Like other states, California is experiencing major shifts in its behavioral health system amidst federal and state-level policy reforms and new managed care requirements. These shifts aim to improve behavioral health care quality and access and bring additional responsibilities for California’s 58 counties that manage and deliver Medi-Cal specialty mental health and substance use disorder (SUD) services. Increasing managed care plan requirements and administrative responsibilities can present significant resource and capacity challenges for counties, especially those that are smaller, rural, or less resourced.

Contracting arrangements, either with third-party entities or through intergovernmental partnerships, provide a possible solution for addressing these challenges by bolstering counties’ capacity, facilitating resource-sharing, and achieving economies of scale. In partnership with the California Health Care Foundation (CHCF), Aurrera Health Group explored the potential of contracting arrangements to help counties meet new responsibilities while improving the administration and delivery of specialty mental health and SUD services. Aurrera Health conducted research, policy analysis, and interviews with key stakeholders to understand challenges and opportunities for contracting arrangements, including associated operational, legal, and political considerations. Key findings are outlined in a recently released report and summarized below.

Key Findings

Counties face significant challenges in navigating an array of new state policies and managed care responsibilities: In California, specialty mental health and SUD services are carved out of the state’s Medi-Cal managed care program and administered by county-based managed care plans. Over time, state and federal policies have reshaped and significantly expanded the county role in providing these services. Recent state and federal behavioral health reforms coupled with existing challenges, including workforce shortages, have strained counties’ capacity and ability to navigate new requirements, especially small and rural counties with limited resources.

Contracting and intergovernmental arrangements can help mitigate county challenges and improve efficiencies: Counties acting jointly to pool resources and expertise can create efficiencies and economies of scale, particularly for low-volume services or in counties with limited staffing or administrative capacity. Under existing law, counties—acting either individually or jointly—can enter arrangements with third-party entities and leverage contractor experience and existing infrastructure to manage certain administrative processes and/or service delivery functions to efficiently meet managed care requirements.

The viability and success of contracting and intergovernmental arrangements depend on unique county dynamics, contracting terms, and governance models: County geography, resources, and the dynamics of working with local authorities can impact the feasibility of contracting arrangements. Competitive procurement processes, detailed statements of work, clear processes for modifying contract terms, and inclusion of performance measures can help ensure successful arrangements. Counties operating jointly may also benefit from an independent governing board and mechanisms like memoranda of understanding to clarify roles.

State-county collaboration is critical to advancing contracting approaches and addressing challenges: Coordinated engagement between the state and counties can help establish processes and flexibilities that recognize the unique structure of various contracting and intergovernmental models. State-county collaboration can enhance understanding of challenges, illuminate opportunities to align and streamline requirements, enable tailored technical assistance and support.

The full paper, including appendices on the legal parameters for contracting models as well as other state models for delivering mental health and SUD services, is available on the CHCF website. Aurrera Health is proud to support CHCF’s work to improve behavioral health care in California and help stakeholders navigate the implementation of new initiatives and policy reforms.

If you are interested in learning about Aurrera Health’s services, including our behavioral health expertise and our approach to policy research and analysis, please reach out to please reach out to Molly Brassil.