In 1974, a class action suit filed in the U.S. District Court for the District of Columbia on behalf of individuals with mental illnesses alleged that the practice of treating the District’s mental health patients in an institutional setting violated the statutory rights of individuals. Specifically, the plaintiffs asserted that patients at St. Elizabeths Hospital had a statutory right to appropriate care in alternative care facilities when less restrictive settings were clinically appropriate. In a ruling known as the Dixon Decree, the court ruled in favor of the plaintiffs in 1975, ordered the District to build a system to facilitate the provision of community-based treatment for these individuals, and continued oversight of the District’s progress in developing this system. In 1997, finding that the District was no closer to complying with the Dixon Decree than it had been 22 years earlier, the court placed the D.C. Commission on Mental Health Services in receivership and appointed a receiver to implement the transition to a community-based mental health system. This receiver introduced initiatives that sought to change the way the District delivered services, but implementation was slow and the first receiver made little progress in implementing these initiatives during his 2-year oversight of the commission. Thus, a second or “transitional” receiver was appointed on April 1, 2000, to facilitate the transition from court receivership to District control. (App. I summarizes the major court actions related to the Dixon Decree.) The transitional receiver was charged with developing a comprehensive plan for the District to achieve compliance with the Dixon Decree and resume full control of its mental health system. The court approved a final plan in April 2001 and required the District to implement it; however, before the receivership could be ended, the court required the transitional receiver to certify that the District had the capacity to implement—and was implementing—the final plan. Although the court originally anticipated this certification in late 2001, in December 2001 the transitional receiver recommended extending the date, characterizing the implementation delay as largely unavoidable because of (1) additional time needed for recently hired senior DMH managers to begin major initiatives, and (2) the unexpected need for crisis services to respond to September 11, 2001, terrorist events. Following this extension, the transitional receiver reported to the court that the District had made sufficient progress and, as a result, the court terminated the receivership and appointed the former transitional receiver as a court monitor to oversee the District’s continued implementation of the final plan in May 2002. (See table 1.) When the transitional receiver was responsible for overseeing the District’s mental health system, the District was the largest provider of mental health services to its residents, treating approximately 10,000 consumers annually and employing close to 2,000 staff in fiscal year 2000. The focal point of the mental health system was St. Elizabeths Hospital, which was the major point of entry for all consumers in the system. St. Elizabeths Hospital provided a wide range of mental health services in an acute care setting, including more than 600 beds divided among two types of inpatient consumers, forensic and civil, for adults and children and youth. The District also directly provided services through outpatient facilities in the community, including two community mental health centers and five mobile community outreach treatment teams. In addition to providing inpatient and direct services in the community, the District contracted with private community providers for housing, employment, case management, and other community-based services. In its contracts with private community providers, the District often used a “slot” system to allocate a defined number of consumers to providers and paid them a fixed daily rate per consumer. Under this system, providers did not compete to attract consumers and were paid regardless of performance, consumer satisfaction, or the actual delivery of service. The District and its providers focused primarily on treating the medical symptoms of the consumer without focusing as much on whether the individual was participating in his or her recovery from mental illness and successfully living in the community. Furthermore, the system did not have many safeguards in place, such as uniform provider standards, to involve the consumer in key aspects of service delivery, such as choosing a provider and developing a treatment plan based on the consumer’s goals. The transitional receiver identified the need for a restructured mental health system that had the flexibility to meet individual needs and allow consumers to successfully obtain treatment and live in the community, maximizing principles of accessibility, recovery, and consumer choice. In 2001, the federal share of Medicaid, an entitlement program in which states and the federal government are obligated to pay for covered services provided to an eligible individual, accounted for 8 percent of District mental health system revenue as compared to the national average of 22 percent. The transitional receiver identified the need to better utilize Medicaid as a major funding source. The District’s access to Medicaid funds had been limited because Medicaid did not cover most of the services provided at St. Elizabeths Hospital, considered under the Medicaid statute as a larger psychiatric institution. This effect was exacerbated by the limited capacity in the developing community-based