Serving people with mental and other chronic illnesses in community settings may improve compliance and satisfaction with treatment, but existing payment mechanisms often favor office-based treatment. This study examines the effect of a change in Medicaid payment on the location and amount of service provided by case managers. Amounts of service given by treatment providers to 185 of their clients in community settings and in mental health centers were compared before and after reimbursement changed from an all-inclusive prospective rate to a mixed prospective/retrospective payment. Clients were enrolled in two different treatment programs: continuous treatment teams with extensive training in in vivo treatment, and a case management program that emphasized office-based treatment. In-community service increased, and the amount of office-based treatment decreased. Continuous treatment teams increased in-community services more than case managers did; case managers decreased office-based treatment more. There was no change in total amount of services provided. It was concluded that mixed prospective and retrospective reimbursement can remove financial barriers to in-community treatment, but it works best in combination with a training program. Additional research is needed to determine the precise financial impact of such changes.
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