Quick Fix

After years of financial neglect, the state is hoping a shot of privatization will cure Dallas County's addicted and mentally ill population

If there is still such a thing as a war on drugs in Texas, then one of its last skirmishes is unfolding in the trenches at New Place, a drug treatment center that operates amid a pocket of vacant lots in Old East Dallas.

On this Thursday evening, the addicts shift and twist in second-hand chairs, which are loosely arranged in the shape of a circle inside a bare-bones meeting room. With no cigarettes or coffee to help pass the time, addicts sit, ready or not, for another dose of reality about how drugs and alcohol have taken command of their lives.

Although some people come to New Place voluntarily, this group came here fresh out of options. They are participants in a 2-year-old Dallas County court program called Divert, which is available only to addicts arrested for drug possession who have never been convicted of a felony. Though they haven't been here long, they can already claim one victory: For the first time in years, they realize they have a lot to be grateful for.

Michael Hogue

The New Place's Carolyn Tartaro conducts the last group session inside the New Place. The first drug treatment center of its kind in Dallas, the New Place became the first casualty in a new experiment in managed health care for Dallas County's low-income addicts and mentally ill residents when it closed its doors on October 15, 1999.
Mark Graham
The New Place's Carolyn Tartaro conducts the last group session inside the New Place. The first drug treatment center of its kind in Dallas, the New Place became the first casualty in a new experiment in managed health care for Dallas County's low-income addicts and mentally ill residents when it closed its doors on October 15, 1999.
Ed Cinisomo has seen a drastic decline in the number of addicted teenagers he treats at Daytop Village, the largest treatment center for teenagers in North Texas. Like Tartaro, Cinisomo believes Northstar will spell the end of drug treatment centers like his and usher in an era in which low-income teenagers.
Mark Graham
Ed Cinisomo has seen a drastic decline in the number of addicted teenagers he treats at Daytop Village, the largest treatment center for teenagers in North Texas. Like Tartaro, Cinisomo believes Northstar will spell the end of drug treatment centers like his and usher in an era in which low-income teenagers.
Dave Wanser, the state's point man on Northstar, says he believes that Dallas County's low-income residents will get better treatment under managed care.
Mark Graham
Dave Wanser, the state's point man on Northstar, says he believes that Dallas County's low-income residents will get better treatment under managed care.
Value Options' Carole Matyas says she thinks her company can make Northstar work financially, but there's no question that the attempt to bring managed care to the public-health system is risky business.
Mark Graham
Value Options' Carole Matyas says she thinks her company can make Northstar work financially, but there's no question that the attempt to bring managed care to the public-health system is risky business.
Douglas Denton, the executive director of Homeward Bound drug treatment center, say he believes Northstar will fail because the public-health system is underfunded, a historical problem that state lawmakers failed to correct before rolling the program out in Dallas in July.
Mark Graham
Douglas Denton, the executive director of Homeward Bound drug treatment center, say he believes Northstar will fail because the public-health system is underfunded, a historical problem that state lawmakers failed to correct before rolling the program out in Dallas in July.

There is "Emilio," a welder by trade and the father of two children, one 5 years old, the other 8. He's thankful his kids know that Dad's finally getting sober. "Scott" the hairstylist has learned that, contrary to popular belief, pot isn't harmless. He's glad he's alive. Today "Natasha" got her first paycheck in two years. It came to only $99.05 after taxes, but it's a start. And then there's "Greg," a crack addict and single father who no longer has to smile just to keep from crying.

Emilio, Scott, Natasha, and Greg are first-time offenders. As such, the courts have given them one chance to avoid an extended vacation behind bars. The threat of jail got them here, but New Place offers the best opportunity to help them battle their addictions.

Getting addicts clean is easy; the challenge is keeping them clean. Addicts often relapse because they are bombarded with emotions that they had numbed into oblivion with drugs and drink. Oddly enough, one weapon in the New Place arsenal is a simple piece of paper called a "feelings poster," on which row after row of round faces appear. Each of the faces represents a different emotion, which is printed beneath each drawing to help the addicts learn how to identify and deal with their emotions. They cover everything from "afraid" and "miserable" to "satisfied" and "worthwhile."

When they got here, Emilio, Scott, Natasha, and Greg were strangers. They were sick, they were angry, and they weren't the least bit prepared to discuss their problems with anyone. Natasha speaks for the group when she says, "I was the type of person that would tell you to fuck off in an instant."

But after a couple of weeks of therapy, the group has created an atmosphere that gives them the confidence to share the emotions their addictions have concealed. They still have months to go, and the last thing they need now is an excuse to use. But tonight the state of Texas just gave them a good one.

