NYS OMH Engaged in Mental Health Services Restructuring

New York State is engaged in a multi-year initiative to restructure the way the State delivers and reimburses publicly supported mental health services. Over the past 50 years, New York’s public mental health system evolved from one dominated by large State psychiatric hospitals serving tens of thousands to a highly dispersed system of non-profit organizations, county mental hygiene departments, and state and private hospitals. There are now more than 2,500 mental health programs in New York State. These programs provide Medicaid and non-Medicaid funded mental health outpatient (clinic, CDT, Day Treatment, PROS), emergency, residential, community support, vocational and inpatient care services to 688,000 individuals annually.

As this change was occurring, New York, like many states, expanded Medicaid funded mental health services. Today, Medicaid pays approximately 50 percent of the more than $6 billion annual cost of public mental health services in New York State. However, the distribution of funding for this system has not adjusted to reflect changes in our service delivery system. As a result, we have a system where:

  1. Approximately half of the public mental health dollars finance mental health hospitalization while the vast majority of people with mental illnesses need outpatient services;
  2. Reimbursement for mental health services is complex and inequitable. “Short term” Medicaid initiatives like “Comprehensive Outpatient Programs” (COPs), a Medicaid payment rate add-on for clinics and selected other outpatient providers, have become permanent solutions;
  3. Research shows that the onset of serious mental illness occurs in early adolescence, yet identification and treatment are often delayed for years;
  4. In some areas of the State, there is insufficient access to specialized services (e,g., case management, vocational services, children’s waiver) that assist individuals in meeting life roles;
  5. The financing system does not incentivize recovery/resiliency, success in school and/or employment, and other desirable outcomes;
  6. Many consumers experience a system plagued by fragmentation, poor communication, poor coordination, and a lack of accountability.
  7. There is poor integration between mental health/substance abuse/physical health care. As a result, individuals with emotional disturbance/mental illness often have unaddressed debilitating health conditions (e.g., obesity, diabetes);
  8. There is insufficient data to demonstrate the effectiveness of service outcomes; and
  9. Other systems serving children and adults (i.e., schools, criminal/juvenile justice, social services and emergency rooms) experience the effects of uncoordinated and/or limited access to mental health care.

To address these challenges, The New York State Office of Mental Health (OMH) has undertaken a multi-year initiative to restructure the way the State delivers and reimburses publicly supported mental health services. Quality reforms have included new “standards of care” emphasizing such key issues as patient-centered treatment, engagement, appropriate caseloads, risk assessment and supervision. OMH is also updating its licensing methodology to emphasize clinical and quality of care concerns over narrower aspects of standards compliance. The goal of these and other reforms is to develop a system of quality care that responds to the individual needs of adults and children and delivers care in appropriate settings.

Clinic restructuring represents the most developed phase of this transformation process. OMH commenced clinic restructuring in the fall of 2007 and anticipates implementation beginning in January 2010. Major clinic reforms have included new resources for clinic expansion in the 2007-2008 budget, elimination of the “Medicaid Neutrality” policy that limited clinic expansion, and provisions to facilitate integrated care (for co-occurring alcohol, drug and medical problems).

In addition to clinic restructuring, parallel initiatives have begun tackling the many challenges facing adult and child non-clinic ambulatory services, inpatient services, and the treatment of co-occurring disorders in both mental health and substance abuse clinics.

These efforts include significant stakeholder participation and input. Clinic restructuring is being done with the extensive involvement of an Advisory Workgroup consisting of a broadly representative range of local government officials, mental health providers, and mental health advocates.

Over the last two years, OMH has developed a plan for clinic restructuring that reflects significant input from our stakeholder group. The plan encompasses several key elements:

  1. A redefined and more responsive set of clinic treatment services and greater accountability for outcomes. Clinic is defined as a level of care with specific services such as outreach and engagement, crisis response, and complex care management. These services should enhance consumer engagement and support quality treatment.
  2. Redesigned Medicaid clinic rates and phase out of COPs. Medicaid payment rates will be based on the efficient and economical provision of services to Medicaid clients. Payments will be comparable for similar services delivered by similar providers across service systems. Payments will also include adjustments for factors which influence the cost of providing services. The new system will eliminate rate add-ons such as COPs.
  3. HIPAA compliant procedure-based payment systems with modifiers to reflect variations in cost. The Federal HIPAA Administrative Simplification Act requires the use of a HIPAA compliant billing system. Billing codes for clinic services will consist of HIPAA compliant CPT codes with modifiers to reflect differences in resources and related costs (e.g., service location, after hours, language other than English).
  4. Address Medicaid HMOs/State insurance plan underpayments. Medicaid Managed Care, Family Health Plus and Child Health Plus (CHP) plans frequently underpay for mental health clinic services. The average managed care payment for clinic services is approximately one-third to one-half of actual cost. This is significant because Medicaid Managed Care and Family Health Plus visits combined represent 12% of clinic visits. This percentage is expected to grow as the state expands mandatory managed care enrollment.

