Managed care in the public mental health system.

The movement towards managed care in the public mental health system has surpassed efforts to develop a systematic literature concerning its theory, practice, and outcome. In particular little has been written about potential challenges and difficulties in translating managed care systems from their origins in the private sector to the delivery of public sector mental health services. This paper provides an overview of managed care definitions, organizational arrangements, administrative techniques, and roles and responsibilities using a theoretical framework adopted from economics referred to as principal-agent theory. Consistent with this theory, we assert that the primary function of the managed care organization is to act as agent for the payor and to manage the relationships between payors, providers, and consumers. From this perspective, managed care organizations in the public mental health system will be forced to manage an extremely complex set of relationships between multiple government payors, communities, mental health providers, and consumers. In each relationship, we have identified many challenges for managed care including the complexity of public financing, the vulnerable nature of the population served, and the importance of synchronization between managed care performance and community expectations for the public mental health system. In our view, policy regarding the role of managed care in the public mental health system must evolve from an understanding of the dynamics of government-community-provider-consumer "agency relationships".