Unbeknownst to them, they are guinea pigs in a new public-health experiment. On July 1, a managed-care program called Northstar descended on the poor in Dallas, Collin, Ellis, Hunt, Kaufman, Navarro, and Rockwall counties. There has been virtually no publicity about Northstar, but its rollout four months ago marked the biggest change in public health care in Dallas County since the advent of Medicaid.

As part of the experiment, state lawmakers have hired two of the nation's largest managed-care companies, Value Options and Magellan, to control the delivery of health-care services to low-income residents in Dallas who are mentally ill and chemically dependent. Northstar is one of several managed-care "models" being tested across Texas, and state lawmakers are hoping one of them will provide a solution to the problem of rising Medicaid costs without forcing them to factor more tax dollars into the equation.

In effect, the state is injecting a shot of privatization into its veins and hoping that the forces of competition will cure a public-health-care system that ranks as the eighth worst in the nation in terms of mental-health spending and fourth worst for substance-abuse spending.

If it works, Northstar supporters say, these two profit-driven companies will usher in a new era of "managed care" that will cut unnecessary costs, expand services, and improve the mental health of the poor. But if Northstar backfires, critics say, those same competitive forces will drive many mental-health clinics and drug treatment centers out of business. They fear the state will awake like a junkie from its stupor to discover that managed-care companies have made off with their wallet and left the county's mentally ill and addicted on the streets or in jail.

"It's an interesting social experiment," says Dr. Kenneth Altshuler, the chairman of the psychiatry department at UT's Southwestern Medical School and a leading expert on mental-health issues. "But people are at risk when you do that kind of experiment. In the public sector, this has horrific possibilities."

The full impact managed care will have on the state's indigent population won't be known for years, but one thing is certain: Northstar is a risky experiment that the state is intent on carrying out, even if it blows up the lab in the process.

After only four months of testing, the experiment has already logged its first casualty: In the wake of drastic cuts in services initiated by the managed-care companies, New Place counselors saw their funding stream evaporate and, on October 15, they were forced to shut their doors.

Emilio, Scott, Natasha, and Greg -- welcome to the dawn of a new era in managed care.


In many ways, the trend toward privatization marks an evolution from the days when government and charities bore the responsibility for minding the public's welfare to a new, more cynical era in which the public's welfare is a commodity, bought and sold on the open market.

This new craze is born out of the philosophy that government agencies, with all their hoops and hair-splitting regulations, have grown bloated and can no longer deliver quality social services. Like schoolgirls at a Ricky Martin concert, the politicians are now rushing the stage of the private sector, infatuated with the notion that businesses can put on a better show because of their ability to cut costs and maximize profits.

In Texas, this new era is well under way. Consider the state's criminal justice system: Some jails are now controlled by a Nashville-based outfit called the Corrections Corporation of America, which bills itself as "the industry leader in private sector corrections worldwide." Before the Dallas school board, there's a proposal to hire a for-profit company called The Edison Project to take over as many as a dozen floundering schools. Down at City Hall, even the comparatively simple task of issuing rabies tags for cats and dogs is now performed by a private company.

Northstar, in a nutshell, is just the latest phase of this trend.

"It's like Starbucks," says state Rep. Garnet Coleman, a Democrat from Houston. "It comes out and everyone says, 'Oh, this is great,' and then later you learn that, wait a minute, Starbucks isn't the best coffee."

Texas, like other states, began dabbling with the idea of privatizing the public-health-care industry in the early 1990s, just when managed care was exploding in the private sector. Back then, HMOs' boards of directors saw that the public sector was a new and otherwise untapped market, and they began convincing state lawmakers that managed care was the solution to their public-health-care woes. Today, virtually every state in the nation is experimenting with some type of public managed-health-care model. While some models have met with varying degrees of financial success, others have been disasters, and none has proven truly effective at improving the health of the low-income residents.

Most notable among the disasters is the ongoing project in Montana, where state officials fired Georgia-based Magellan in March -- just two years into Magellan's five-year contract with that state and four months before Texas decided to hire Magellan for Northstar. As part of the debacle, which consumed the front pages of Montana's newspapers, Magellan racked up millions of dollars in losses that it tried to offset by cutting payments to providers and denying care to hundreds of mental patients.

Although one angry psychiatrist publicly called Magellan's actions "irresponsible...criminal," the Montana experiment is generally thought to have failed because state lawmakers refused to pump enough money into the project from the beginning. Magellan could easily face the same problems in Texas, where the No. 1 complaint about the public-health-care system is that it is historically underfunded. And state lawmakers failed to correct the problem before they officially embraced managed care in 1995.