system to support inpatients ready for discharge. For example, in October 2000, District officials estimated that approximately 60 percent of individuals in acute care units at St. Elizabeths Hospital could be moved into the community where outpatient services covered by Medicaid would be available, if stable alternative housing were available. A second limit to the District’s accessing federal funds was that the District had not taken advantage of optional community-based mental health services that could be reimbursed through the Medicaid program. The transitional receiver required the District to implement a strategy adopted by at least 40 other states to expand the services reimbursable by Medicaid through an option to cover rehabilitative services, thus expanding the scope of eligible services and providers beyond that of the program’s traditional focus on services delivered by physicians and psychiatrists who work at hospitals, clinics, and other facilities. Rehabilitative services include crisis and emergency care, medication treatment, and community-based interventions. The variety of rehabilitative treatments and services covered by this Medicaid option is intended to facilitate a consumer’s recovery from mental illness, including restoring a consumer to his or her best possible functional level. The court-approved final plan broadly outlines the mental health system’s direction, philosophy, major roles, and governance. It represents a major shift in the District’s mental health system on several fronts, including the system’s structure and organization, method for enrolling consumers and paying providers, and involvement of consumers in their plan for recovery. For example, the final plan identifies the need to create a new mental health department with the additional responsibility of oversight along with continuing the District’s historic role as provider; envisions a significant change in enrollment and billing systems, such as linking payment to the delivery of services, and developing new funding strategies that increase federal reimbursement; and articulates that the new system have a built-in capacity to measure itself in key performance areas and to translate any findings into continued system improvements. Underpinning these structural changes is a refocusing of the mission of the District’s mental health system toward involving the consumer in treatment decisions and incorporating changes that facilitate the consumer’s recovery from mental illness and away from focusing primarily on treating the individual’s medical symptoms. The court also approved exit criteria for the Dixon lawsuit, which provide a basis for measuring the performance of the District’s mental health system and which must be met in order to end the Dixon case. The criteria cover four areas: 1. consumer satisfaction, which assesses consumers’ satisfaction with mental health services provided; 2. consumer functioning, which tracks consumers’ clinical, social, and other conditions upon entry into the mental health system and again after receiving services for a specified period of time; 3. consumer service delivery, which assesses the adequacy of the mental health system’s overall performance for consumers in a range of areas including treatment planning, coordination of care, and response to emergent and urgent needs; and 4. system performance, which demonstrates how well the community- based system of care is serving particular populations. The first two areas require DMH to develop and implement methods for reviewing and measuring consumer satisfaction and consumer functioning and to use the data to refine the system. To fulfill the remaining criteria, DMH is required to meet 17 performance targets, many of which measure activities identified as national best practices in the field of mental health. According to the court monitor, implementing the final plan, including developing the ability to measure DMH’s progress against the exit criteria, will take 3 to 5 years, with year 1 beginning July 1, 2001. In general, efforts for years 1 and 2 were expected to center on planning, laying the basic infrastructure for the system, and beginning to provide community- based services. By the end of year 3, which began October 1, 2003, DMH is expected to be stabilizing and improving performance within the system, and in years 4 and 5 DMH is expected to be actively measuring performance outcomes. (See table 2.) In addition to developing performance targets for the exit criteria, the court monitor is required to provide the court with semiannual reports on the District’s progress in meeting all of the exit criteria. The court monitor’s first two reports, submitted to the court in January 2003 and July 2003, respectively, focused primarily on DMH’s status in implementing the final plan and also included an update on the status of meeting the exit criteria to end the Dixon case. In accord with the transitional receiver’s final plan, the District restructured its mental health system by creating DMH to oversee the provision of mental health services, including the authority to set regulations and monitor compliance—a shift away from the structure of its predecessor office, which was primarily a provider of services. Under this structure, DMH also continues the District’s historic role as a provider of mental health services. In its oversight role, DMH has developed certification standards and made use of licensing standards to enroll a network of providers to deliver an array of mental health services, which DMH continues to expand to ensure adequate capacity for community- based mental health services.