Ambulatory Patient Groups (APGs)

and Net-Deficit Funding (NDF)

Posted July 1, 2009

COMPA has been extraordinarily busy working on the issue of APGs with OASAS and the other treatment provider coalitions in New York State.  APG stands for Ambulatory Patient Groups. This is the new approach which New York State will be using for developing outpatient Medicaid rates.  For outpatient Medication Assisted Treatment (MAT) programs this will mean the eventual end of the Medicaid weekly fee.  It will be replaced by a series of Medicaid prices which can be billed on a service specific basis.  For example, individual counseling, group counseling, medication dispensing, and a number of other services will be separately reimbursable.

Such an approach has broad implications in terms of revenue predictability, clinical service delivery, record keeping, administrative costs, audit liability, etc.  In general COMPA likes and supports the APG concept.  We believe it will allow us to better individualize care and improve outcomes.  However, this will only be true if the rates reflect the true cost of providing quality service to our patients.  In the months to come, check this website for more news about COMPA’s involvement in the APG initiative, and our efforts to make sure the rates and the reimbursement rules promote good quality care.

APGs only address funding for the Medicaid eligible population in our programs.  It is COMPA’s view that we also need to rationalize the funding approach for the non-Medicaid population which we serve.  To promote this concept COMPA has partnered with ASAP (Alcohol and Substance Abuse Providers of New York), and TCA (Therapeutic Communities Association) in making a joint proposal to New York State OASAS.  What follows is a written proposal for a funding approach which would allow OASAS to disburse local assistance dollars in a manner compatible with the APG approach to Medicaid.  This was officially recommended to OASAS Commissioner Karen Carpenter Palumbo on June 30, 2009.

******************************************************************************

F.A.I.R.

Funding Alternative for Investment in Recovery

A joint proposal of ASAP, COMPA, & TCA for

a limited pilot in select Part 822 & Part 828 programs.

Background

OASAS has traditionally paid for alcoholism and substance abuse treatment and prevention services utilizing a funding mechanism widely referred to as net-deficit funding (NDF).  While an extremely useful tool, NDF has its limitations.  Every OASAS Commissioner since Jean Miller has decried the limitations of NDF and has expressed a desire to find one or more alternatives to this funding approach.  Despite this OASAS has yet to explore any meaningful alternatives to NDF.

The advent of the APG method for billing outpatient, OASAS licensed chemical dependence services, we think, provides an opportunity for OASAS to introduce a comparable, transparent and rational payment system for individuals who are not Medicaid eligible and are not able to pay for the full cost of the service.

Currently, the “working poor” are subject to an unintended system that severely rations both access to care and its delivery.  Driven by fiscal necessities, providers:

1. Direct their admission activities to Medicaid eligible patients and begin to sound the alarm for the need of state-aid supplements when Medicaid revenues begin not to cover costs.

2. Close clinics where Medicaid eligible patients fall below a percentage target.

3. Do not open clinics where any significant number of “working poor” will populate the service system.

In those instances where state-aid is apportioned, it is allocated on an incomplete, net deficit basis – only distantly tied to any direct patient care.  Net deficit funding does not distinguish between inefficient service delivery to all clients, and services delivered to the working poor.

Net deficit funding, by its one-time nature, drives providers away from delivering services that might again require such a supplement.  Further, we see the APG pricing method as reducing a provider’s ability to serve non-Medicaid eligible working poor.  “Generous” Medicaid payments will no longer cover services delivered to those patients not eligible for Medicaid.

We are suggesting that OASAS make its state-aid payments available for service delivery on the same, or similar, basis as will be utilized for Medicaid eligible patients via APGs.  We think service delivery should be based on individual treatment needs.  We think the cost of the services should be transparent.  On the state-aid side, we think the total billable amount should be capped.

We see a system where OASAS apportions its state-aid available to support outpatient services to the working poor transparently – essentially based on service delivery costs established for Medicaid eligible patients.  Payments are made to a maximum available amount.  After that amount is reached, providers would be no worse off than they are today.  In fact, they would be better off, because they could quantify what funding they need to serve the working poor.  OASAS’s APG state-aid payment system would have the advantage of giving a dimension to expenditures that are now inscrutable; provide data for future budget requests; allow for a re-arrangement of APGs similar to but not directly tied to Medicaid requirements.

