[NYAPRS Enews] OMH Outpatient Rate Study Calls for Annual Inflation Adjustments, Quality Incentives, Indigent Care Pool

Wed Jul 11 08:46:53 EDT 2007

NYAPRS Note: Note some of the report's most prominent recommendations: 

*	"Annual inflation adjustments and regular rate rebasing to
maintain adequate reimbursement amounts can help to support quality and
effectiveness of services. Regular, scheduled adjustments and rebasing
also provide rate continuity for provider planning and cash flow
purposes.
*	Add-on payments should be eliminated. The savings should be
reinvested into a new payment structure that takes case mix into
consideration and that would apply to all providers.
*	Incentives can be built into the reimbursement methodology to
support quality, effectiveness and equity. For example, factors can
encourage providers to seek third party payments or to strive for
certain performance outcomes.
*	The state needs to recognize the need for indigent care and
should consider developing an Indigent Care Pool, which would address
issues related to net deficit financing and wrap-around services.
Indigent care payments to providers should be based on the relative
percentage of uninsured patients in their caseload."

OMH Distributes Mental Health Outpatient Reimbursement Study
<http://www.omh.state.ny.us/omhweb/Provider_Reimbursement_System/report.
html>  (Excerpts and Highlighting by NYAPRS)

OMH has distributed a review of the financing and reimbursement of
mental health services provided by outpatient clinic, continuing day
treatment, and day treatment programs licensed under Article 31 of the
Mental Hygiene Law. The report was commissioned by the Legislature in
the 2006-07 state budget. Work on the report was carried out by Public
Consulting Group (PCG), under contract with the Office of Mental Health.

Executive Summary (NYAPRS Note: and included the participation of an
array of providers and advocacy group reps that included NYAPRS' Dick
Jaros and Harvey Rosenthal and NYAPRS member reps Peter Trout from
Behavioral Health Services North and Allison Carroll of Putnam Family
and Community Services).

The 2006-2007 Enacted Budget directed New York State Office of Mental
Health (NYS OMH) to conduct a study of the mental health reimbursement
system...Public Consulting Group, Inc. (PCG) was engaged by NYS OMH to
conduct this study. New York State currently uses a funding and
reimbursement methodology for their clinic, continuing day treatment
(CDT) and day treatment programs that includes the use of a regional fee
schedule for recognized services (the base rate) with the addition of
provider specific supplemental payments (known as add-ons) to compensate
providers for the costs of providing services. This system was
established in 1991, and at the time it was a creative solution that
provided the funding needed to meet the growing demand for and cost of
these services. With the passage of time, however, the existing funding
and reimbursement system has become antiquated and is not able to keep
pace adequately with the needs of the providers and their consumers.

Based on this study, PCG has concluded that the current system of
financing outpatient mental health services using an add-on structure
should be replaced with a more equitable and more rational system of
payment. The current system is outdated, inequitably funded and is based
on a rate structure that has outlived its usefulness. 

The COPs/Non-COPS structure that has been used for nearly two decades
has resulted in provider payments that vary considerably (by over $200 a
unit after cost outliers are removed), and these payment variations
cannot be uniformly explained by differences in case mix or service
intensity. In fact, at times the same service is reimbursed at different
rates based solely on the facilitys license. Overall, reimbursement for
facilities licensed by NYS OMH is divorced from reimbursement for
facilities providing the same or similar services under licenses from
the Department of Health (DOH), the Office of Alcoholism and Substance
Abuse Services (OASAS) or the Office of Mental Retardation and
Developmental Disabilities (OMRDD). This discrepancy in reimbursement
methodology is particularly striking given that, in some instances, the
same individuals are served by all of these facilities. The irrational
nature of the current reimbursement system is in part of a function of
reimbursement and licensing freezes around which providers have learned
to work. 

What is needed is a complete overhaul of the current payment system.
However, no changes to the reimbursement methodology for outpatient
mental health services can be done without considering New York States
overall health care policy goals. In writing this report, we understand
that our study is narrowly focused, but that any solutions would have to
include a much broader perspective of the states Medicaid reimbursement
system as a whole....

