"If you need to change the financial arrangements, there should be provisions to protect these kinds of vulnerable patients," said study co-author Wayne Ray, a professor of preventive medicine at Vanderbilt University Medical Center.

Sixteen states subcontract -- or "carve out" -- Medicaid mental-health services, which provide medical services for the poor. Tennessee transferred its mental health services to two HMOs in 1996, paying them a fixed amount for each patient regardless of how serious his or her condition was.

Ray and colleagues studied the records of 4,507 patients who took antipsychotic medications -- most suffered from schizophrenia -- and compared their care both before and after the changeover. For comparison, researchers also looked at the initial and follow-up care received by 3,644 patients under the old system.

The researchers report their findings in the May 8 issue of the New England Journal of Medicine.

Patients served by the HMOs were 1.18 times more likely to miss at least 60 days of treatment, including medication, during follow-up after initial treatment. High-risk patients were especially likely to miss treatment after the changeover. Nearly 30 percent of them weren't treated for 60 days or more, compared to 20.3 percent of those studied in the pre-HMO period.

Treatment with antipsychotic drugs is vitally important for schizophrenics, Ray said. "If patients stop taking them they may have hallucinations return, they may have voices directing them to do bad things. The control they have over their disease and the capacity they have to lead a normal life may go away," he explained.

Overall, the odds of disruption in treatment was 79 percent higher among the high-risk patients served by HMOs, Ray said. "That's a major lowering of quality of care."

The reasons behind the decline in care aren't clear, Ray said, but he has theories. "For some of these high-risk patients, there were carefully developed strategies to show that they adhered to their medications -- reminders, transportation, and those kinds of ancillary services. These probably fell by the wayside under the new program."

Also, patients served by the HMOs were more likely to find themselves with new doctors, a change that could have sparked more disruption, Ray said.

According to Ray, the care of the neediest mental-health patients should take precedence over saving money. Officials shouldn't disrupt the access of patients to medication or to their regular doctors, he said.

In an accompanying commentary in the journal, a researcher writes that other states did a better job than Tennessee when they switched from providing mental-health care to paying for someone else to do it. But the new study shows the importance of making sure that "careful monitoring and strict accountability" accompany such changes, writes David Mechanic, a professor at Rutgers University's Institute for Health.

Officials at the Tennessee Department of Human Services, which administers the Medicaid program, were not immediately available to comment on the study.

More information

Get information about Medicaid from the Centers for Medicare & Medicaid Services. Learn more about schizophrenia from the National Alliance for Research on Schizophrenia and Depression.