Blog Post July 8, 2020 Behavioral Health in the Spotlight: Optimizing Managed Care Contracting and Positioning for the Future Authors Katie Fellin Jaclyn Waszkiewicz In our previous post about disruption and innovation in behavioral health services, we noted that providers will have to navigate a changing reimbursement landscape over the next few years. Both government and commercial payers are focused on behavioral health services and are developing initiatives to support increased access, coordination of physical and behavioral health services, and value-based contracting. The COVID-19 pandemic has further increased the demand for behavioral health services, as recent studies have indicated that the stress and trauma experienced during the pandemic will compound the challenges present before COVID-19. In today’s fee-for-service environment, even the most sophisticated behavioral health providers find it difficult to establish managed care contracts with reimbursement rates that reflect the level of resources and the quality of care they offer to the community. New demands on providers related to the cost of PPE and implementation of telemedicine further increase the gap between standard behavioral health reimbursement and appropriate rate levels. As reimbursement methodology becomes more complex, behavioral health providers will have to reevaluate their managed care strategies. Two important questions emerge that behavioral health providers should be asking themselves as they think about the future: How do we navigate the nuances of behavioral health contracting to optimize our existing payer agreements in the near term?How do we start preparing and positioning ourselves to be successful under more innovative payment models in the coming years?Behavioral Health Contracting Nuances: How to Make Them Work for YouIf your organization is already in network with major payers, then you know there are differences between behavioral health and medical services managed care contracting. Behavioral health providers who understand these nuances are more likely to optimize reimbursement and can pursue more targeted negotiations with payers. #1: The Outsourced Behavioral Health Payer ModelTraditionally, national payers have outsourced behavioral health services to third-party payers, such as Magellan or Beacon Health Options. This means providers are dealing with different payer representatives, have a separate set of contracts to manage, and likely see limited reimbursement increases, as the outsourced behavioral health organizations operate under capitated arrangements. While this continues to be a challenge across the behavioral health service line, payers are starting to bring the behavioral health contracting process in house. As payers reassert management of behavioral health functions, providers will likely be required to establish new agreements. If this happens in your market, use this transition as an opportunity to improve rates and negotiate other terms to address ongoing operational challenges.#2: Reimbursement Differentials for APPsLike primary care, behavioral health provider groups rely heavily on advanced practice providers (APPs). Yet APP rates are often overlooked in negotiations; the emphasis has historically been on physician rate levels only. To truly optimize payer reimbursement, rate negotiations should be structured to fit your organization’s specific provider mix. To prepare for those conversations, behavioral health providers need to understand the distribution of volume by provider type and the customary reimbursement differentials between APPs and physicians. Providers can use historical charge volume to assess which providers (by license level) deliver the majority of services for the organization. For reimbursement differentials, providers can look to Medicare as a relevant benchmark. Medicare reimburses APPs 85% of the current physician rates. A 15% discount from physician rates is standard, and providers should work with payers to ensure commercial contracts include a differential no greater than the 15% observed by Medicare. Finally, behavioral health provider groups should also consider any future shift in their provider mix. How many APPs versus physicians will be in your group in one to three years, and are your contracts ready for any shift? If your mix has changed or you anticipate a change, start evaluating your agreements. #3: Service Mix: Limited Number of Services and the Shift from Inpatient to OutpatientNegotiations between large healthcare organizations and payers typically involve a broad range of services. This allows for flexibility during the negotiation process without affecting the overall financial performance of the agreement. Behavioral health organizations, on the other hand, rely on a small set of services, so each rate needs to be thoughtfully considered. Look at rate parity among your major commercial payers and obtain regionally specific benchmarks for each service to ensure payers are offering reasonable reimbursement levels. Relying on a small set of services also necessitates predicting how any shift in service mix will affect payer agreements’ financial performance over time. Payers are focused on shifting care to the low-cost outpatient setting, so while residential and inpatient rates are important, focusing on partial hospitalization programs (PHPs) and intensive outpatient programs (IOPs) can have a significant impact. Determine whether your contracts can maintain budget neutrality if they experience a significant decrease in residential services and an increase in outpatient programs. #4: Inclusive versus Exclusive Per DiemsSeparation of professional and facility reimbursement is standard across the industry. Yet, within the per diem reimbursement methodology for inpatient, residential, PHP, and IOP, payers may include or exclude professional services. For example, while your organization receives a single inclusive per diem rate for a residential patient, an organization that negotiated an exclusive rate may be getting a per diem rate plus reimbursement for professional services. This means that there may be opportunities for your organization to realize additional revenue if contracts are negotiated to exclude professional services from per diem rates. #5: Telehealth ServicesTelehealth services have become vital to the entire provider community during the COVID-19 outbreak as a means to increase access and safely treat patients who do not require in-person care. In response to the pandemic, the US Department of Health and Human Services (HHS) reduced the requirements to provide telehealth therefore changing Medicare telehealth guidelines. Many commercial payers also suspended restrictions and now offer commensurate reimbursement for in-person and telehealth services. They have also relaxed the infrastructure requirements for providing telehealth to their members. Behavioral health providers cannot assume that payers will extend reimbursement and security exceptions once the public health emergency has ended and need to confirm their current agreements cover telehealth. The following actions may be required to add telehealth services to behavioral health contracts: Complete payer-specific telehealth credentialing applications.Attest to the following standards: Professional liability insurance that includes services performed via telehealth Written protocols in place specific to telehealth, including emergency situations and compliance with state and federal telehealth lawsCovered telehealth services are not standard across payers, and your organization will need to understand which services each payer is willing to reimburse. Payment Innovation Is on the HorizonRecent Market ActivityPayers are becoming more focused on managing their members’ behavioral health needs concurrently with physical health. In recent years, both government and commercial payers have been piloting more innovative payment models for behavioral health services. CMS introduced collaborative care and integrated behavioral health billing models, and more recently, the Primary Care First Pilot, which includes behavioral health requirements. Commercial payers are piloting bundled payment models inclusive of addiction medicine services, and in some markets, exploratory models that attribute members with behavioral health diagnoses to mental health providers for management with shared savings opportunities (see figure 1).Figure 1: Innovative Payment InitiativesWith an increasing focus on primary care and behavioral health integration, more innovative payment models are on the horizon. Over time, behavioral health reimbursement will evolve toward models that put providers at risk for the total cost of care. In preparation for this shift, payers across the country are bringing management of their behavioral health networks in house and investing in the resources to manage members’ behavioral health needs. Examples include Anthem’s acquisition of Beacon Health Options and Blue Cross Blue Shield North Carolina’s January 2020 insourcing from Magellan. While payers are making the initial investment in integrated behavioral health, they will move quickly to identify opportunities to shift risk to providers. Positioning for Payment InnovationTo be a part of these innovative models, the first step is to be in network with payers. Out-of-network providers will not have the opportunity to participate. Of course, this is only a small step. Behavioral health providers must determine whether they are ready to participate in value-based payment models—and identify which models will work best for their specific service offerings and patient populations. Figure 2 includes key considerations as an organization determines its value-based readiness. Figure 2: Value-Based Readiness AssessmentNow Is the Time to PreparePreparation is the key to negotiating managed care arrangements that account for the future of behavioral health services. Take a minute to ask your organization’s leadership team these questions: If you are planning to transition to in-network contracting or have in-network contracts in place, have you factored in the five key considerations referenced above? Are you ready to take on risk for your behavioral health population? What are the key obstacles standing in the way, and which innovative payment arrangements mitigate the risk associated with your unique challenges?If your team is unable to answer any of the above questions, it’s time to start reevaluating your existing managed care strategy.