The state's Medicaid spending had soared from $7.5 billion in 1990 to $18.7 billion in 1995. Under the direction of then Lt. Gov. Bob Bullock, lawmakers began drafting new legislation designed to curtail those costs by reforming Medicaid, a joint federal-state program that pays for the health care of nearly 2.5 million low-income Texans. The solution they came up with was full-scale privatization.

As part of the legislation, the state initially hoped to turn its responsibility of delivering health care to poor Texans over to the private sector by 2002. Implementation began in earnest as the state began soliciting contracts with managed-care organizations and managed-care "pilots," which emphasize the physical health-care needs of the indigent, began rolling out seemingly overnight in places like Lubbock, Fort Worth, Houston, and now Dallas. But Northstar is by far the riskier social experiment. Only in Dallas and the six other Northstar counties will the mental-health and chemical-dependency needs of the poor be targeted.

To implement the project, the state contracted with two companies, Magellan and Virginia-based Value Options, which obligated themselves to bring the same benefits to the public sector that HMOs do to the private, in which patients receive a "continuum of care" that emphasizes preventive medicine and cuts costly expenses, such as emergency-room visits. Theoretically, the companies are supposed to save enough money that they can improve the health of their indigent consumers yet still make a profit. But even in the private sector, most HMOs in Texas are losing money. Which is precisely what worries mental-heath advocates, who argue that the only way to make a profit is by taking advantage of society's most vulnerable and destroying the quality of their care. Which, they add, wasn't so terrific to begin with.

Under the old system, the state used to "buy" health care for its Medicaid population directly from agencies like the Dallas County Department of Mental Health and Mental Retardation (MHMR), which worked with a sprawling network of community-based mental-health clinics and separately funded drug treatment centers. Together these agencies created a public safety net that cared for uninsured patients whose illnesses would otherwise land them in public emergency rooms, on the streets, or in jail.

There is no question that the old system erected huge bureaucratic barriers to treatment and was often riddled with mismanagement. Yet mental-health advocates say its biggest flaw was its unconscionable lack of funding -- a decades-old problem state lawmakers failed to correct when they unleashed Northstar.

Under Northstar, the mental-health clinics and drug treatment centers that used to contract with the state will still treat the same patients, only now they will do so under contracts they've signed with Magellan and Value Options. In turn, these two managed-care companies will mix traditional providers with private ones and create a new, and supposedly improved, network of doctors, counselors, and nurses who will be available to treat the poor.

The state hopes that two private companies, each with its own administrative overhead, can take the same dollar the state has always spent on public health care and use it to increase the number of people treated, improve the quality of that treatment, and make a profit at the same time.

There is growing concern, however, that when money gets tight, the managed-care companies will start cutting services and reducing reimbursements to traditional providers, who will then be forced out of business. This concern, which is still being played out in Montana, is already a reality in Dallas.

When New Place shut its doors this month, it became the first of what may soon become a series of closings among the county's drug treatment centers. Counselors at these centers say they can no longer get authorization for the amount of care they need to treat addicts because the managed-care companies under Northstar view their recovery programs as too expensive.

Rather than deny treatment, the centers are covering costs by laying off counselors, taking out loans, and begging private donors for new contributions. Perhaps some of these facilities were grossly inefficient to begin with and Northstar is just a wake-up call for them to become better money managers. Yet one thing's for sure -- the centers must shore up their treatment programs if they hope to survive in the new, bottom-line world of managed care.

A growing number of doctors, led by the Texas Medical Association, fear that the county's drug treatment centers are drowning in the first wave of a financial storm that's heading straight for the county's mental-health providers. Earlier this year, the association formally asked state officials to delay the Northstar rollout amid concerns that doctors and their patients weren't ready for the transition.

"While we believe [the project] can ultimately succeed, we feel strongly that if the concerns raised below are not quickly addressed, the health-care safety net for Dallas' low-income patients will quickly unravel, jeopardizing not only the stability of Medicaid managed care but also Dallas' indigent-health-care system," the doctors wrote. "Like the foundation of a new house, it is imperative that the foundation of a new health-care delivery system be stable and unbroken. Otherwise, the entire system is likely to collapse."

Despite the TMA's request, problems with enrollment, and early medication costs that have skyrocketed above what was projected, Northstar rolled out as scheduled on July 1. Doctors did, however, persuade state lawmakers to put a temporary moratorium on all new managed-care projects. The time-out will give the state a chance to see whether this trend toward privatization will truly revolutionize the lives of poor Texans or lead them to the brink of disaster.


Dave Wanser is the state's point man on Northstar, and the burden of making the project work falls on him. Wanser is the director of behavioral health services for the Texas Department of Mental Health and Mental Retardation in Austin, but a more appropriate title might be negotiator or, perhaps, miracle worker.