Findings

Finding 1: Reimbursements, costs and deficits vary substantially among
providers.

There is substantial variance in the reimbursements providers receive
and in the costs and deficits providers report. The reimbursement
variance is attributable to the COPs, Non-COPs and CSP add-ons as well
as the inconsistent COLA adjustment for some providers. Specifically,
reimbursements for services vary by hundreds of dollars from provider to
provider:

Continuing Day Treatment, 1 hour service for units 1-50: $12.65 to
$225.32 

Clinic Regular: $49.64 to $567.25 

Day Treatment, full day - $70.93 to $332.83 

Costs per unit of service vary considerably with some providers expenses
reported as being thousands of dollars higher than those of other
providers. Even when the top 5% and bottom 5% outliers are removed from
the analysis, because we question the accuracy of the reported data,
expenses vary over $200 per unit. 

The average cost per unit follows:

Continuing Day Treatment-$19.28 

Clinic Regular-$122.55 

Day Treatment-$67.40 

Provider gains and deficits vary considerably with some providers
reporting over $13 million in losses while others report over $2 million
in net gains. While some of this variation may be attributable to poor
data, when outliers are removed losses and gains ranged from ($1.5
million) to $2.3 million. 

Finding 2: The current reimbursement system is complex and is not
transparent or easily understood by providers.

Providers feel the system is arbitrary, has negative cash flow impacts
on their business practices and is difficult to manage. For example,
providers are required to estimate and set aside any over allocation of
rate supplement funds that could be recouped by the state on an annual
basis.

Finding 3: New York State collects a significant amount of detailed data
from providers.

Through the CFR and ICR reports and the Patient Characteristics Survey,
the State collects a significant amount of data from providers that can
be utilized in the development of a reimbursement methodology and later
in ongoing reimbursement updates. Although the infrastructure is
comprehensive, there are some issues of data quality and comparability
that would need to be addressed if the data were to be used for this
purpose. 

Finding 4: Providers recognize the importance of Quality. Providers are
conducting various continuous quality improvement (CQI) initiatives and
are measuring various outcomes. 

Many providers are taking part in the states continuous quality
improvement (CQI) initiative for which they receive additional
reimbursement. Additionally, many providers have established their own
quality initiatives. The degree to which quality measures are
implemented varies by provider, with many larger providers employing a
dedicated quality assurance staff and smaller providers relying on
administrators to fulfill that role. 

Finding 5: There are several cost drivers that significantly impact
clinic, CDT and day treatment.

Provider costs are impacted by many factors that include, but are not
limited to: geographic location, client need and characteristics,
staffing models, productivity and no-show clients, provider size, and
the provision of non-reimbursable services, as well as serving Medicaid
Managed Care and uninsured consumers. 

Finding 6: In total there was a 50.7 million net deficit for the
agencies and programs included in this study. (346 out of approximately
455 in the New York State mental health reimbursement system).

Providers reviewed reported an overall program deficit on their cost
reports. The $50.7 million includes state and local net deficit funding
of $25 million reimbursed to the providers included in this study. (The
deficit is $75.7 million when the state and local net deficit revenue is
removed.) Even when the outlier providers (10% of the top) are excluded,
the remaining 90% of providers have an $11.4 million net deficit for all
of the programs combined. The loss appears to be based on a combination
of uncompensated care and limits and rate inadequacies by Medicare,
managed care companies, and other insurance programs.

Finding 7: Providers are performing Medicaid outreach services to
increase client enrollment in Medicaid. 

Although they are not required by NYS OMH and are not currently billed
to Medicaid administration, some providers perform outreach services to
clients, including providing Medicaid informational material, assessing
clients for Medicaid eligibility, and helping set up appointments with
Medicaid eligibility workers. 

Finding 8: New program funding, changes to state law, and changes to the
SCHIP program will reduce the size of the un- and underinsured
population. 

Recent changes in funding, law and policy in New York State will impact
the availability of funding to support mental health services. Timothys
law the expansion of Child Health Plus and the removal of administrative
obstacles to Family Health Plus will increase the amount of private
insurance and Medicaid/State Childrens Health Insurance Plan coverage
available to mental health clients and thereby decrease the pressure of
the un- and underinsured population on mental health providers.

