Facing financial pressure, Tucson behavioral-health agency Community Partners Inc. this week acquired Assurance Health & Wellness, creating a merged company that will be one of the largest mental-health-care providers in Arizona, executives say.

“It’s a good-news story, in spite of the challenges that may have contributed to the need for the merger,” which was finalized Wednesday, said Fletcher McCusker, CEO of Assurance’s parent company, Sinfonia HealthCare Corp. Assurance runs a network of clinics that provide both behavioral and physical health care. “The more services you have, the better it is for the patient.”

The combined company will be a nonprofit like Community Partners, though Assurance was for-profit, said Neal Cash, who until the merger was CEO of Community Partners. Cash will now act as chief strategy officer of the merged company, with Community Partners executive Vanessa Seaney taking over as president and CEO.

Cash declined to share the value of the acquisition, but he said the combined company is expected to generate annual revenues between $40 million and $50 million.

McCusker said he’s known Cash for 40 years and the two recently began discussing “how either one of us survive independently. It became clear to us that we have a lot more fortitude combined.”

Community Partners was previously known as CPSA, which for 20 years served as Pima County’s regional behavioral-health authority, or RBHA. The company reinvented itself as a provider in 2015, when the Southern Arizona RBHA contract went to Cenpatico Integrated Care. Cenpatico is the for-profit subsidiary of publicly traded insurance giant Centene Corp., based in St. Louis.

FINANCIAL SQUEEZE

Some Pima County behavioral-health providers have said Cenpatico’s higher expectations of efficiency, reduced reimbursements and midyear contract reductions have made it harder for smaller providers to stay viable in Southern Arizona. Facing mounting financial pressure, Tucson-based Pasadera Behavioral Health Network closed its doors last fall. La Frontera Arizona announced layoffs in January.

As one of three RBHAs in Arizona, Cenpatico contracts with AHCCCS, the state’s Medicaid agency, to distribute Medicaid funding to on-the-ground provider agencies that treat patients with mental illness who are enrolled in AHCCCS, or Arizona Health Care Cost Containment System.

Under the state’s new “integrated care” model, adults with serious mental illness can get their physical health care covered by Cenpatico and its contracted providers.

Cash said Cenpatico isn’t the problem as much as broad changes in the public behavioral-health-care system.

“Consolidation has to occur to achieve the kind of economies of scale you need in this new kind of environment,” Cash said. “It’s like every other business. Whether it’s good or bad, the mom-and-pop shops are needing to develop different strategies to survive.”

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Payers like AHCCCS and its contracted RBHAs are now shifting toward a “value-based” reimbursement model, rewarding providers financially if they achieve better outcomes for patients, such as reductions in hospital stays and securing employment or housing for clients, McCusker said.

At the same time, starting in April, the payment structure will move away from advance “block” payments that agencies have historically received each month, based on their spending history, in favor of a fee-for-service structure that pays agencies for care provided after they submit a claim.

While some behavioral-health leaders are optimistic about the shift, it represents a dramatic funding change.

“It’s going to be a huge changeover in cash flow for all of these providers who have been used to getting money in current month,” McCusker said.

Larger agencies, with greater access to lines of credit, will be better positioned to handle the cash-flow challenges that will inevitably result from the “double-whammy” of financial pressure — both the squeeze from Cenpatico and the changes in reimbursement, McCusker said.

Ultimately, the behavioral-health landscape will evolve, McCusker said.

“I think you’ll see fewer (providers) and larger providers that can manage cash-flow hiccups and adapt to new payment methodologies,” he said.

Contact reporter Emily Bregel at ebregel@tucson.com or 573-4233.