Nowadays, Wanser is consumed with the unending task of ironing out glitches in the project and, increasingly, negotiating disputes between the shrewd representatives of Value Options and Magellan on the one side, and fuming traditional health-care providers on the other.

"There are some burnt bridges out there that need to be rebuilt," says Wanser, who has spent nearly three years preparing for Northstar but is still struck by the size of the task before him. "If I had any capacity to appreciate how much complaining there has been," he says, "I would have just walked away."

At least Wanser still has a sense of humor, which gives him the ability to discuss what is an astonishingly complex project in relatively simple terms. Basically, he says, the state is becoming a wiser consumer of health-care services.

"The fact is, mental illness makes you poor, and these people cost taxpayers a lot of money. It doesn't matter who pays the bill; the idea of Northstar is to reduce confusion in the system," Wanser says. "We're looking at a population of people who can't afford health care because they're poor, and we are helping them purchase health care."

Just like people who have private insurance, Northstar clients will select a plan, either Magellan's or Value Options', and a primary-care physician. Once enrolled in the program, the patients have the option of switching between plans, and they are free to change their primary-care providers. In an attempt to avoid costly emergency-room visits, patients will also have 24-hour telephone access to nurses who can answer medical questions.

If it works, the new system will make a world of difference to patients, who have historically been bounced from one county agency to the next, seeing different doctors unfamiliar with their medical history and unable to provide consistent care. Patients found the bureaucracy all the more difficult to navigate because they were often sent to doctors whose offices were too far away from their homes.

If patients didn't make it to the doctor, for example, they couldn't get their medications, their symptoms would grow worse, and they might ultimately end with a costly visit to Parkland Hospital's publicly financed emergency room. Once the patients were stabilized at Parkland, getting follow-up treatment depended on whether they qualified for Medicaid. In the end, Wanser says, many patients were sent home, and the cycle would begin anew.

"Any rational person who doesn't have a vested interest in not seeing things change would agree this is not a sensible way to go. The idea of having coordinated systems of care that aren't redundant makes perfect sense," Wanser says. "For the consumer, [Northstar] starts to level the playing field so you don't have treatment ghettos."

From the perspective of consumers, the greatest potential benefit of Northstar is its promise to give them a watchdog authority over the companies that are supposed to help them get healthy. Unfortunately for them, the review board that's supposed to wield this authority is at the moment stalled. Initially, Dallas Area Northstar Authority (DANSA) was supposed to be fully operational by September 1998, but its board did not begin meeting until after the first of this year, and they didn't hire an executive director until May.

Under the old system, Dallas County's MHMR delivered health care for the mentally ill and Dallas County provided oversight of that care via the MHMR board of trustees, whose members were appointed by the county commissioners. When things went wrong, patients had nowhere to turn except the board, where they often found that their concerns fell on the deaf ears of political appointees who were more interested in protecting their reputations than in investigating consumer complaints.

The problem was last illustrated in 1997, when state auditors reported that the department was rife with financial mismanagement that had festered under the watch of the trustees, who were too busy to notice because they were micromanaging staff and clashing with advocates of the mentally ill during public meetings.

As conceived, DANSA would mark the first time that an independent board made up of Northstar patients and their advocates would be responsible for policing the public-health-care system. Even though DANSA is still in its infancy, spats have broken out regarding who should sit on its board. Mental-health advocates fear the board will be stacked with political appointments, breaking the state's promise to make the board more consumer-friendly.

If DANSA had been up and running on time, it might have been flooded with complaints. An unexpected delay in obtaining federal approval caused tremendous difficulties in getting patients enrolled in Northstar and pushed the deadline for enrollment back three months. Of the nearly 200,000 people the state expects to enroll in Northstar, only 50,841 have applied for membership so far, says Rudy Villarreal, the regional manager at Maximus, a Virginia-based company the state hired to handle enrollment for its managed-care pilots.

Once everyone is enrolled, state officials hope, a new computer database will enable them to better track patients through the system. As part of the new system, the managed-care companies will enter information that details everything from whether patients showed up for an appointment to what medications they were prescribed. While state officials have always tracked how the counties have spent their funds, they are hoping the database will enable them to discern whether a patient actually improves.

"Northstar gives us the ability to look at things at a larger policy level," says Patrick Gillies, the Northstar contract manager and Wanser's right-hand man. "In the past, monitoring contracts was about [asking providers], 'Are you spending money properly?' Now we're asking questions we haven't historically asked."

Whether Northstar will truly improve patients' health remains to be seen, but already the project has made the state's job of buying health care infinitely easier.

