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Stitching Up Temporary Safety-Net Funding for Behavioral-Health Providers

Measure would require state to reimburse providers for any shortfalls resulting from switch to fee for service

homeless mentally ill

New Jersey lawmakers are poised to consider a plan to provide a temporary financial backstop for community behavioral health providers slated to undergo a shift in how the state pays for treatment they provide to some of the poorest, sickest residents – a change some organizations fear will force them to cut services, turn away patients, or close their doors altogether.

Sen. Robert Gordon (D-Bergen) has sponsored legislation that would require the state to reimburse these providers for any shortfall, on a quarterly basis, during the 2018 fiscal year that starts July 1. The measure sets aside $90 million for these potential costs, according to Gordon, a member of the Senate Health and Human Services Committee, which is scheduled to hear testimony on the plan today.

sen. robert m. gordon
Credit: NJTV
Sen. Robert M. Gordon (D-Bergen and Passaic) chairs the state Senate Legislative Oversight Committee.

The proposal is designed to provide a safety net for the more than 70 mental-health providers who are scheduled to shift in July from a system of annual state contracts to a fee-for-service reimbursement, part of the state’s effort to modernize its payment systems and maximize its use of Medicaid dollars.

Serving the most vulnerable

These providers offer a mix of services ranging from one-on-one counseling, group sessions, assistance with medications, as well as case management, housing support, and assistance with other social services. Some of their patients are severely mentally ill, cycling in and out of jails, state psychiatric hospitals, and emergency rooms.

Many substance abuse and other behavioral-health providers have already made the switch to fee for service, but some of those remaining are concerned the new system will leave them without the funding and flexibility to cover administrative costs, capital needs, and other expenses. Fears of a funding loss prompted two county agencies to announce last month they will join forces in an effort to maintain patient services and sustain their programs long term.

“This would allow us to see how the system rolls out and make any modifications,” Gordon told NJ Spotlight. And as state officials consider the cost-benefit analysis of these funding reforms, he said any “savings” need to be viewed in a broad context that includes more than just the line item for these healthcare programs, but also the potential to consider costs to law enforcement, corrections, and society at large if these illnesses are left untreated.

While most states have already switched their Medicaid programs to fee-for-service payments — and some have further evolved into managed-care models — New Jersey is one of a handful that still pays some community mental-health providers on a contract basis. The state has made a number of efforts to reduce the immediate impact of the shift, adding more funding for reimbursements and tinkering with the rates. Most providers said they aren’t opposed to the change, but insist the state must add more funding to make it a success.

A number of organizations, backed by the New Jersey Association of Mental Health and Addiction Agencies, have waged a public campaign over the past two years to convince lawmakers to revisit, delay, or reform the states fee-for-service rollout. Last month, nine groups joined forces under the banner of the New Jersey Community Mental Health Coalition to further this effort; leaders of this group plan to testify today in support of Gordon’s measure.

The Legislature passed a measure designed to increase state oversight of the transition, which awaits action by Gov. Chris Christie, a strong advocate for the payment reform. The measure requires the state to monitor the upcoming payment shift and report back to lawmakers with their findings. But some provider organizations have wondered if this would be enough protection.

General fears

Gordon said his legislation stems from “the general fears” that providers continue to share about the potential impact in New Jersey and how similar reforms in other states had caused problems. He is concerned not only about the impact on providers and their ability to maintain operations, but also the state’s capacity to track the transition closely enough to be able to adjust course or provide immediate assistance if an organization is in crisis.

“We kicked around a number of ideas,” Gordon said. He considered legislation to halt the reform, or delay it for several years so the impact could be fully assessed, but decided that wasn’t likely to get implemented. “We have to be mindful of the governor’s office” and what he would be likely to support, Gordon added.

In the end, Gordon and the stakeholders he was working with came up with a safety-net proposal. The bill allows providers to bill the DHS on a quarterly basis if there are gaps between what they spend and what they are paid through the fee-for-service reimbursements, he explained. The $90 million in funding is not based on any analysis of the likely costs, he said, but is merely a quarter of what the state plans to spend on these mental-health provider costs in the coming year. (Details of the bill had yet to be posted online Sunday night.)

“We thought a better approach (than stopping or delaying the process) was to create a transition period of a year, during which providers would be held harmless over the course of four quarters,” Gordon said. “They would get a rebate to fill any gap, and therefore be held harmless.”

Running lean

Gordon said he didn’t think this kind of short-lived program would subsidize inefficiency among the providers. “One might make that argument, but I think there are enough financial pressures on these organizations that already keep them pretty lean,” he said.

Provider organizations agree they have already faced many years of funding cuts. Several groups predict the fee-for-service change will cost them millions of dollars in revenue and a survey of providers conducted last year by NJAMHAA found the shift could leave 20,000 of the most vulnerable patients without services.

The impending shift also drove the Mental Health Association of Morris County to announce last week that it will join forces with the Mental Health Association of Essex County to help protect patient services in the long term. And several county freeholder boards, including the leaders of Morris and Ocean counties, have passed resolutions opposing the fee-for-service transition, supporters said.

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