Finding 9: Providers cited difficulty in recruiting appropriately
licensed staff, particularly in specialty areas.

Providers say they have a difficult time recruiting appropriately
licensed staff, particularly in specialty areas such as childrens
psychiatry and bilingual staff. Providers cited low salaries/salary
competition, tough work environments and fewer licensed providers than
actual demand as impacting their ability to recruit and retain staff.
The staff recruitment problem is exacerbated among providers who serve
large Medicaid Managed Care populations because many Managed Care
Organizations have higher standards for provider qualifications than the
state Medicaid program. These problems are compounded by the fact that
rates have not kept pace with increasing costs.

Finding 10: The existing reimbursement system has not kept up with
changes in the delivery system. It does not have a process in place to
adequately adjust the baseline from which funding add-ons were
originally calculated. 

The initial funding calculations that determined the amount of the
provider-specific add-on payments were largely based on the overall
financial performance and funding sources of the provider in the 1989
base year and its designation as either a COPs or Non-COPs provider.
There is no mechanism within the system to rebase these add-on payments
to maintain a consistent relationship between costs and funding at a
provider level. As a result, inequities among like providers have become
significant over an 18 year period. 

Finding 11: Providers indicate that the distinctions differentiating
providers have narrowed since the original funding formula was
developed. 

Over the years, services offered by various providers have become more
comparable, consumers served and payer types have become more consistent
across providers. As a result, anecdotal evidence suggests that the
distinctions that originally separated some types of providers have
disappeared. 

Finding 12: If the resources in the existing system were redistributed,
a significant increase in the clinic base rate could be financed.

The current rate structure roughly reflects the average cost of services
but is disproportionately distributed. Hypothetically, an average per
visit increase of approximately $70 could be supported if all current
add-ons were evenly distributed.

Finding 13: Low Medicaid managed care reimbursement and the subsequent
addition of the COPs add-on managed care reimbursement has eroded the
financial health of providers and created a duplicative, costly state
payment mechanism.

Individual providers must negotiate the Medicaid managed care rate with
the managed care organization. For COPs providers, the COPs add-on
amount is paid separately to the provider for outpatient services
provided to a Medicaid managed care consumer. This system exacerbates
financial strain on the system both by providing a reportedly
insufficient payment to providers and by eliminating state savings
gained through a managed care capitation.

Conclusions

As New York State moves forward in considering whether to restructure
its Medicaid reimbursement methodology for outpatient mental health
services, there are a number of items the state should consider. First
and foremost, the state should consider how outpatient mental health
services fit into the states overall health care policy objectives.
Second, it should create a system that is based on validated, consistent
and up-to-date data. By ensuring consistent data collection and using
the most current data available, the State of New York could create a
reimbursement system that is based on current costs. The state can also
use this opportunity to tie the reimbursement methodology more closely
to the mission and goals of NYS OMH. 

The new system should also give due consideration to the following
reform principles and ideas for redistribution of resources: 

*	Medicaid payments should address the reasonable and necessary
cost of providing services to Medicaid enrollees. 
*	Medicaid payments must take into account the multiple needs of
individuals requiring mental health services, including integration with
general health care, substance abuse, and mental retardation services. 
*	The payment method should be built on an econometrically sounds
basis, taking into account differences in provider service type, case
mix, service intensity, geography and volume. 
*	Financial incentives must be aligned across facility licenses
and settings. 
*	Add-on payments should be eliminated. The savings should be
reinvested into a new payment structure that takes case mix into
consideration and that would apply to all providers. 
*	NYS OMH should consider the use of more appropriate,
HIPPA-compliant codes, where the type and amount of services delivered
are consistent with CPT-4 definitions. 
*	Further consideration should be given to the development of
incentive payments that tie to measurable indicators of quality, such as
outcomes accountability, individualized services, and overall
responsibility for the client. 
*	The state needs to recognize the need for indigent care and
should consider developing an Indigent Care Pool, which would address
issues related to net deficit financing and wrap-around services.
Indigent care payments to providers should be based on the relative
percentage of uninsured patients in their caseload. 

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