Summary

The Defense Department (DOD) is now undertaking a managed care demonstration project for mental health services in the Tidewater, Virginia, area for beneficiaries of the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS). Allegations began surfacing in November 1991 that the project's contractor was denying needed care for CHAMPUS beneficiaries to boost its profits under the fixed-price contract arrangement--$31.2 million in fiscal year 1992. GAO discovered that the project has saved money, mainly by (1) reducing the use of inpatient services by about 83 percent and substituting less expensive partial hospitalization and outpatient treatment and (2) paying mental health providers lower reimbursement rates. DOD oversight and contractor controls, however, have failed to guarantee CHAMPUS beneficiaries access to quality treatment. Although DOD effectively monitors the administrative aspects of the contractor's operations, it has fallen short in independent evaluation and quality-of-care monitoring of the project. Similarly, although the contractor's system for assessing and authorizing care has many favorable features that help beneficiaries receive treatment, it may also be unduly restricting access to care and limiting identification of quality treatment problems.

GAO found that: (1) the project's total costs were less than projected totals and averaged about $32 million annually; (2) DOD realized savings of $148 million in comparison with nationwide CHAMPUS mental health care costs; (3) reasons for the project's savings included shifts in utilization patterns from inpatient services to less expensive partial hospitalization and outpatient services, and reductions in provider reimbursement rates; (4) DOD oversight and contractor controls were insufficient to ensure CHAMPUS beneficiaries access to quality treatment; (5) DOD has not provided for effective independent project evaluation or quality-of-care monitoring; and (6) the mental health care contractor's system for assessing and authorizing care may restrict access to care and limit identification of quality treatment problems.