InvisALERT Solutions – ObservSMART

How Health Care Reform Affects Providers and Consumers

Health Care reform has been vigorously debated. Many have attributed the deficiencies in the health care system to various causes including Lack of Access (48 million citizens without insurance), overuse of unnecessary, high cost tests and procedures, underuse of prevention, early intervention primary care and behavioral health services, and medical errors due to poor coordination among providers, and poor communication with patients etc. (1) The 2010 Affordable Health Care Act attempted to address these root causes of the inefficiencies in the health care system in four ways.

The first strategy proposed in the National Health Care reform bill is coverage expansion. This is achieved by requiring most individuals to have coverage, implementing Coverage Requirements employers for (>50 employees), and most noticeably, expanding Medicaid. The second related strategy is insurance reform, which prohibits all annual and lifetime limits, bans pre-existing condition exclusions, and creates an essential health benefits package that provides comprehensive services including mental health and substance abuse at parity. The third and fourth strategies are delivery system redesign and payment reform. (1) These are manifested in a transition from traditional division between mental health and behavioral health services and medical services to a more comprehensive patient centered care coordination model (otherwise known as Health Homes) as well as a shift from a traditional fee-for-service model to a capitation payment model.

Health Homes

Many recipients of Medicaid suffer from many chronic conditions (including mental health and health conditions). In order to provide better coordinated care for such individuals, the Patient Protection and Affordable Care Act (ACA) enacted on March 23, 2010 (and became available to states on January 1, 2011), provides states with a new Medicaid option to provide “health home” services for enrollees with chronic conditions. These will be systems of care centered around the patient that facilitate access to and coordination of primary care, acute physical health services, behavioral health care, and long-term community-based services and supports. As an additional incentive for states to take up the new option, ACA authorized a 90% federal match rate (FMAP) for health home services specified in the law for two years. This national initiative gives individual states the flexibility in the manner in which they implement it. (2)

Health Care Reform in New York State: Creation of the Medicaid Redesign Team (MRT)

In New York State, Governor Cuomo challenged the state to reduce Medicaid expenditures by approximately 3 billion while simultaneously maintaining access and improving the quality of services. To meet this challenge he formed the Medicaid Redesign Team (MRT) by joining representatives from the Legislature, health care industry, patient advocacy groups, and State executive staff including the Commissioners of the Office of Health, Office of Mental Health, Office of Persons with Developmental Disabilities and the Office of Alcoholism and Substance Abuse Services, and the New York State Medicaid Director. (3)

Behavioral Health Organizations

The MRT proposed various means of achieving the challenge to reduce Medicaid expenditures. Behavioral health services emerged as one of the central concerns due to the fact that the 300,000 behavioral health recipients were deemed “high cost”. (4) The MRT, therefore, proposed creating Regional Behavioral Health Organizations (BHO) to monitor inpatient behavioral health services for Medicaid fee-for-services beneficiaries and SSI enrollees in managed care, for a two-year period prior to moving all consumers into some type of managed care.

The Tasks of BHOs

  • Monitoring behavioral health inpatient admissions, length of stay, and discharge planning
  • Children’s outpatient SED tracking
  • Provider Profiling
  • Facilitate cross-system linkage (5)

Utilization Threshold

To further control costs of health care, 30-Day amendments have been passed and implemented as of April 1, 2011. The amendment subjects outpatient clinics operated by agencies licensed by the Office of Mental Health (OMH), the Office of Persons with Developmental Disabilities (OPWDD), and the Office of Alcoholism and Substance Abuse Services (OASAS) to utilization thresholds. The thresholds were established by DOH, in consultation with these state agencies, on either a provider-specific or patient-specific basis. Provider-specific thresholds are based on average patient utilization compared to a peer-based standard and are to be applied prospectively based on the amount a provider’s utilization exceeds the threshold. Patient specific thresholds are based on annual thresholds determined for each service and reduce payments for visits over that threshold by a pre-determined amount. The base year for the thresholds is 2009 and is retroactive as of April 1st, 2011. OASAS has adopted a provider specific threshold and OMH has adopted a patient specific threshold.