Prior to Northstar, the Texas Health and Human Services Commission took money out of the state's Medicaid budget and gave it to county-run agencies like the Dallas County MHMR, which spent the money in accordance with contracts they signed with the state. The state managed similar contracts with various private doctors who agreed to accept Medicaid patients.

Since Medicaid did not cover the cost of most drug treatment programs, the state used a separate funding stream for indigent addicts. The Texas Commission on Alcohol and Drug Abuse (TCADA) funded a network of drug treatment centers, which worked hand-in-hand with various county agencies but were nonprofit organizations under contract separately with the state.

This old system required the state to manage some 270 contracts representing a total of $93 million in the Northstar region alone. From the state's end, the new system is light years ahead of the old in terms of billing and oversight.

Instead of writing hundreds of checks to agencies scattered over the seven-county area, now it has to write only two -- one to Magellan, the other to Value Options. What's more, the state no longer has to hold all of those agencies accountable for the money they spend -- a task that usually fell to the state auditor when major problems arose.

Under Northstar, Value Options and Magellan will keep a leash on agency spending by either authorizing or denying treatment their doctors request for patients, while the state will enforce its new contracts with each company to ensure they don't attempt to gouge the poor by denying treatment and pocketing the money.

As part of their contracts with the state, Magellan and Value Options agreed to adhere to minimum-treatment guidelines, which include existing federal Medicaid treatment requirements and new ones written by doctors employed by the state. If the companies don't live up to those guidelines, they can be fined or their contracts may be terminated.

"If people do things the way they're supposed to," Wanser says, "the clients are supposed to get better."

Like all big promises, however, there's a catch.


With Northstar, the state is investing in the theory that private companies will make a better middle man when it comes to buying health care for poor Texans. Whether they're right involves a simple and, as of yet, unanswered question: Is the $93 million the state is now divvying up between Value Options and Magellan enough to ensure that the companies can make a profit and improve an indigent health-care system that has been historically underfunded?

Not surprisingly, the representatives of Value Options and Magellan say they can. Or at least they think they can.

"It's a very risky business," says Carole Matyas, the executive director of Value Options in Dallas. "There's no guarantee we get a profit. We believe we can do it, but it's too early to tell how the financial piece of this is working out."

With their millions of dollars in revenues and modern computer billing systems, the companies believe they can effectively trim the administrative fat that washed out the old system and then use the savings to improve services. They hope to accomplish this by applying two new principles to the old system, in which the state sent its money down to a familiar network of county agencies like MHMR in big chunks.

Under Northstar, the state's money will now follow the patient instead of the program, while the traditional providers will no longer be able to spend it as they please. Instead, they will have to compete with one another to get the companies' business and, when they do, they'll have to justify the care they give patients by getting permission from their authorization departments. In other words, they'll have to behave like capitalists if they hope to survive.

The state will not interfere with the day-to-day treatment Magellan and Value Options either authorize or deny for patients, but it will monitor the total amount of money the companies spend on services to ensure they are living up to their promises.

Specifically, Value Options has agreed to spend 86 percent of the state money it gets on services, while using the remaining 14 percent to pay for its in-house administrative costs. Magellan has agreed to spend 90 percent of its money on services and 10 percent on overhead.

The way this works is simple. For every dollar the state gives Magellan, 90 cents must be spent on patients. If it costs Magellan only five cents to deliver that care, it gets to pocket the remaining nickel as a profit. If it costs 10 cents to deliver the care, then Magellan breaks even. But every penny over the 10 cents that the care costs is money that comes out of Magellan's revenues.

If it turns out that the companies underestimated their administrative costs, they will lose money.

Like Matyas, Magellan Executive Director Robert Waters says he believes he can do business under Northstar eventually, but so far the numbers don't look good. "We have not had a good first three months," says Waters, who adds that "we'll be happy to get back to even by January."

Waters declined to specify the company's early losses, but he blames most of the shortfall on the three-month delay that kept Medicaid patients from enrolling in Northstar. Because the patients weren't getting care, the company wasn't getting paid -- right at a time when it was investing its own money to pay rent, buy office equipment, and hire staff for its new Dallas office.

The delay dealt a blow to Magellan's initial projections, but Waters says the real challenge is not to let unanticipated problems knock the company off the narrow tightrope that the state's limited resources force it to walk. During the next few months, he says, the company will continually tweak its policies while it searches for a way to adhere to its contracts without sinking further into debt.

And the task won't be easy.

Although Northstar has yet to finish enrolling patients, Magellan and Value Options are already seeing their medication costs spiral out of control.

