Managing California’s Behavioral Health System: County Contracting Strategies

California’s behavioral health system is undergoing a significant transformation due to federal and state policy reforms, new investments, and requirements. The CalAIM initiative brings new responsibilities for the state’s 58 counties managing specialty mental health and substance use disorder services under Medi-Cal. Counties now face expanded requirements for managed care operations, quality measurement, data reporting, member services, and care access.

Contracting arrangements, either with third-party entities or through intergovernmental partnerships, offer an opportunity to address these challenges collectively. These arrangements can bolster counties’ capacity, facilitate resource sharing, and achieve economies of scale. The California Department of Health Care Services has included Behavioral Health Regional Contracting in its CalAIM initiative, encouraging counties, particularly smaller and rural ones, to develop multicounty or regional approaches.

This paper explores options for improved administration and delivery of specialty behavioral health services in California, focusing on how counties can leverage contracting arrangements to meet managed care responsibilities effectively and efficiently. It identifies viable contracting and intergovernmental agreement models and highlights operational, legal, and fiscal considerations that may impact uptake across diverse counties.

Key findings:

• Counties face significant challenges in navigating new state policies and managed care responsibilities. Workforce shortages, limited resources, and high demand for behavioral health services strain counties’ ability to manage services, especially in smaller and rural areas.
• Contracting and intergovernmental arrangements can help mitigate county challenges and improve efficiencies. Counties acting jointly can create economies of scale, particularly for low-volume services or in counties with limited capacity.
• The viability and success of contracting arrangements depend on unique county dynamics, contracting terms, and governance models. Factors such as geography, resources, and local stakeholder dynamics impact feasibility. Prepackaged solutions can help counties with fewer resources participate more easily.

State-county collaboration is critical to advancing contracting approaches and addressing challenges. Coordinated engagement can help establish processes that recognize the unique structure of various contracting models, improve data sharing, and enable tailored technical assistance that better recognizes county variation.