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Providers brace for fee-for-service conversion

March 1, 2011
by Dennis Grantham, Editor-in-Chief
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Staffing, reporting, clinical, and claims management challenges await as grants give way to third-party payers

Historically, grant funding played an important role in building and sustaining the service capacity of community mental health and addiction treatment services, particularly for underserved or marginalized populations. But, amid the backdrop of historic shortfalls in federal and state budgets and years of successful advocacy for behavioral health parity, insurance reform, and expanded availability of accountable and high quality healthcare for all, the scope and availability of grant funding is rapidly changing.

The days in which it has been possible for behavioral health providers to exist primarily on grant funds, while avoiding the perceived hassles and expense of working with third-party payers are numbered, says David Lloyd, President of MTM Services (Holly Springs, NC). Lloyd and his colleagues consult with the National Council and with many of the nation's community behavioral health providers about the complex changes involved in converting from grant-funded to fee-for-service (FFS) funding.

“As we move Medicaid eligibility to 133 percent of the poverty level, and as those between 133 and 400 percent of the poverty level get subsidized insurance through insurance collaboratives, our services to the old uninsured, self-pay clients are going to start diminishing,” he says. And, as we start to look at who our funders are going to be-we'll face a very different model than ever before, far different from the old block grants or capacity grants on the state level.”

Looking back on a funding system that dates to JFK's Community Mental Health Act in 1963, Lloyd reflects that “Grant funding has been the most unbelievable blessing-and the most unbelievable curse- we've had as a community system. The blessing is that we got payment at a time when we needed a safety net, when we were building community-based services, when we didn't have staff with a lot of the credentials and licensing levels that were needed.”

As important as this funding was then, Lloyd argues that its “curse” was that it tended to separate behavioral healthcare from the healthcare mainstream while fostering organizations that delivered clinical services without developing key business and administrative capabilities. Such capabilities are the ones now sorely needed as behavioral healthcare seeks to re-integrate with primary care and the rest of the healthcare mainstream.

“The question is, how do we reconnect with the mainstream of healthcare while making sure that we meet all of the requirements of our new payers?” Lloyd asks. “When people think this through, they are realizing, ‘Gosh, we've got to have more support staff to do this.’ And they're right. Because historically, when providers ran short of dollars, they terminated non-clinical staff to preserve clinical capability. The problem with that approach today is that they realize that they don't have enough finance, IT and clerical staff to get all of this work done.” The solution of the past-relying on clinicians to muddle through-just won't work given the very real financial and operating necessities of the FFS environment.

Seeing a new way forward

As the first step in helping providers to recognize and consider their new challenges, Lloyd often starts an agency consultation with a question:

“Is your agency ‘full’ now?”

Lloyd says that 70-plus percent of behavioral health executives and clinicians respond with a “yes.” And, although this reply could indicate a sense that little can be done to expand or improve matters, Lloyd says the question often helps agencies open the door to new possibilities: “Why are you full, and how can you manage that differently?” Lloyd challenges. The discussion starts forward as provider teams consider an initial list of challenges involved in FFS conversions:

Redefine “convenience” with your patients in mind. Lloyd notes that unlike substance-use treatment facilities, which have always offered flexible hours, mental health providers have typically stuck with 9 to 5 hours. This schedule works fine under a grant-funded approach for patients who are not employed or who lack other choices. And, the flexibility of allocating grant funds means that service time lost on a no-show might be flexibly allocated to another consumer or service category for reporting purposes.

David r. lloyd, president mtm services and consultant to the national council.
David R. Lloyd, President MTM Services and consultant to The National Council.

But as more and more working people tap into insurance benefits-thanks first to parity and later to health reform-Lloyd says that consumers will drive providers toward their own notions of convenience. “We're going to have to look at evening and Saturday hours of intake. I know of several centers who have begun working with third-party insurers, serving people who work and who, in many cases, cannot come for appointments until after work or school is over.” Consumers with insurance have choices for care-and will exercise them.

Consider the impact of new credentialing requirements. As providers tap into new payers, credentialing requirements for clinical professionals will change dramatically. “Credentialing requirements for federal- and state-funded substance abuse treatment services were often not that high,” says Lloyd, “but as more consumers get insurance and more Medicaid beneficiaries receive managed care, the payers are going to expect credentialed staff.”

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