford, said Ostroff.

The scope of the contract alone_covering the entire state and 140,000 lives_is groundbreaking for a group practice that is entirely owned by psychiatrists.

As important, say Ostroff and others who spoke with Psychiatric News, is the fact that a statewide insurer chose to contract directly with local providers rather than with an out-of-state managed behavioral health care company.

Psychiatrist Robert Schreter, M.D., a consultant with APA's Consultation Service, which was hired to help PsychCare in its competitive bid, emphasized the ground-breaking nature of the contract between the Connecticut psychiatrists and the Blues.

Schreter said that by agreeing to a capitated contract_thereby accepting risk for the lives they are caring for_the Connecticut group has essentially eliminated managed care as the middleman.

While Psychiatric News has publicized other physician groups that are competing for contracts, the Connecticut contract is unique in terms of market share and the commitment of a major statewide insurer to invest in a local provider network, Schreter said.

"This is brand new," he told Psychiatric News. "This is the wave everyone predicted."

Schreter called the agreement between Blue Cross/Blue Shield and PsychCare Inc. a model for what health care thinkers such as Uwe Reinhardt, Ph.D., have heralded as the next evolution of managed care.

"This is the first genuinely statewide provider-owned network that has successfully bid against all of the giants [and won] a guaranteed five-year contract," he said.

Moreover, Ostroff and Jerry Schnitt, M.D., a member of the board of directors of PsychCare Inc., emphasized that in choosing PsychCare, the Blues are investing in a local network of providers with a long-term commitment to the community.

Typically, Schnitt said, provider networks are put together by an out-of-state managed care company, which may have only a tenuous commitment to the community it serves. In contrast, PsychCare is composed predominantly of private-practice psychiatrists who have been working in their communities for many years and intend to stay.

"We don't want to have to move," Schnitt said. "We have a vested interest in increasing state-of-the-art quality care."

Schnitt, who will be helping to direct utilization management efforts by PsychCare, said the group has access to "state-of-the-art" computer technology and data on utilization trends in the population that will be served by the group.

"Those of us in PsychCare have an average of 20 years practicing psychiatry," Schnitt said. "We have chosen the membership [of the group] based on a track record. We intend to have a useful utilization tracking system and as clearly defined a quality assurance system as possible."

Schreter said APA's Consultation Service helped the Connecticut psychiatrists take the initial steps toward formation and assisted the group in putting together a competitive bid. The Consultation Service also helped the group establish a "medical service organization," owned by the provider group, that will serve as the administrative arm of PsychCare.

If the Connecticut psychiatrists are taking back control of clinical decision making from managed care companies, then with that control comes the burden of holding down costs.

As Schreter has said elsewhere of the movement toward physician-owned groups assuming risk under capitated contracts: "It won't be a return to seeing every patient as much as you want to for as long as you want. When we meet with the enemy, it will be us"

(Psychiatric News, July 19).

The principal determinant of the quality of care deliverable under a capitated contract will be the per-member-per-month rate.

Ostroff would not reveal the capitation rate agreed to between PsychCare and the Blues, but he said that bidding had been between $3 and $5. That range is high compared with capitation rates around the country, Schreter said.

At the same time, Ostroff said that the per-member-per-month rate represents a significant drop in what Blue Cross/Blue Shield had been paying for the same population under an unmanaged mental health plan.

Ostroff added that the biggest challenge for PsychCare will be to control costs in the area of outpatient psychotherapy.

In an October 7 letter to other Blue Cross/Blue Shield providers, PsychCare chair Peter Benet, M.D., of Hartford, outlined the group's strategy.

"From a clinical standpoint," Benet writes, "our experience with other provider-directed mental health networks around the country indicates that treatment programs must be very directed; often short-term intervention will be the treatment of choice. We will ask practitioners to keep this in mind and to submit treatment plans for review, prospectively (preapproval for sessions) and retrospectively (analysis of outcomes and patient satisfaction), by a well-trained team of psychiatrists and allied mental health case managers."

(Psychiatric News, November 1, 1996)