Agreement with Carelon to review psychiatric and addiction treatment authorizations

In plain English

The county would renew its contract with Carelon Behavioral Health for three years, through June 30, 2029, at a total of $2,126,564, to review and authorize care for people on Medi-Cal who are admitted to psychiatric hospitals or residential drug and alcohol treatment. Carelon does the state-required "concurrent review" work: near-daily clinical case reviews, timely authorization decisions, and physician-level review when medical necessity is disputed. A yes vote approves the agreement (Contract No. 27H0176) and lets the Health Services Agency Director or a designee sign it.

The reviews affect Medi-Cal beneficiaries admitted to out-of-county psychiatric hospitals, the Telecare Psychiatric Health Facility, and residential substance use treatment at Janus of Santa Cruz, New Life Community Services, and Encompass Community Services, where these decisions shape how long a person's stay is authorized and how discharge and aftercare are planned.

Key facts

Three-year total: $2,126,564 — estimated at $688,008 for FY 2026-27, $708,648 for FY 2027-28, and $729,908 for FY 2028-29, including a 3% annual cost of living increase effective July 1 each year.
State and federal funds cover 75% of eligible utilization management costs; in Year 1 that is about $516,006, leaving a County share of roughly $172,002. Funding comes from 2011 Realignment and federal participation funds, with no new County General Funds requested.
The contract is a sole source procurement, based on Carelon's existing staffing, infrastructure, clinical expertise, and reporting capacity.
History: the Board approved an agreement with Beacon Health Options (later renamed Carelon) on June 2, 2020, and ratified a renewal through June 30, 2026 on May 14, 2024.
Tiered pricing: a fixed monthly base fee covers a set volume of initial authorizations, and a reduced per-admission rate kicks in when monthly admissions exceed the base threshold by 26 or more.

Reasons to support

State rules (Behavioral Health Information Notices 19-026 and 24-001) require timely concurrent review and prior authorization for inpatient psychiatric and residential substance use treatment, and the county says it lacks the utilization review and psychiatry staffing to meet the mandated turnaround times in-house.
Because these activities qualify for 75% federal financial participation, the county pays only about a quarter of the cost — roughly $172,002 in Year 1 — with no new General Fund money needed.
Staff report that the real-time review process has improved the timeliness of clinical oversight, supported medically appropriate lengths of stay, and strengthened discharge planning and documentation of medical necessity.

Reasons to oppose or change it

The work is awarded without competitive bidding, so there is no price comparison from other vendors on a $2,126,564 three-year commitment.
Costs rise automatically with a 3% annual cost of living increase, and the county's 25% share still comes from local 2011 Realignment dollars that could otherwise fund direct services.
An outside company makes the authorization and medical necessity decisions, including physician-level review of residential treatment disputes, rather than county clinicians; staff note earlier attempts to bring residential review in-house proved unsustainable and say they will keep evaluating alternatives.

Official wording

Approve multi-year rate agreement with Carelon Behavioral Health for psychiatric and residential substance use disorder utilization management services for eligible beneficiaries, and take related action (Health Services Agency)

Official agenda Staff Report Contract 27H0176 Carelon (eSign)

Summary written by claude-opus-5 from the agenda and the Staff Report. It can contain mistakes. The official documents govern.