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Avoid these 6 financial mistakes in the era of accountable care

February 15, 2016
by Brian Albright
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Managing the financial operations of a behavioral health treatment center has never been easy, but the past several years have been an especially challenging rollercoaster ride. There were massive cuts to public funding of mental health and substance abuse treatment during the height of the recession, followed by an expansion of insurance coverage via parity, the Affordable Care Act and Medicaid expansion.

Now, reimbursement models are poised to change in ways that will require providers to adjust their financial management strategies, shift their payer mix and make potentially large investments in quality and cost tracking capabilities.

And not every facility will successfully make those adjustments. Recent years have seen significant merger and acquisition activity in the behavioral health space, as well as a few high profile failures.

In a 2012 case, for example, Baltimore Behavioral Health sought bankruptcy protection when authorities alleged mismanagement and fraud. In another case in New York, the not-for-profit Federation Employment and Guidance Services declared bankruptcy after a series of financial missteps in a for-profit subsidiary resulted in a $19 million shortfall.

In the era of accountable care and with providers potentially taking on risk, it will be imperative for those in behavioral health to avoid financial mistakes that could potentially sink their businesses. With the help of financial experts in the field, we’ve compiled a list of common financial mistakes and ways to avoid them.

1. Failure to Adjust for New Reimbursement Models

The transition has only just begun, but the biggest and most immediate pitfall for behavioral health providers to avoid is failing to prepare for the seemingly inevitable change in reimbursement from fee-for-service to value- or quality-based reimbursement. The Centers for Medicare and Medicaid Services (CMS) plans to shift the majority of its reimbursement to this model in just a few years, and many private insurance companies are following suit. That means providers are going to have to do a better job of tracking costs and documenting quality and outcomes.

Tracking reimbursement is already a huge challenge, made more complex by the value-based incentives emerging in the system at large.

“A single encounter could have as few as two and as many as five different payers for that bill,” says James Clark, managing director at Harris Williams & Co.’s healthcare and life sciences group. “Tracking those payments is complex, and being able to take the payment and match that to an actual invoice is also complex. Billing and collecting are by far the most complex thing about healthcare services.”

In the behavioral healthcare space, many providers in both the for-profit and non-profit sectors are unprepared. Most providers have not realized how fast reimbursement is changing, according to Bill Bithoney, chief physician executive and managing director with BDO Consulting.

“There are now 62 million people in ACOs, combined with 27 million in Medicare Advantage, which gives you around 90 million people in programs where providers are penalized if they don’t perform well in terms of cost,” he says.

Providers have to adjust accounting systems and EHRs for quality/value-based reimbursement. If a provider group receives bundled payments, there must be a way to divvy up that payment and track which providers receive which portion.

“There’s a lot of confusion about how it’s going to work,” Clark says. “You have to be able to track care in the EHR system, and do that across the continuum of providers for bundled payments. We’ve got a long way to go for that process to be seamless. It will come down to some standardization of systems and standard interfaces.”

Just tracking costs and claims is half the problem; providers also have to adequately track clinical outcomes.

“That’s where the EMR has to be able to tie into payer data,” Clark says. “The patient might be seeing different doctors and therapists, and you may only capture a part of that care. You have to use a claims-based methodology.”

2. Lack of Payer Diversity

Being too dependent on one type of revenue stream can leave the organization vulnerable to economic swings or regulatory shifts. Not-for-profits have to be certain that attempts to attract new payers don’t conflict with their mission, or lead to a loss of engagement among traditional sources of charitable support. For example, a not-for-profit that seeks donations might be seen as less than charitable if it is also tapping into the commercial market through subsidiaries.

“Groups that are trying to gain entrance into insurance markets to get a different payer mix, if they run on that non-profit brand name, that may trigger a reaction from other income sources,” says Charles Ray, principal at Criterion Health.

Further more, public and private payers alike are looking to get the most out of their contracts. They won’t hesitate to sever a relationship with a low-value provider that relies on volume alone.

“It’s no longer useful to just have patients coming back for repeat visits,” Bithoney says. “You have to show that the cost of care has decreased, and that outcomes are better. If you wind up excluded from these narrower payer networks, you could be in trouble.”

3. Failure to Track Costs and Measure Performance

In order to better manage costs in the value-based environment, providers have to be able to accurately track adjudicated claims and reimbursements in detail. That means the EHR, patient charts, claims submission and automated auditing should be linked. In some organizations, that may require a new investment in technology.