The Deficit Reduction Act of 2005 (DRA) brought significant changes to reimbursement for medical care and increased scrutiny of healthcare compliance. Included with these changes are new Medicaid rules that mental health professionals must follow.

Not all the changes proposed in the DRA are currently in effect. The rehabilitation requirements presently under legislative moratorium are scheduled to take effect June 30.

The potential cost of failing to comply is huge compared to the penalties of the past. Previously, if CMS detected a billing error, the cost was normally limited to the amount of the error—this is no longer the case, says Terry Haru, chief compliance officer at Heritage Behavioral Health Center in Decatur, IL.

For example, take the OIG’s audit of Illinois community mental health providers for fiscal year 2003. Out of 200 randomly selected service items, the OIG found 33 with one or more payment errors, totaling an overpayment of $1,269.

The state Medicaid payments to community mental health providers totaled $170.5 million that year; of that total, $89 million was federal money. Extrapolating from the audit sample, the OIG determined that Illinois’ total Medicaid overpayments for these services amounted to nearly $11.5 million, and it told the state to repay nearly $6 million.

“Immediately, the Deficit Reduction Act is going to result in far more scrutiny,” Haru says.

Given the potential for findings like these, many states plan to do extrapolation audits of their own to determine problem areas before the OIG examines claims, Haru says, adding that, previously, there were roughly eight full-time OIG employees performing Medicaid audits, but the DRA calls for nearly 100, at a cost of hundreds of millions of dollars.

“They are expecting to recover that many times over,” Haru says, with some suggesting an estimated savings of $12 billion in the next five years.

Challenges to conquer

Providers of mental health services face several obstacles on the way to compliant billing. If a patient breaks a leg, the medical treatment is straightforward, and the outcome is easily documented. However, neither the course of treatment nor reasonable expectations for recovery are as easy to quantify for a patient who suffers from depression.

Such inherent difficulties of mental health treatment make billing and medical necessity documentation far more complex than other medical procedures. CMS continues to complicate compliance concerns. It remains unclear whether Medicaid Integrity Contractors (MIC)—who started audits this spring—will disallow claims that already met state Medicaid plan criteria. MICs may not be familiar with each state’s specific rules.

To further complicate things, it remains unclear how auditors will rule on a host of questions, from who is qualified to provide treatment to what treatment is appropriate to how cases should be managed and by whom.

With the states auditing most claims, providers were on solid ground as long as billing met state regulations, says Charles Ingoglia, vice president of the Public Policy National Council for Community Behavioral Healthcare in Rockville, MD.

“It’s a different ball game now,” he says.

The effect of the added scrutiny can be felt in several ways, from the number of errors detected to how the OIG judges the mistakes its auditors find. The OIG or the DOJ might view errors repeated over time, but never detected, as evidence of fraud, Haru says.

“There are indeed providers … who knowingly and deliberately try to rip off the government,” he says. “But the real vulnerability, the real risk for most of us, is not the willful or intentional stuff; it’s the inadvertent stuff.”

Providers face civil action in cases of fraud, Haru says, and the threshold for proving fraud is far lower than for criminal behavior. All that is required is a pattern or a practice that exhibits “reckless disregard or willful ignorance,” he says. “If it goes on long enough, there’s your pattern—specific intent is not relevant.”

Civil judgments add to the cost of repaying the government for billing errors, Haru notes. Thus, most providers choose to settle out of court regardless of whether fraud occurred, because it is cheaper in the long run.

Case management compliance complications

The proposed rule governing targeted case management was published March 30, and CMS plans to publish the final rule in August. Some problem areas may be adjusted by then, Ingoglia says. But targeted case management and rehabilitation need to remain high on the mental health compliance watch list.

Case management can no longer include direct delivery of medical, educational, or social services referred to a patient. No federal matching Medicaid funds can be applied to case management services if there is any other third party available to pay for them.

Further, only one case manager per patient should bill for services. This could cause providers to compete over who gets to bill for services, says Dean True, compliance officer at Butte County Department of Behavioral Health in Chico, CA.

The rule may give rise to quality-of-care concerns, True says. One case manager with expertise in a specific area should not necessarily preside over a patient’s entire range of mental healthcare. For example, an HIV patient with behavioral problems may also need services for bipolar disorder. One case manager may not know how to treat both of these diseases.

Documentation and preparation prove critical in such situations, Haru says. The federal government outlines the four categories that constitute targeted case management as follows:

• Assessment
• Treatment planning
• Referral and linkage
• Follow-up

Medical necessity requirements blur lines

Documenting medical necessity of treatment is another problem area, True says.

A patient diagnosed with depression might have “angst about life, but can still get up and go to work,” True says. But in order to bill for treatment, CMS asks: “Where is the significant effect of the depression?”

Payments based on rehabilitation documentation pose particular problems for mental healthcare providers. Different providers may evaluate rehabilitation according to different standards.

A key problem lies in the Medicaid requirement that providers prove the service they provided actually helped the patients, Ingoglia says.

“You may not always be able to show forward progress,” he says. “The question is what will be the standard” for the industry to measure the successful treatment of a mental health patient.

Conversely, Ingoglia says, if the mental health patient’s condition deteriorates, will CMS allow payment or deny the claim under these more stringent payment rules?

For example, in the case of a patient with schizophrenia, True asks: “How do you measure progress from point A to point B?”

One provider may work to assist the client in overcoming barriers to using public transportation, whereas another may focus on reducing specific negative symptoms. If documented properly, either of these treatment areas is valid for claiming by CMS within individually approved Medicaid plans.

However, the question is whether auditors will have the appropriate training and knowledge to understand plan differences as they move from provider to provider or, more importantly, state to state. If they don’t, there may be significant numbers of disallowances for legitimate services.

The federal interpretation of what constitutes sufficient progress toward rehabilitation varies. Providers have not received much guidance from the federal interpretation.

Credentialing barriers

Mental health treatment, particularly in residential settings, may be done by providers without a medical license, or by those whose training might not at first seem directly related to the care provided. However, unlicensed caregivers are allowed to participate in treatment plans, say Haru and True. They may even perform a majority of a patient’s treatment. “The question becomes how much training people get, the quality of training, the supervision they get,” Haru says. Residential staff members typically have a high school education, he adds, and there is a “degree of inconsistency” in their training.

To get around this, Haru’s facility established a standard curriculum to ensure staff members have a minimum amount of training, Haru says. Providers have to document what level of training and experience care providers have to justify billing for those services.

The uncertainty increases mental health professionals’ “paranoid factor,” Ingoglia says, adding that CMS hasn’t “done a real good job of explaining what the expectations are.”

CMS will consider alternatives to some of the new policies, but Ingoglia says no one knows what they might be—the indecision threatens to stifle innovation.