To ensure continued access to clinic services, OMH needs to address Medicaid managed care underpayments. We are working with DOH and Managed Care companies to address this issue as part of clinic restructuring. Additionally, OMH and DOH need to monitor managed care plans to ensure appropriate member access to mental health services.

  1. Provisions for indigent care. Assuring access for the uninsured to mental health clinic services is a key element of clinic restructuring. Currently, OMH clinics receiving COPs are required to serve all clients regardless of ability to pay. As part of restructuring, New York State is requesting a CMS approval of federal financial participation in the existing state funded indigent care pool for Diagnostic and Treatment Centers. Under this waiver, if approved, reimbursement for indigent care would be expanded to include freestanding OMH licensed mental health clinics. Funding from the pool will enable uninsured middle class and working poor individuals and families to continue receiving care at OMH licensed clinic sites.

OMH has also put in place additional measures to help seriously emotionally disturbed low-income children get access to care. For several years, OMH has excluded mental health services for children with serious emotional disturbance from Medicaid Managed Care. This “carve–out” allows children with greater needs to access specialty mental health clinics without prior authorization and allows Medicaid to reimburse these clinics at the higher Medicaid fee-for-service rate.

There is no doubt that clinic restructuring will require change on the part of providers. And this restructuring will affect clinics in different ways. Mental health clinics have a wide range of costs and staff productivity. Clinics will need to assess their current operations in light of the new array and packaging of services as well as the new payment rates. While the new approach will smooth the reimbursement differences between providers, the base Medicaid rate paid to providers will be significantly increased. Additionally, unlike the current system where clinics receive one payment regardless of the number of services provided to a recipient on one day, the new system will pay clinics for multiple medically necessary same day services to a recipient. This should help both the clinics and the recipients to avoid unnecessary trips back to the clinic to get the services they need.

Separate from clinic restructuring, clinics will also need to respond to changes in staffing requirements brought about by a 2002 New York State licensing law. This law established licensing requirements for psychologists, social workers and four new licensed mental health professionals (Mental Health Counseling, Licensed Marriage and Family Therapist, Licensed Creative Arts Therapist, and Licensed Psychoanalyst). The law also provided an exemption from these requirements to programs or employees of programs “operated, regulated, funded or approved” by the department of mental hygiene, local government units, the Office of Children and Family Services, or local social services districts. This waiver expires June 2010. Currently, about 28% of staff in OMH licensed clinics are not licensed. OMH recognizes the difficulty this presents and is actively working for a legislative extension of the waiver to provide mental health clinics with the time they need to come into compliance.


To summarize, the metal health clinic system faces numerous and pressing financial and programmatic challenges. New York must and is taking the actions needed to address these challenges. Our clinic restructuring plan, developed with enormous input from stakeholders, responds to these challenges by (1) adding a range of new services to clinics; (2) restructuring rates to support comparable payments for similar services; (3) incentivizing services provided off-site, after hours, in languages other than English and by physicians; (4) complying with federal HIPAA billing requirements; (5) beginning to address underpayments by Medicaid HMOs; and (6) establishing a pool to compensate clinics for providing indigent care. While these are major changes, they are necessary to improve service delivery and ensure the survival of a quality mental health clinic system in New York.

We recognize that providers need time to adjust, to understand the service and revenue implications of the new service and reimbursement design and to respond to the incentives and disincentives in the new design. That is why we are providing a 4-year phase-in of the new reimbursement system. In the first year of the transition, almost all providers are shielded from major reduction in State financial support. Some providers will necessarily have to implement their practice changes by year two to preserve their viability. This prolonged phase-in allows time for providers to adapt and move New York toward a more accessible, person centered, and cost-effective clinic system.

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