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Reform promises dollars, but not soon enough

October 1, 2010
by Brian Albright
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Hit hard by recessionary cuts, providers battle their way toward a brighter future

In August, after a lengthy battle, Congress finally extended its “enhanced” federal medical assistance percentage (FMAP) beyond a scheduled expiration in December 2010, providing a 3.2 percent FMAP boost from January to March and a 1.2 percent boost from April through June. While much less than the original FMAP enhancement of 6.2 percent, at least it was on the plus side, right?

“It just postponed the inevitable,” says Joe Roszak, executive director at Kitsap Mental Health Services in Bremerton, Wash. “I don't know that Congress will seriously consider another continuation of FMAP in the future, because the deficit is becoming an issue for so many legislators. We've gotten a reprieve, but the endgame hasn't changed.”

For providers, the endgame is survival. Given behavioral healthcare's recent and remarkable gains on the public policy front, it's a painful irony that some community-based providers are now struggling to survive, both long enough and strong enough, to take advantage of the hard-won victories in parity and healthcare reform legislation.

“We were holding our breath on FMAP,” says Shannon Harvey, CEO of River Edge Behavioral Health Center in Macon, Ga. “That's been a blessing for us, and has helped hold our Medicaid rates steady. But Georgia ranks 46th in mental health funding and 9th in population. We started out behind, so the fact that we've had no reduction doesn't mean we're sitting in the catbird seat.”

In Kentucky, another state that has not reduced state general funding for core behavioral health services, Howard Bracco, president and CEO of Seven Counties Services in Louisville, says that years of “flat” funding can take a toll: “Over time there's an erosion of capacity, unless you find ways of reducing costs, improving efficiency, or finding alternative sources of revenue to underwrite particular services.”

With prospects for major funding changes dim until 2014, when major phases of reform-and related funds-kick in, providers like Harvey and Howard are, like many of their peers, now looking past the FMAP fight. They're trying to figure out how to keep the lights on as a deep and painful recession continues to choke funding, even as they watch a bright, but still very blurry, future take shape. That future promises millions of new consumers and tens of billions in additional behavioral healthcare resources from the federal government and private insurance companies.

But promises don't pay today's bills and the prognosis for near-term help isn't good. “The initial projections in Washington [state] were that this might be over in four years. Based on the analyses I've been reading, these budget issues could go on for eight years or more,” says Roszak at Kitsap.

“People are trying to find new funding, but even more than that, organizations are looking for things that might make their systems more efficient, or that can make their limited dollars go a little further,” says Robert Glover, executive director of the National Association of State Mental Health Program Directors (NASMHPD).

Belt tightening: How many notches are left?

Unfortunately, many providers have been forced to cut back on staff, services, or both as state funds have dried up and revenue becomes more sporadic. In Illinois, where the state budget deficit exceeds $8 billion, providers have seen funding cut by 25 percent in two years and organizations have been laying off staff, eliminating programs and even skipping payrolls.

“Even with the cuts, payments are getting behind,” says Sara Moscato Howe, CEO of the Illinois Alcoholism & Drug Dependence Association (IADDA). “The state is only paying when they can. No one is sure when payments will come, and the banks aren't lending like they used to because state revenue is no longer a good source of collateral.”

In other cases, though, providers have been able to maintain services by doing more with less. “We squeeze every possible value we can from every dollar,” says Harvey at River Edge. “As a result, we've sought to take advantage of technology investments to increase efficiencies.”

River Edge has realigned its staffing and scheduling to improve efficiency, and invested in new technologies like an electronic medical record and telemedicine capabilities. Still other providers have implemented lower-cost peer-counseling and group therapy programs where appropriate.

The logic of such improvements is clear to Jonathan Evans, CEO of Safe Harbor Behavioral Health in Erie, Pa. “A big part of healthcare reform is that there are going to be large numbers of people who are going to queue up for care, but there aren't enough providers. So when you are thinking about rural access, for example, programs like this [telemedicine] are going to be key.”

Information technology: Data means dollars

Thanks to intelligent planning, some providers have armed themselves with the information technology and skills needed to demonstrate their value and impact locally or statewide. For example, Safe Harbor used outcome data to establish itself as the most cost-efficient provider of care for patients with persistent mental illness in its region.

Increasingly, both public and private payers expect claims of value and medical necessity to be backed up with data. “We have a fully integrated electronic health record, and we can't say enough about how valuable a tool it has been,” Evans says. With its IT resources, Safe Harbor can track its actual costs per unit of service, track individual patients, and even manage incentive-based productivity contracts with licensed therapists.