What States Should Know Before Applying to CMMI’s Innovation in Behavioral Health NOFO

Health Highlights


On June 17, 2024, the Center for Medicare and Medicaid Innovation (CMMI) at the Centers for Medicare and Medicaid Services (CMS) released a notice of funding opportunity (NOFO) for Innovation in Behavioral Health (IBH), a new eight-year model focused on adult Medicaid and Medicare enrollees with moderate to severe mental health conditions and substance use disorders (SUD). IBH will provide funding for states to work with behavioral health practices to develop and implement new care delivery models, with a focus on care management, that aim to integrate physical health, behavioral health, and health-related social needs (HRSN). The IBH care delivery model must be accompanied by a value-based payment (VBP) methodology. Interested states must apply for IBH by September 9, 2024.

State Medicaid agencies will administer the IBH Model in partnership with state agencies that oversee mental health and SUD services. Eight states will be eligible to receive up to $7.5 million in cooperative agreement funding over the course of the model’s eight-year period of performance, which is slated to begin in January 2025. The first three years will be a “pre-implementation period,” during which states will recruit practices to participate in IBH, design their care delivery and payment models, and build state Medicaid agency and practice-level infrastructure using cooperative agreement funding. The model will be implemented for five years beginning in January 2028.

States can choose to deploy IBH statewide or in a portion of the state. Practices will have the option of participating in IBH for only their Medicaid populations or for both their Medicaid and Medicare populations.

Key Features of IBH

At its core, IBH establishes a care delivery framework for states to create integrated models of care, with a focus on care management, for adults with significant mental health and SUD needs; requires the use of a VBP methodology to reimburse for a state’s care model; and provides financial support for states and practices to be successful in this new paradigm.

Behavioral Health Practice Participation Requirements. Participating practices must employ or contract with at least one state-licensed behavioral health provider that is Medicaid-enrolled; offer outpatient mental health and/or SUD treatment services; and provide these services to a monthly average of 25 Medicaid beneficiaries with moderate to severe mental health conditions or SUD. A wide variety of provider types may participate, including Certified Community Behavioral Health Clinics (CCBHCs), community mental health centers, tribal health organizations, opioid treatment programs, federally qualified health centers, and independent practitioners. To join the Medicare component of the model, practices must be enrolled in the Medicare fee-for-service program.

Care Delivery Framework. CMS’s IBH care delivery framework offers states flexibility in how they structure their care model, while requiring several key components, including:

  • Care Integration – CMS envisions that IBH practices will be “entry points for integrated, value-based care” across physical health, behavioral health, and HRSN. While practices are not required to offer co-located physical health services, they must integrate certain aspects of physical health care into their care delivery. CMS establishes three priority conditions for care integration: diabetes, hypertension, and tobacco use.1
  • Care Management – Practices must provide ongoing, whole-person care management across an individual’s needs, including physical health, behavioral health, and HRSN. Care management must encompass use of an interprofessional care team that includes an individual’s physical and behavioral health providers in addition to other types of providers, such as community health workers or peer support specialists. Care management must include person-centered planning, care coordination, and support for care transitions, among other functions.
  • Health Equity – Practices are required to develop a health equity plan describing their efforts to address the health disparities impacting their patient populations. They must annually screen IBH-eligible individuals for HRSN needs using a standardized tool and provide referrals for services addressing HRSN.

Payment Approach. While CMS has established the IBH Medicare payment approach, and states will develop their own IBH Medicaid payment approach, Medicaid and Medicare payment approaches must be “directionally aligned.” For both Medicaid and Medicare, IBH payments will cover the components of the care delivery framework—care integration, care management, and health equity, as outlined above. The IBH payments on their own will not reimburse for the cost of underlying physical health or behavioral health services. Both the Medicaid and Medicare payment approaches will incorporate performance-based payments using a standardized practice measure set established in the NOFO; performance-based payments must start to shift from pay-for-reporting (Health Care Payment Learning & Action Network (LAN) Category 2B) to pay-for-performance (LAN Category 2C) by the second year of the implementation period (2029).

Beyond the parameters outlined above, states have flexibility in how they structure their Medicaid payment approach. For example, they may choose to fully align with the Medicare payment approach (described below) or implement a per-beneficiary per-month (PBPM) prospective payment, a prospective payment system (PPS) rate, or a fee-for-service methodology.2 States can determine whether practices will assume upside risk, downside risk, or a combination of the two. If relevant, states can adapt payment methodologies they are already using for other federally sponsored behavioral health reform initiatives, such as CCBHCs or Medicaid Health Homes.