While Medicaid paid for only three prescriptions per patient per month, Northstar requires the companies to pay for unlimited medications, including the exorbitantly priced "new generation" medications used to treat patients who are severely mentally ill. Waters says the policy has already sent his pharmacy costs soaring some 200 percent over his budget.

"The requirement is to spend more money on medications, but that's not reflected in our overall revenues," Waters says. "The price of the drugs has gone up, and the number of people needing it has gone up. That means we have to cut back on something."

Waters hopes to curtail costs by entering into a contract with drug manufacturers, who would be guaranteed the Northstar account in exchange for lowering their prices. Even if the plan works, Waters says, some patients will not automatically get the best available drugs, particularly "new generation" medications, even though they vastly improve patients' ability to stay healthy and represent the best chance the companies have to reduce the long-term costs of treating those patients.

"That is counterintuitive to everything we want to do with Northstar," says Waters. "It's getting to be an ethical question."

The medication dilemma reflects a broader problem the companies will face in solving future disputes with doctors over what type of care is necessary for patients. So far, there have been few complaints from the county's mental-health providers, whose Medicaid patients are only now enrolling in the program. But the county's chemical-dependency counselors, who haven't traditionally relied on Medicaid dollars, are beginning to cry bloody murder.


In the close-knit community of chemical-dependency providers, New Place has always been a place of distinction. A sign posted above the agency's front door captures its philanthropic mind-set: "Thru this door pass the most beautiful people in the world."

Founded in 1983, New Place is the first outpatient drug treatment center of its kind in Dallas and, until this month, it was the largest, serving some 160 indigent clients at its offices in East Dallas, Plano, and McKinney. On September 27, New Place earned a final distinction by becoming Northstar's first fatality.

On that Monday afternoon, the center's staff of 18 counselors solemnly gathered inside a group therapy room while Carolyn Tartaro, the center's executive director, took her position behind a lectern. Although Tartaro came equipped with a prepared announcement, her tears told the staff everything they needed to know.

"I've worked every possible scenario to try to make it work. I've worked all the numbers, and I just can't make it work," Tartaro told her staff. "They won. I cry uncle."

Since a basic goal of Northstar is to limit costly medical emergencies, such as drug overdoses and botched suicides, New Place should be booming with business because its sole purpose is to prevent such incidents by teaching addicts how to kick their habits. Instead, Northstar has had the opposite effect: The number of its clients dwindled and, because the money follows the patient in this new system, so did its revenues.

Since July, Tartaro tried to offset the impact of Northstar by laying off administrative staff, beginning with her accountant. Then Tartaro started losing counselors, including the Hispanic woman who ran the center's only Spanish-speaking treatment program. By September, it became clear that those cuts still weren't going to generate enough money to cover its $1.2 million budget.

Although New Place was the first center to cave under Northstar, it isn't the only agency getting squeezed. New treatment guidelines, in which Magellan and Value Options are systematically reducing and denying services, are testing the financial limits and the quality of care provided at all the nearly two dozen drug treatment centers in the Northstar region.

"Paranoid" may be the best word to describe the current mood among the centers' directors, who believe Magellan and Value Options are slowly eliminating their programs because they are too expensive.

"We all get the feeling in the nonprofit world that they want us gone," says Ed Cinisomo, the executive director of Daytop Village. "The illusion was that we kept patients too long and wasted money. That's a sham. We know how to keep things together with duct tape and chewing gum. If my programs in Texas close, that's terrible."

Daytop is a New York-based nonprofit that operates residential drug treatment programs in Dallas and Palestine. Together, the two centers treat more addicted teenagers than any other adolescent program in the state. Like Tartaro, Cinisomo is now seeing his patients and his revenues disappear. "Last year at this time, I had 95 kids in my program. Today I have 55," he says. "Where are the kids? They're not showing up."

Several factors -- some intended, others not -- are conspiring to reduce care.

For years, the Greater Dallas Council on Alcohol and Drug Abuse served as the county's central intake unit for indigent adults who suffered from addiction. When those adults showed up at the council, its staff would conduct an initial chemical-dependency assessment and then would refer them to treatment, either residential or outpatient, depending on what level of care they needed and which centers had space available. For teenagers, a nonprofit organization called Dallas Challenge was an important referral agency.

But both agencies became obsolete on July 1, when Magellan and Value Options took over the job of referring patients to the centers. Since then, the number of clients getting into treatment has steadily declined, says Homeward Bound's Douglas Denton.

Homeward Bound is the county's largest residential treatment program for adults, but even its size hasn't protected it from the cuts. "We have had to cut in half the women's residential program because we can't afford to staff it and wait," Denton says.