Ending Cross-Subsidization

At every public presentation about the APG system, Ms. Deborah Bachrach of the New York State Health Department has stated that a major goal of the APG system is to end “cross-subsidization”.  Cross-subsidization in the current New York State Medicaid program comes in many forms.  Some Medicaid services are paid for at a rate lower than the true cost of the service, while other services are paid at a rate higher than the true cost of services.  In this kind of cross-subsidization the profit made from providing some services underwrites the losses incurred for providing other services.

In the alcohol and substance abuse treatment system we have a different kind of cross-subsidization.  Many outpatient alcohol and substance abuse treatment programs use Medicaid dollars to pay for the cost of care to Medicaid enrolled patients, but also to pay for the cost of some care provided to the uninsured, underinsured, and the working poor.  This means that in many Part 822 and Part 828 programs Medicaid pays more than the true cost of current services.  That surplus allows programs to pay for some of the care provided to the uninsured, underinsured, and the working poor.  Additionally, providers operating multiple levels of care often use Part 822 Clinic surplus income to offset losses in non-NDF Inpatient services in order to maintain the viability of the inpatient service.

If the APG process will pay a fair price to provide a particular unit of service this cross subsidization will end altogether or be dramatically reduced.  Without some form of fiscal intervention this will mean that Part 822 and Part 828 providers will not be able to provide care to nearly as many of the uninsured, underinsured, or the working poor, or to operate inpatient levels of care.

What is the FAIR proposal?

We suggest that OASAS field test (in a limited number of Part 822 and Part 828 providers) a new method of disbursing local assistance and block-grant dollars.  We call our proposal FAIR (Funding Alternative for Investment in Recovery).  Some of the key elements of FAIR would be:

·       OASAS would enter into a contract with a limited number of Part 822 and Part 828 providers to test the FAIR system.  As with current contacts there would be a maximum reimbursable amount allocated to the program.  There would also continue to be a requirement that providers make a reasonable effort to maximize third party and self pay revenue.

·       When the patient is a Medicaid recipient the provider must accept as payment in full for a particular service the amount Medicaid will pay under the APG system.  When the patient is not a Medicaid recipient the provider would first bill any available third party payer (such as private insurance), and in accordance with the approved OASAS client fee policy, the provider would bill (where appropriate) a patient fee.  The dollar difference between the APG rate and the amount paid by patient fees and/or other third party payers would be billed to OASAS.  OASAS would pay these claims up to the maximum reimbursable amount of the annual contract.

·       All Medicaid payments made under the FAIR system and all OASAS fee for service payments made would be subject to a small provider tax.  This tax will become a bad debt and charity pool to be shared among the participating providers.  At the end of a particular cycle (perhaps a year) all providers who paid into the pool will receive an allocation from the pool in an amount proportionate to how much uncompensated care they provided. (Example – Ten providers pay into the bad debt and charity pool an amount which totals $1.6 million.  Provider A can demonstrate that after being paid by Medicaid, OASAS, other third party payers, and patient fees they provided $800,000 in uncompensated care.  If this $800,000 amounts to 20% of the charity care provided by all ten providers who paid into the pool, then Provider A would be awarded 20% of the pool, or $320,000.)

What are the benefits of FAIR?

·      The APG prices will be the result of an exhaustive process of determining a fair price to pay per unit of service.  This should reflect an approximation of what it costs a reasonably efficient provider to produce that unit of service.  Since the cost of producing a unit of service doesn’t change based on whether or not a patient has a Medicaid card, it makes sense to pay for the service at a uniform and fair rate.

·      Converting to the APG method of recording patient encounters and billing will need to be undertaken by all Part 822 and Part 828 providers in order to be able to continue participation in the Medicaid program.  By using essentially this same patient encounter and billing technology to bill OASAS, the administrative burden of maintaining two separate approaches to billing will be reduced.