The MRT proposed thresholds for OMH, OPWDD and OASAS. For OMH adult clinic providers, there will be a decreased in billable rate of 25% after 30 sessions; and a decrease of 50% in the billable rate after 50. For children’s clinics there is no decrease after 30 sessions but the 50% reduction is in effect after 50 sessions. For OPWDD clinics, the reimbursement rate would be a 25% reduction after 90 visits and a 50% reduction after 120 visits. Lastly, for OASAS clinics, the 25% reduction occurs at visit 66 and the 50% reduction would occur at visit 86. (6) It is expected that the implementation of this utilization threshold will reduce costs by twenty-five percent if a lower threshold was exceeded, and a fifty-percent reduction in payment would occur if a higher threshold was crossed. This would translate into an annual total reduction in New York State Medicaid expenditures of at least $10.9 million in OMH’s Article 31 clinics, at least $2.4 million in OPWDD Article 16 clinics, and at least $13.25 million in OASAS’ Article 32 clinics. (3)

Health Homes in New York State

The MRT’s recommendation to create Health Homes to provide coordinated care for Medicaid enrollees with multiple chronic conditions was adopted into law effective April 1, 2011. Health Homes are required to provide the following services:

  • Comprehensive care management;
  • Care coordination and health promotion;
  • Comprehensive transitional care from inpatient to other settings, including appropriate follow-up;
  • Individual and family support, which includes authorized representatives;
  • Referral to community and social support services, if relevant; and
  • The use of health information technology (HIT) to link services, as feasible and appropriate. (7)

Under New York State’s approach to health home implementation, a health home provider is the central point for coordinating patient-centered care. Health Homes will be responsible for coordinating care, and connecting people to services that meet their needs. Their ultimate goal is accountability for improving health outcomes and reducing avoidable health care costs (i.e. preventable hospital admissions/readmissions and avoidable emergency room visits). In addition, NYS health homes will provide timely post discharge follow-up, and attempt to improve patient outcomes by addressing primary medical, specialist and behavioral health care needs through direct provision, or through contractual arrangements with appropriate service providers, of comprehensive, integrated services.

What this Means for Providers and Consumers

These policy changes will have potentially profound effects on both providers and consumers. First, utilization thresholds for outpatient providers will lead to decreased funding for high need clients who require more sessions than are covered under the full rate. Second, the BHO will impact inpatient utilization and maintain additional reporting requirements for inpatient and children’s providers. In addition, providers of all types will receive profiles of their services based upon certain performance metrics. Lastly, the impact of health homes is more unpredictable but will likely lead to, at a minimum, a radical re-structuring of the behavioral health case management system. The creation of health homes will also require physicians and behavioral health clinicians to work more closely with one another to provide more efficient and holistic care.

The increase in Medicaid recipients as well as the parity measure with behavioral health will require that clinicians in both areas provide services more efficiently to meet the needs of a greater number of clients without sacrificing the quality of care or positive outcomes. This will be a particularly salient issue for behavioral health providers as they will see an even larger increase in consumers seeking services. Behavioral health and health providers will also be incentivized to provide services in the most efficient means possible as the state and country move from a traditional fee-for-service model and utilization thresholds are implemented. At this time, both the long and short-term outcome of health and behavioral healthcare payment reform is uncertain. What is clear is that this transition will present a number of challenges and opportunities. How consumers of services, policy makers, providers, and academic partners work together to address these changes will have a significant impact on the outcome.


  1. Ingoglia C. Implications/Impact of Parity Legislation and Healthcare Reform for Behavioral Health: Systems Perspectives: The National Council for Community Behavioral Health Care;
  2. Focus on Health Reform. Menlo Park The Henry J. Kaiser Family Foundation 2011.
  3. Memo: Medicaid Redesign and 30-Day Amendments to the Executive Budget: Manatt, Phelps & Phillips, LLP; 2011.
  4. Beitchman P. Editorial: New York’s Medicaid Reform Portends Major Changes in Behavioral Health Service Delivery. Mental Health News 2011 Summer Issue.
  5. Behavioral Health Organizations Selection Process Document Instructions In: NYS Office of Mental Health and NYS Office of Alcoholism and Substance Abuse Services; 2011.
  6. Collins WA, Welsh DP, Furman W. Adolescent romantic relationships. Annu Rev Psychol 2009;60:631-52.

7.            NYSDOH. Interim NYS Health Home Provider Qualification Standards for Chronic Medical and Behavioral Health Patient Populations. In; 2011.

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