The CMS-developed Medicare payment approach uses a prospective, risk-adjusted PBPM “integration support payment” to cover required components of the care delivery framework. In a February 2024 webinar, CMS projected that the integration support payment will be between $200 to $220 PBPM. Practices will only be expected to assume upside risk for the Medicare performance-based payment.

Infrastructure Funding. The IBH cooperative agreement will fund infrastructure at both the state Medicaid agency and practice levels. States must distribute at least 30% of cooperative agreement funding to practices.

IBH-participating practices must adopt Office of the National Coordinator (ONC) for Health Information Technology (HIT)-Certified HIT and are strongly encouraged to connect to a health information exchange or health information network. Recognizing that many behavioral health providers were ineligible to receive EHR adoption incentives under the HITECH Act, state Medicaid agencies can use IBH funds for investments in participating practices’ HIT capacity, including adoption and enhancement of electronic health records and interoperability. IBH funding may also be used to fund telehealth infrastructure and population health management tools and for other types of capacity building, including staffing and workforce development efforts and creation of new clinical workflows.

States will use their cooperative agreement funding to invest in infrastructure at practices that are only participating in IBH for their Medicaid population. Practices participating in IBH for both their Medicaid and Medicare populations will apply to CMS directly for infrastructure funding. CMS estimates that states should allocate approximately $100,000 in infrastructure funding for each participating Medicaid-only practice but does not provide information on the expected funding amount for practices participating in IBH for Medicare.

At the state level, state Medicaid agencies will leverage the cooperative agreement funding to build capacity to implement IBH. The funding can support development of HIT infrastructure at the state level (e.g., support for a data warehouse, development of admission, discharge and transfer systems), design of the care delivery framework and Medicaid payment approach, provision of technical assistance to practices, hiring of IBH staff, and stakeholder convenings, among other purposes.

Quality. States will be required to report on state and practice-based measures quarterly and annually for Medicaid enrollees in the IBH Model; practices participating for Medicare will report practice-based measures directly to CMS for their Medicare panel.  The quality strategy includes both standard and patient-reported outcome measures (PROMs). Ten percent of cooperative agreement funding is at risk if states do not meet reporting requirements or do not demonstrate improvement on state-based measures. States are also required to participate in federal IBH evaluation efforts.

Considerations for State Medicaid Agencies

  • Alignment of IBH with other state-driven behavioral health care delivery reforms. States that are participating in the CCBHC demonstration or that have a Health Home program will be looking to align IBH with their existing integrated care models. The NOFO suggests that it will be easier for a CCBHC demonstration to serve as the platform for IBH implementation than a Heath Home program.
  • Ability to advance long-term Medicaid payment goals. CMS commits to partnering with states to determine a suitable authority to implement their IBH payment approach, whether it be adapting authorities already in place (e.g., Health Home, CCBHC demonstration) or establishing new authorities. When determining whether to apply for IBH, states will be considering whether IBH will offer them opportunities to pursue payment innovations that otherwise would have been difficult to accomplish.
  • Sufficiency of infrastructure funding to meet state Medicaid agency needs. Planning for and implementing IBH will be a considerable lift for states. States will need to determine whether the cooperative agreement funding—a maximum of $5.25 million over eight years that the State Medicaid agency can retain3—is sufficient to support federal requirements.
  • Interest in Medicare-Medicaid alignment. Unlike CCBHC and Health Homes, IBH presents the opportunity for Medicare participation, which is likely to be enticing to states with a strong interest in promoting Medicare-Medicaid alignment and supporting safety net providers.
  • Provider Interest in IBH. IBH offers significant opportunities to behavioral health providers, including the ability to participate in new VBP arrangements for both Medicaid and Medicare. In assessing whether to pursue IBH, states will need to gauge interest and secure participation commitments from their provider communities since the model cannot be implemented without their investment.

Next Steps

CMS will be hosting a webinar on July 11, 2024, to provide more information on the IBH NOFO.

1 States may establish additional priority conditions.

2 These methodologies all must include performance-based payments.

3 As referenced above, states can only retain 70% of cooperative agreement funding; the rest must be used to fund practice-level infrastructure.



pursuant to New York DR 2-101(f)

© 2024 Manatt, Phelps & Phillips, LLP.

All rights reserved