State Officials Report Fee-for-Service Transition Is Going Well

Some providers indicate continuing concerns about budget shortfalls and need to reduce critical services to state’s most vulnerable

State Sen. Anthony Bucco
State officials defended New Jersey’s ongoing efforts to reform the way it pays community behavioral-health providers, reporting to lawmakers Monday how organizations that have transitioned to the new system now enjoy greater budget flexibility and more timely reimbursements.

But a number of mental health providers pushed back on that narrative later in the day. Representatives testified before a different group of state legislators that New Jersey’s shift to a fee-for-service payment system will leave some organizations with budget deficits close to $2 million and could reduce critical services for thousands of the state’s most poor and vulnerable patients.

Their comments helped convince the Senate health committee to approve a bipartisan proposal by Sen. Robert Gordon (D-Bergen) and Sen. Anthony Bucco (R-Morris) to provide additional state funding as a one-year backstop. It would protect remaining providers as they transfer from a system of annual contracts to a fee-for-service model in which they are reimbursed regularly for specific services. The bill (S-3121), awaits the introduction of an Assembly counterpart.

Delaying until deadline

The reform applies to nonprofit organizations that provide case management, counseling, group programs, and other services to those with mental health and substance-use disorder diagnoses. Most addiction-treatment providers have already made the switch, but the bulk of the mental health providers have chosen to delay the transition until July, the final deadline to make the switch. Nationwide, only a few states have yet to make the transition to fee-for-service, and some have already moved on to more modern payment systems.

Department of Services Acting Commissioner Elizabeth Connolly, whose agency oversees community-based behavioral care, said the dozens of addiction-services providers have had a “good experience” with the shift to fee-for-service payments and the state has even seen an increase in the number of organizations doing this work. The system allows providers to get paid more quickly and helps the state “determine in real time the availability of the beds or slots” for treatment, she told the Assembly budget committee in her testimony Monday.

“On the addiction side, it has been very positive,” Connolly said. “Many of you likely have heard the concerns of a few mental health providers reluctant to transition to this model, but the addiction providers and the sixteen mental health providers that moved to (fee-for-service) in January have adjusted well and are appreciating the budget flexibility and timely Medicaid reimbursements (it) provides,” she told lawmakers.

Concerns among mental health providers over the fee-for-service transition have led some organizations to lobby lawmakers to slow or delay the state’s implementation of the new system. The Legislature adopted a measure earlier this year that requires the state to monitor and report back on the reform; the bill awaits action by Gov. Chris Christie. Providers also welcomed the plan Gordon introduced this week, which the senator hopes will include $9 million to provide a temporary safety net during the transition.

Other hot topics

The fee-for-service transition was just one of several hot topics Connolly faced at the Assembly budget committee hearing, the first time her department has been called to discuss the governor’s proposed $18.3 billion spending plan for Human Services. With the largest spending plan of any department, the DHS is slated to use $6.65 billion in state funds and $9.88 billion in federal funds for programs in the fiscal year starting in July.

That heavy reliance on federal dollars raised significant concerns for a number of New Jersey lawmakers, especially given the interest among Washington, D.C. Republicans in cutting spending on the Affordable Care Act and other federal programs. But Connolly said there is not much the state can do to prepare until there is a concrete plan in place.

Assemblyman Antony Bucco (R-Morris) — the senator’s son — raised the issue of federal funding, but he focused most of his questions on the DHS transition from contract payments to fee-for-service reimbursements for behavioral health providers. Bucco, who has monitored the situation for more than a year, asked about the department’s efforts to adjust the planned reform based on feedback it received from providers. He also wondered how many had sought out bridge funding offered by the department.

A system that works

Connolly said DHS officials in the Division of Mental Health and Addiction Services have worked closely with these providers to shape a system that worked. The transition, which began last summer, came with an extra $127 million in funding to increase provider payments and the state has raised 90 reimbursement rates, nearly half of which were doubled.

“We’ve been having many, many meetings with the providers,” Connolly said. “We feel confident in the rates we have set but continue to monitor (the providers’) billing and receive feedback.”

The division has also dispatched teams of experts to meet with providers, discuss the new model, and review their books to help ensure a smooth transition to fee-for-service, Connolly said. Nine of the 16 mental health providers that have already shifted received bridge funding, a partial advance payment designed to help them get used to the new system, according to the DHS.

Pushing back against fee-for-service

But during the Senate health committee hearing, Mary Abrams, senior health policy analyst with the New Jersey Association of Mental Health and Addiction Agencies, which has led the effort to push back on the fee-for-service switch, said several providers she’s talked to who have already transitioned remain extremely concerned about their financial stability. Many services — including most transportation, case management, and patient outreach — are not reimbursable on their own in the new system, she said, and small organizations remain concerned whether they can sustain client services.

One organization, the Mental Health Association of Morris County, has already elected to merge with its Essex County counterpart in order to reduce administrative costs and sustain client services. But others are concerned that, regardless of any efficiencies they can achieve, patients will be the ones who suffer.

Victoria Sidrow, president and CEO of Vantage Health System, a 60-year-old mental health provider in Bergen County, said even with the rate adjustments the reimbursements remain too low and she will be forced to cut back the number of psychiatrists on staff. As their numbers dwindle, patients will lose services. “I don’t know where I’m going to have all these children go, let alone adults,” Sidrow told the Senate committee. “The state got it wrong. (The fee-for-service system) won’t work.”

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