BEHAVIORAL HEALTH:

Demo will expand pay for psychiatric hospitals

Demonstration will boost pay for psych hospitals

Hospital industry executives will be eager to see the results of a Medicaid pilot project launched last week that could lead to expanded Medicaid reimbursement for free-standing psychiatric hospitals.

The three-year CMS demonstration, announced March 13, will give a total of $75 million in federal funds to 11 participating states and the District of Columbia, which in turn will have to kick in their own funds, estimated to be as much as $50 million. The demo, called the Medicaid Emergency Psychiatric Demonstration, results from a provision in the Patient Protection and Affordable Care Act.

The states are to use the money to create Medicaid reimbursement programs for psychiatric patients ages 21 to 64 and seeking emergency treatment at what the CMS calls institutions for mental disease, or IMDS, a type of hospital care that doesn’t currently qualify for Medicaid reimbursement.

The pilot, if successful, could inspire Congress to pass legislation to fund such care through Medicaid for the entire country, with the idea of lowering costs while improving care. The demonstration, which could also include state Medicaid funding of as much as $50 million, should provide valuable information on the effectiveness of increasing Medicaid coverage at psych hospitals, said Mark Covall, president and CEO of the National Association of Psychiatric Health Systems. “We’re going to learn how much is being spent, and how much we saved or didn’t save as part of implementing this” demonstration, he said.

Medicaid already spends a lot on mental health and is the largest payer for treatment, according to a February 2011 study in Health Affairs. In 2005, 10% of Medicaid spending was on mental health, a total of $31.1 billion in that year, according to the report.

But Covall said shifting some of the psychiatric emergency care to psych-focused hospitals shouldn’t increase costs, because psych hospitals can provide inpatient care at as little as 50% of the cost that an acute-care emergency department can. Moreover, many acute-care EDS are overburdened and Medicaid patients are unable to get the psychiatric care they need from those facilities, “I think it will save money in the long run,” Covall said.

Rebecca Chickey, director of the section for psychiatric and substance abuse services at the American Hospital Association, said that although there may be acute-care hospitals that would prefer that there not be a national change to Medicaid psych reimbursement, the AHA endorses the demonstration as part of the ACA. “We’ll have to see if the demo achieves it goals,” Chickey said. “I’m hopeful.”

Many patients who miss out on care do so in part because of cost, according to an April 2011 report from the Kaiser Commission on Medicaid and the Uninsured, called Mental Health Financing in the United States: A Primer. A 2009 survey by the federal government found that 45.7% of mental health patients not getting care cited cost as a reason why, the report noted.

Through a quirk in the law that dates to the beginning of Medicaid in 1965, acute-care hospitals are reimbursed for such care by Medicaid, and many in the industry have sought to give psychiatric hospitals the same reimbursement for years. “It’s about time. It hasn’t been a level playing field for the IMDS,” said Dr. Steven Sharfstein, president and CEO of Sheppard Pratt Health System, Baltimore, an IMD that will be participating in the demonstration through Maryland’s successful application.

IMDS, defined as independent psychiatric hospitals with more than 16 beds, were originally excluded from Medicaid because at the time and for years before that, mental health funding was considered to be the responsibility of the state alone, through public hospitals. The designers of Medicaid saw no reason to take on the cost of that care.

But the mental healthcare model has changed, with far fewer patients living in institutions and more seeking care on an emergency basis at private acute-care and psychiatric hospitals. And, of course, the Emergency Medical Treatment and Active Labor Act requires that IMDS treat ER patients whether they have insurance coverage or not.

The 10 other states in the demo are Alabama, California, Connecticut, Illinois, Maine, Missouri, North Carolina, Rhode Island, Washington and West Virginia. The AHA’S Chickey praised the CMS for spreading the demos across the country to reflect the diverse nature of the states’ Medicaid programs. The demonstration is expected to begin July 1 and calls for the CMS to report to Congress no later than Dec. 31, 2013, a CMS spokeswoman said.