To its credit, the state has tried to correct the problem by giving the Greater Dallas Council more money to resume its role as a referral agency, while Magellan and Value Options are compensating the centers' early losses by advancing them payments.

This adjustment may help some places survive the transition into managed care, but even those that do will find the length of their treatment curtailed. As a result, they will have to either cut back their programs or provide the care by asking private donors and Dallas County to bail them out.

Both Matyas and Waters confirm that their companies are scaling back residential drug treatment services because of their costs. For his part, Waters says the cuts are necessary because they are the only way he can live up to the state's requirement that he expand the number of people covered under Northstar.

"By lowering lengths of stay, you create increased capacity," Waters says. "For chemical dependency, a lot of the research shows that you can be just as effective with a program that has a reduced length of stay for residential [treatment] and an expanded outpatient program."

But chemical-dependency counselors object to the notion that their residential programs are too long, pointing out that they were designed in accordance with state guidelines that have been steadily cut over the years because of funding constraints.

"There is a direct correlation between length of stay and recovery. The longer you stay, the better your chances are for getting healthy," says Daytop's Cinisomo. "Nobody wants me to discharge kids because I ran out of money. That's morally reprehensible. God forbid it was one of these people's kids -- how long would the length of stay be then?"

Even if it were true that the residential programs were too long, the counselors say they are not seeing a corresponding increase in the length of time patients are getting approved for outpatient treatment. Instead, that time is also being cut.

In fact, it was a reduction in outpatient services that undid New Place, says Tartaro, who saw the number of hours for outpatient treatment per patient cut in half under Northstar. "We were in a kind of Catch-22," she says. "We would have to have twice as many clients to make the same money we made before, which increases staff and increases expenses."

At Homeward Bound, Denton says the situation is exacerbated because the companies' reimbursement rates are lower than what the state used to pay under his old contract with TCADA. When you add those losses to the new administrative costs associated with getting authorization for care, Denton says, Northstar equates to a financial crisis that he may not survive. But he doesn't blame the companies for this.

"Truly Northstar is a work of art on the part of the managed-care companies to provide services. It can be a beautiful project if it's done correctly and the rules are followed," Denton says. "But once you start looking at the numbers, you see it's a grossly underfunded project."

If the state doesn't take steps to reverse the current financial strain, Daytop's Cinisomo says, anyone wondering what the future holds for kids should think about Plano. If the number of kids dying of heroin overdoses looks high now, he says, they should just wait.

In September, Cinisomo laid off six counselors in an effort to offset his losses. Despite the cuts, Daytop is some $230,000 in debt, a situation that has prompted its New York-based board of directors to consider closing its Texas operations.

Like New Place, Daytop works closely with the criminal court system, and its potential demise would blast a major hole in Dallas County's efforts to prevent juvenile offenders from becoming career criminals. The center is one of only three programs that Dallas County's juvenile-services department relies on to treat kids who wind up in detention because of their abuse of drugs and alcohol.

"Three of these programs wasn't enough. If we lose one, then it's gonna be a concern," says Mike Griffiths, the department's director.

Since Northstar began, Griffiths says, the companies will only authorize up to two months of treatment, down from the traditional six months, for kids who wind up in detention because of their addiction. Worse, some kids who sit in detention for up to three weeks while waiting for a judge to order them into treatment are getting denied coverage altogether.

"The plans say, 'Well, he's not medically eligible anymore because he's been sober for three weeks,'" Griffiths says.

While Cinisomo is having to cut costs and beg for more donations to make ends meet, Griffiths is paying his bills by spending money earmarked for other juvenile programs. Unless the plans change their authorization policies, Griffiths says, he'll be forced to go before the Dallas County Commissioner's Court to request a budget increase.

The good news, Griffiths says, is that the companies' representatives have shown a willingness to figure out a way to get his kids covered under Northstar.

"Everyone wants to paint these guys as evil money mongers, and that's not the case. They're just seeing that their managed-care system doesn't work in Texas," Griffiths says. "We are working with the officials to sift through the process, and we have gotten their commitment to work out the problem. Will it happen soon enough for the providers? I don't know."

Magellan's Waters says he's optimistic that New Place's closure won't become part of a trend. "I would not in the foreseeable future expect to see more closings," Waters says, "but this is a business."

Oddly enough, the complaints from drug treatment counselors fall on less sympathetic ears down in Austin, where the prevailing attitude is increasingly Darwinian.

"Do I think some [centers] may shut down?" the state's Gillies says. "That's really out of the state's control. If they are going to continue to do business the way they used to, some of them may not survive."

Wanser, sounding much less like a negotiator, has even less tolerance for his critics. "There have been some people whose single focus for the last two years has been to prevent this from happening," Wanser says. "Well guess what? It's happened."


