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The NYSPA Report – Outpatient Mental Health Clinic Reimbursement Reform

The New York State Office of Mental Health (OMH) has embarked upon a far-ranging project to reform outpatient mental health clinic programs and the Medicaid reimbursement methodology which supports them. A particular target of this reform process is the elimination of the COPs add-on. COPs (short for “Comprehensive Outpatient Programs”) was implemented in the early 1990s as an add-on to the Medicaid rate paid to clinics for providing outpatient care and treatment to patients covered by Medicaid. In order to receive COPs payments, clinics were required to see patients referred upon discharge from inpatient psychiatric services or emergency departments within five working days. Many of the issues discussed in this article may appear arcane or irrelevant to the care and treatment of patients with mental illness. However, the reform of the clinic reimbursement methodology ultimately comes down the simple issue of how much money will clinics receive for treatment of patients and, as is always the case, adequate funding is an essential prerequisite to continued access to appropriate care and treatment.

All OMH licensed outpatient clinics receive the same base rate for treatment of Medicaid patients, but only certain clinics receive the additional COPs add-on or additional payment. The COPs payment varies widely from clinic to clinic because the COPs payment was itself merely a device to translate local assistance monies provided to certain clinics by the state and localities (the various counties and NYC) to enhance their funding for uncompensated and undercompensated care. Essentially, the COPs add-on was calculated by dividing the local assistance dollars by the Medicaid units of service. The state devised this approach for one reason only – to access federal Medicaid dollars to reduce the cost of local assistance. By converting local assistance funding for which there was no federal Medicaid participation into a Medicaid rate add-on, the state was able to draw down federal Medicaid matching dollars – the federal government provided 50% of the COPs add-on rate.

During the final years of the most recent Bush administration, concerns arose that the Medicaid division of the US Department of Health and Human Services would take issue with the methodology used to determine the COPs add-on. Federal Medicaid rules require that reimbursement methodologies established by state Medicaid program to set payment rates reflect reasonable costs incurred and most important, pay the same amount for similar services provided by similar providers. There was fear that the COPs add-on would be rejected by the federal government and that the state would have to repay hundreds of millions of dollars. However, we are uncertain whether this issue of federal regulatory compliance is at the same level of concern for the Obama administration.

It is correct that the COPs payment methodology system has resulted in significant and unjustified differences in the Medicaid reimbursement for identical services often provided by clinics only miles apart. The problem is that eliminating COPs payments will undoubtedly result in significant reimbursement swings with some clinics receiving far more Medicaid reimbursement than they currently receive (or even need to cover their costs) and other clinics will face a dramatic drop in reimbursement that threatens their financial viability. Although the new methodology will be phased in over several years, many clinics may not survive the phase-in period and services to patients may be jeopardized. We are concerned about the financial viability and survival of individual clinics because of significant reductions in reimbursement. Contingency plans need to be developed now to prevent an adverse impact on patients’ access to treatment.

Apart from the direct financial impact, NYSPA has also suggested taking into consideration factors such as the patient’s prior history of hospitalization, recent discharge from an inpatient psychiatric facility or the acuity of the patient’s mental illness. NYSPA recommended that OMH provide enhanced reimbursement to clinics to ensure proper aftercare following an inpatient psychiatric hospitalization. The primary cause of re-hospitalization is the failure of patients to maintain outpatient follow-up and continue to take their medication. Avoiding unnecessary re-hospitalization is both cost effective and good care. Thus, we recommended that the new reimbursement system provide enhanced reimbursement for outpatient treatment following hospital discharge. Another target of enhanced funding should be the care and treatment of patients with serious and persistent mental illness and children with serious emotional disturbance. OMH has estimated that at any one time there are approximately 50,000 patients with serious and persistent mental illness receiving services in this state. This cohort is not stable, and persons move in and out of this core group all the time. However, it is this group that typically utilizes a disproportionate share of services dollars. Targeting funding with incentives to meet the needs of this population will also ensure that limited resources go to those with the greatest need.

OMH responded to suggestions that funding be targeted for special populations that it was unable to confirm from the financial data available to OMH that treatment of these patients is more costly or time consuming. However, the typical financial data available to OMH from clinics was never intended to assess this type of cost data. Second, and more important, the prioritization of limited monies for the highest risk and most potentially costly patients is entirely appropriate and reasonable. OMH has already agreed to recognize the higher costs incurred by clinics operated by counties in this state because these clinics typically have significant forensic responsibilities in the court system. Clinic reorganization at this time incorporates no element to replace the COPs requirements for expedited intake for patients referred upon discharge from inpatient services or emergency rooms. We believe that treatment of patients discharged from psychiatric hospitals and patients with serious and persistent mental illness (and children with serious emotional disturbances) should also be recognized as a priority for funding.

OMH has proposed several new services targeted for patients whose needs require enhanced services. The new services include off site outreach and engagement, crisis intervention, and complex care management. The inclusion of these new services is a positive step to adding new tools to address the needs of patients with significant clinical needs. However, there is a potential financial trade-off in adding these new services. Because OMH is working with a fixed pool of funds, dollars used to pay for these new services will inevitably reduce funding for essential services such as psychotherapy and medication management. Care needs to be taken to ensure that new services are not funded at the expense of core services.

NYSPA also recommended a change in the role of psychiatrists in clinics. Under current Medicaid rules, psychiatrists are compelled to divert a significant portion of their time from patient care to paperwork. Under current rules, every patient’s treatment plan must be signed off on by a psychiatrist even when the psychiatrist has not treated or even seen the patient. We recommended elimination of this requirement. A psychiatrist who treats or directly supervises the treatment of a patient should participate in the development and updating of the treatment plan together with the other professionals involved in the patient’s care and treatment. This simple change will free up psychiatrists to focus on treatment of patients and will eliminate the need of clinics to use limited resources to pay psychiatrists for unnecessary paperwork. OMH staff have expressed support for these concerns and we look forward to reviewing OMH specific recommendations on this issue.

Finally, under the new system, a new billing system will be implemented using the same clinical service codes (the AMA CPT codes) used by Medicare and other third-party payers. NYSPA strongly recommended that the permissible codes for psychiatrist’s services include the CPT evaluation and management codes. Use of these codes for psychiatrist’s services will enhance Medicare reimbursement for patient’s covered by both Medicare and Medicaid and thereby reduce Medicaid’s financial responsibility.

NYSPA has participated actively on the various OMH work groups formed to implement the change to the new payment system. We will continue to work with OMH to ensure that patients in need of outpatient mental health services can access necessary and appropriately funded care and treatment.

Seth P. Stein, Esq. is a Partner in the law firm of Moritt, Hock, Hamroff, and Horowitz.

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