·      Part of the APG strategy is to routinely adjust rates on an annual basis.  This will be done by adjusting the base rate through an annual review of actual cost and visit history.  Additionally the weighting indexes will be subject to an annual review and will be adjusted where practice patterns and new evidenced based practices warrant.  This kind of annual adjustment will help to keep the provider community from falling behind inflationary factors such as liability and health insurance costs, energy costs, and union mandated contact adjustments.  It will also better enable providers to embrace the Gold Standard of care and new and more efficacious evidenced-based treatment practices.  Contrast this to what our current experience is.  Part 822 Medicaid rates have not been adjusted for more than eight years, and OASAS NDF payments to Part 828 programs in 2008 are actually lower in real dollars that they were ten years ago.

·      This helps to transition OASAS from being a funder of programs to being a purchaser or services.  As a purchaser of service OASAS will be better able to make sure that the treatment dollars follow patients as they progress towards recovery.  We know that substance abuse is a chronic relapsing and remitting disease.  This means that a patient may be expected to have multiple treatment episodes of varying duration and intensity over the course of many years.  By paying for a patient’s care on a purchase of service basis, the OASAS funding strategy is better aligned with the chronic disease model.  When a patient needs more care they can receive it, and the provider will be compensated for the additional cost of such care.  Likewise, when a patient is doing well, and requires less care, payment to the provider reflects this fact.  The dollars follow the patient as he/she moves through various treatment settings and treatment episodes towards recovery.  This is not the case when OASAS simply pays a monthly voucher which amounts to the difference between a provider’s bills and their revenues.

·      The FAIR approach helps to promote a recovery oriented system of care through employment.  Under the current NDF system moving a patient from Medicaid to employment costs the program money.  By paying for services at the same price without regard to Medicaid status, FAIR reduces the fiscal disincentive to move a patient from welfare to work.

What are some other issues to consider?

·       Will this require new statutory authority for OASAS? – We believe that the answer to that question is no.  Our review of the NYS Mental Hygiene Law (Art 32) suggests that the OASAS Commissioner already has all the statutory authority necessary to implement FAIR.  This perspective is shared by Mark White, Associate Counsel for Phoenix House foundation.

·       What happens when a provider reaches the maximum reimbursable amount of their OASAS contract prior to the end of the contract year? – To the extent that providers are able to find other resources, they would continue to provide care.  Just how much care they can provide will determine how much of a share they will be awarded in the bad debt and charity pool.  At some level, this is what is going on now…providers do the best they can with a finite amount of OASAS dollars.  There is a key difference with FAIR however.  For the first time we will be able to quantify exactly how much uncompensated care has been provided to the uninsured, underinsured, and the working poor.  This will help OASAS and the provider community to make a case for how much additional money is necessary to make the system whole.  It is our belief that part of the reason local assistance growth has lagged far behind the true cost of treatment is that OASAS and the provider community have been unable to say exactly what the consequences are of failing to keep pace with need and inflation.  At some point, when treatment demand exceeds resources, people who need treatment don’t get it.  The ability to quantify this in objective terms will help secure the additional resources we need.

·       Not every service provided in a Part 822 or a Part 828 program is Medicaid reimbursable.  What do we do then? – Some services (such as didactic education and vocational services) are not reimbursable by Medicaid and therefore there will be no APG rate for these services.  To the extent that such services are valuable and necessary, and to the extent that OASAS desires to pay for such services, a mechanism must be developed.  OASAS could develop a set of fee for service prices for such services.  In this case OASAS could pay for both Medicaid and non-Medicaid patients at these prices.  Alternately OASAS could simply pay for staff to provide these services on a grant or cost reimbursement basis.  Another alternative would be to try to incorporate such “wrap around” services in base rate calculations when constructing APGs.

·       Would the FAIR system totally replace NDF? – That would not be our initial recommendation.  First, we would want to pilot test FAIR to see how it works.  The pilot test must include a rigorous evaluation component.  Further we support adding “tools to the toolbox”.  Start-up grants, cost reimbursement for non-Medicaidable services, grants for “essential community providers”, and some residual NDF should remain options.