Local mental health firm wins $380 million contract Rapidly growing CMG to run services for state of Montana


With the announcement yesterday of a five-year, $380 million contract to manage mental health and substance abuse services in Montana, CMG Health of Owings Mills got another boost for its already rapid expansion.

Although its revenues were about $27 million as recently as 1993, CMG will have revenues of about $85 million this year (including some from joint ventures) -- and expects to double that next year, according to Alan Shusterman, its president and chief executive officer.

Essentially, CMG does for mental health services what HMOs do for general health:

It usually receives a flat fee for members it covers, contracts with providers who care for them, and sets guidelines for care to keep costs down.

And like other forms of managed care, the industry is growing quickly, about 10 percent a year, and now covers about 120 million Americans, according to E. Clarke Ross, executive director of the American Managed Behavioral Healthcare Association.

CMG was launched 10 years ago by Shusterman, his wife, Lisa, a psychologist, and two psychiatrists, "interested in creating an organization responding to the change" that started with managed health care, Shusterman said.

"I was the one who wasn't a clinician, so I did the administrative work."

The company now has about 500 employees nationally, including about 200 in its Owings Mills headquarters, Shusterman said.

He expects to add about 15 more to help administer the Montana contract.

Most headquarters employment, he said is in clinical care management and management information systems, plus a claims-processing operation.

The founders still own a majority of the company, although Humana, a large, national managed-care company, became a minority partner in 1994.

"We were looking for strategic investors for whom we could provide service," he said.

While CMG contracts with a number of HMOs -- including Aetna and Preferred Health Network locally -- to provide mental health services to their members, its growth recently has been in government contracts.

The largest, awarded this year, according to Shusterman, was to provide mental health services through the CHAMPUS program to 1 million military dependents in 10 Southeastern states.

Also in the past few years, half a dozen state Medicaid programs have switched to behavioral managed care firms, Ross said.

Maryland is preparing to award a contract for mental health services for its Medicaid program. Shusterman said CMG is bidding jointly with Green Spring Health Services of Columbia, an even larger behavioral managed health company. Compared to CMG's $85 million in revenue and the 2.3 million people it covers, Green Spring officials say it had $265 million in revenue for the year ending Sept. 30 and covers 13.5 million people.

(As of the beginning of the year, Green Spring was the fourth largest company in the field and CMG 14th, in terms of people covered, according to Open Minds, a trade publication.)

The Montana contract goes beyond Medicaid. It is, Shusterman said, the first time a state has combined Medicaid, benefits for the uninsured mentally ill and the state mental hospital budget into a single contract.

Montana set the budget for the program at 95 percent of what it had been spending, and bidders competed on the quality of their plans. Such a system, Shusterman said, allows the care manager to save money, "rather than by review and denial of services, by rebuilding the system to serve people better."

For example, he said, CMG hopes to save money in the long run by providing better crisis services and seed money for new programs.

Critics say managed care is saving money in mental health by cutting provider reimbursements and skimping on care. "In general, patients are receiving much less care than they did previously," said Paul Berman, professional affairs officer for the Maryland Psychological Association. "The main trend is fewer and fewer and fewer sessions. The less services they provide, the more money they make."

CMG, in particular, he said, "is well known to micromanage every case, requiring frequent and extensive reviews" every few therapy sessions before approving additional sessions.

Shusterman, however, says, "The issue in managed care is to make sure patients are getting medically necessary and appropriate care for their needs. In mental health, there might be 10 or 15 different ways to treat a particular problem. We look for the ones that are most cost-effective."

Pub Date: 11/19/96

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