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Improving the quality and cost-effectiveness of publicly financed health care

Medicaid Pilot Program Demonstrates Decrease in Emergency Department Visits and Hospitalizations for Patients with Serious Mental Illness

October 1, 2012

Hamilton, NJ, October 1, 2012 - A project that demonstrates the benefits of integrated care for Medicaid beneficiaries with serious mental illness in Pennsylvania shows potential for state cost savings through reduced emergency room visits, mental health-related hospitalizations, and hospital readmissions, according to an evaluation released today.

Through the Serious Mental Illness (SMI) Innovations Project, Pennsylvania's Department of Public Welfare sought to improve the integration of physical and behavioral health services and reduce unnecessary utilization for Medicaid beneficiaries with both mental illness and chronic medical conditions. The two-year initiative, which began in 2009, included two pilots in the Southeastern and Southwestern regions of the state. It was part of the Rethinking Care Program, a national initiative coordinated by the Center for Health Care Strategies (CHCS) and supported by Kaiser Permanente Community Benefit to test new care management approaches for Medicaid's highest-need, highest-cost beneficiaries.

Although outcomes varied across the two regions, the evaluation conducted by Mathematica Policy Research identified that one or both pilots were successful at reducing the rate of mental health hospitalizations, all-cause readmissions, and emergency department visits. Compared with projected trends in these outcomes without the interventions:

  • The rate of mental health hospitalizations was an estimated 12 percent lower (Southwest pilot);
  • The all-cause readmission rate was an estimated 10 percent lower (Southwest pilot); and
  • The rate of emergency department (ED) use was an estimated 9 percent lower (Southeast pilot).

In Pennsylvania, as in states across the country, individuals with both SMI and chronic medical conditions are among Medicaid's highest-cost populations.  In most states, only 5 percent of Medicaid beneficiaries account for more than 50 percent of total program spending. Health care costs are typically as much as 75 percent higher for patients with common chronic conditions who also have mental illness, than for those without a mental illness. Yet, Pennsylvania, like most states, uses separate managed care systems for physical health and behavioral health services, often resulting in uncoordinated and fragmented care for this group of patients with complex needs.

"The SMI Innovations Project was designed to more closely align physical and behavioral health services and improve health care quality through better coordination and information exchange across health plans and providers," says David Kelley, MD, chief medical officer for Office of Medical Assistance Programs at the Pennsylvania Department of Public Welfare. "We are encouraged by the very promising results that point to vital improvements in care for our beneficiaries and potential cost savings for the state." 

Under the pilot, the state partnered with managed care organizations, managed behavioral health organizations, and county behavioral health systems in the two regions. Each region tailored its approach based on its delivery system environment, but shared a number of common features including a focus on: (1) consumer engagement: (2) information exchange across health plans and providers; (3) multidisciplinary care planning; and (4) member education and support around appropriate ED use and follow-up after a hospital discharge. To promote more effective coordination across the entities responsible for managing physical and behavioral health services, the state also implemented a shared incentive pool tied to joint performance on defined process and outcome measures.

Although both regional efforts were initially designed as two-year pilots, both have been extended by local partners based on program successes in improving care coordination and reducing unnecessary utilization. 

"States across the country are looking for better ways to control costs and improve quality for Medicaid's highest-need, highest-cost beneficiaries," says Allison Hamblin, CHCS vice president. "In Pennsylvania, improved integration of physical and behavioral health services was an effective means for achieving these goals. The pilot programs' experience offers concrete strategies to guide other states interested in developing similar approaches." 

"The time is now for identifying and implementing innovative strategies that improve the quality and cost effectiveness of Medicaid services," says Raymond J. Baxter, PhD, senior vice president, Kaiser Permanente Community Benefit, Research and Healthy Policy. "The results from the Rethinking Care Program demonstrate such innovation and offer great promise for the future of health care in America."

For more information on the Pennsylvania SMI Innovations Project, including: (1) the full evaluation report; (2) case studies of the two regional pilots; (3) a project profile; (4) and background on the Rethinking Care Program, visit

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The Center for Health Care Strategies (CHCS) is a nonprofit health policy resource center dedicated to improving health care access and quality for low-income Americans. CHCS works with state and federal agencies, health plans, providers, and consumer groups to develop innovative programs that better serve people with complex and high-cost health care needs. Its program priorities are: enhancing access to coverage and services; improving quality and reducing racial and ethnic disparities; integrating care for people with complex and special needs; and building Medicaid leadership and capacity. For more information, visit

Kaiser Permanente is committed to helping shape the future of health care. We are recognized as one of America's leading health care providers and not-for-profit health plans. Founded in 1945, our mission is to provide high-quality, affordable health care services and to improve the health of our members and the communities we serve. We currently serve more than 9 million members in nine states and the District of Columbia. Care for members and patients is focused on their total health and guided by their personal physicians, specialists and team of caregivers. Our expert and caring medical teams are empowered and supported by industry-leading technology advances and tools for health promotion, disease prevention, state-of-the-art care delivery and world-class chronic disease management. Kaiser Permanente is dedicated to care innovations, clinical research, health education and the support of community health. For more information, go to:

Mathematica Policy Research seeks to improve public well-being by conducting studies and assisting clients with program evaluation and policy research, survey design and data collection, research assessment and interpretation and program performance/data management. Its clients include foundations, federal and state governments and private-sector and international organizations. The employee-owned company, with offices in Princeton, NJ; Ann Arbor, MI; Cambridge, MA; Chicago, IL; Oakland, CA; and Washington, DC; has conducted some of the most important studies of health care, nutrition, education, international, disability, family support, employment, and early childhood policies and programs.

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