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Mental Health Reform: How Are We Paying for Care?

Ecg Bg Mental Health Reform How Are We Paying For Care Web

As behavioral health increasingly moves into the national spotlight, approaches to paying for services are coming under fresh scrutiny. The behavioral health market has long been characterized by its fragmentation.

But with recent studies exploring the impact of mental health diagnoses on the cost of physical health, payers are starting to see opportunities to achieve savings by integrating disparate systems of care. Doing so will require innovative thinking and collaboration between payers and providers.

Katie Fellin is a managed care expert and one of the leaders of ECG’s behavioral health service area. We spoke with Katie about the factors prompting payers to reexamine behavioral health reimbursement and what that might mean for providers going forward.

Mental health is becoming a more prominent topic in the national conversation on healthcare. Are payers starting to change the way they reimburse for behavioral healthcare?

We’re certainly starting to see some more innovative reimbursement models. There’s a lot of buzz around collaborative care billing, for example. We’re also seeing some payers and providers pilot risk-based arrangements for substance use disorders. But in reality, most behavioral health providers are still reimbursed under a fee-for-service model. Historically, and even today, behavioral health reimbursement rates are carved out through separate managed care agreements that are separate from medical services. Those behavioral health contracts or rates historically have not been a priority in most major payer negotiations, particularly for provider organizations that offer both medical and behavioral services.

How do commercial payer rates for behavioral health compare to those of Medicare?

We frequently hear from our clients that commercial reimbursement levels for behavioral health services just aren’t adequate. So we studied professional reimbursement levels for behavioral health services across four national markets and then compared those to commercial benchmark rates and to Medicare. What we found was that even though commercial rates have increased by about 30% across the last five years, compared to only about 11% increase for Medicare, the commercial rates for professional behavioral health services are still only about 91% of Medicare now.

There’s a historical philosophy for managed care contracting: “You have to establish your commercial reimbursement levels high enough such that it can help offset your losses for your government payers.” And the reality is, at least on the professional side, that’s not happening in behavioral health. You’re actually seeing reimbursement that’s below that of the government payers, and that’s problematic.

We’ve written about payers beginning to recognize that undiagnosed mental health issues can become much more expensive physical health issues. Wouldn’t that motivate them to want to invest more in this area as a longer-term approach to bringing down costs?

Absolutely. Studies from the past few years are starting to demonstrate that there really is a potential opportunity to bend the cost curve by focusing on the impact of behavioral health on physical health. And so a working hypothesis has emerged that suggests that investing in the integration of behavioral and physical health will create an opportunity to achieve cost savings. And studies have found that not only are patients with a behavioral health diagnosis more costly, but that a behavioral health diagnosis actually drives up the physical health cost as well. So the value opportunity for payers is presenting itself as minimizing excess healthcare costs through effective management of a patient’s behavioral health diagnoses.

How are payers tackling this?

Payers are recognizing that there’s a value opportunity here, but for those that utilize a third-party vendor for BH network management, they’ve got two disparate systems managing behavioral health and physical health. They have to start bringing those together. So now we’re watching payers start to in-source management of their behavioral health networks so that they can create enhanced referral management systems, link their medical and behavioral health data, identify target populations, and create more advanced programs around integration and management of those populations.

What could an integrated model achieve?

There are three primary goals: reduce delivery system fragmentation and enhance integration of care between physical and behavioral health providers; increase access and improve navigation to a full range of behavioral health and physical health services; and improve quality and reduce the total cost of care by closing those care gaps and driving the appropriate utilization of those combined behavioral health and physical health services.

The healthcare industry continues shifting toward value-based care. How does that play out in behavioral health, especially considering how fragmented this space it is?

Over time, there’s going to be a transition to value-based reimbursement models in behavioral health. As payers in-source behavioral health services, they’re starting to take on more risk for behavioral healthcare delivery. And historically, when payers start to take on more risk, they eventually start to push that risk on down to providers.

We’re still pretty early in that spectrum, but we do have some provider organizations asking us how they can start preparing. We use a value-based readiness assessment, a tool we created for medical services that’s applicable for behavioral health, too. We typically evaluate providers on six key domains to determine their readiness for participating in a value-based care model:

  1. Strength of the organizational foundation, leadership support
  2. Degree of care delivery transformation already implemented or in progress
  3. Robustness of technology infrastructure, including data integrity and reporting capabilities, referral management, and information exchange
  4. Comprehensiveness of the provider network and care continuum
  5. Degree of provider compensation alignment Previous risk-based or value-based experience
  6. Previous risk-based or value-based experience

    Our perspective is that providers and payers need to collaboratively develop behavioral health reimbursement arrangements that align with modern models, support integrative care, and then actually reward providers when reductions in total cost of care are achieved.

    Our conversation about changes in behavioral health care delivery continues later this week. Check this space to learn how health systems are exploring contemporary mental health strategies.

    The need for Behavioral Healthcare has never been greater.

    For Mental Health Awareness Month, we’re focusing on the need for greater access to and equity in behavioral healthcare and how providers can achieve it.

    Learn More