Payment and quality reform for mental health and substance abuse care: The time is now

April 19, 2021 / By Dawn Weimar, RN

We have heard the adage: “The definition of insanity is repeating the same mistakes but expecting a different result.”  This adage can be applied to the state of mental health and substance abuse (MHSA) care provision and payment.  Our patients deserve better care and measured outcomes. What has worked? What should we do in the midst of Medicaid managed care parity initiativesteam-based care initiatives and value-based payment?  If we aim to treat the whole person, why draw an arbitrary distinction between “mental health” and “physical health” for purposes of analysis and payment? Certainly, adherence to fee for service (FFS) payment alone has not ensured the provision of appropriate, quality MHSA care. Look here for a review of economic incentives inherent in health care payment methods. Let’s review the history and success of prospective bundled payment briefly and how state Medicaid programs have implemented bundled payment for medical services and MHSA.

Diagnosis Related Groups (DRGs) are “…arguably the most influential innovation in the history of health care financing.” Medicare has paid by MS DRGs since 1983; most state Medicaid and some private health plans pay with 3MTM APR DRGs. The hospital stay is the unit of measurement that is reimbursed using clinical categorical models weighted according to the expected average utilization of services. DRG reimbursement has been successful for over 30 years because it establishes efficiency, an economic principle, and is inherently fair, as providers are paid similarly for the provision of similar services.   

In the niche world of health care payment, experts are quite familiar with APR DRG and Medicare DRG payment, with less awareness of its outpatient counterpart 3M™ Enhanced Ambulatory Patient Groups (EAPGs). (APCs is the Medicare fee schedule method for outpatient care.) APR DRGs and EAPGs are both bundled payment methods appropriate for all patient populations and focused on the inpatient stay and ambulatory visit respectively as the unit of payment.  Both define clinical cohorts of patients similarly, both clinically and in expected use of resources. 

Therefore we apply the same principles that secured the success of the Inpatient Prospective Payment System (IPPS) to an Outpatient Prospective Payment System (OPPS). 3M responded to market demand for a similar tool in the outpatient space in the 1990s: EAPGs. EAPGs bundle services within the ambulatory care visit as the unit of measurement for payment and analysis similar to how DRGs bundle services within the inpatient stay. EAPGs are built upon a sophisticated clinical categorical model designed for the range of services and complexity seen in outpatient settings—ambulatory surgery centers, hospital emergency departments and clinics, including day treatment for MHSA—and include pharmaceuticals, supplies, ancillary tests, type of equipment needed, type of room needed, treatment time, etc. EAPGs can be used for telehealth reimbursement. EAPGs do not include professional services. A key difference is that whereas one APR DRG is assigned to each inpatient stay, multiple EAPGs can be assigned to an ambulatory care visit.  This is to capture the range of complexity in OPPS in a different manner than APR DRG which represents acuity as the combination of base DRG assignment and the severity of illness indicator.  APR DRGs bundle all services within the inpatient stay with very few exceptions. 

New York Medicaid was the first to implement EAPGs in 2007 for hospital outpatient and ambulatory surgery centers, hospital emergency departments, freestanding diagnostic and treatment centers and freestanding ASCs. MHSA services in a range of settings were added in 2010 and 2011.

In light of MHSA parity and team-based primary care, wouldn’t application of bundled payment methods that categorize medical and MHSA services similarly for payment be a step in the right direction? 3M methodologies are designed to be comprehensive, including psychiatric disease and substance use disorders as both primary diagnoses and comorbidities. DRGs and OPPS are recognized as “a more accurate method of paying for services than per diems or percentage of charges” and as “more equitable and rational payment” in the 2018 MACPAC report. Furthermore, we have been preparing for site neutral legislation by linking common elements of care provision within APR DRGs and EAPGs, so that payment is similar despite the inpatient or outpatient label for short stays. 

Currently, almost 30 state Medicaid programs pay using APR DRG as their IPPS, while a dozen pay using EAPGs as their OPPS; more state adoptions are imminent. MississippiMontana, Ohio, Rhode Island, South Carolina and Texas pay MHSA using APR DRGs (with some exceptions), some with a policy adjustor to boost payment and some with a day (or cost) outlier provision. EAPGs provide state Medicaid programs such as FloridaOhioMississippi, New York, Minnesota, and Washington state flexibility in implementing their payment policies for ambulatory services including MHSA.  

Each state Medicaid program or payer sets specific policy reflected in instructions for billing as well as reimbursement calculations such as policy adjustors and relative weights. For providers, this means that though EAPG grouping is standardized, EAPG reimbursement will vary by payer. 

Essentially, APR DRG and EAPGs establish the clinical and economic foundation which ensures a clinically defensible payment system and an established common language between clinicians and CFOs, as well as payers and providers.  3M Clinical and Economic Research has defined the clinical cohorts and accomplished the statistical analysis to ensure the appropriateness for all patient populations, both commercial and Medicaid

Part two of this blog will explore EAPGs and APR DRGs more deeply, as well as how to drive quality outcomes with a systems rate-based approach.

Dawn Weimar, RN, is director, state regulatory affairs for 3M Health Information Systems.