Dallas County Commissioner Mike Cantrell laughs when asked whether he thinks Northstar will cure the county's financially strapped public-health system.

"No, we didn't want Northstar. No, we couldn't stop it," Cantrell says. "I still don't believe when you break the money up between two [companies] you're gonna have less administrative costs. If you're taking profits out that aren't being reinvested into the system, that's taking away from the services. That money is leaving the system."

A fiscal conservative, Cantrell has taken a leading role in helping the county adjust to the more competitive environment Northstar creates. As part of that effort, the county revamped the old MHMR department by trimming its administrative overhead, laying off some staff, and renaming it Dallas Metro Care Services Inc. It's a more business-sounding title that reflects its new businesslike mind-set.

"We are looking more and more like a private provider as the days go by. People who used to be our contractors are now our competitors," says Jim Blagg, Dallas Metro Care's executive director. "We have not experienced any consumers falling through the cracks and not getting service. That doesn't mean they won't in the future."

Like Cantrell, Blagg doubts Northstar can deliver on its promise of improved care for the county's indigent population unless state lawmakers give the companies more money.

But Dave Wanser says that more state funding is not an option. "Our Legislature is not of the mind to spend much more on social services. So the fundamental question remains, How do you stretch your dollars and get the most bang for the buck?"

To Dr. Glenn Pearson, the new clinical director of Dallas Metro Care Services, the only answer is to reduce care, something he is loath to do. "Health care is not a commodity," Pearson contends. "Though it is not listed in the Constitution, increasingly people view it as a right, but we're increasingly treating it as a commodity that can be dealt with by businesses."

"Managed-care companies have an incentive to limit care," says Dr. Joel Feiner, the director of Mental Health Connections, a unique program that helps the severely mentally ill learn to live with their illnesses. "Once you put a pricetag on [health], then you're subjecting it to all the market forces that products have, including their ability to bring large salaries for the president of the board and the stockholders."

Even in the private sector, managed-care companies already operate on what Feiner calls the "shameful assumption" that there is a limited amount of money to go around, which means that the gap between the haves and the have-nots grows wider.

"What the doctors have been forced to do is weigh the many against the few," Feiner says. "The question becomes, Why are there such limited resources at a time when the economy is thriving?"

As part of the temporary moratorium on the state's managed Medicaid program, state lawmakers will soon renew the debate over how much the health of the state's most impoverished citizens, including those affected by Northstar, is worth. Although money will drive the debate, Rep. Garnet Coleman argues that his colleagues must consider the broader philosophical questions managed care raises.

"If the [companies] are not interested in the health of the patient, that patient may very well die," Coleman says. "The state cannot take lightly the real importance of the role we are giving these companies." Instead, Coleman says, the state must consider two questions before it decides to make managed health care a permanent reality.

"We have to determine, one, Are we saving money and, two, Is this detrimental to care? Those questions are not answered," he says. "We want to make sure that managed care in the public system is working. The jury is still out and, yes, I'm worried."


Back in the trenches at New Place, Emilio, Scott, Natasha, and Greg listen quietly as their counselor explains how in the next week they will be split up and assigned to new treatment centers. They don't know yet where they're going or whether they'll get the care they need. All they know is that their lives have been put on hold.

Greg, the crack addict, scans the faces on his feelings poster to find the one that captures his thoughts about Northstar. Some of the accompanying words -- uneasy, tense, bitter -- come close, but none is quite fitting. The word he's looking for actually isn't on the sheet, but it should be listed somewhere between "frustrated" and "hurt."

The word is helpless.

"I feel like we're just a cog in the system," Greg says, fixing his eyes upon his counselor. "How long is it going to take me to trust another person like I trust you? It's getting to the point where there is no outlet. Who's to say that the next place we go isn't going to shut down?"

"I'm disappointed," Emilio adds. "It's like breaking a family up. Everybody knows each other."

The other addicts nod their heads in agreement. The room grows silent as they contemplate their fate. Their family is breaking up, and there is no one to say that the same thing won't happen at the next place they go. Sensing that the news is dragging the group down, counselor Gerald Strickland adopts a drill sergeant's demeanor.

"What they want to do is lock ya'll up. They're setting you up for failure. I'm real pissed off about this situation," Strickland says, pausing as if to check his own emotions. The drill sergeant takes a deep breath, using the air to swallow his rising anger. He tells the group not to give up, not now, while there's still hope.

"I know it's gonna be hard. Tough. It's like somebody dying," he says. "What you gotta do is be smart. Take advantage of this treatment stuff, because, as you can see, it's fading away. Pretty soon, Texas won't have nothing."

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